CEO Darin LeGrange doesn't claim to have a silver bullet, acknowledging that none of the state exchanges faces the scale or complexity that the federal government had to confront. “The state is a bite-size chunk,” he says. “It's a more manageable project than a federal exchange. They're doing 50 different things under one umbrella. For us, it's one state.”
But he knows opportunity when he sees it. “The legislation drove new customers right to us,” LeGrange says of Aldera, an 11-year-old software maker formerly known as Healthation.
On the state exchanges, Aldera acts as a subcontractor to vendors including CGI Inc., the contractor that led development of the federal exchange. Aldera's software processes enrollments, connecting customers with an insurer once they have chosen a plan. It also handles billing of premiums, which often are split between the individual, an employer and the government.
LeGrange says he plans to bid on work for two other states that may leave the federal exchange and launch their own marketplaces. He's also betting that state Medicaid programs and plenty of big insurers will need major technology upgrades.
It's a good bet, says Christina Lucero, a Denver-based analyst at Gartner, which estimates that the federal health coverage mandate will inject $33 billion into the insurance industry. International Data Corp. forecasts that U.S. healthcare technology spending will increase 7.4% annually through 2017. With 30 million people needing to buy coverage, individual plans soon will account for 40% of insurers' business, up from about 13% today.
“This is a seismic shift,” Lucero says. “We haven't seen anything this big or this complex since Medicare and Medicaid first came about.”
Investors sense the opportunity and are piling into the industry. Venture funding in healthcare IT has been at record levels for three years.
“There's a role for technology in every corner of healthcare. There are huge IT opportunities, and that drives investment from venture and private-equity funds,” says Bijan Salehizadeh, managing director of NaviMed Capital, a healthcare investment firm in Arlington, Va. “It's really good if you're a company raising money in this space. Prices are going up.”
Aldera took in $14 million in June from Baltimore-based venture fund ABS Capital Partners to invest in new products and turn up the volume on marketing. In the past year, Aldera has increased staff by two-thirds to 100 people, 70 of whom are in Lisle. LeGrange, who was hired as CEO last year to crank up sales, plans to hire another 30 locally in the next 18 to 24 months. The company won't disclose revenue.
HealthEdge, a Burlington, Mass.-based rival, raised $17.5 million last month. It's just one of the competitors facing Aldera as it chases multimillion-dollar contracts with insurers. TriZetto Corp., based in Englewood, Colo., is the industry giant, alongside DST Health Solutions of Birmingham, Ala.
While Aldera is in the middle tier with 25 to 50 customers, TriZetto and DST have hundreds of insurers using their systems, Ms. Lucero estimates. Although Aldera provides end-to-end services, through processing claims, will have to move beyond its roots in the dental-insurance business.
Aldera's founders, Daniel Knies and Scott Kornhauser, got their start on the pharmacy side of the business, a technological thicket of complicated, fast-changing rules that require near-instant information about how much an insurer and member would pay. That makes the company well-suited to handle calculations for the healthcare exchanges, which can involve payments from an insurer, the customer and government subsidies, LeGrange says.
Other vendors have those capabilities, too. But Todd Stockard, president of Valence Health, a Chicago-based technology firm and an Aldera customer, says Aldera has an edge in speed and price. Its software costs 15% less than some others and is cheaper to keep running, he says. “The competition takes a year to 18 months to implement,” he says. “They cut that in half.”
"How to build a better healthcare website" originally appeared on the Crain's Chicago Businesses website.
