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Why venture capital firms are pouring money into health insurance

Shared by Radhika Narayanan | 0 162 1 | about 3 years ago

Entrepreneur Vivek Garipalli has a dim view of the way health insurance companies treat providers and patients. Patients develop trust with doctors and hospitals, and he thought insurers should be the “glue” between them instead of creating friction.

So Garipalli persuaded a couple of venture funds to pump $135 million into his own bid to build an insurer he describes as a technology-based clinical company, rather than “an actuarial engine” like the big legacy players.

His company, Clover Health, sells only Medicare Advantage plans and has enrolled 16,000 members as of this month. It differs from UnitedHealth Group and other giants, Garipalli said, in the way it uses real-time patient data to connect seniors to the care they need. The plans also provide free primary-care visits, and notably, don’t charge extra for seeing out-of-network providers.

“The really large companies, like an Aetna or a United, they’re really insurance companies at their core,” Garipalli said. “They spend a lot of money on technology, but we all know there’s a big difference between spending a lot of money on technology and being a technology company.”

Venture capitalists and entrepreneurs have been investing and building new health insurance and related companies at a torrid pace—which may seem odd, because the industry is highly regulated and has relatively low profit margins.

But widespread consumer dissatisfaction with dominant carriers and the Affordable Care Act’s new marketplaces for individual plans has created an opening for innovators to come up with alternative approaches and has primed investors to take a chance on what they’re pitching.

Read More On www.modernhealthcare.com

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