There’s a new health insurance player on the block, and it’s making a lot of noise. Clara, a technology-enabled supplemental benefits provider, has made its intentions abundantly clear. The firm will use smart technology to bring a modernized approach to supplemental health insurance coverage so that “health hardship doesn’t equal financial hardship”.
The New York City-based insurtech, which was founded in 2019 and will launch for Texas employers this summer, is attempting to tackle arguably the biggest pain point in US health insurance – the extortionate cost of care. If the average American family has a medical emergency, they will typically face financial bills that are greater than the amount of liquidity they have available. Their savings are often wiped out in the payment of one policy deductible.
“We want to solve that problem,” said Clara founder and CEO, Veer Gidwaney (pictured). “The world of healthcare has changed dramatically over four decades. Forty years ago, the average deductible was $500, cost of care hadn’t gone through four decades of inflation, and the middle class had savings. These things are not only not true today, but they’re so far from the truth today that they’ve caused, in many ways, tectonic shifts in society. You would think, at the very least, that incumbent carriers in the supplemental benefits space would have adapted their products to deal with these issues, but they haven’t. And so, that’s what we’ve done. We believe there are insurance products you can create that can deal with these issues.”
According to Gidwaney, Clara has three differentiating value propositions. The first is that Clara offers a single, comprehensive benefit that pays out a lump sum of cash if someone gets sick or injured. This is different to the traditional market, in which insureds typically have to buy multiple supplemental products on top of their existing medical insurance – a practice that Gidwaney describes as “convoluted” and out-of-date.
Secondly, the firm claims to cover a wide range – up to 93% - of conditions that would require urgent medical care, including chronic conditions and mental illnesses. And finally, through natural language processing and machine learning, insureds can kickstart the claims process by snapping a photo of their cast, their X-Ray, or their hospital discharge papers, and so on, and the smart technology will send a lump sum of the payment to the claimant within hours.
When asked how Clara is able to offer such a comprehensive benefit, Gidwaney replied: “It’s philosophical. It’s not about data and technology advantages – although they do enable us to do this better – it’s more about philosophy. If you look at supplemental benefits historically – let’s use critical illness as an example – an incumbent policy might pay $30,000 to someone who suffered a heart attack. That’s a lot of money, which obviously is great and useful for the claimant. But the problem is, that’s actually a lot higher than most people need.
“What we’ve said at Clara is, instead of paying $30,000 for a heart attack, we’d rather offer lower amounts of more like $8,000. In doing that, we’re able to offer coverage for a lot more conditions that are typically not covered by the incumbents. With supplemental benefits in the past, when you had a $500 deductible 40-years-ago, it didn’t make sense to cover a whole bunch of conditions that cost less than $500, because there weren’t many things that cost less than $500. But today, if your deductible is $3,500, then even if your daughter breaks her ankle playing soccer, and a hospital charges you $2,000 or $3,000, that’s not going to be covered in an accident policy today, whereas in Clara, because of our unique structure, it would be.”
Despite being an insurtech disruptor, Clara’s distribution will be 100% through the broker channel. Historically, supplemental benefits have been quite a hard sell for insurance brokers because of the price and the high deductibles, among other pain points. Gidwaney’s aim, in making the product simpler and more comprehensive for employers, is to boost enrollment, which he said will help brokers make money by driving more premiums.
“I think there are real ROI opportunities for employers,” he added. “With the cost of healthcare on the rise, employers only really have two options – they can either offset some of the cost to their employees or they can increase the deductible. It’s a combination of those two tools that have been used for the last 15-years, and the problem is, that’s what people really hate about their health insurance. But at some level, I think there’s actually an interesting opportunity where if you increase the deductible and bring down the premiums, and use those savings to then fund Clara, more often than not, you’ll be able to bring your overall benefits spend down. It’s a ‘have your cake and eat it too’ scenario.”
