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San Francisco-based startup Collective Health — which operates health benefits administration for self-insured businesses like Uber and eBay — scored $205 million in an investment round led by global investment giant SoftBank Vision Fund, hauling its total funding up to $435 million. It’ll use the fresh cash to give its tech platform a boost and enter new US markets.
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Collective Health is among a rank of digital health cash magnetsshaking up the insurance industry, and we think its model sets it up for steady growth. The startup aims to help employers cut costs by streamlining health plan navigation for employees:
For around $25 a month per-employee, employers linked with Collective Health can offer their workers an app that guides them to find appropriate care and easily see what their plans cover, per Axios.
Health plan illiteracy is likely a pain point for employers: 35% of consumers somewhat understand, don’t understand, or know nothing about their healthcare coverage, which may hike up employer costs associated with workers seeking out-of-network-care.
Companies like Collective Health could be hot commodities for employers given the tailwinds sweeping the employer health coverage market.
- Solutions that trim down health plan spending should be in high demand since employers are up against ballooning costs. Large US employers’ health costs are expected to soar to $14,800 per employee in 2019, up 10% from 2017. A rise in projected costs should have employers bracing for impact, and investing in tech to reign in costs could be a good bet. For example, US grocery manufacturer Kraft pared down spending by 9% on users of Castlight — a health benefits platform — which led to combined savings of over $1 million, per a case study.
- These companies’ addressable markets are set to widen as more companies opt to self-insure. Eighty-one percent of employees at large firms were enrolled in plans that were partially or totally self-funded in 2018, up from the 79% who said the same in 2017, per Kaiser Family Foundation. And smaller firms are even making the pivot to self-insure: The percentage of smaller employers offering at least one self-insured plan climbed to about 17% in 2016, up from 14% in 2015, per Plan Sponsor. As more employers sponsor their own plans, demand for tech that’s proved to reel in spending will, too. And despite a small uptick in small employers making the move to self-insure, we think startups entering the space will remain focused on tapping large employer partners that can help them rope in the most possible revenue.
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