“Did you know you can actually negotiate and get a better deal at the doctor’s office if you offer to pay up front?” co-founder and CEO of Collective Health Ali Diab asks.
He’d broken his foot and had to go to the doctor for an MRI that would have cost him $3,700, with a $1,500 deductible. Instead it cost just $600 in cash that day. He says that’s because he paid for it without going through his insurance provider. This is part of what gave him the idea for Collective Health, a new Founders Fund-backed employer health program launching today. It promises to take the paperwork and runaround out of health insurance.
Diab and co-cofounder Dr. Rajaie Batniji, a physician and political economist at Stanford University, paint Collective Health as a way to cut out the middleman (health insurance) and instead offer employers a less expensive, cloud-based, a la cart version of health care coverage for their workers. Employers can pick and choose which things they want covered for their employees. “We’re not building another health app or gadget. We’re building a complete solution to replace your employer provided health insurance,” says Diab.
Founders Fund led an undisclosed Series A to back the idea. Formation 8, the Social+Capital Partnership, and prominent angel investors including Scott Banister, Max Levchin, Jeremy Stoppelman and Amr Awadallah also added money in support.
The other part for the idea for Collective Health was first planted when Diab’s intestine suddenly twisted up on itself, cutting off the blood supply to about 10 feet of his intestine. “Nothing could have prevented or predicted this. It was just bad luck,” says Diab.
To have that happen is a scary and life threatening experience. And then, just as he was struggling to regain his strength, his health insurer didn’t want to pay his fees. Diab says he’d been paying for premium coverage for years in the event of something like this happening. Instead of the help he needed, he was left with papers up to his gut in legalese and medical insurance loop-de-loops he didn’t understand. It was either pay up or face legal action, ruined credit and further unnecessary hardship.
Diab’s story is not unique. Dr. Batniji has seen it over and over again while working in the medical field. “Patients are often left to advocate for themselves and trying to get a clear answer from your health insurance company about what’s driving costs is impossible,” says Dr. Batniji. According to NerdWallet, one in every 5 American adults are struggling to pay their medical bills, and three in five bankruptcies will be due to medical bills. And to add more insult to any possible injuries, over the last 10 years, the average premium for family coverage has increased 80 percent, according to ACA International. It was a 90 percent increase from 2008 to 2009, according to data provided from Wellpoint, Cigna and United Health (see chart below).
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