$80 million dollars. That’s just the beginning for Bright Health, a new technology-driven insurance company for consumers freshly formed in Minnesota with plans to launch next year. We spoke with cofounder and CEO Bob Sheehy to discuss:
What has your background been in the health care industry that led to Bright Health?
My health care experience began back in the early 80’s with a small physician led startup health plan formed in Colorado Springs. That was eventually acquired in 1986 by UnitedHealthcare and I spent the next few decades of my career there, moving up the ladder.
I moved to Minnesota with my family in 1998 and have been around ever since. It was a great run with UnitedHealthcare, ultimately I became the CEO in 2000 before retiring in 2009.
After that, I got into the venture capital / private equity world with Cimarron Healthcare Capital, Genstar Capital, and Flare Capital Partners. My expertise and focus was on healthcare technology companies — investing and advising.
How do you know your new partners Kyle Rolfing and Tom Valdivia?
I knew Kyle from Definity Health, a company that he cofounded that was eventually acquired by UnitedHealth in 2004 for ~$300m. We had stayed in touch over the years since then, I had been following the formation of RedBrick, his next startup.
I knew Tom through Carol Corp, where he was a founder and the president when Optum purchased it in October 2011.
When were the first conversation around Bright Health?
Early last year, I got the sense that Kyle was thinking about starting another company, a technology-driven health plan. At that time I was also thinking about it, and so we joined forces and recurited Tom.
We thought: let’s build a health plan for consumers that is for individuals first, not focused on the employer groups but the people, their immediate family, and their unique needs.
Do you see Bright Health as a marketplace or platform of sorts, vs an entirely independent standalone company?
The latter..we’re a health insurance alternative and one of the ways we’ll be distributed is through the public and private exchanges.
Why build an entirely new insurance company, brand, and plan from scratch?
The size of the opportunity! There probably hasn’t been a chance like this in 30 years because of the ACA and the consumer-driven marketplace growth. The barrier to entry has been lowered and now a company like ours with the right strategy has a real chance to get into the mix — to compete and win.
Furthermore, there is a lot of obscurity in the marketplace still, about what is working and what isn’t. I like that there’s a defined population to be responsible for, because by using the right technology, the health of that base can be clearer now than ever.
What do you see as your competitive advantage vs. the existing options people have to obtain insurance?
Three main ways.
First, we’ll be working exclusively with health system partners to achieve the premium pricing we are seeking. This creates a very collaborative approach with these partners to optimize the care and deeply align incentives, which when integrated, will drive costs down.
Second, because we’re focused exclusvely on the consumer market, both medicare and non (under 65), this will provide us with the means of ensuring that we are doing right by each customer, the end user and most important stakeholder.
Lastly, and in nor particular order, by using technology to ensure a simplified, measurable, personalized mobile exprience.
And what are some examples or opportunities that you see as it relates to technology in health care today?
We’re in the process of discovering that right now, by talking with people to determine what kind of experiences would be important to them.
Both customers and administrators — everything from how a plan is percieved, selected, used, find a doctor, schedule an appointment, receive a prescription, and make a claim. Both sides of the equation in this experience.
Assuming you’re able to achieve that sense of technologic utopia — how will people know about Bright Health relative to other established and trusted insurers, including your former employer?
People will always be seeking more affordable plans with a higher quality experience. If we’re able to achieve these two things, then they will determine our success. Back to our differentiation — working very closely with the healthcare delivery side, how its provided, coordinated, and managed — will be a completely new and different experience for them.
Ultimately, better healthcare at a lower cost will win the long run.
What does success look like?
Healthier people. Membership enrollment, growth and retention. Economic upside.
At the end of year one operations, I’d like us to be poised to grow into a second marketplace.
How do you define marketplace?
It’s a geographic one, not necessarily defined by state lines, more of a metropolitan statistical area.
Do you see Bright Health doing business in all 50 states some day?
We’re pursuing a more localized approach with one market launch in 2017 and 3-5 other geographic markets over the following 2-5 years.
What will your first market be?
We’re not announcing that yet.
Moving onto the money — why $80 — how was that figure determined?
It’s the right figure to get us into the market for what is a multi-billion dollar opportunity.
Research, technology development, support, market launch are all supported with this capital.
There were three investors disclosed in the round, how were they chosen?
Flare was involved with the initial seed capital. From there, the response to our plan was quite strong…we met with many individually; we had a great connection with Mohamad Makhzoumi at NEA and Steve Kraus with Bessemer Venture Partner. Obviously the economics play their part, but a lot of it is gut. We have two of the best VC firms in the world backing Bright Health.
When did Flare make that initial seed investment?
Around October, 2015
And if all goes according to plan, do you see this as the first in a successive round of equity capitalization?
Yes, I think we’ll have subsequent rounds.
When it comes to technology and talent, critical ingredients to have on a foundational in this scenario, do you buy it or build it?
No question the team will be of foremost importance, for they will lend their talents and experience to develop our IP.
I think the idea of bringing it in house or building it outside, it’s not a clear answer yet. We’d like to direct as much of that technology design in house with our own people, and we’re in the process of building our team already.
Have you already started developing that technology?
We’re in the early design/spec stage.
Do you have CTO/VP engineering, or tech lead already?
We’re not ready to disclose that.
What do you say to all the consulting and recruiting firms that are going to come knocking on your door?
Call Kyle Rolfing…
How many employees does Bright Health claim already?
How does that break down?
Focused mostly on health plan operations so far, truly the nuts and bolts of the business.
What does the plan call for in headcount through 2016 and so on?
50 people by the end of this year and 65-75 by end of 2017.
Do you have any parting thoughts?
We’re excited to be here and provide better health care coverage for individuals by focusing in on the relatinships they have with their care providers.