Enhance Health, an insurance brokerage startup focused on Medicare Advantage, launched with $150 million in financing on Friday, according to a news release.
Bain Capital Insurance, a division of investment firm Bain Capital, will provide the company with the funding and other support. Enhance Health hopes to cash in on the Medicare Advantage market by making it easier for consumers to choose a plan.
“There is a large addressable market for solutions that enable consumers to make better informed decisions about their benefits and care needs,” Enhance Health CEO Matt Herman said in a news release.
Consumers often face a dizzying array of options when shopping for a Medicare Advantage plan, making it difficult to choose one. The average person on Medicare can choose from 33 Medicare Advantage plans, according to the Kaiser Family Foundation. People buying health coverage from Affordable Care Act marketplaces face a similar dilemma.
Now investors are racing to make it easier for consumers to shop for health insurance.
“Enhance Health will pursue a growth strategy to build a leading Medicare insurance distribution and care navigation platform through acquisition and organic initiatives,” the news release said.
Medicare Advantage has attracted investors’ attention because it’s profitable and gaining market share. Nearly 28 million people on Medicare are enrolled in private coverage, making up 43% of all Medicare beneficiaries and almost half of federal Medicare spending—about $350 billion—according to the Centers for Medicare and Medicaid Services. The Congressional Budget Office predicts 51% of people eligible for Medicare will enroll in Medicare Advantage plans by 2030.
But it’s unclear how long the program’s relentless growth will continue, as some federal policymakers are increasingly frustrated by Medicare Advantage’s rising costs and disappointing results.
Spending per beneficiary is growing faster for people on Medicare Advantage and other private plans than for people on traditional Medicare and Part D prescription drug plans, Modern Healthcare reported. While traditional Medicare spending per beneficiary grew at a 4% rate from 2011 to 2019, private coverage like Medicare Advantage and Program of All-Inclusive Care for the Elderly plans grew 6.9% annually.
In addition, a Commonwealth Fund report found Medicare Advantage and traditional Medicare enrollees visit hospitals and emergency departments at the same frequency, despite members enrolled in the privatized program receiving more care management services, according to Modern Healthcare.
