Commentary: The biggest story this month in health benefits comes down to one word: consolidation. Whether its the Aetna-Humana merger, CVS buying Target's pharmacies, or Willis and Towers Watson combining forces mass consolidation has benefits leaders and consumers alike wondering if this latest wave of consolidation will add up to less choice in the market. While some point out the potential grave results of these mega-mergers, others are focused on a possible silver lining: with less choice provided by big (and bigger) players, has the time finally come for health care startups to take stage?
History shares good lessons on this topic. In the past, industry consolidation has made it more difficult for large incumbents to innovate, and often reduced incentives to invest heavily in new products and solutions. As these large-scale mergers and acquisitions go through, they will likely be focused on the business of integrating their teams and re-arranging their processes in an effort to achieve better operating efficiency.
But when it comes to offerings that benefit consumers and employers, its natural for many to fear that fewer players will equal less choice in health plans, less differentiation and innovation in every area from member experience to productivity and management tools, and less willingness to accommodate employer requests from data access to customization.
But, theres good news. While these big mergers are grabbing our attention, there is an interesting trend happening at the other end of the market. In the last few years, health care startups have received an ever-increasing level of investment, suggesting that the days of innovation in health care arent over theyre just beginning. The numbers speak for themselves health care investing hit an all time high in the first quarter of this year, with U.S. medical startups raising a record $3.9 billion in venture capital. These startups arent just raising capital they are making huge inroads with strategic employers in a variety of areas helping companies reduce health care costs, better manage diseases in their populations and more effectively engage their people around health benefits that make an impact.
Considering employers control the majority of the conversation by paying 93% of private health insurance premiums, health startups have found success in developing increasingly attractive offerings for benefits leaders, falling in line with the bullish investing climate. In 2015, its no longer unusual to hear that a Fortune 500 company has trusted a two year-old Silicon Valley startup with the health of their employees.
This trend is why benefits leaders can breathe a sigh of relief. While the big players get bigger, theyre also opening up opportunities for, and partnerships with, the newest entrants to ensure a better experience for consumers and employers alike. A great example of this is visible in the rapidly changing market around the consumer experience of health care. Its here that tech-enabled health care companies are already gaining traction and driving results for customers.
Whether its One Medical Group making every doctors visit a spa-like experience, Omada Health driving measurable impact in preventing diseases like diabetes, or our team at Collective Health rebuilding the health benefits experience to make managing every aspect of your health plan easier and faster, startups today are shifting the health care conversation from consolidating payers and providers back to people they take care of. These young and nimble companies have the support from employers to change the future of health benefits, and are building new products and experiences that drive American health care forward.
So, theres a silver lining. As you consider your 2016 health benefits strategy, you can be confident that the next chapter of health benefits is just beginning. The leaders in defining how we manage our health will be tech companies that can be bold and nimble enough to rethink the status quo, and the large players that open paths for partnerships and joint innovation. As the incumbents consolidate, these new players are becoming an increasingly viable alternative for the benefits leader that wants a better experience for themselves and their members.
Rajaie Batniji, MD, DPhil, is chief health officer with Collective Health, a technology firm offering a cloud-based self-insurance platform for employers.
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