When Senator and Democratic presidential candidate Bernie Sanders last week asked Twitter users to reveal their most absurd medical bill, thousands of comments poured in.

One poster said she was billed $600 for her son who had died at birth.

“As he died almost immediately he didn’t get enrolled in my insurance plan, so I got the bill.  From the hospital where I was a doctor,” she wrote.

With healthcare costs soaring and demand for more consumer-friendly and reasonably-priced options climbing, health insurance issues have dominated the 2020 presidential campaign.

 Known for its opacity, complexity and dated technology, the industry also creates opportunities for insurtechs — startups seeking to reimagine how consumers get health coverage. Their number has tripled since 2010 to more than 650, “posing a significant threat to incumbent players,” according to Bain & Co.

The number of uninsured Americans rose for the first time last year since Obamacare was enacted, to 27.5 million, partly due to political efforts to discourage immigrants from using public benefits like Medicaid. The U.S. spends more per capita on healthcare than other developed nations, yet life expectancy is shorter, and while the rate of maternal and infant death is higher. 

An Oscar for Location

New York-based insurtech Oscar Health last month announced its “biggest expansion ever,” with plans to expand the company’s services to 15 states, as it seeks to fix the country’s “broken healthcare” through more transparent, personalized services.

The startup, which mainly sells individual coverage under Obamacare, known formally as the Affordable Care Act, says its technology and data science pinpoints more cost-effective, higher-value hospitals and physicians, helping members save an average 10% on healthcare expenses.

Oscar’s services eliminate the middlemen that remove competition and are a big reason healthcare costs have risen so much, Mario Schlosser, the CEO of Oscar Health, told Wired last year.

Healthcare costs have soared. Last year, an average family of four with an employer plan spent $7,726 on premiums and cost sharing, a whopping 67% more compared to 2008, according to a study from the Kaiser Family Foundation.

Insurtechs are seeking opportunities in the industry’s challenges, from claims processing to consumer experience, and eliminating the constraints of legacy technology, says Bill Fox, chief strategist for global healthcare, life sciences, and insurance at MarkLogic.

“They want to make it a low-ball, customer-centric, omni-channel, frictionless experience,” said Fox. “If I can sign someone up for life insurance, or find a new doctor in 15 minutes online instead of it being a stressful, clunky, paper-and-phone call experience, I’m going to take over an industry.”

Chicago-based Advocatia Solutions, for example, automates the screening and application process for uninsured hospital patients, eliminating cumbersome paperwork. The startup’s benefit-sharing platform links to Medicaid and other programs in over 20 states.

“People just don’t understand that they are eligible, and then there’s a lot of barriers for them,” Laura Robbins, co-founder and COO of Advocatia, told Karma. “We work with hospitals to help their uninsured and underinsured navigate what programs they are eligible for and help them with that enrollment”

Yet insurtech adoption can be slow because of cultural disparity between insurers and healthcare providers, according to an Accenture report.

“Startups with little or no prior knowledge of the insurance industry struggle to quickly demonstrate their value proposition and make tangible impacts,” Renaud Million, co-founder & CEO of SPIXII, said in the report. “Another significant challenge is recruiting people who have that ‘startup agile’ spirit but who can also cope with the often slow pace of the insurance industry.”

Record Deals

Deals involving U.S.-based insurtechs doubled last year to a record $2 billion, as investors poured money into startups like Oscar and Bright Health, who are taking on some of the largest insurance companies, including UnitedHealth Group and CVS Health.

The incumbents are paying attention. In the past few years venture capital arms of insurers including Liberty Mutual, American Family Insurance, Aflac and Nationwide have made investments in their own disruptive ventures. Meanwhile, the German insurer Allianz has more than doubled  its digital investment unit Allianz X to $1.1 billion. 
The vast majority of insurtechs don’t sell insurance policies. Only 20 of 655 startups worldwide are payers, while the rest provide agents and brokers with hardware, software and analytics, according to a Bain survey. Another large category is digital marketplaces, which offer consumers an easy way to compare coverage and prices.

Software provider Picwell, for example, uses AI technology and predictive analytics to help employees select the best healthcare plans, based on current and future costs as well as personal preferences for risk aversion.

“Individual consumers do not vote or buy in their best economic self-interest so they tend to make bad choices,” said Matthew Sydney, president and CEO of Picwell. “What we are trying to do is get people the optimal plans, that leads to better management of expectations and ultimately is saving money for them and their families.”