Behind the Term Sheet: Sidecar Health’s $165M Series D

Simon Wu
Cathay Innovation
Published in
5 min readJun 27, 2024

How this LA based insurtech continues to revolutionize healthcare access with a big entrance in the jumbo employer market

By: Simon Wu & Elijah Yi, edited by Jaclyn Hartnett, Cathay Innovation

A surprise $4,179 bill for a 45-minute ER visit that turned out to be a false alarm — this was the topic of a recent viral X post. The real kicker was the cash price: $685 in total.

It’s a tale as old as time, highlighting the complete lack of transparency and incentives alignment that continues to plague the US healthcare system.

Navigating traditional healthcare insurance in the US is difficult for all parties (not just patients):

  • Patients are affected by high out-of-pocket spend and access due to limited insurance coverage.
  • Providers have challenges with administrative burden due to the complex requirements for insurance reimbursement.
  • Employers, who often bear the cost, struggle with rising premiums for high quality coverage.
  • Health plans face significant difficulties managing medical loss ratios.

This is exactly what prompted our investment in Sidecar Health, tackling these systemic challenges with a transformative (and transparent) insurance model that rejects the industry’s status quo and aligns incentives across parties. The approach is simple: members can access care from any provider, with the knowledge of costs and coverage in advance, and pay upfront (via Sidecar Health’s VISA benefit card), at the time of service.

We initially invested in the company back in 2020, leading its $20M Series B, followed by another $125M round in 2021. Since then, Sidecar Health has proven its innovative health insurance model, from individuals to employers, and now embarks on a new chapter with a $165M Series D led by Koch Disruptive Technologies and joined by a major state employee pension fund, GreatPoint Ventures, Drive Capital, Bond Capital, Duke University, Menlo Ventures and us at Cathay Innovation.

As proud early Sidecar Health investors, we’d like to reaffirm our conviction in this transformative insurtech bringing greater transparency and access to healthcare. Here’s why…

What’s Working?

The Model:

  • Sidecar Health uniquely addresses systemic pain points in healthcare. No prior authorizations, no mandated network, and no delayed payment to providers allows the user experience to be less restrictive and more cost effective.
  • Through the easy to use Sidecar Health branded card and mobile app, there is complete transparency into benefits and local pricing. This empowers consumers and promotes a free-market approach that aligns incentives for providers, patients and employers — ensuring that healthcare is more accessible and affordable.

The Employer Market:

  • Sidecar Health initially offered plans to individuals without access to employer-sponsored insurance, serving a large and underserved portion of the population that consists of roughly 6% of the US.
  • But the bulk of the market lies elsewhere — most Americans are covered by either government programs (i.e. Medicare & Medicaid) or employers. Roughly half of Americans receive employer-sponsored coverage, representing >$1T annual spend within the healthcare ecosystem.
  • After proving its model with individuals, Sidecar Health has since shifted focus towards the employer market to bring transparent healthcare to the masses. And it’s bringing a differentiated solution to the space — providing wider coverage at prices 20% below those of traditional employer insurance plans, a refreshing change for companies facing regular rate hikes.

The Traction:

  • Despite being a newcomer in the insurance industry, Sidecar Health has found product-market fit with particular success in Ohio and Georgia. Employers across various sectors, including manufacturing, food & beverage, transportation, healthcare, and retail, are making the switch to Sidecar Health.
  • It’s demonstrated impressive customer retention by providing an exceptional product and patient experience. This retention is further enhanced by offering first-dollar coverage on commonly utilized services.
  • It’s driving incentive alignment with downstream behavioral changes. When members select care that is below their allotted benefit amount, the savings are shared back to patients in the form of cash back. This has given patients the ability to make informed decisions on coverage for services. Examples: reduced ER visits, increased use of cost-effective centers such as ASCs, and filled prescriptions at more affordable pharmacies.

What’s Next?

With this new round of funding, Sidecar Health is equipped to expand its offerings in existing states and launch its employer business in Florida.

The introduction of Koch Industries as a strategic partner will be instrumental to this next chapter of growth, as the company provides coverage for over 100,000 Americans. Starting in 2025, Sidecar Health will be made available to a segment of the company’s workforce. Additionally, Koch industries will serve as a design partner in developing a healthcare insurance solution built on its existing model, but tailored for the self-insured employer market (the jumbo market). This collaboration promises significant mutual benefits. Koch Industries gains the opportunity to enhance healthcare coverage and achieve substantial cost savings for both the company and its employees. For Sidecar Health, the door will open to self-insured employers, which constitutes a considerable part of the $1T+ employer insurance market.

With additional state launches to come, we anticipate access to Sidecar Health dramatically increasing as employers understand and choose this innovative form of health insurance. In the long run, we believe that Sidecar Health will emerge as the definitive alternative to large health insurance companies like UnitedHealth Group and Elevance, ushering in a new focus on price transparency and patient choice. At scale, Sidecar Health has all the potential to drive the industry away from its current state of fragmentation, opacity, and inaccessibility towards a revolutionary patient-centric approach.

Parting Thoughts

At Cathay Innovation, we are dedicated to investing in innovation with impact. In the healthcare industry, the notable lack of innovation is glaring and contributes to escalating inefficiencies. This is evidenced by non-clinical administrative costs that constitute up to a fourth of overall healthcare expenditures. We believe this shouldn’t be the case.

With our reinvestment in Sidecar Health, we’re reaffirming our conviction that its groundbreaking approach to price transparency and access to care will bring significant improvements to healthcare in the US. As the company continues its impressive growth trajectory, we remain enthusiastic supporters of the ongoing journey — onwards and upwards!

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Simon Wu
Cathay Innovation

Partner @ Cathay Innovation VC. Partnering with the next generation of entrepreneurs focused on software, consumer, fintech and digital healthcare