A growing number of startups think they have found the solution to employers rising healthcare costs: cash.
Sidecar Health launched its first fully insured health plan for companies on Monday, after opening its first plan for self-insured employers at the beginning of 2022. Cash pay competitor Sesame jumped into the employer fray in February, launching a virtual plan for small- and medium-sized businesses. Friday Health Plans said it grew its membership more than 300% year-over-year in part by focusing on employers that wanted to offer individuals a stipend to buy coverage off the Affordable Care Act exchanges.
Hospitals often set lower, discounted cash prices for common procedures than their insurer-negotiated rates, according to a recent study published in JAMA Network Open. By taking advantage of these rates, Sidecar claims the new plan will save employers an average of 39% compared with traditional health insurance companies. Direct-pay also eliminates the administrative burden doctors and patients face when navigating the traditional insurance industry, said Dan Korpman, Sidecar's head of business development.
The company already counts at least one, Ohio-based company as a customer of its self-insured plan, Korpman said. During Sidecar's last funding round in January 2021, the startup was valued at more than $1 billion.
"The user experience is very much like Expedia," Korpman said. "It's actually the experience that you have paying for pretty much anything else. You search for the price, shop for care, go get the care and you pay for the service."
Founded in 2018, Sidecar billed itself as an insurtech, but did not offer insurance. The company launched as a tech-enabled, fixed-indemnity plan that paid consumers its estimated cash price for each medical visit and let them shop around for the best deal. It banked on new price transparency regulations, displaying to consumers the price nearby providers would charge and the price Sidecar would pay. The company encouraged individuals to use the information by letting patients pocket any difference between its estimated cost and what providers actually charged.
Sidecar's plans were not compliant with ACA-mandated coverage regulations, so the company could charge lower premiums. Not complying with the ACA also meant Sidecar could decline coverage to individuals with preexisting health conditions, limit how much care it would cover and fail to cap enrollees' out-of-pocket costs.
Last November, the company launched its first ACA-compliant plan in Ohio. Korpman declined to comment on how many members are on the Sidecar plan.
Now, the startup is marketing the same product to employers, arming employees with plan and provider price information and encouraging them to shop around for healthcare services. The fully insured product for businesses is currently only available in Ohio, although the startup aims to expand the plan to two additional states this year. The self-insured plan is available to companies nationwide.
To bridge the divide between the price Sidecar will pay and cost to employer-plan members, Sidecar offers workers a health savings account through healthtech startup FirstDollar. It also partnered with virtual credit card Paytient to offer workers 0% financing on any expenses that their health plan and HSA do not cover. Sidecar members are automatically approved for the service.
But the offer to curb member expenses through an HSA will leave many patients behind, since individuals don't often put money in the account when they sign up for insurance and employers may not immediately put all their contributions in on day one, said Paul Fronstin, director of the Health Research and Education Program at the Employee Benefit Research Institute.
"If you're one of those unlucky ones who happen to go into the hospital the day after you enroll in an HSA plan, the money's not there to cover your deductible," he said.
Sidecar's new self-insured offering mirrors that of several startups recently that have banked on small- and medium-sized business' desire to ditch their insurers, said said Aaron Miri, senior chief digital and information officer at Baptist Health in Jacksonville, Florida and co-chair of the Health Information Technology Advisory Committee.
"The overall cost of care is rising, overhead costs are rising, it's becoming more difficult for small businesses to be able to afford the ability to provide private insurance," Miri said.
Sidecar's move could only work in a competitive market like Ohio, with several nearby health systems competing with each other over chargemaster rates and large commercial insurers pushing their fees down even further, Miri said.
"The Midwest has these great health systems surrounding each other so prices will be favorable so that people can go take their stipend wherever they want, and Sidecar knows 'Okay, prices will be within reason.' So they'll cover people,'" he said.