How UnitedHealth is competing against venture-backed startups and insurance giants in the hottest part of healthcare

Lydia Ramsey

Oct 15, 2019, 22:06 IST

How UnitedHealth is competing against venture-backed startups and insurance giants in the hottest part of healthcare

Courtesy UnitedHealthcare

UnitedHealthcare senior vice president of Medicare Advantage Steve Warner

UnitedHealthcare, the insurance arm of health giant UnitedHealth Group, has the biggest piece of the booming Medicare Advantage market.
The private arm of the government-funded Medicare program for seniors 65 and older has been an area that's attracted investments from health insurance giants and venture-backed startups alike.
We spoke to Steve Warner, the senior vice president of the company's Medicare Advantage product, about how he's confronting the competition.
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The biggest player in a hot market in healthcare is keeping an eye on the competition.

When it comes to Medicare Advantage, the private version of the government-funded Medicare health insurance program for seniors, UnitedHealth Group is the company to beat. Of the 22 million members enrolled in Medicare Advantage, about a quarter are in plans run by the company's insurance arm, UnitedHealthcare, according to the Kaiser Family Foundation.

Medicare Advantage is a lucrative and growing business, so startups and established insurers are vying for a piece of it. Startups Oscar Health, Devoted Health, Bright Health, and Clover Health have raised a combined $3 billion to use technology to build new kinds of health-insurance plans, and all are going after Medicare Advantage. Plus, insurers like Centene and Humana are battling for members, too.

UnitedHealth says it isn't worried. When asked about competition in the Medicare Advantage market as seniors sign up for 2020 health plans, UnitedHealth CEO David Wichmann told investors and analysts, "I think we're pretty bullish."

The company's stock was up 8% Tuesday morning after it raised its earnings forecast for 2019 and signaled optimism for 2020, largely driven by its Optum unit.

Earlier this month, Business Insider spoke with Steve Warner, the health insurer's senior vice president of Medicare Advantage, who explained how the company plans to maintain its edge.

"We're obsessed with the competition." he told Business Insider. "As we look at the next 10 years, we certainly don't see this thing becoming any less competitive."

When it comes to confronting new rivals, Warner's betting that using UnitedHealthcare's size and network of doctors will help it win out over some of the other models that prioritize closer relationships with select medical groups and health systems.

"While there will always be a market for more narrow network products, we haven't seen data that would tell us that's the future of Medicare Advantage," Warner said.

The competitive Medicare Advantage market

About a third of people on Medicare are enrolled in private Medicare Advantage health plans, a percentage that's steadily growing. People can typically choose to enroll in Traditional Medicare or Medicare Advantage plans when they turn 65. Either way, their health needs are largely funded by the US government. As of 2019, 22 million Americans were enrolled in Medicare Advantage plans.

In March, insurer Centene said it would acquire rival health insurer WellCare in a $17.3 billion deal. The acquisition bulks up Centene's presence in the Medicare Advantage market. CVS Health acquired the health insurer Aetna in 2018, and is building clinics in some of its drugstores in part to cater to seniors.

In August 2018, Oscar Health raised $375 million from Alphabet as it gears up to get into the Medicare Advantage market in 2020. Devoted Health in October raised $300 million in a round led by Andreessen Horowitz ahead of launching its first Medicare Advantage plans in Florida this year.

The companies are betting better technology and customer service, and more focused networks of doctors can help them provide better care to their members.

The way Warner sees it, the venture-backed companies are just as much a competitor as anyone else tackling the Medicare Advantage market.

"I think every competitor is formidable in our opinion," Warner said.

While the venture-backed companies are working on technology, bigger players are getting creative about the benefits they offer members. Warner said that will be a key part of UnitedHealthcare's strategy.

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For instance, Warner said the company's focused on building out plan offerings that incorporate fitness or dental benefits for those who want them. The plans will also come with more coverage of prescription drug coverage and $0 copays on primary care appointments so that members can get proactive and preventive care without feeling the pressure of high medical costs out of pocket.

In 2020, UnitedHealthcare is offering on average four plans to members, up from just over 3 on average per person in 2019.

UnitedHealthcare's Medicare Advantage plans have benefitted from bonuses paid out by the Centers for Medicare and Medicaid for plans that have a rating of four stars or higher. Going into the 2021, analysts at Jefferies noted in an October note, 83% of UnitedHealthcare's membership qualifies for the bonus.