The health insurance exchanges (HIXs) resulting from Obamacare are upon us, and by January 1, 2014, all Americans will be required to have health insurance. There are few markets that are mandated by law to include virtually every American man, woman and child, so this opportunity is particularly juicy to investors, and the next few years offer an opportunity to turn market confusion into gold.
Here are five areas where innovators and investors will see big opportunities.
1. Back-end support
Among the biggest investment opportunities are technologies and services that power the new HIXs, both public and private. Venture-backed companies, like GetInsured.com, have emerged to provide the various state-sponsored exchanges with back-end technology that enables the comparison-shopping, financial transactions, and enrollment support essential to operating these insurance marketplaces.
2. Helping Private HIXs with new branding
While state and federal healthcare insurance exchanges are the focus right now, much of the real action has and will continue to take place in private exchanges serving the large and small employer market, particularly as many employers choose to end their role as benefit plan intermediaries.
There are important differences between public and private HIXs that make the investment opportunity particularly good on the private side. Private exchanges can more broadly customize and personalize their products and the consumer experience. Since health insurance companies are being forced to sell directly to the consumer marketplace where they have previously sold almost exclusively to businesses, we should see some real innovation as these companies establish new consumer-facing brands characterized by high quality service, a concept not typically associated with most American health insurers.
We will also see a growing demand for new and creative insurance products for the HIXs, such as value-based health plans like SeeChange Health, that integrate wellness and prevention to help consumers realize the potential for increased health and decreased healthcare costs, two of three goals, alongside universal coverage, that started this whole Obamacare drama in the first place. [Disclosure: SeeChange is a Psilos investment.]
3. Customer Education & Service
HIXs are far more mysterious to consumers than they need to be. According to a September 2013 USA Today / Pew Research survey, only 25% of Americans say they understand the law’s impact on them and their families. As a result, the HIXs create a need for new educational products and services to engage consumers of all types, whether they are from underserved populations or being dropped from their Blue Chip employer’s Cadillac health plan. There is an even greater need for educational tools and “plain-English” translation of medical and insurance information to help consumers manage their newfound clinical and financial accountability. Each of these areas is ripe for innovation and investment.
Once they are faced with purchasing through the HIXs, consumers must have decision-support and personalization tools to help them select the best plan and take best advantage of its features. HIXs also need back-end administrative products and services—everything from call centers to enrollment, shopping and financial software–to help tens of millions of people purchase and manage their insurance plan.
4. Financial Services For an HIX World
New financial services products are also essential in the HIX world, including credit facilities that help people pay their insurance premiums or for services with high co-pays and deductibles. Financial services will be especially relevant for those who do not have credit cards or bank accounts or who live paycheck to paycheck and who may need help paying monthly premiums when they are between jobs. For the 1/3 (and growing number) of Americans enrolled in high deductible health plans, there will be further demand for financial products to manage the different buckets of money that come into play as healthcare services are utilized.
5. Self-Triage Services
Many believe that the HIXs and Obamacare generally are a platform to initiate more cost-effectively care delivery. Thus, a related investment opportunity is consumer-facing engagement technologies and services that help people make better self-triage decisions about where and when to get care in order to maximize the value of their chosen health plan. For instance, a consumer might save money and time by using a nursing hotline for self-triage or telemedicine services when the only locally available alternatives are high cost and hard to access. New products that encourage medication compliance or home-based care are also gaining venture investment traction.
While much of the U.S. sees chaos as they watch Obamacare unfold, the investment community sees opportunity to prosper. Times of massive system transformation pave the way for new market entrants and disruptive technologies. The HIX and associated products may just be the NetFlix to the old insurance model’s Blockbuster. In a world where such disruptive innovation might also bring about a healthier populace, it is a fine time to be an investor who can do well by doing “good.”
Lisa Suennen is a cofounder and Managing Member of Psilos Group, a healthcare-focused venture capital firm with approximately $600 million under management. She has headed Psilos’ West Coast office since the firm’s founding in 1998 and focuses on the healthcare IT, healthcare services, and medical technology sectors. She currently serves as a Director on the Board of several Psilos portfolio companies, including AngioScore, PatientSafe Solutions,OmniGuide, and VeraLight. She is also a board member of Miraculins.