For Venture Capital Investors: The Employee Benefits Marketplace

Are you considering a healthcare innovation for the self-insured employer marketplace? Do you want a handle on likelihood of success in this lucrative market? Below are some of the questions and issues that need to be considered.

Besides the employer market, healthcare innovations often target other marketplaces including:

1) Direct to consumer; 2) Healthplans and TPAs; 3) Healthcare Delivery and Providers

Whereas many healthcare innovations have multiple markets- it is important to be sure that your solution is something that employers will want.

Is this something employers would want?

Determining whether employers would want the solution you are considering is the first and most vital step. If “no one else” is doing this is your calling card- think carefully about why that is.

If you’re thinking that the healthcare innovation that you’re building (or investing in) might be successful in the employer market, ask yourself these buyer questions about your solution:

• Can you show us that it will lower medical costs?
• Will it improve access to care for our members?
• Will our members receive better quality of care?
• Can you demonstrate and measure improved health outcomes for participants?
• Will our plan members have a seamless and positive user experience?
• How will you report and update us on your activity and progress?
• How will you work with our other vendors?
• Will it improve workforce engagement and productivity?
• Is this something that will improve employee satisfaction and loyalty?
• Is this something that will help us attract the talent that we need?

And if you’re thinking “this is a lot more complex and nuanced than we realized” – welcome to the self-funded employer marketplace. Let’s look at some of the value drivers for success with self-funded employers.

What is the value proposition for employers?

The value proposition must be real and resonate with the right employers. It must be as credible as it is compelling. Reduction of medical costs often leads the pack but can be remarkably hard to prove. Just because your solution touches an expensive medical condition doesn’t mean it will meaningfully mitigate unnecessary medical costs.

The outcomes that employers will most commonly look for are: 1) best health outcomes; 2) member satisfaction with the service; 3) medical costs.

Proving your worth means proving your return on investment (ROI) or value on investment (VOI). Employer decision-makers must easily believe in the return or value that a solution delivers. In the end, there are five dimensions of value to consider:

Lower medical costs: Cost is king, but lowering medical costs is tricky business. Your approach to demonstrating cost savings should never be at the expense of clinical outcomes. It is important to provide the same rigor to demonstrating the health economics outcome of your solution that you would provide an insurance company or provider organization.

Great example: “We have a digital therapeutics solution that reduces morbidity of Inflammatory Bowel Disease and reduces spending on costly specialty medicines like Humira and Entyvio for those conditions.”

Better outcomes: For many healthcare innovations (think digital health or virtual care) the ability to significantly extend medical feedback and intervention provides a compelling health outcomes story.

Great example: “Our diabetes management program both delays progression of disease and slows progression of treatment options for Type 2 Diabetic program participants (when compared to a control cohort of Type 2 Diabetics).”

Improved performance and productivity: Direct costs for lost productivity focus on lost workdays. If there is a way to credibly demonstrate how your innovation can do this- it’s worth pursuing. It is also fair game to cite indirect costs for lost productivity- presenteeism and reduced engagement or performance. Impact on indirect costs of productivity is helpful to build the case for your solution.

Great example: “Our Back and Neck Virtual Care and Digital Health Solution reduces lost workdays and improves on the job performance for blue collar workers with medium and heavy job requirements.”

Employee loyalty and retention: Does your healthcare solution go above and beyond what an employee would expect for themselves and their family? Is this something that “no one else who works and gets benefits” can get? Does your innovation break through the noise and make employees appreciate that they work for an employer who cares about them?

Great example: “Our family support benefit provides employees and their family members concierge-level services when a family member is in the hospital for an extended period of time.”

Employee attraction: Does this healthcare innovation have enough allure to use as a reason why a prospective employee might come to work for this company?

Great example: “Our fertility benefits solution for your plan members is a great way to show prospective technical and professional talent that yours is a great company to work for.”

Playing in the Sandbox

Healthcare Innovators need to show that they understand their customer. It is critical that you can demonstrate how your solution addresses each of the following:

Member experience: Employer decision-makers will be looking for a customer-focused, seamless member experience. Folks in HR are always happy to get rave reviews. They hate complaints and fire drills. You need to show them that you understand that and that you can deliver on your promises for service.

Employer experience: What does your account management look like? Who will be servicing the employer’s account? What kind of reporting can you provide? Be valuable and accessible.

Coordination: There has been a proliferation of third-party vendors, point solutions and carve-outs in this space and self-funded employers manage an ecosphere of third-party vendors. There are minimum administrative requirements your solution must be able to demonstrate. Employees and their families that make up an employer’s membership are the customers, here. Good service is table stakes.

Integration: In some cases, an employer will be looking for how you can integrate with what the carrier is doing, what the treating provider is doing, or what some of the other third-party vendors (i.e., member navigation, patient advocacy) are doing.

Is the value proposition strong enough to warrant move or change?

The challenge for any “point solution” is the friction produced by moving those services from where the currently are (usually the carrier or the TPA) to the new solutions vendor. Is the solution additive or is it replacing something that is currently in place? What’s involved in implementation? Innovators need to be prepared to describe in detail what that process looks like: what will customer onboarding look like; what will be communicated to the carrier or TPA; what is the user experience; etc.

Employer decision-makers are busy. Very busy. Unless the problem you are solving has already been identified as a priority- it is easier to pass on new solutions that just make something better.

Who are the competitors in the marketplace?

There is always a competitor, even when the strongest competitor is “do nothing.” In fact, it may be argued that FRICTION is the biggest challenge facing most startups and market entrants. ?

Sometimes the strongest competitor is the incumbent solution. If it’s not particularly broken- there’s no need to fix it.

It is important that your value proposition sufficiently differentiated from the competition. “How are you better?” Your competition may not look like you. Your chief competition might have a broader approach. It might be embedded in a different approach.

Ask potential clients who they think is your competition. Their answers will be very telling.

What type of employers would want this?

Not all employers are the same. Larger employers buy very differently than medium and smaller ones. Companies competing for talent usually want different benefits solutions than companies with largely hourly workforces and high turnover rates. Employers with geographically distributed populations have different needs and requirements than those with workforces clustered in one or two locations.

The farther along the healthcare solution has gone to segment employers by size, region, industry or other variables, the more it is showing how it is thinking through practical sales strategies for the marketplace.

Bottom line: This is an enormous and potentially lucrative market that many healthcare innovators should consider. It has its rules and priorities. Understanding how your solution fits into the needs of key stakeholders and decision-makers in this market will help the chances of success.

Ron Leopold, MD, MBA, MPH

Physician Consultant and Advisor

Due Diligence / Product Development / Business Development