Why new insurance start-ups are focused on the employer market

Health insurance is a tough business to break into. 

Friday Health Plans, founded in 2015, made headlines in June when the company abruptly closed down, after several states took control of the company's finances. 

Bright Health Group, included on Forbes' list of the "next billion dollar startups" in 2017, ended most of its insurance business at the end of 2022 and is in the process of selling its last Medicare Advantage plan in California. 

How do new startups on the insurance scene plan to avoid these pitfalls? By focusing on the employer-sponsored market, CEOs said. 

Fred Turner, CEO of Curative, told Becker's the ACA exchange is a "very difficult" market for startups. 

"The key lesson for us is the employer space doesn't have a lot of those same issues. Plans are fully insured, they are unwritten at a group level, premiums are set based on underwriting at the time the group is enrolled. It's really a space that's been untapped by those startups," Mr. Turner said. 

Companies like Friday Health, Bright Health, Oscar Health and Clover Health have primarily offered Medicare Advantage plans and individual and small group insurance on the ACA exchange. 

Curative, initially founded as a COVID-19 testing company, pivoted to health insurance in 2022. It offers plans in several Texas cities, including a recent expansion into the Dallas-Fort Worth metro area. 

The company offers a "Netflix" model of insurance to employers — employees pay a monthly premium and have no deductibles or cost sharing for services if they participate in a baseline preventive care visit. 

Curative's ambition is to eventually compete with big name national carriers, Mr. Turner said. 

"We think [employer-sponsored] is the untapped market that's in need of innovation, and really neglected to some degree by the large plans that are really focused on earnings growth that comes from Medicare and Medicaid," he said. "They're not focused on offering something new and innovative within the workplace." 

Ty Wang, CEO and co-founder of Angle Health, which also offers employer-sponsored plans, said the company is only focused on the employer market, which comes with a "very different risk demographic" than the exchange. 

"When you're looking at companies like Oscar and Bright Health, and even non-insurance companies like Lemonade, these are all very direct-to-consumer products where they're selling directly to individuals where they have very high customer acquisition costs and high churn rates. We focus only in the employer-sponsored market," Mr. Wang said. 

Angle Health, founded in 2019, received a $58 million funding round led by Portage in January. 

Sustainable growth is another priority for Angle Health, Mr. Wang said, so the company isn't "disappearing overnight." 

"[Our goal is to grow] in a way that really meets the needs of our customers, whether that be the members, the employers, the brokers, the providers that we're working with," he said. "Those are the key things that we're focusing on, and ensuring our operations are highly efficient, that we're able to lock in the operational efficiencies even today, so we don't end up in a place where the business fundamentals just don't make sense." 

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