Dear Digital Health Startup - PART 3 on Employer Sponsored Insurance

And we are back to Part 3 on our series of "Unpacking Employer Sponsored Health Insurance". As a reminder, in Part 1 we talked about how Employers are less interested in reducing costs than what people typically think. In Part 2 we delved into the variance between employers, and how that can be a critical factor in assessing Go-to-Market strategies.

Now we turn to another misconception that many founders still cling to: frequently founders believe employers are waiting for your point solution to solve of their benefits needs, when in reality Employers are less interested in your solution than you think...

But first some relevant background:

Even with emerging trends like D2C healthcare services, employer-sponsored health coverage is still by a large factor the main way Americans access care, and will undoubtedly remain so, and there is literally a trillion dollars wrapped up in it.

Now let's dig in...

Part 3: Employers don’t know what to do with your widget

Employers are inundated with outreach from startups, to the point where they don’t have the capacity to assess each one individually. As a recent WSJ correctly pointed out, benefits managers are generally curious about these solutions (see Part 1), but there are just too many overlapping point solutions. There is scant interest in, or ability to adopt, yet another widget. For example, some estimate that there are allegedly nearly 1000 mental health startups… How is a benefits manager supposed to assess all of them? As succinctly stated in the WSJ article: "If you’re a one-trick pony, it’s easy to replace you".

You tell me which of these your employer should use and why...

This presents a major conundrum... How is a benefit manager supposed to choose your startup when there are literally dozens of seemingly similar startups vying for the extremely limited attention of the same benefit manager?

In addition, times have changed and benefit managers have quickly realized that a PMPM deal doesn't make sense when a large portion of their employers are not using the product.

In order to crack this nut, startups need to think more robustly across a number of different angles. 

First, founders should think about how to make their partnerships more robust. The world is filled with benefits brokers and consultants who are both gatekeepers, champions, and partners. Entities like Aon, Mercer, Lockton, OneDigital, and dozens of others, can help make or break a new startup. This also means exploring potential partnerships with insurers, TPAs (third party administrators), and even larger, better funded startups.

Typically large consulting houses (Aon, Mercer, etc...) will work with the larger Fortune 500 type of companies, and can be key lynchpins in a startups GtM strategy. For example, last year Aon bundled together a number of startups to offer major employers a full package for musculoskeletal care.

Another example is Hinge Health partnering with Willis Towers Watson (again in the MSK space). Partnering with TPAs or benefits managers is another interesting avenue to explore.

Secondly, founders can think about making the product more robust:

• Address one specific clinical indication, but building out complete ownership of that indication for all stakeholders, not just employers
• Addressing one use case but for a broader family of associated indications.
• Build out a platform to address all of the touch points for a specific clinical indication
• Integrate with an existing solution to form a broader suite of product offering
• Or all of the above… 

Finally, founders should make sure their validation is more robust. This means doing the necessary work to show you can actually do what you claim. It is important to note here that validation is not just clinical/medical validation. Validation, from the perspective of employers, can also be demonstrated by user engagement and retention (see above note on PMPM models). Economic validation is also a major plus, and models where the product/service takes on a portion of the risk (or all of it), will take precedence.

(N.B. – demonstrating validation is a whole separate article…)   

To Summarize

Employers are swamped with offerings from startups, to the point where they don't know where to begin assessing options. In order to stand out, founders should think about about their Go-to-Market strategies via three unique, and equally important pathways: Building potentially strategic partnerships, ownership of a specific product space, and proving validation.

All of these pathways are challenging, but trying to sell a widget directly to the employee benefits manager of an F500 company is going to be more challenging.