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Technology

Can Silicon Valley Fix America's Ailing Health Insurance System?

Here, four startups with the capital and ambition to remake U.S. health care. May the odds be in their favor.

Can Silicon Valley Fix America's Ailing Health Insurance System?

[Illustration: The Project Twins]

Eager to leap in where so many others have stumbled, Silicon Valley investors have been pumping capital—$1.2 billion in 2015 alone—into startups taking on the task of improving health insurance for individuals and employers. It’s not for the faint-hearted: The industry is rapidly consolidating, making it harder for new companies to gain traction. But the payoff could be huge. "It’s a big, juicy opportunity with a lot of market cap," says Sequoia Capital’s Mike Dixon. Here, four of the biggest bets on the future of health insurance.

Oscar Health

What it is: Consumer-friendly alternative to traditional insurance—with a $750 million war chest.

Big idea: Use technology to make health care less confusing, more fun for millennials.

Secret weapon: An intuitive app that allows members to find and chat with doctors, access their medical history, and refill prescriptions.

Members: 135,000 in New York, New Jersey, Texas, and California.

Biggest hurdle: In the Affordable Care Act era, profit margins are slim if you don’t have scale: Oscar lost $105 million in 2015 alone.

Survival strategy: Offer a narrower range of providers to keep premiums low enough to entice new users.

Clover Health

What it is: Affordable, easy-to-navigate insurance for seniors enrolled in Medicare.

Big idea: Mine data to reduce the cost of caring for high-risk patients with chronic conditions.

Secret weapon: Algorithms that anticipate which members need preventive care, such as in-home nurse visits.

Members: 18,000 across New Jersey.

Biggest hurdle: Large incumbents—Aetna, UnitedHealthcare—will not cede this space without a serious fight.

Survival strategy: Attract customers by generating health outcomes too good to be ignored.

Stride Health

What it is: Insurance-plan marketplace with concierge-style services for individual buyers.

Big idea: Make it pleasant and efficient for users to find plans that meet their specific needs.

Secret weapon: A well-designed app that translates insurance lingo into layman’s terms and helps users buy a plan in under 20 minutes.

Members: 125,000 in 50 states, plus D.C.

Biggest hurdle: Federal and state insurance exchanges are improving their user experience, creating new competition. Sign more partners like Uber to become the go-to broker for gig-economy workers.

Survival strategy: Sign more partners like Uber to become the go-to broker for gig-economy workers.

Collective Health

What it is: Tech tools to help smaller companies cut out the middle­man and self-insure workers.

Big idea: Take the hassle—and risk—out of offering health benefits directly to employees.

Secret weapon: A sophisticated platform that helps companies design and administer plans, manage claims, and anticipate costs.

Members: Half a dozen companies, with about 35,000 beneficiaries.

Biggest hurdle: Big employers tend to self-insure, but smaller ones are still more likely to buy off-the-shelf plans from insurance carriers.

Survival strategy: Demonstrate the efficiencies—and lower costs—of going the self-insured route.

A version of this article appeared in the November 2016 issue of Fast Company magazine.

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