How health plan start-ups are disrupting the industry

Traditional health plans are getting hit with significant financial losses. These losses are largely attributed to individual products sold on health insurance exchanges created under the Affordable Care Act. While some private insurers proposed substantial premium increases to cover losses, others withdrew from certain states, or left the market altogether Traditionally, private insurers focus on employers as their primary membership channel, whereas this market requires sales directly to the consumer.

While individual insurance existed for years, a boost in direct-to-consumer products, fueled by ACA, has spurred dozens of start-ups looking to change consumers’ experience with the healthcare system. Some barely survive, some thrive, and others have failed. Those that failed, or that barely survive – including consumer oriented and operated plans (CO-OPs) – also had large losses in this market. For many, premium prices did not cover claim costs, and scaling for these new private insurers was a challenge.

However, a number of start-ups have emerged with thriving, solvent businesses. We took a closer look at these start-ups and found four key differentiating factors from traditional insurers:

1.  Focused marketing: It’s all in the way you pitch it

Instead of trying to be everything to every consumer, start-ups have focused marketing strategies. Most start-ups got their start with a specific member segment and used data to determine what benefit services these members need and how they want to consume those services. They built their go-to market strategies, surrounding members with an improved, all-around experience at a price and with benefits on-par with traditional insurers. This approach led to consumer-friendly, technology-enabled offerings, like the ability to easily get a person on the phone to explain benefits, insurance contract language that’s in in plain English, and easily accessible, transparent pricing information. Members can access network, claim, and out-of-pocket information easily and on their mobile devices. These tools proactively help members make informed care purchasing decisions. In addition, wellness perks – such as fitness trackers and free primary care – enable start-ups to attract certain demographics. These benefits are relatively inexpensive compared to complex care coordination and seem to work when focused on specific member populations.

These ideas are not new – many of the traditional insurers have tried, or currently have them, too. The key difference is that start-ups have focused on how to effectively market to a specific consumer segment through clear, concise messaging. Also, when they enroll these consumers, they pair products with convenient, technology-enabled services that foster ongoing member relationships.

Some examples:

  • Canopy Health has been transparent about who its target member is: the young, healthy and tech-savvy. It also targets healthy individuals who may have forgone insurance altogether. Its pitch focuses on simplicity and was “created to serve individuals, not big companies.”
  • Oscar Health is a prominent startup that also targets young, healthy consumers. Its minimalist webpage boasts of “smart, simple health insurance.” It identifies services important to its target audience – like free primary care, free generic prescriptions, and perks like activity trackers and gym membership reimbursement.
  • Collective Health acts as a middle man between employer-sponsored health plans and their employees, and has found a niche in managing benefits and communication to members in a way that promotes transparency, and improves member experience.
  • Bright Health’s motto, “The health insurance you deserve for the way you live,” implies that other insurance companies are not meeting the needs of its targeted population.

Unlike traditional insurers, start-ups deliver insurance to consumers in a more personal, less corporate-feeling way. These start-ups also market to a younger, healthier demographic, which is cost-advantageous since they don’t have influence to negotiate lower reimbursement in exchange for more membership. Members are not sold products with confusing coverage, or picked by a corporate HR manager. Coverage is designed with the consumer in mind, and start-ups are pitching this difference in a way young, healthy members see and are attracted to.