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Millions more people will gain access to health care next year, as the Affordable Care Act comes into effect.
With change comes opportunity — and confusion. So investors are placing their bets on health transparency startups like Change Healthcare, which help people save money and select the best insurance plan.
Today, Change secured $15 million in financing from strategic investors, including the venture arm of BlueCross Blue Shield. The company will use the funding to grow its team in anticipation of opportunities arising from the Affordable Care Act.
“With the shift in the number of consumers who purchase healthcare as individuals, the market needs a fundamentally different set of decision support tools, and we believe the time is now to build those tools,” Change Healthcare CEO Doug Ghertner told VentureBeat.
“Our goal is to become the platform for consumer engagement in healthcare,” he said.
Ghertner will continue to develop products that promote both cost transparency and education. Recently, the company launched Healthcare University, a training program for corporate clients to learn about available health benefits.
Change makes its money by selling its transparency services to health plans and employers. Ghertner said the company has seen a “significant demand” for these services in the last 12 months.
The Obama Administration has repeatedly stressed its commitment to lowering health care costs. Likewise, companies are keen to educate employees about their benefits now, so they will see their physician regularly and remain healthy in the long-term. Employers are even experimenting with offering tangible rewards to staff who regularly hit the gym and eat well.
Startups in the health care transparency space are on the rise, so Change Healthcare is facing fierce competition. The Tennessee-based company competes with San Francisco’s Castlight Health, as well as upstarts like New York-based Maxwell Health, which pulled in $2 million in funding this month.
The market opportunity is probably large enough for multiple players to succeed, given that health costs and insurance plans will differ state by state. In addition, some of these companies are focused on small- to medium-sized businesses, while others are selling to large, self-insured employers.
The round was led by HLM Venture Partners, joined by new investor Noro-Moseley Partners and existing investors BlueCross BlueShield Venture Partners, Sandbox Industries, Mitsui & Co. Global Investment, Inc., Gary and Mary West Health Investment Fund, LLC, and Solidus Co.