As the InsurTech space heats up, Bright Health raises $200 million

Steven Loeb · November 30, 2018 · Short URL:

The company has a unique business model where it only works with one health system in a given area

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In just the first half of 2018, global investment in the InsurTech space reached over 85 percent of the total invested in all of 2017, with companies raising big funding rounds. That includes Medicare Advantage provider Devoted Health, which raised $300 million in October, and Oscar Health, which raised $375 million from Alphabet in August.

If the pace keeps up for this year, it will reach a total of $3.4 billion far outpacing the record $1.9 billion raised in 2017.

The InsurTech space just saw another company get a big infusion of cash as health insurance tech company Bright Health raised $200 million in Series C funding on Thursday.

The round included two new investors, Declaration Partners and Meritech Capital, along with the company's existing investors Bessemer Venture Partners, Cross Creek Advisors, Flare Capital, Greenspring Associates, Greycroft Partners, New Enterprise Associates (NEA), Redpoint Ventures, and Town Hall Ventures.

The company has previously raised two rounds of funding, an $80 million Series A in 2016 and, most recently, a $160 million Series B round in June of 2017. With this latest funding, the company has raised more than $440 million. Its current valuation is not being disclosed. 

“In over three decades of investing in healthcare, we’ve never seen a company with more potential to change the landscape of care delivery and customer experience as Bright Health," Stephen Kraus, partner at Bessemer Venture Partners, told VatorNews. "Our continued investment in Bright Health is a testament to our faith in this amazingly talented and experienced team and our belief that their continued success will result in millions of hardworking Americans having access to quality, more affordable healthcare."

Founded in 2015, Bright Health offers "Care Partner Health Plans," which it says are more affordable and give patients a better experience due to it's business model of only working exclusively with one health system per market, driving customers to those systems that are already providing better care at a lower cost. 

"On thing that is interesting about healthcare, as expensive as it is, it does not have a good reputation for a good consumer experience. So, we primarily point to the affordability but we also address the experience," Kyle Rolfing, co-founder and President of Bright Health, told me in an interview.

"The way we do that is with a very unique business model where we go into markets and look at the various health systems that are located in the market and identify those health systems that are most efficient in delivering care and delivering high quality care to individuals and we partner exclusively with that health system. The consumer buys Bright Health as their health plan and part of that they get all of their care with the health system that we partner with, we call them our Care Partners."

Bright Health is currently available in three markets, Denver, Birmingham and Phoenix, where it has 25,000 members collectively. It is also currently in open enrollment in nine other markets in New York City, Ohio and Tennessee.

In terms of consumer satisfaction, in 11 of those 12 different markets, Bright Health has the lowest priced plan in medal tier offerings, Rolfing told me, and it has the the highest satisfaction rates and renewal rates in Colorado.

In terms of value for the Care Providers, that comes by Bright Health delivering them additional market share; by only working with one health system per market, Bright Health can drive a greater amount of market share to that one system, rather than having patients go a variety of health systems within that geography.

One thing that is driving up the cost of healthcare right now, Rolfing said, is the employer-based healthcare system, which drives a system where insurance companies have to contract with virtually all the health systems in the market.

"Those health systems vary in terms of quality and efficiency that they deliver. Because they’re contracted throughout you have kind of a weighted average rolled up of all the healthcare costs based on where individuals go out and seek their care, and that rolls up into one effective premium. When you step back from that, the big picture economic model that happens out of that is you have the most efficient health systems subsidizing the least efficient health systems in the market. It’s crazy that would exist, it really doesn’t in any other industry," he explained. 

"We recognize that flaw in terms of the economic dynamic that’s created, and said, ‘If we can identify those health systems that are most efficient, delivering high quality care, and package that up for consumers, we can have much more affordability and a better experience for the consumer.’”

Bright Health plans to use the new funding, in part, to expand to new geographies. While Rolfing couldn't say which specific markets it was looking at for 2020, he did say that the company looks for markets with multiple health systems that customers can choose from.

"What’s happened in the last couple of decades is there’s been a lot of mergers and acquisitions and these health systems have really grown robust care delivery systems where they have all the various specialties that are represented, really strong primary care that’s connected to them, and then all the various types of care delivery from facilities to home care are represented by these different health systems," he said. "Obviously we need health systems that are pretty comprehensive in that delivery for our model to work, so we look for markets where there are multiple health systems that are robust in terms of their care delivery. Then we try to identify the one that is the most cost efficient and highest quality in that market."

In addition, the company will continue to invest heavily in technology, particularly around leveraging the services its Care Partners have and then serving those up in a was that's for the consumer to use. 

"We have built and own a foundational technology platform that allows us to plug in various technology solutions that our health systems use. We also have our own solutions that we incorporate, more on the administrative side of the health plan. This foundational technology platform allows us to customize and leverage the care partners’ technology assets on behalf of the consumer is really unique in the market," Rolfing explained. 

"We’re a different type of insurance model in that most insurance companies will build technology, for example they’ll have virtual healthcare technology as part of their solution. They might have provider look up tools and things of that nature. We do a similar type of thing where there’s a consumer need and desire for access to information and services leveraging technology; the difference is we try to leverage our Care Partners’ assets that they have and make sure that care is all kept under one roof and really well coordinated with that Care Partner and leverage technology to do that."

For example, in one market, a health system may use a certain vendor for a virtual care solution and in another market that health system may use a completely different solution, but with Bright Health's technology platform it can plug in any vendor and provide those services to the consumer.

While technology is important to Bright Health, the company been successful, according to Rolfing, in part because it doesn't build technology for technology’s sake, but to actually make care better and more affordable for patients. 

"It starts with the very unique business model that solves a very important problem for both the consumer, with more affordability and a better experience, but also for the Care Partner in those that are delivering lower cost and higher quality now have a chance to achieve better market share for delivering that," said Rolfing.

"We build technology to enable that business model and to maximize the value that is achieved through that business model. That, to me, is the right approach, and where you see the most value creation in this industry. I think there’s a lot of noise in this industry, particularly in the health plan space and healthcare space, where there’s a lot of point solutions that have been done and apps around technology. But if they don’t connect to a disruptive and value driving business model, we see they don’t typically do very well. There’s a lot of opportunity to do more when thoughtful around what’s the business model and the value creation that we’re doing before just creating new technology solutions."

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In 1911, Henry Phipps founded Bessemer Securities to reinvest the proceeds of his sale of Carnegie Steel for the benefit of his descendents. The start-up investment operations were spun out into Bessemer Venture Partners, which now operates out of seven offices around the globe.