Americans are spending increasing amounts of their very own money on health care.
According to the federal government, so-called out-of-pocket spending now exceeds $470 billion a 12 months the latest accounting. Spending is also expected to rise with the proliferation of high-deductible health plans and health care providers that do not accept insurance.
Although consumers are not particularly thrilled with this trend, startup founders and their supporters see very scalable opportunities. Over the past few years, a whole lot of tens of millions of dollars have gone to firms working on savings account platforms, care price comparison apps and tools for employers offering high-deductible plans.
Who will receive funding? By Crunchbase datawe have chosen a sample list of 19 firms that have innovated attributable to the increase in out-of-pocket healthcare spending. In total, they have raised over half a billion dollars so far.
Looking at the list above, we see that much of the funding activity is skewed early on. However, there is likely potential for exponential growth, given the huge amounts of money at stake coupled with the seemingly low bar for improving the establishment.
As a heavyweight sector Andreessen Horowitz put it in explanatory piece on his investment thesis: “Why are we so optimistic about consumer health? The current state of affairs is terrible. Patients are dissatisfied; suppliers are burnt out.”
The company’s investment strategy is based on the assumption that as consumers incur higher health care costs, they may develop into more aware of their health care experiences and due to this fact “are likely to vote with their wallets.”
Key topics: Access, price transparency, alternative plans
It is also value noting that more and more consumers have wallets with which they’ll vote. According to a recent study, as of 2022, more than half of private sector employees (53.6%) were covered by high-deductible health plans test. Enrolled people also often use savings or flexible spending accounts to cover on a regular basis medical expenses.
Behind Colin Tobiaspartner in SemperVirens enterprise capital, many recent startup investments are focused on making it easier to make use of HSAs and manage self-pay transactions. One he points to in this area is based in San Francisco PayZen, which offers consumers payment plans for health care expenses. Another is First dollarwhich develops tools to consolidate advantages into one digital wallet.
Others are working on tools to assist healthcare consumers find the best value for money. More heavily funded startups using this approach include: Turquoise health, which allows consumers to check prices for medical treatments from providers in their area. In January, the San Diego-based company secured $30 million in Series B financing, bringing its funding thus far to more than $55 million.
Meanwhile, perhaps the newest recipient of price transparency funding is Health, Milu. The Illinois startup raised a $4.8 million seed round last month to develop technology that analyzes medical records to seek out ways to lower your expenses and improve care.
Employers and ICHRA
The healthcare industry is notorious for coining acronyms, which brings us to our next popular investing topic: ICHRA, or Individual Medical Reimbursement Arrangements.
This is shorthand for employers who, somewhat than offering their very own health insurance plan, provide money to employees who can use it to pay for their very own policies or cover out-of-pocket medical expenses. ICHRAs are becoming increasingly popular among employers, and startups are trying to capitalize on some of this growth.
Several of these startups have raised funding quite recently. Based in Berkeley, California Sellerwhich offers AI-powered tools to make the most of ICHRA money, raised $7.6 million in August seed funding. Thatchwhich offers tools for choosing the right insurance and debit cards to cover health expenses, made $6 million last 12 months. Stretched dollaraimed at small businesses offering ICHRA to employees, closed with a pre-seed round of $1.6 million in September.
Getting higher
Overall, while most of us do not like paying out of pocket for health care expenses, especially when we’re already paying huge sums for insurance, there are some encouraging lessons to be learned from recent trend lines.
One is that employers are given more tools to make premiums and help employees navigate insurance in a world of high deductibles and higher out-of-pocket expenses. In addition to contributing to the cost of the policy, employers can even fund an FSA to cover out-of-pocket expenses.
Another issue is that if AI tools work well and providers make price transparency a priority, startups could help alleviate one of the biggest complaints about self-directed care: price anxiety. Before opening their wallet, consumers will greatly appreciate the opportunity to ascertain from the starting how much a consultation, examination or treatment will cost.