Sales to Self-Funded Insurance Plans?: 6 Tips for Healthcare Innovators
The secret to this part of healthcare is caring about health.
One of my favorite terms that would never survive a surgical operating room (OR), culturally, is “Go-To-Market Motion.” This is followed by “Product-Market Fit.” All physicians in the US complete surgical rotations as part of our medical training, and in the OR, we use straightforward language. Things need to “work.” If they don’t work, we let colleagues know, with varying degrees of deference and humility, that they didn’t. But no one gets out of surgery, as a surgical team member, with a patient gushing blood on the table and casually calling it a day.
Getting a product to market in healthcare for some customers is similar to surgery. It has got to work. People need to be helped. It can’t be just a good idea. But, much like in surgery, traction is essential. That is a bad joke; I’m sorry.
Health Technology Futurists—nerds, if you will, have had a difficult time bringing their products to market. “We save money!” That sounds like a great sales pitch… Until you actually understand the underlying economics of Big Health, or go through the punishing process of trying to get a pilot with a payer started, finished, or scaled. There are health technology companies that would save a lot of money…
Here is a guide for how to get a healthcare product sold in the “very difficult” world of self-funded plans1. I identify as both a “Health Tech Nerd” and a “Healthcare Hacker,” so this is my attempt to introduce HTNs to the Hacker culture! It’s like bringing a partner you like home, and hoping your parents approve—I am a little nervous!
1. It Needs to Work.
This should, of course go without saying. But every founder, with evangelical zeal, knows the product is the second coming. Self-funded plans, especially OGs, are built, administered, and evaluated by people with a degree of seriousness that would make a surgeon blush.
You will need data that demonstrates two things:
Your product is better than existing alternatives ( > 1 standard deviation at least)
Your product is so much better, it’s worth more, and it should demonstrably save money.
The data you present needs to have independent validation.
The people to whom you are selling your product have heard all the other pitches. They are skeptics.
The Venture-Backed Company has a plausible advantage—you could be in the clinical trials-for-effectiveness business. So if you have venture money and you want to sell a thing that saves money or works better—self-funded employers + dual-eligible Medicare/Medicaid populations are the only ones who will have aligned incentives. Thus savings plays take more capital to get to scale, not less.
Directive advice: Spend your money on “giving your product away” and measuring what it does, and once it works better ( > 1 SD) and saves money, then you are ready to go to market with self-funded plans.
To quote Junior Soprano, in another context:
“Next time, come heavy,* or don’t come at all.”
*with data of your product driving better health and value in the real world
Please read this book: It’s by Al Lewis of Quizzify.
2. Put Your Money Where Your Mouth Is
Self-funded plans are about improving the health of their employees, and the medical loss ratio is 100%. That is to say, they spend all their money on health things. So their incentives are to run their company, take care of their teams, and go about the business of their business.
The provenance of data from wellness industry folks is dubious. I’m looking at you, Livongo. More importantly, so are others.
Consider independent validation from the validation institute. Also, offer a money-back performance promise on your fees. This is how self-funded plan buyers and brokers will feel comfortable that you are not scamming them (from the VI website):
The last ten years have witnessed an explosion of vendors “showing savings” that don’t exist…and yet are readily accepted by buyers and their advisors. The mission of the Validation Institute (VI) is to reverse that trend, to eventually eliminate the gap between reported outcomes and actual outcomes.
3. It’s About Compliance.
ERISA is a law. It is important. It’s why health and retirement benefits are tax-exempt. And, as of 2021, it’s mandatory that employers act in the fiduciary interest of plan members. So if your health product works, and saves money, it’s crucial to know why that is important. Here is a 9-part guide.
4. If You Can, Go Self-Funded Yourself.
Dogfooding. It works for product design. It works for health plan sales. You will understand the market in detail if you have to deal with it as a company.
5. It’s A Community.
The benefits brokers, employers, vendors, and advisors in this world share a secret: they all actually care. Those stakeholders care about their health, their colleagues’ health, and their client’s financial health. They are a community. The culture is nerdy, mathy, and have overwhelming compassion at the core of their values. We all talk to each other. Some of us write: check out Moral Health , Wendell Potter and William Bestermann . We respect our differences of opinion. Strong beliefs, held loosely (h/t Profitable Growth ) is the ethos. But on the regular, members of this community are advocating for regular people in horrific situations. A member in crisis, in the ICU, often in dire straits? These situations are met with grace, compassion, and love.
The organization to know is Health Rosetta. This is ground zero.
No one is keeping you out. The kool-aid is warm. It’s culture and trust that you need to build. Hint Health is a good conference with DPC overlap. The Health Rosetta Summit is another. Join us!
6. Build Like it Matters, Because it Does.
In summary, the secret to successful self-funded employer market sales in healthcare:
Sell something that works, with demonstrable value. Getting to patient-health-fit first!
Externally validate that demonstrated value, which becomes your Go-To-Market ace in the hole.
Respect community values: The Quadruple Aim is…
Improving the patient experience of care
Improving the health of populations
Reducing the per capita cost of healthcare
Improving the work life of healthcare providers
Go self-funded for your company if you are able.
In the past, you could just pay brokers, and they would sell it for you. Now they actually have to disclose all of those payments, so if they're going to take that money, it’s as a fiduciary2. The game has changed--which is why it's time to introduce technology that can save money to people who need to care about it.
—Owen Scott Muir, M.D.
Self-funded plans are those which pay for their employees health care directly, even if they use a brand name like Cigna or Aetna to administer the claims. They usually buy “stop loss” insurance so they basically have a “catastrophic policy” on their policy. Thus they spend all their healthcare money on health care not profits for them. That makes a huge difference.
This is thanks to the combined appropriations act of 2021, which is going to create a Sea Change in healthcare. You heard it here first, or you already know me and you've heard me talk about this for years and want me to just shut up about it already.
Another spot-on & insightful article, Owen. Well done!