| | DECEMBER 202219UTLOOKHealthcare Tech CXO INSIGHTSBy Rick Zullo, Co-Founder and General Partner, Equal Ventures & Simran Suri, Associate, Equal VenturesThe last decade has undoubtedly seen one of the most fundamental changes to the benefits ecosystem in known history. While the long-term impacts of the pandemic on our healthcare system are still unknown, we've also seen a continued (and unrelated) evolution of the way healthcare and other benefits are funded. Given a highly competitive employment environment and rising healthcare costs, the benefits market has needed to evolve. With the adoption of the Affordable Care Act, we've seen the industry's cost structure continue to evolve even more, further incentivizing employers to self-fund and identify creative ways to cut costs while expanding coverage. The benefits industry of today is so radically different from the cookie cutter plans of the past, which is why we're referring to this newly formed dynamic as Benefits 2.0.As this new Benefits 2.0 dynamic emerged, new opportunities were created. We moved from large, monolithic reimbursement processes to those driven by real-world ROI. Employers could choose care options based on what would drive the best outcomes at the lowest cost, not just what was approved for reimbursement by their providers. Becoming eligible for reimbursement across major healthcare plans had historically been a long, arduous, and bureaucratic process. Opening that up has coincided with new risk management solutions, a renewed focus on economic efficiency, and an expansion of benefits offerings beyond traditional healthcare. Collectively, we believe these trends have created an environment full of choice, but difficult for employers to navigate on their own.3 Key Trends Emerging in Benefits 2.0As the market wrestles with the new normal, new service areas and solutions are drawing interest, creating opportunities for the entrepreneurially minded. We see the areas below as major shifts creating opportunities for employers, service providers, and founders alike.(1) Growth in self-funding increases employers' need for risk management solutions like stop lossBenefits 1.0 saw self-funding limited to large employers with enough cash reserves to cover the potentially high costs of unexpected claims. The majority of small employers either offered no benefits or stuck to fully-funded plans with predictable annual costs. Rising premiums and ACA's mandated coverage changed the game. With 21% of small employers and 82% of large employers shifting to self-funded plans, interest in stop loss has risen. Traditionally used as a risk management measure to curb the cost of expensive, unexpected claims, the stop loss market has exploded, hitting $25.2B with consistent 10% YoY growth for the past 4 years.Benefits 2.0: Brokers as the Frontline of Benefits InnovationRick ZulloBROKERS AREN'T JUST TRANSACTING ON POLICIES ­ THEY ACT AS TRUSTED THOUGHT PARTNERS AND CONSULTANTS, HELPING EMPLOYERS ANALYZE THEIR WORKFORCES' DIVERSE HEALTH NEEDS AND CURATE BENEFITS PACKAGES FOR THEM
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