WSJ: Clover Health eyes $120M to join the unicorns

Dive Brief:

  • Greenoaks Capital Management is prepping to lead a new round of funding to raise $120 million for Clover Health, which would bring the company’s valuation to more than $1 billion, The Wall Street Journal reported.

  • Clover Health, which sells Medicare Advantage plans in New Jersey, has grown its membership from approximately 16,000 in 2016 to more than 25,000 in January.

  • Clover Health is one of several several startups that has entered the health insurance business in recent years with hopes to transform care through technology.

Dive Insight:

As has occurred in other industries, startups in the healthcare space have raised a lot of money without much evidence that they can deliver results. Investors committed more than $1.3 billion to startup health insurers in 2015 alone, according to CB Insights.

Startup health insurers face numerous obstacles as they attempt to grow their businesses. There is a complex regulatory framework that they need to abide by and significant groundwork needs to be laid before they can even begin selling plans in various health insurance markets. Despite these challenges, startups like Clover Health believe they can leverage technology to improve patient experiences and keep costs low.

It is not clear that these startups will succeed in their efforts to transform health insurance. Oscar Health, which entered the individual insurance market several years ago, covered 135,000 patients last year, but lost more than $200 million in 2016. Despite early challenges, the startup has expressed confidence in its ability to offer a better product than legacy payers.

Clover Health is somewhat insulated from the challenges that Oscar has encountered. While Oscar has had to deal with volatility on Affordable Care Act insurance exchanges and renewed debate over healthcare reform (it recently opened a primary care clinic in Brooklyn), Clover operates solely in the Medicare Advantage market, which is unlikely to be significantly affected by potential legislation.

Investors will be watching as startups continue to expand into new markets and tweak their business models. 

Filed Under: Payer Finance