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Yamil Berard
Yamil Berard
Articles (51) 

Healthcare Shares Fall With Buffett in the Game

Buffett is teaming up with Amazon and Chase to craft a plan to provide reasonable health care

Today’s announcement of a health care partnership between legendary investor Warren Buffett (Trades, Portfolio) and two major corporations is striking a bit of panic on Wall Street.

Stocks of U.S. health insurers were down by more than 7% just before market close. That was hours after Berkshire Hathway's (NYSE:BRK.A) (NYSE:BRK.B) chairman and CEO announced plans to join up with Amazon’s (NASDAQ:AMZN) Jeff Bezos and JPMorgan’s (NYSE:JPM) Jamie Dimon to create an independent health care company to support their hundreds of thousands of U.S. employees.

In afternoon trading, shares of one of the largest managed care organizations in the U.S., Cigna Corp. (NYSE:CI), fell by 7.15% to $207.89 a share.

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Anthem Inc. (NYSE:ANTM), which provides managed care plans to large and small employers and individuals, fell 5.73% to $242.30 a share. UnitedHealth Group (NYSE:UNH), which insures 50 million people, fell 3.88% to $237.80 a share. Humana (NYSE:HUM), one of the best-known providers of Medicare Advantage plans, was down by 3.07% at $282.28 a share. And Aetna (NYSE:AET) was trading at $188.77 a share, down 2.57%.

The stock drop also came at one of the worst days the market has seen in months. By late afternoon, the Dow Jones Industrial had lost almost 400 points due to angst over rising bond yields.

Reasonable costs

Berkshire Hathaway’s chairman and CEO described the ballooning costs of health care as “a hungry tapeworm on the American economy.” Buffett says he wants to fix that, as part of an effort to lift the burden on Americans and the economy, as a whole.

The new health care company, the partners say, would operate independently and be free from “profit-making incentives and constraints.” One objective would be to develop technology that can provide their employees and their families with “simplified, high quality and transparent healthcare” at a reasonable cost.

Buffett said the partners are starting from scratch "with a beginniner's mind" to develop the new company.

“Our group does not come to this problem with answers," Buffett said in a prepared statement. "But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”

It was not clear if the plan would be extended to U.S. workers that are not employed by one of the three companies headed by the partners.

Shares of JPMorgan Chase & Co., the nation's largest bank, were down slightly by 0.52% to $115.60 a share.

Shares of Amazon.com were up in afternoon trading.

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