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Google joins $81 million funding round of health benefit startup

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(Bloomberg) — Collective Health Inc., a startup that helps employers set up self-insured group health plans, raised $81 million as the firm takes its technology nationwide.

Google Ventures invested in Collective Health for the first time, and New Enterprise Associates and Founders Fund also participated in the Series C fundraising round, bringing the total amount the firm has raised to $119 million, Collective Health said in a statement. The company is partnering with Anthem Inc. (NYSE:ANTM) and other health insurers to use their hospital and doctor networks for customers across the United States.

Collective Health helps employers act as insurers for their own employees, taking care of functions like signing workers up, processing claims and answering their questions. The company doesn’t take financial risk and relies on health insurers like Anthem and Blue Shield of California for doctor networks.

Employees get insurance cards that are co-branded with Collective Health’s name and the insurer’s. Collective Health’s platform can also provide benefits like dental or vision coverage, along with wellness programs.

Established competition

The challenge for the company will be to show that its offering, which costs an average of about $50 per worker per month, is better than what large health insurers and benefits managers already provide. About 94 percent of workers at the biggest companies are already in plans that are fully or partly self-funded, according to the Kaiser Family Foundation — an opportunity for Collective Health if it can find customers that want to change the design of their insurance benefits.

Clients thus far include video-game publisher Activision Blizzard Inc. and software company Palantir Technologies Inc. With those companies on board, Collective Health will be managing insurance for 30,000 people starting Jan. 1.

Private health insurers were responsible for about $1 trillion out of the $3.1 trillion spent on health care in the United States last year. Government programs like Medicare and Medicaid paid much of the rest.

Founders Fund has invested in a series of companies that are focused on how health care is managed and delivered. The firm has also made bets on the doctor appointment-booking site ZocDoc Inc. and health insurer Oscar Health. ­ With health care approaching 18 percent of the U.S. economy, there are lots of opportunities to improve the system and make a profit, said Scott Nolan, a partner at Founders Fund who sits on Collective Health’s board.

“One of these fundamental things that needs to be done is actually fixing the health care system at a payer level,” he said. “It’s one of these industries that feels like it’s in the stone age a little bit.”


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