CNBC’s Jim Cramer on air as benefit managers tumble (screen cap via Twitter)

Kudos To Kirk Spano

As Seeking Alpha contributor Kirk Spano reminded us on Tuesday, he had warned back in October that UnitedHealth (UNH) was at risk of a decline of 50% or greater. As of Tuesday’s close, UNH was up about 16% from Spano’s October warning.
 

But Tuesday’s swoon in the sector on news of the healthcare joint venture between Berkshire Hathaway (BRK-A), (BRK.B), JPMorgan (JPM), and Amazon (AMZN) highlights the possibility that Kirk Spano may be proven right. With that possibility in mind, I present a couple of ways UNH shareholders can limit their risk while staying long the stock. First, a couple of general thoughts on the “Amazon effect” as applied to healthcare, and the challenge of predictions.

Team 1492 Coming For You

One point Kirk Spano makes, which I agree with, is the significance of Amazon’s in-house healthcare unit, Team 1492:

Amazon is already known to have a “secret” healthcare technology project called 1492, which is working on electronic records, billing and virtual visits. Combine technology with the financial strength of the three companies (Amazon, JPMorgan, and Berkshire Hathaway) involved, and bringing a new health insurance competitor to the market seems very likely.

If this new health insurance company would be non-profit and follow a model similar to Kaiser, where other related health companies made some profit, then that shakes up the entire health insurance and health delivery industries.

And Spano also makes a good point about how the joint venture could leverage Amazon’s experience in pioneering online disintermediation of traditional, brick and mortar businesses:

It seems very likely to me that the new health insurance company could allow businesses to enroll in health insurance programs using a low-cost online marketing, sales and underwriting process? That would put huge pressure on the other health insurers who largely rely on commissioned agents and a general lack of transparency about plans in the industry.