U.S. investors poured a massive $1.2 billion into new health insurance startups and health insurance technology in 2015, including Collective Health, Clover Health, and Oscar Health, according to the research firm CB Insights.
But health policy experts say it’s a highly challenging market for new players. While the Affordable Care Act has opened up some opportunities for upstarts to sell health insurance on the individual market, the system still favors established insurance companies with tens of thousands of members. “Health insurance is a business where scale matters,” Bob Kocher, a venture capitalist and key shaper of the Affordable Care Act, recently told me.
As Scott Harrington, a health care management professor at the University of Pennsylvania, put it in an interview with Modern Healthcare: new health insurance investments are “are really quite speculative…And in many instances, they are not likely to bear fruit.”