As politicians and their constituents grapple over Medicare for All, these well-funded startups hope to capitalize on the public’s appetite for new, consumer-friendly approaches to health insurance.

Rising animosity toward healthcare costs means ripe opportunity for insurtech startups

By Dave Muoio
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The US is wading into election season, and once again the healthcare system is a prime focal point for each campaign. And although the subject of “Medicare for All” was certainly present back in 2016, movements to overhaul the country’s insurance industry have gained some steam among voters over the last few years and now command considerable airtime during debates between presidential hopefuls.

Regardless which side of the ideological debate one lands on, it’s clear that the discourse is fueled by growing frustration with the status quo. For the insurtech startups focusing on data-driven models, consumer choice and convenience, it’s the ideal environment to stake a claim.

“For sure, I think everyone knows deductibles have out risen wages and other costs to the consumer are getting out of control,” Sara Wajnberg, chief product officer at Oscar Health, said this week during a Health 2.0 panel discussing the rise of insurtech startups. “So for us right now, our perspective has been … focusing on trying to improve cost transparency and predicability and help them make smarter choices so that they owe less generally, whether it’s subject to deductible or not. They pay a lot out of pocket, and a lot of people don’t even hit their deductible at the end of the year, so there’s still a lot of opportunity to reduce their total costs.”

Oscar Health, much like other panel participants Ooda Health and Bind On-Demand Insurance, have raised a staggering amount within the last couple years to revamp the commercial insurance market. While the specifics of their approaches may differ, each looks to engage the consumer during the decision-making process and empower them to select care that will reduce costs across the entire system.

Of note, several of these approaches will provide patients upfront with the full cost their chosen care services, observed Vivek Garipalli, CEO and cofounder of Clover Health. From his perspective working across the aisle in the Medicare Advantage market, these approaches can go a long way toward reducing payment anxieties consumers are experiencing.

“When you hear about Medicare for All, what that really means is that in Medicare there’s actual rate setting. You can’t say that there’s better care in Medicare versus commercial or vice versa — [it’s just that] we have rate setting,” Garipalli said during the panel. “What I fear is if there’s not a rate solution that comes into place on the commercial side, it’s going to be really, really difficult to remove that anxiety from the consumer. In the meantime there needs to be solutions around that.”

What this means is that industry support for such solutions is coming from an unlikely place — the payers themselves. Looking back on his previous years at cost transparency platform Castlight Health, Ooda Health President and cofounder Seth Cohen said that the past decade has allowed these companies to shift from a movement of “rebel outsiders” to one of accepted innovators.

“If we tried to do what we did 10 years ago it wouldn’t work, but because of this Medicare for All existential threat, because of the work of Oscar and others, I do think there is a very different perspective than there was before, and we’ve been amazed at the receptivity and the recognition,” Cohen said. “These health plans say ‘Look, we have to embrace this or we’re going to be disrupted ourselves.’ I didn’t see that 10 years ago.”

Support from entrenched healthcare institutions means more investment capital that insurtech startups can use to break into the very well-established insurance market. Additionally, it also yields strategic partnerships that provide companies like Bind On-Demand Insurance with the connections and systems they need to hit the ground running.

“United is an investor [in Bind On-Demand Insurance], and they’re an investor in a couple ways. They’re a capital investor, but more important than a capital investor is we needed the underlying data to do what we’re doing, and we needed the underlying negotiated contracts,” Tony Miller, CEO of Bind, said. “So instead of raising a ton of capital and then trying to assemble those assets, we decided that we would convince a large carrier to hand us those assets and give us the ability to reform them in a better product, a better design. And I think this whole thing has to start with better design.”

That being said, there’s bound to be some growing pains as the new kids on the block buck against the practices of their benefactors. But the writing is on the wall, Miller said, and no one knows that better than the payers whose business models are increasingly at risk of upheaval.

“Now I can tell you, I have fights every day with [our payer investors], and it’s because we are breaking rules that they hold sacred,” he said. “So it comes with a cost, but my view is that they see disruption coming, and I think that ‘Medicare for All’ is evidence that, as a society, we’re at a point where this has got to get better or we need a reset.”