HealthTech business models explained: Benefits of B2B2C

Health insurance benefits have been commonly used to attract new employees since the mid-twentieth century. During WWII as the number of eligible, non-military workers in the US dropped dramatically, companies began increasing wages to attract scarce workforce talent. Concerned about the resulting effects on inflation, the Roosevelt administration imposed a nationwide wage freeze. Instead, companies began to leverage employee health insurance benefits—not considered ‘wages’ at the time—to draw in and incentivize employees. Later, this tax-free compensation was enshrined in law resulting in a roughly $250B annual subsidy to the industry each year.

Today, employers lean heavily on healthcare benefits as a means for attracting top talent. From a purely financial and perhaps cynical perspective, the tax deductions on health benefits make improving health insurance offerings an appealing alternative to raising base salaries. There are many arguments against the coupling of employment and health insurance—chief among them that the high cost of individual coverage makes employees reluctant to leave an employer with whom they are unsatisfied or unhappy.

But health benefits, from insurance to add-on digital health tools and services, also help maintain a healthy, balanced, and productive work culture. As healthcare costs have risen dramatically, employers have taken a more active role in crafting health benefits that are both cost-effective and valuable to employees.

Explains Megan Capriccio, entrepreneur and Director of FemTech Consulting. “Partnering with a healthtech or femtech company to provide an additional and more specialized service is not only attractive to employees but allows employers to ensure their staff is happy, healthy, and able to be productive at work.”

Mounting evidence points to the benefits of a healthy workforce for productivity and retention. The CDC estimates that productivity losses related to personal and family health cost US employers $225.8 billion annually, or over $1600 per employee per year. Resources that help employees manage their own mental and physical health may therefore improve the company bottom line by reducing absenteeism and overtime pay. Preventative health and condition maintenance resources are particularly crucial as the percentage of the US population managing one or more chronic conditions continues to rise. Digital health offerings have also been shown to improve an employee’s perception of their employer: A Thomsons survey found that over 80% of employees with accessible benefits feel more loyal to their employer and Mercer found that over one-fourth of employees are less likely to leave a job that offers digital health solutions.

As a result, companies are investing in solutions beyond just insurance coverage. A Castlight report found that the average US employer offers 14 discreet digital health solutions—nine from a health plan and 5 from third-party vendors. Another recent Mercer report found that over two-thirds (68%) of US employers plan to invest more in digital health solutions over the next five years with the primary goals of improving workplace safety, improving morale, and decreasing health-related absences or poor performance.

Employers’ demonstrated interest in digital health solutions creates a rich market for digital health companies. But beyond just making the sale, employer partnership has unique upsides for these health solutions providers too:

The biggest challenge for digital health companies working with the B2B2C payment model is securing the first employee partnership. The health solution must demonstrate workforce value that will positively impact both employees and company decision makers. Rania Nasis explains: “The challenge is in conveying value to employers, especially now that many wellness programs are being looked at critically. Are you providing the employer with healthcare cost-savings or increasing employee happiness/retention, or both?”

Jessie’s Amy Domangue expands on the challenge of landing a first client partnership: “Large employers have a long sales cycle and decisions about what benefits to offer employees are typically only made once a year. If you don’t get the approval year one, you’re looking at another 12 months of sales efforts before another decision can be made.”

However, once a first partnership has been established, the digital solution automatically has a new segment—tens or hundreds to even thousands—of users who have very little barrier to entry. “The partnership ensures user conversion in bulk and in most cases delivers a quarterly or monthly subscription payment, regardless of how much the product is used or not,” explains Megan Capriccio of Femtech Consulting. “This eases the sales process while being able to access a larger user base.”

The employer market is also enormous, creating an exciting business opportunity for digital health companies who can hit the mark: “Employers who provide self-insured, or self-funded plans currently cover an estimated 94 million of the nation’s 156 million employees, says Domangue. “If you want to make a large impact in health, the best place to start is with the largest provider of health coverage.”

Another strategic benefit of B2B2C is the ability to get digital health solutions to users faster. While commercial insurers typically require months or years of qualifying data, employers are typically more willing to experiment with new tools and technologies that would benefit their workers.

“We initially targeted traditional payers like United Health, Blue Cross Blue Shield, etc. and quickly learned that traditional commercial payers use pre-existing data to drive decisions,” Domangue explains. “In other words, we would need a significant data set to back up our claims before an insurance company would roll out a new solution for virtual care. Large self-insured employers, however, are more nimble, innovative, and willing to implement new and unproven solutions. Instead of focusing our efforts on commercial payers we decided that a better point of entry into the market would be through employers.”

Domangue also adds that due to the high cost of postponed care, employers are motivated to provide direct access to their workforce. This allows digital health companies to test and iterate on products with full access to user behavior and data in a controlled setting.

After working with one or more employer partners, digital health companies have a clear case study with the data to support the value of their product. Many health solution providers aim to secure early deals with large corporate employers who are less vulnerable to financial risk. Larger companies provide a higher number of users, allowing the digital health company to collect information on digital health solution use and behavior while also tying this data to broader trends in employee health, engagement, and retention.

As an added benefit, when employers provide a digital health benefit to employees, they validate the product—both to employee end users as well as other employer partners and investors. Mercer found that 63% of employees are more confident in a digital health tool if it is promoted or sponsored by their employer. Similarly, once an investor sees a success case with a reputable employer, they are more likely to invest. Capriccio explains: “When healthtech companies can turn an already reputable employer into a client, they quickly gain credibility and investors will assume that equally notable companies will follow suit.”

In addition to all of the strategic benefits described above, the B2B2C model may be particularly well suited for digital health companies whose services may help companies recruit and retain a diverse employee population. Year after year, global studies point to the disproportionate representation of men—and particularly white men—in leadership roles. As a result, many companies are looking for new tools and techniques that contribute to a more inclusive work environment.

While a range of structural and socioeconomic factors have led to the underrepresentation of women in leadership and across certain sectors more broadly, health and access to gender-specific care is a major contributor. Many workplace norms such as default work logistics, parental leave policy, and available health benefits fail to meet crucial needs of women employees.

Pregnancy discrimination, a very real phenomenon in many workplaces, leads to delayed career development and lost earning power, exacerbated by sexist notions that pregnant women and working moms are less competent or committed (also known as the “maternal wall bias”). Pain and discomfort associated with menstruation and menopause has been shown to result in loss of productivity or absence from work and due to stubborn societal taboos, these topics are rarely discussed with colleagues.

But of course reproductive health is just one aspect of gender health disparity. Women are twice as likely to be diagnosed with anxiety, which (perhaps ironically) has also been shown as an outcome of the gender wage gap. Women are also proportionately affected by stroke, osteoporosis, certain autoimmune conditions, and thyroid issues, making preventative care and condition maintenance services crucial. Beyond just their own health, women also take the lead managing family healthcare decisions and finances: According to Frost & Sullivan, 90% of women are the primary healthcare decision makers for their households and are also responsible for 80% of family healthcare spending.

These differences make it clear that healthcare benefits at the employer level are not a one-size-fits-all solution. In order to attract and retain women throughout all levels of leadership, companies must think about how digital health offerings can ease the unique burden placed on women. Many companies in the rapidly growing femtech space are working directly with employers to achieve this goal. Two femtech companies working directly with employers, Caia and Hela Health, shared their strategic approach in the following case studies.

Caia, an Australian B2B2C femtech company, leverages technology to provide a health and wellbeing concierge service to women at all life stages. Their platform connects employee users with a range of vetted women’s and family expert providers they can trust, offering tailored support that goes beyond just primary care. Their network and personalized tech platform aims to improve access to appropriate care pathways and reduce overutilization of emergency care.

COO and Co-founder Rob Haggett shares that the decision to work directly with employers came from the glaring need for services that improve each user’s ability to manage her health and wellbeing in the workplace: “There’s a lot of friction between work and outside life, particularly as people spend more and more time at work. There are rarely appropriate support structures in place to ensure that an individual who is grappling with the challenges of a particular life stage can show up at work and be successful. This is a huge problem as it really starts to impact productivity and even mental health. Being able to manage your health and wellbeing within the workplace becomes ever more important.”

Caia offers a broad network of women’s and family health practitioners: general practitioners, mental health practitioners, sleep consultants, lactation consultants, menopause specialists, fertility experts, nutritionists, doulas, and midwives. The platform gives users a dependable place to ask questions, find information, schedule virtual consultations, and get prescriptions. But the real key is personalization: “If we know somebody is in postpartum and they’ve got a newborn baby, then based on research and what we know about them through our onboarding process, we know there’s a high likelihood that they may be struggling with sleep,” explains Haggett. “We can start to say, how can we support that individual’s needs? What types of articles or recommendations would be valuable for improving sleep for themselves or their baby? So we can start providing information and support in a timely way, right through the device.”

Caia’s larger goal is to improve workplace systems and culture to better support the health and engagement of employees. Based on research, for instance, the Caia team knows that the transition back to work after maternity leave can be challenging: “The first day back, many workplaces expect that you’ll be right back to operating at 100%,” says Haggett. “However, in reality this may not be possible as an employee is grappling with the needs of a child and perhaps even their own physical and mental wellness—there is an adjustment period. Then there are factors that can make the transition more difficult: maybe the person has a new manager, or their access pass doesn’t work because someone forgot to log their return date. Maybe their team even switched floors and no one told them. All of those little things together—and the lack of communication and support between employees and their management or HR—actually further compound the challenges people are already facing when they return to work.”

Caia hopes to use its digital platform and feedback from employees to help managers, team leads, and HR build better support systems to improve the employee experience: “In the new COVID-19 reality, where more employees are working in virtual constructs this becomes even more critical. Caia can support the individual going through that major life change and also provide support for the employer. And if companies don’t support women at these stages, it ends up costing them a lot—both in the short term if they lose a good employee, but also in the longer term of what gender representation looks like at the higher levels of the organization,” explains Haggett.

Hela Health is an early-stage B2B2C virtual women’s health and wellness marketplace. Hela Health users can discover health solutions curated and vetted by medical professionals to meet their unique needs at any lifestage. The platform aims to reduce “vendor fatigue” by bringing hundreds of products and services—from classes, to apps, to wearable devices—together in one place.

“The concept for Hela actually started out as consumer-facing,” explains co-founder and CEO Cathy Sebag. “But we found that there was a price barrier where women didn’t prioritize spending money on their own health and wellness. So we built Hela Health as a B2B2C platform, recognizing that when women experience and enjoy better long term preventative healthcare, there’s an increase in workplace productivity, health outcomes, and general satisfaction. The marketplace model also gives exposure to those tools that we’re featuring.”

Hela Health consists of tiered plans. Employees on the basic plan can access the platform and browse or shop for products with a discount. The premium package allows employers to provide a “digital health wallet” so employees can purchase products or services with no out-of-pocket cost. “So for instance if you’re post-partum, you can take a class on everything you need to know after having a baby. One thing that may come up is your pelvic floor and you may want to buy a pelvic floor trainer. You may also want to take physical therapy classes or exercise classes to go along with that pelvic trainer you bought. All of that is available through the platform,” says Sebag.

While Hela Health is still early days, they’ve seen impressive results from the first months of testing, including a 35% increase in Net Promoter score and an 84% utilization rate of the platform. But Sebag hopes that the employer value goes beyond these metrics: “I think more importantly, women want to feel that their employer supports their health and wellness goals and decisions. They want to feel that they can be open and supported in the workplace.”

While there is no doubt about the value of a healthy workforce for employers, the B2B2C model may not be immune to economic factors that affect employer budgets and unemployment rates more broadly. The COVID-19 moment provides a grim inflection point: How will employer health benefits fare when businesses face major economic challenges and reduced employee headcount? Analysis from industry experts suggests that we’ll just have to wait and see.

Capriccio of Femtech Consulting points to the current moment as evidence for further investment in digital health solutions to support employees: “If there were more investment in this space before a time of crisis, our healthcare services would be less overloaded because companies would have support solutions for their employees within their own benefits plans. Ultimately, end users/employees would feel more supported by their employer as a whole person instead of just a worker.”