Investors are hungry to support startups looking to challenge incumbent health plans in the red-hot Medicare Advantage space
The latest example is San Francisco-based company Clover Health raising another $500 million led by existing investor Greenoaks Capital, even after a series of missteps a few years back that culminated in co-founder and former CTO Kris Gale stepping down from his role.
The new funding amount was initially reported by TechCrunch and independently verified by MedCity News.
As part of the financing, Clover Health CTO Andrew Toy has been promoted to the position of CTO and president and now sits on the company’s board of directors.
Clover Health – like its rivals in the space – has pursued a narrow network strategy that focuses on partnerships with a select group of providers and the development of a strong data infrastructure to more effectively and efficiently route care.
Clover CEO Vivek Garipalli touted the company’s 35 percent membership growth over the past year as well as well as their machine learning models which has an 85 percent accuracy in identifying members at risk of hospitalization in the next 28 days, in a blog announcing the new funding round.
Last year, the company launched an in-home primary care service informed by genomic testing that is meant to take care of their highest risk (and most expensive) members.
Clover Health was originally founded in 2012 and has raised around $925 million from investors including Google Ventures, Sequoia Capital and First Round Capital. Their last $130 million Series D financing round valued the company at $1.2 billion.
Another insuretech company, New York-based Oscar Health received a $375 million investment from Google parent company Alphabet last year to help them enter the Medicare Advantage market.
Business interest in Medicare Advantage has been booming, driven by the demographic reality of the country’s aging population.
Medicare Advantage enrollment in 2018 topped 20 million and has continued to increase year-over-year. What’s more is that the sheer number of options available to beneficiaries have also been exploding, with around 3,700 Medicare Advantage plan choices in 2019.
By 2025, Medicare Advantage is projected to grow to more than $500 billion in annual revenue and more than 38 million members.
It’s not only startups that see the value in picking up that expanding market share. Traditional health plans like Cigna, UnitedHealthcare and Aetna have seen Medicare Advantage as major potential growth avenues.
The largest player in the space, insurer UnitedHealthcare has nearly 5 million Medicare Advantage enrollees.
Clover, by contrast, has only around 40,000 members across New Jersey, Arizona, Pennsylvania, South Carolina, Texas, Tennessee and Georgia.
The gap between those numbers comes with a nod to the difficulty of being an upstart payer organization and an acknowledgement that in order to find success Clover needs to be in the business for the long-haul.
“The Medicare Advantage space, however, is not easy – there are enormous barriers to entry,” Garipalli wrote in his blog post.
“Clover is committed to taking a long-term view – decades long – because we know healthcare is not for the faint of heart. This kind of determination is essential for making fundamental, positive change for patients.”
Photo: abluecup, Getty Images