Daniel Petkevich is an American entrepreneur pursuing the American dream following his parent’s immigration from the old Soviet Union. But, while his entrepreneurial story could shape up to be the quintessential experience that every immigrant family hopes for, unfortunately for his parents, they are also getting the quintessential experience that comes with the U.S. healthcare system.
His mother, who recently needed a knee-replacement surgery, couldn’t find adequate provider quality data online and delayed her procedure. His father slipped a disc and let it go months without getting an MRI after a doctor advised him to wait “to see if it didn’t improve in a month.” And, as for either of them finding usable information on costs for basically any healthcare service, price transparency communicated in a meaningful way for consumers remains elusive.
Those frustrating experiences define the U.S. healthcare system, especially for older Americans who need more care, but the problem runs deeper than just the services themselves. Issues navigating healthcare extend to even finding the right coverage – something that both of Petkevich’s parents also encountered. It’s an intimidating hurdle for seniors – how the hell to make sense of anything related to Medicare as someone approaches their golden years.
Americans reaching Medicare eligibility are already facing a significant shift in their lives, but first must confront the critical question of whether to continue paying large premiums for private health insurance or enroll in a government-run Medicare plan.
For those that do enroll in Medicare, which right now includes more than 44 million Americans (15 percent of the total population), that’s when the real daunting challenge begins, as they soon find out that Medicare coverage is not what they were used to when on commercial health insurance. They must determine which, if any, additional benefit plan fits their risk profile, entering a labyrinth of Medicare Advantage and Supplemental options, desperately trying to make heads or tails of the dozens available.
It’s enough to overwhelm the average person, which is why most rely on insurance brokerages for help. And it’s a huge market. More than 10,000 seniors turn 65 every day, and with Baby Boomers continuing to age, that number will only grow bigger. The market is so large that some brokerages have ridden the Medicare market wave to go public.
However, a common problem with brokerages that are accountable to shareholders is that incentives are misaligned and, as a result, many seniors each year end up unhappy, overpaying for Medicare coverage that doesn’t best meet their needs. After watching his parents experience it firsthand, Petkevich set out to change the system.
“I wanted to build the brokerage that I wish my parents had – a customer-obsessed, tech-enabled firm that makes plan recommendations regardless of commission,” said Petkevich.
So, in 2019, he founded Fair Square Medicare with the mantra that doing what’s right for someone will always be good business, even if you don’t make as much money off of it.
A YCombinator (YC) alum, Fair Square Medicare is a technology-driven, senior care-navigation company that started as a Medicare brokerage firm. It combines algorithmic intelligence and concierge support to help seniors find the right Medicare coverage even if the company makes less money. So, if a senior doesn’t need as much coverage, Fair Square Medicare will enroll them in a Medicare Supplemental plan that comes with less commission.
“Most brokers live off commission and often will steer people to the wrong Medicare Advantage plan that doesn’t fit their risk preference or doesn’t cover their doctor or prescriptions,” said Petkevich. “So a year or two down the road, they realize their plan sucks and want a different one. Sometimes they can switch easily, but sometimes they’ll have trouble switching without being screened for pre-existing conditions.”
Petkevich’s point about pre-existing conditions is particularly notable. While the 2010 Affordable Care Act (ACA) did away with most pre-existing condition clauses that allowed insurers to charge more or deny coverage, 2018 Kaiser Family Foundation analysis found that, in all but four states, insurance companies can deny private Medigap insurance policies to seniors after their initial enrollment in Medicare because of a pre-existing medical condition – except under limited, qualifying circumstances.
So, essentially, unless grandma and grandpa are health-insurance savants, they may find themselves stuck with a plan that forces them to find new doctors or pay higher out-of-pocket costs for prescriptions – all while on a fixed income – because a company prioritized profits over preferences.
These issues are in part what Petkevich says contributes to the insurance brokerage industry’s low net promoter score (NPS) average, which he contrasts against Fair Square Medicare’s 95 NPS. He also believes it’s a reason why some large public brokerages have reported customer churn rates above 40 percent compared to Fair Square Medicare’s 94 percent customer retention.
Petkevich’s theory is that making less money in year one will pay dividends if you can keep them around for many years. Key to the company’s strategy is its personalized support for seniors that helps them understand and maximize their benefits, including a laser focus on education as opposed to selling.
“We don’t incentivize our agents to spend less time with our customers, so we usually work with them over two calls, the first of which is purely educational to answer any burning questions,” said Petkevich
Fair Square Medicare has a customer count “in the high thousands with plans to quadruple in the next year,” according to Petkevich, operating in 49 states and D.C. The platform’s proprietary agent-facing technology will help the company scale to hundreds of agents while still maintaining the same level of support. Its consumer-facing technology ensures that seniors experience less friction when enrolling in their plan and allows them to engage in other digital services to stay healthy.
A Fair & Square Investment
While it’s still too early to tell if Fair Square Medicare can maintain its 90+ percent customer retention rate over time, the company is growing fast, which is why investors are interested.
Today, the company announced a $15 million series A round led by Define Ventures. Slow Ventures, YC and a group of angel investors also participated in today’s round, which brought its total funding to date to $19 million (Amplo also is an investor).
With the new investment, Fair Square Medicare plans to double down in digital health, capitalizing on customer loyalty to build a more comprehensive senior care-navigation platform. The vision is that it can translate the trust built with seniors into demand for more concierge healthcare services, which will include everything from scheduling appointments with preferred providers, to helping seniors find lower-cost prescriptions, to supporting seniors living with chronic conditions, to even coordinating dental care. It also wants to connect seniors virtually with providers on demand, when needed, among a list of other services.
Fair Square Medicare’s approach to building a digital health platform business is assuredly more unique than others, which may be why tech VCs who might not normally consider investing in an insurance brokerage are interested. By engaging and building high levels of trust with a fast-growing consumer segment (seniors) at the critical life-transition point (i.e. Medicare eligibility), you have an established and powerful lever to engage them in other parts of their healthcare journey. It’s even more powerful when that critical transition point is a historically frustrating experience that was already ripe for disruption.
“The B2B2C channel doesn’t really exist around this population because most of them are retired, so we needed a really compelling use case to demonstrate to seniors that we can help them,” Petkevich said.
As the platform adds new services, Fair Square Medicare plans to create new revenue streams in addition to the commissions the brokerage generates. Petkevich also said he plans to launch retention offers for health-insurance carriers, which will give them insight into what behaviors are making members stick around.
Chirag Shah, the Define Ventures partner who led the Series A round, sees tremendous opportunity for Fair Square Medicare moving forward.
“A lot of the healthcare journey for seniors starts with plan selection,” said Shah. “There’s a lot of potential growth on the brokerage side alone, and no other player thinks about the consumer and their experience like Fair Square Medicare.”
Shah, who met Petkevich in 2020 when Fair Square Medicare graduated from YC, said he was immediately drawn to how much Dan seemed to care about the problems seniors face.
“I was particularly struck by how much of his focus was on the individual, probably more than any other founder I talked to. That’s what drove him to create a better model,” he said.
Define Ventures, which only invests in digital health and focuses on early-stage companies, also understood the opportunity in senior care and felt Fair Square Medicare fit into the firm’s larger investment ethos. Shah noted that the founders in Define Ventures’ portfolio all “have a deep understanding and empathy for what consumers want.” For Fair Square Medicare, he thinks the company has a ton of runway.
“So much of the process is broken, so once you create a lot of trust with seniors, you can be the connection point that works with seniors’ providers and insurers more broadly.”
While Fair Square Medicare does appear to have the building blocks in place to grow and defend its market, its model could attract more competition. There are other digital care-navigation companies with lots of experience that could pivot by adding similar services. But, regardless, Fair Square Medicare has plenty of room to thrive, especially with thousands of potential new customers entering the market every day.
Honorable Senior Care
Fair Square Medicare is part of a growing list of digital health platform companies looking to support an aging America.
One of the well-established players is Honor Technology, Inc. (Honor), which connects seniors with in-home care support via its platform, handling things like companionship, personal hygiene, provider check-in visits and transportation. Among other services, it also provides resource guides to enable caregivers to help seniors who are living with a number of chronic conditions. The company has raised a whopping $625 million since founding in 2014, achieving a reported $1.25 valuation after its series E round last October.
Honor’s journey started when Co-founder and CEO Seth Sternberg saw his mom start to slow down. Together with his co-founders, they built a national network of agencies and developed the platform to strengthen the bond between the care professional and customer (seniors and their caregivers).
The historical problem with the home-care industry, according to Sternberg, was that the network of home care agencies and providers was so fragmented, which made choosing the right support difficult.
“There was no brand that stood for caring for your parents, and that left people with nowhere to turn. They would ask their friends what to do, but often it was hard for people to talk about,” said Sternberg. “We started in home care because of the great need. From there, we can help with so much more, ultimately assisting them navigate their whole healthcare journey.”
Today, Honor touts itself as the “largest home care company in the U.S.” while also having the “largest network in the world,” following its 2021 acquisition of Home Instead.
For franchises in the Home Instead network, the Honor platform allows them to scale their business, which is normally logistically and operationally hard for beyond a certain point. “Our infrastructure cannot handle the growth in the aging population, and all these agencies get to a place where they just can’t serve anymore seniors. It becomes too complicated. So we built a technology stack that allows agencies to grow beyond that critical point.”
Sternberg said Honor’s prime motive is to ultimately expand society’s access to senior care, which is shaping up to be a significant problem. While the over-60 population is expected to double by 2050, the percentage of people over 80 globally will triple in that same period.
Another problem that Honor works to solve is matching families with the right kind of home care support. A senior living with dementia has different needs from a senior who is mobility-challenged, so the platform’s technology ensures that providers with the right skill sets are in the right homes. The platform also includes matching for “softer” characteristics like personality-matching, because, unlike some in-home senior care services that may provide less hands-on support, Honor says its providers are often in a senior’s home for 25 to 30 hours a week.
Because a care professional working through the Honor platform is so involved, Sternberg said another big focus for Honor’s technology is to provide resources to make caregivers’ jobs easier. “A happier care pro yields better-quality care,” he said.
Honor also recently launched a service called Honor Expert, which aims to “demystify” the challenge of properly caring for aging parents. The service includes a number and/or chat where people can connect with a social worker who provides guidance about what services or resources might be needed for a senior in any given scenario.
Sternberg said that part of the motivation for Honor Expert is the “ridiculously complex and highly fragmented” market for senior care solutions that “all sound very similar.”
“They are actually very different services that have different labor pools, different payers and different regulators. It’s insane that we’re trying to get consumers to understand all of it,” said Sternberg.
A Pal for Senior Care
Papa is another digital health platform “unicorn” ($1.4 billion valuation following its $150 million Series D) providing important care services to seniors. Founded in 2017 by CEO Andrew Parker and his co-founders, Miami-based Papa addresses senior loneliness by providing companions to seniors. These “Papa Pals” also handle duties like shopping, transportation and light housekeeping, though they don’t provide some of the more-involved care services like bathing or hygiene support.
Senior loneliness and isolation are major concerns in the U.S. A 2021 study by UCSF found that just under half of the over-65 population experience at least moderate loneliness. Aside from just the mental health considerations, the National Academies of Sciences, Engineering and Medicine reports that both exacerbate risk factors for more serious health conditions as well. It’s a reason why CMS includes reimbursement codes for loneliness and isolation under its social determinants of health umbrella, and when CMS makes a move like that, it creates a definable market for a company like Papa.
Like Petkevich and Sternberg, the whole idea for Papa germinated from Parker’s experience with his own family. He and his family were struggling to balance the daily demands of life with supporting his grandfather (the original “papa”), so he posted on Facebook, asking who’d be willing to be a “pal to his Papa.”
To solve the problem, the Papa platform works by providing members with on-demand access to its national network of thousands of pals who will visit a senior either in person or virtually. However, one of the many ways it’s different from a service like Honor is that it’s only available to members of an insurer or employer that’s partnered with Papa. The company counts more than 70 health plans, many of which are Medicare Advantage or Medicaid plans, as customers.
In a randomized controlled trial reported by Papa, approximately 70 percent of Papa members experienced a “significant” reduction in loneliness, and 45 percent say they have a meaningful increase in the days they feel physically and mentally well.
The service also provides some of the same concierge support as the others. Beyond just companionship and basic support to help seniors live independently, Papa pals are also available to assist seniors navigate the U.S. healthcare maze.
“The U.S. healthcare system is hard to navigate, period. It’s geared toward sick care over health care, and lacks the personal and human touches needed to treat whole health. This system naturally puts certain populations at a disadvantage, including older adults” said Parker. “Only 3% of older adults are health literate, meaning the majority of older adults struggle to understand their health benefits and may not know where to go for help. When you consider that lower literacy rates are associated with higher emergency department utilization, fewer preventative care services, higher health care costs, and higher mortality rates, it’s clear this is a critical barrier that can impact an individual’s overall health. We have to make the system easier to understand and easier to navigate for everyone, but especially for aging adults.”
Parker also shared that one of its pals recently worked with a member to resolve a $10,000 medical bill. The pal escalated the issue to Papa’s care navigators, who coordinated between his insurer’s claims department, the hospital and billing company, helping the member avoid the stress and anxiety associated with surprise billing.
“Our pals serve as ‘boots on the ground,’ spending time with members in their home and in their communities—where health happens. With this unique perspective, they can uncover barriers and care needs that are often unknown to health plans and providers in traditional care settings,” said Parker. “By identifying, escalating, and meeting each members’ unique needs, we’re delivering truly personalized care.”
Senior care as digital health platforms’ boomtown
The senior care market will likely continue to be a bright spot amid an uncertain future in digital health. After record levels of investment during the pandemic, the broader market correction in the tech sector has not been overly kind to health tech as well.
However, no one can deny that the “silver tsunami” will continue to crash on the U.S. healthcare system shores, so it’ll be interesting to see if and how that wave mints new “unicorns” and affects exits and M&A in the digital health platform arena. The one sure thing is that those who build the most trust with seniors and their caregivers – and can defend their businesses from new entrepreneurs who also witnessed how the U.S. healthcare system treated their family – will be the ones that survive.
Life Sciences, Forbes – Healthcare