Healthcare fintech matures as investment patterns change, and much will ride on the fate of Obamacare after the 2016 US presidential election
Hixme has announced a Series B funding round worth $14.1 million, almost doubling the health benefits startup’s funding, now totaling $26.6 million. The funds will go towards developing the company’s Hixme Bundle and Workplace Market platforms. Several companies will be developing specific tools for Hixme as it expands, notably Transamerica for supplemental insurance, Silicon Valley Bank for the company’s HixPay feature, Kashable for digital lending, and PayMD for out-of-pocket settlement issues.
Hixme’s Series A round last year raised $10.5 million, led by Kleiner Perkins Caufield & Byers. Propel Ventures Partners, the new fintech financing vehicle for Spanish bank BBVA, is the leading investor in the Series B round. Propel was set up earlier this year with $250 million to retool how the bank deals with fintech startups in the US and Europe, and is particularly focused on small businesses.
Health fintech, according to KPMG, “has exploded with insurers actively competing head-on with banks, private equity firms and global technology companies to secure some of the latest technologies.” Since the healthcare sector remains one of the largest employers and industries in the globe, fintech companies have found a lot of room to maneuver in.
Hixme offers employers a way to manage their employees’ healthcare under the Affordable Care Act (ACA) in which an “employer pays for the plans, but employees have freedom of choice and the plans are portable.” The company’s cloud platform takes in medical and financial data from employees and their dependents for customizing benefit packages. Employees are therefore the ones “buying directly from carriers,” according to Hixme, rather than from a public exchange or having to rely on a group plan. (Hixme’s CEO optimistically predicts that this model will replace group insurance within 10 years.)
Hixme advertises that this provides companies with maximum flexibility under the ACA mandate, especially in terms of unemployment insurance and renegotiating terms for a group plan every year. Hixme runs a contribution calculator for percentage sharing adjustments between employers and employees, keeping in line with inflation and increasing healthcare costs.
And these costs are rising despite the introduction of Obamacare. Part of this is a legacy impact of earlier industry trends: “Since 1999 the share of total premiums paid by employees has increased at a rate 3 times higher than the increase in wages,” according to Hixme. Yet going into 2017, ACA premiums will rise by 25% and coverage options will be more limited unless the ACA is further amended, according to The New York Times. (Insurers’ losses under the plan have discouraged several large entities from remaining.) There will also be stiffer penalties for companies who fail to provide care for employees: $700 per person.
In response to the ACA, the online private exchange model is becoming more popular since the ACA was ratified: according to the Accenture consultancy, small companies employing under 2,500 people are driving much of the growth. (The number of Americans now enrolled is more than double what it was two years ago.) Hixme focuses on both these smaller entities, and mid-sized companies as well, those with up to 5,000 employees.
According to Accenture, “If current vendors can deliver on the key elements of a private exchange, they can capture share in a market that will continue to grow,” though should they fail to “deliver meaningful differentiation,” then legacy providers will step in.
These latter entities specialize in solutions for larger companies with over 2,500 employees, the same customer profile that Hixme hopes to focus its business on in the coming months and years.