The latest healthcare and health insurance reform proposal collapsed in Washington this week, about when the Minneapolis health benefits company Gravie Inc. announced its latest venture capital financing round.
Who would invest in a company like Gravie in the chaotic healthcare environment of 2017? Somebody who really knows the score in how health insurance should be delivered, that’s who.
This $14.1 million round was led by a new investor to Gravie, General Electric Co.’s venture affiliate. As is common in venture capital deals, previous investors invested some of the $14.1 million, too, and the total capital invested is more than $44 million since inception.
The GE Ventures investment was led by senior managing director Lisa Suennen, who has a long track record in healthcare venture capital. That included work with the firm that funded one early health insurance success story here in the Twin Cities called Definity Health — where she met Gravie co-founder and CEO Abir Sen.
Minneapolis-based Gravie is still just a small company, of course, looking after about 65,000 people in the benefits plans of more than 900 employers. But it’s well worth paying attention to, as momentum gathers in a transition in the way employers provide benefits to their staff, pushing decisions out of the human resources office and into the hands of employees.
“There is an opportunity to create a Fortune 500 company in this space,” Sen said.
Sen, along with co-founders Marek Ciolko and Jill Prevost, had worked together on previous health insurance technology start-ups, including Bloom Health. Health insurance is both messy and heavily regulated, but Sen thinks of Gravie not as a seller of health insurance but as a customer service provider, one that is trying to make it easier for employees to get the benefit package that suits them best.
More than half of Americans still get their health insurance through an employer, and it’s still a costly hassle for employers and employees. Most big employers have been trying to control cost increases in part by self-insuring, meaning they have basically created a mini insurance company in their human resources departments, although they usually hire an outside insurance company to manage their plans.
Smaller employers, ones with a total staff that’s counted in the tens or hundreds rather than the thousands, usually pick fully insured plans for their employees’ health coverage.
Small employers don’t usually have much in-house real benefits policy expertise, one reason an owner or CEO would be open to hearing different ideas about how to deliver benefits better. And so Gravie from the very beginning targeted smaller employers.
The basic Gravie pitch to the boss is that the workers will be much happier with a benefits package if they have selected it for themselves.
Employee benefits are so complex, however, that giving a person the choice only really works if there is someone to guide them through the process. That help can come from an online tool, as Gravie provides, or in a trusted voice over the phone, both during the enrollment phase and throughout the year as questions pop up.
There are lots of people in the employer-sponsored health plan market that provide services now, Sen said. They are just not necessarily being paid to help an individual employee decide what’s best. An insurance broker retained to help the employer pick health insurance options collects commissions, and even the best-intentioned could subtly tip the playing field toward the insurance company that’s about to pay a higher commission based on sales volume.
Gravie is a licensed broker that could get a commission, too, but Gravie customer advisers don’t work for a commission for selling insurance plans. They won’t even know if there is one. “Maybe option B has no commission,” Sen said. “We don’t care.”
The Gravie pitch to employers is broader than health benefits, too, as other benefits that workers want should be selected on an individual basis, too. The easiest thing to do is just offer a total benefits contribution, leaving it up to the employees to use the budget as they see fit.
That’s called a defined contribution system, when the employer decides how much benefits money it should provide to attract and keep employees. That’s a switch from a defined benefit system, when the company provided pretty much the same benefit, a health plan, to everyone.
It’s a little like how 401(k) style retirement savings plans with an employer match supplanted traditional pension plans.
Four years in, Sen said, the company’s growth is on track. The capital just raised from the last round should be a last it needs as the company is now approaching profitability. Yet just since the day this conversation took place in Gravie’s Minneapolis offices, expectations for coming changes in federal healthcare policy got upended once again.
Sen said Gravie has encountered “every possible headwind,” but the basic business idea of making it very easy to tailor individual benefits plans seems just as valid as it ever did.
But healthcare policy uncertainty is having an effect on health benefits managers, said Dorsey & Whitney attorney Bob Seng, a co-author of the American Benefits Council’s latest long-term policy plan.
Calling it a “malaise,” Seng said corporate executives are so worn down by continuing chaos in federal healthcare policy that they are not thinking much about anything new.
Yet Seng said he pays close attention to companies like Gravie, too.
“Employers are sort of in holding patterns, because they don’t know what the hell’s going to happen,” Seng said. “But I guarantee you that long term ... employers will be looking at defined contribution health.”