At the risk of inducing hives, I would like to ask you to take a moment to think about your health care plan. Do you know all the benefits you’re entitled to? Do you know if you have a health savings account, and if so, how much it contains? Do you know if there are steps you can take to reduce your premium and what those steps are? If you’re shopping for a new plan, do you know if you should get an HMO, a PPO, or a point-of-service plan based on your biometrics, prior family history, location, income? Do you even know your biometrics?
If you answered no to any or all of these questions, you’re not alone. The $3 trillion U.S. health care industry is unfathomably complex, and has only become more so with the introduction of the Affordable Care Act. Theoretically, the ACA sought to induce a shift from a fee-for-service model, incentivizing so-called “sick care,” to a model based primarily on wellness and prevention. In practice, the ACA falls short in completely establishing the means for a new health care paradigm, leaving ample space for tech-savvy startups with lofty ambitions of disrupting the industry by simplifying how it operates, encouraging wellness behaviors, and tracking and contextualizing data.
One of these is Rally Health, a digital health company that’s trying to spear the white whale of the heath care industry: patient engagement. Founded in 2010 under the name Audax by a 21-year-old college dropout named Grant Verstandig, Rally raised more than $55 million before insurance giant UnitedHealth Group acquired a majority stake in 2014. By then, Verstandig had assembled an impressive executive board, including John Sculley, former president of Pepsi-Cola and CEO of Apple; David Ko, late of Zynga and Yahoo; and Dr. John W. Rowe, former chairman and CEO of Aetna.
Verstandig, 27, is an unlikely tech entrepreneur. A neurobiology major and avid lacrosse player, he was a freshman at Brown University when a chronic knee injury flared up, eventually requiring surgery. He figured he’d be back on the field before long, but the initial operation led to another, and then another, and then another–until, by the spring of his sophomore year, he’d undergone seven knee surgeries, including a meniscus transplant. His doctor told him that not only would he never play lacrosse again, he’d be lucky to walk in a straight line.
“That was a sinking, a-ha moment,” he says now. “You go through all the pain and adversity to get back on the field, only to be told it’s a pipe dream. I felt something needed to change–there had to be a different way to go about solving these types of problems.”
Verstandig was facing a stark reality shared by many people whose health suddenly changes: an inherent lack of alignment between the consumer and the health care system. People rarely engage with their health care until there’s a moment of crisis–a diagnosis or an injury or an impending life event. “Most people say there are four things they look at in concentric circles: career, relationship, money, and health,” says David Ko, the president and COO of Rally. “And when you talk to most individuals, health is on the bottom. But if anything were to happen to you or somebody you know, what becomes number one? Health.”
This lack of alignment between a faceless, mind-numbingly complex industry and specific, individual, changeable health circumstances presents two fundamental problems. The first is that people are not empowered by their health care plans to take simple steps that might prevent negative outcomes. “Health has a very long feedback loop,” Verstandig explains. “If I drink soda every day for the next six months, the next day I don’t get fat. People haven’t had the products, tools, and support around them to engage in prevention and wellness, which sets up a ‘sickcare’ system, where you’re only engaging when it’s too late.”
This compounds the second core problem with the health care industry: inefficiencies which cause prices to…
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