Behind the Term Sheet: How Sidecar Health Brings Better Access to Quality Affordable Healthcare in the US

Alexandre Lazarow
Jul 23, 2020 · 6 min read

The US healthcare system is broken. On one hand, it is the most expensive in the world, costing around $8,000 per person a year and representing over 17% of GDP. Compare that to the average of comparable countries from France, the UK, Norway and others — which is less than half at around $3,000 per person. Relatedly, it is also one of the least distributed in the developed world — with nearly 9% of the population not having health insurance of any kind and far more having inadequate coverage.

On top of this, as the world continues to battle the global COVID-19 pandemic, the US has seen over 33.5 million people file for unemployment. Since the vast majority of the population receives health insurance coverage through their jobs — this has led to an estimated 27 million people who have recently lost health coverage. While programs under the Affordable Care Act have certainly been a helpful safety net, the barriers to entry are still too high for many throughout the US.

At Cathay Innovation, we built our Fund for entrepreneurs who genuinely want to have a positive impact on society through new technologies and business models that address these very kinds of issues.

Thus — it’s with great pleasure that today we can announce our investment in Sidecar Health, a provider of innovative health care insurance plans for the millions of people who are left out of the traditional model. In leading this funding round, we are greatly looking forward to joining the Sidecar Health team on their mission to make health insurance more affordable and access to great healthcare more attainable in the US.

“This latest funding accelerates us towards our goal of significantly lowering the cost of health care in the U.S. while increasing access to care. Cathay Innovation’s vision of backing startups to create a positive impact through technology and innovative business models is perfectly aligned with our mission at Sidecar Health. Their unique access to industry knowledge across financial services and healthcare — as well as their proven track record helping startups scale — will be a force multiplier for our business. We’re thrilled to have Cathay Innovation on our team.”

- Patrick Quigley, CEO, Sidecar Health

Why is the healthcare system in one of the largest most developed countries in the world so broken? There are of course many reasons for this. Two of them are that the private-sector based-system has complicated and often conflicting incentives coupled with an incredible lack of transparency on pricing.

Imagine a patient looking for a knee replacement. Their doctor would prescribe the treatment, as well as recommend a specialist to complete the procedure. The patient books the care from said provider, but often has no idea how much the procedure costs — these are based on negotiated rates between their insurance carrier and the healthcare provider. Even if they asked for the price, not all providers or payers are able (or willing) to share it.

Eventually, the patient would receive a bill for their share of the care, often many weeks or months after. The patient has no incentive to search for affordable care (their insurance carrier will cover it), nor an ability to given negotiated prices are closely guarded secrets. The provider is motivated to maximize profits. And paradoxically the insurance company is too — ACA plans must pay out 80% of their premiums to providers (their “medical loss ratio”), so the only way to increase profits is to increase the 20%, which only happens if premiums and thus medical losses (spend) increases.

We’re seeing these issues come to life all too clearly during a global pandemic while people around the country are not only battling the Coronavirus but facing unpredictable health prices at high costs for treatment. For example, see this story in the New York Times that outlines the issue vividly: Two Friends in Texas Were Tested for Coronavirus. One Bill Was $199. The Other? $6,408.

The ultimate payers of healthcare insurance — often individuals or corporations — don’t have the tools to negotiate prices or drive better and cheaper outcomes. What’s worse, is that there is no way to know ahead of time (or at the moment of treatment) what exactly something costs.

Sidecar Health is reinventing health insurance, providing affordable coverage for individuals, small businesses and the millions of Americans left behind by traditional insurance. It does so by fixing both the incentives and the price transparency problems that have plagued the U.S. healthcare system until now.

How does it work?

The product is simple. Members are given a Visa payment card which they use to pay for care at the time of service. Sidecar Health plans pay a fixed benefit amount for every medical service (like a doctor visit) or prescription drug, which members can see the costs and coverage of in advance using the mobile app.

The coverage covers over 170,000 services and prescriptions without any network restraints. When customers choose providers that cost less than the benefit amount, they pocket the difference (and if it costs more, they pay the difference). Upon payment, the customer is debited their share in real time and any adjudication is completed afterwards once they upload their detailed bill.

The prices for any service is posted on a map, so the community builds real-price transparency into local markets. For those not listed, members can request the price from providers before they get care. The whole process is seamless and eliminates surprise medical bills. It is also affordable: a healthy 30 year-old in Texas can get $2,000,000 in annual benefits with no deductible for $279/month.

Importantly, this transparency and behavior alignment works. Because customers have an opportunity to see what prices are ahead of time, all the while knowing exactly what their benefit will be, they can choose the best care specific to their medical and financial needs.

The result? Customers are choosing healthcare based on value provided and shopping around for plans in their preferred price range. This translates to powerful customer value — Sidecar Health offers its members 40% savings over traditional health insurance plans.

Today, the Sidecar Health focuses on the underserved segment of the market: those that are self-employed or don’t receive insurance from their employers. Over time, Sidecar Health’s model of cash prices, price transparency and incentive alignment can work equally well with other segments of the market, including self-insured employers, employer plans and even Medicare. After all, transparency and choice should be for everyone.

At scale, the Sidecar’s innovative model could help turn the insurance industry on its head. Customers choose the coverage they want and the care they desire. Prices will be transparent and open, customers can get reimbursed in real time, and patients are effectively turned into purchasers.

At Cathay Innovation, we are focused on investing in innovations with impact. We focus on multiple sectors like financial services, future of work and healthcare. We’re thrilled to be partnering with Sidecar Health for the next leg of their journey and the potential impact of helping Americans access quality affordable healthcare — particularly as we are all collectively worried about the impact of COVID-19 on our families and our communities.

Cathay Innovation

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