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The Bottom Line: Health Insurance

The U.S. health insurance market exceeds $450 billion, with a typical player running at 6-7% operating income margin. Two-thirds of the costs are attributable to payments on health provision for members while the remaining third is divided approximately equally between marketing/sales, operations (i.e., policy issuance, policy management, and claims), IT, and support functions. We are very bullish on the healthcare insuretech space because it has the potential to integrate disparate data sources (e.g., claims, electronic health records, lab results, provider cost and outcomes) and apply smart analytics to incentivize healthy patient lifestyle and the use of best-value healthcare providers. Tech capabilities could also help to reduce operating expenses significantly. Any health insurance tech platform that can reduce a small fraction of the total healthcare spend ($3.5 trillion) – and increases efficiency of the health insurance sector – will immediately command a high value.


With about $6 billion invested in digital health and another $2 billion in insuretech in 20177 (this figure included life and P&C insurance), there is ample capital flow to nourish startups in this space. Moreover, companies that demonstrate the ability to acquire sticky customers and grow revenues will have no shortage of exit options. Large insurance companies, which are seeking to disrupt themselves to remain competitive, are stalking this space to acquire potential disruptors.


We are very excited by Centivo’s business model because it has the potential to fundamentally solve key problems of any healthcare system by putting the focus on community primary care, incentivizing healthy lifestyles and preventative health, rewarding the best providers, and increasing affordability for members. Not only are Centivo’s services likely to gain traction in the U.S., but they could be also be adapted to many nationalized health systems, especially where accountability for health outcomes is pushed down to the community level. For example, it is easy to imagine how Centivo’s model could be adapted to the U.K.’s National Health Service, which is divided into 200 Clinical Commissioning Groups (CCGs), each responsible for the care of an average of 226,000 people.


Although narrower in scope, Bind’s model of driving people into higher quality, lower-cost providers using copays as an incentive has the welcome blessing of simplicity and focus, which is so essential for a startup.

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