Serial entrepreneur Abir Sen wants to revolutionize how employers buy health insurance for their workers as well as provide more control and choice to employees in how they choose health benefits.
Sen is the founder and CEO of Minneapolis, Minnesota startup Bloom Health. The startup announced last week that it has signed up Blue Cross Blue Shield of Michigan, the largest insurer in that state, and Medica, a Minneapolis health plan, to provide health benefits through Bloom’s newly launched private health exchange.
The innovative company, which marries a technological, consumer-friendly interactive platform to the onerous process of buying health insurance, generated a bit of national buzz when it described itself as launching the nation’s first private exchanges. However, the concept of private health exchanges is not new and Bloom is not the only company to create a marketplace of health plans where people can go and shop for the most appropriate coverage.
But Bloom’s platform is novel and new in the way it provides a technological platform that allows a health insurer to bring its own defined contribution plan to the market. Sen also believes that the customer experience — be it employers or workers — in using the Bloom platform will help fulfill its ambition of being a national private exchange.
In a year and a half since the company was founded, the startup with 50 full-time employees has signed up more than 50 employers. Those employers have chosen to jettison the old, expensive model of providing a few plans to employees and having to administer those benefits, in favor of Bloom’s consumer/employee-driven healthcare model.
“Employers are increasingly saying the administrative burden of healthcare is too much and how did we end up where we are in the business of healthcare,” Sen said, noting that with Bloom’s, private exchange helps businesses becomethe co-financier of their employees benefits versus the decision maker.
An expert on managed healthcare agrees.
“The ability to lower overall health insurance expenditure while providing more choice to employees so they can select benefits that best meet their personal needs,” is what is attractive to the employers, said Richard Birhanzel, senior executive at Accenture Health, in an email.
A small, regional private exchange in New York in existence since 1999 agreed that the concept of health exchange will “catch on” amongst employers.
“Many exchanges, regardless of their public or private status, will likely consider an “active purchaser” strategy whereby they attempt to leverage their enrolled population to garner higher-value plans for their members,” said Shawn Nowicki, director of health policy at HealthPass New York. And indeed, some exchanges may be able to negotiate lower cost plans using such an approach.
This is how Bloom’s private exchange works:
An employer decides on a fixed dollar amount it wants to spend on each employee’s health coverage and hands out that money to the worker. Each employee then goes to Bloom and answers some questions about their financial condition, appetite for risk and their health profile. Then Bloom’s technology uses a proprietary algorithm to recommend some health plans that the system decides would be most suitable. The recommendation tool is simple and easy to navigate. (Scroll below to see demo). Alternatively, employees can also browse through each plan available on Bloom’s website to make a selection.
If the employee doesn’t use up all the money that the employer allocated, the money can be rolled over to the next year, Sen said, or tied to a debit card for healthcare related expenses. Employers pay a fee-per-member each month to Bloom in exchange for the service. The startup also makes money in the form of a commission from the insurer whose plan an employee chooses.
Sen said that about 20 percent of its employer customers are those who previously weren’t able to offer benefits to their employees – these are small companies with around 50 employees.
Initially, employers were coming directly to Bloom (the employers are based in Minnesota, Michigan and Indiana). But now that Medica and Blue Cross Blue Shield of Michigan have created My Plan by Medica and Glidepath, the two insurers can market their individualized plans to their employer customers. Bloom is also talking with national employers and national carriers.Sen declined to comment on whether he is talking with insurance giant UnitedHealth Group to which he sold the first startup he co-founded — Definity Health — for $300 million.
Sen believes that based on a year-and-a-half track record, Bloom Health is managing the three risks that startups face well. The financing risk has been dealt with having raised $12.5 million from investors that include Blue Cross Blue Shield Venture Fund and Sandbox Industries. Adoption risk and execution risk are two that are “still on the table,” but Sen is heartened by the number of employers the company has signed up and customer satisfaction numbers key to a company like Bloom with a big consumer focus.
“We’re significantly ahead of where we thought we would be in a year and a half,” Sen said.