With the big health reform, came the transition from the defined benefit insurance model to the defined contribution model. For those that are not familiar with this, the defined benefit model was pretty much a one-size-fits all model. An employee basically bought a single insurance plan and distributed it to its employees. The problem with this model is that each individual has different needs and so this model did not allow for choice and personalization. The reform has allowed the transformation of this model into that of a retail industry paradigm. People can now have more choice and flexibility in what they want out of a certain insurance plan. This is where Array Health comes in. Jonathan Rickert has developed a user-friendly and aesthetically pleasing interface that serves as a platform for consumers to “shop” options within an insurance plan. The platform allows the insurer to communicate better with the company itself and its consumers. With this in mind, it relieves the burden of administration costs on both sides by streamlining the workflow. In more Layman’s terms, the company sells its software to insurers (brokers) to allow their insurance plans to utilize the defined contribution model though an easy-to-use platform. This then makes that specific insurance plan more appealing to businesses looking for benefit plans to distribute to its employees.
It is interesting to note that when you view the website and read about its product and solutions, it seems as if their target market would be the consumer, businesses buying insurance, and the insurer. I personally thought the company would be monetizing on those transactions between employers and insurance companies. Its position according to Jonathan however is in fact focused on B2B selling with insurance companies, and licensing its software to these insurance companies for use.
Health reform in 2010 caused an increase demand for health insurance in the United States and thus sped up the transitional step from the defined benefit model to the defined contribution model. Back in 2006, this model was just coming out and Jonathan Rickert saw the opportunity to take advantage of it. At the time Array Health was one of the first to enter this market, and so one could say they created a market for software platforms that allow this model of insurance distribution to be viable and flourish. Since then, the competitive market space has somewhat saturated.
According to Jonathan, Array Health’s position in the market is to create a platform for insurers to help manage and distribute its products to businesses and its employees. The generation of the idea actually came when he was working in consulting and found that employers were really unhappy with the defined benefits model. He also got some inspiration by studying what happened in pension space. Finding a problem in both areas motivated him to find a way to help empower and help people make better health care decisions. So he first started validating his idea by just asking employers if they would use his product. He achieved this by utilizing his own network that he created through his consulting job as a channel.
Jonathan and the team at Array Health have done a great job of finding an opportunity and building around it. The team just had success by closing out 2014 with $13 million in venture funds, and hopes to continue to improve health care through the future.