Clover Health set out to upend healthcare for aging Americans. 5 years and $925 million in funding later, it's proving more challenging than expected.


Vivek Garipalli (1)

  • If Vivek Garipalli, CEO and founder of Clover Health, could do it over again, he’s not sure he’d get into the health insurance business. 
  • “If I knew then what I know now, as to how hard that would be, I can’t say I would have done it again,” Garipalli, who founded Clover in 2014, told Business Insider onstage at an insurance technology conference in New York. 
  • Over the past five years, Clover’s brought in $925 million in funding. It now covers about 40,000 members.
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Vivek Garipalli never expected to get into the insurance business. 

After a career in finance, Garipalli, now the CEO of health insurer Clover Health, had been a cofounder of Ensemble Health Partners and CarePoint Health, a New Jersey-based health system, so he was used to being at odds with insurers. 

“I never thought, nor did I ever want to start an insurer,” Garipalli told Business Insider onstage at the Global Insurtech Leaders’ Summit in New York.

Nevertheless, Garipalli helped found an insurer in 2014. The company, called Clover Health, specializes in Medicare Advantage plans, which are privately run health plans for seniors.

Five years in, Clover’s raked in $925 million from investors and has more than 40,000 members. In March, Clover laid off 140 employees and the startup has struggled with billing and customer issues that impacted the plan’s standing with Medicare.

Now, it’s setting up shop in the Nashville area, branching out from its San Francisco headquarters, in continued pursuit of building a health plan that uses technology to better care for America’s seniors.  

Building Clover

At first, Clover wasn’t meant to be an insurer. Garipalli and his cofounder Kris Gale were interested in building a consumer-focused healthcare company aimed at making people healthier.

In particular, they thought it’d make sense to build that company for American seniors, who tend to interact with the healthcare system more frequently than healthy young people. 

“If  you’re going to create a consumer product generally you want your consumer to really care about that product,” Garipalli said. “Once you get to the 65 and over population, that population actually has healthcare as their most important purchasing decision annually.”

At first, Garipalli thought that might be possible by working with health insurers. He says he pitched big insurance companies that catered to seniors on the idea of developing a data platform that could help doctors take better care of patients. None of them were interested.

That meant Clover would have to go it alone and build its own health plan.

The effort proved to be more challenging than he expected.

“We felt the only way for our platform to be valuable, if it was inside our own insurance company,” Garipalli said. “If I knew then what I know now, as to how hard that would be, I can’t say I would have done it again.” 

Clover isn’t alone in trying to position itself as a friendlier version of health insurance, with the help of technology. It’s the pitch other health insurance startups like Bright Health, Oscar Health, and more recently Devoted Health are making to varying degrees.

Read more: Health insurance startups like Bright and Oscar have raked in $3 billion in venture funding. They’re using that war chest to plot out massive expansions across the US.

Moving through growing pains

Managing the health of its members hasn’t been easy. For instance, in early 2018, CNBC reported that it had billing issues related to lab tests. That hurt Clover’s standing with the CMS, and upset customers.

Clover’s still working to get to profitability as well. Clover lost $40.9 million in 2018 in New Jersey, according to a state insurance filing reviewed by Business Insider, a deeper loss than the $22 million the company lost in 2017. 

The company recruited more members in 2019. Clover had 40,137 Medicare Advantage members at the end of the first quarter of 2019, up from 32,425 at the end of 2018.

In January, Clover raised $500 million in a round led by Greenoaks Capital. Two months later, Clover laid off 25% of its employees, changing its focus to hiring people with more knowledge in the healthcare. That led to Clover opening an office in June in Nashville. For now, the company is maintaining its headquarters in San Francisco.

Plus, Garipalli noted that the Silicon Valley business model doesn’t work well in the health-tech sector. At tech startups, the goal is to raise money quickly and develop a strategy to grow quickly. That doesn’t work as well when an individual’s health is at stake. 

“Our consumers can’t show up at a pharmacy and have a denied prescription because of our error,” Garipalli said. “If we grew too fast and weren’t able to enroll their data fast enough, that stuff has real consequences.”

Over the next two years, Garipalli said he wants to publish peer-reviewed data to show how Clover members’ health outcomes compare to members in other plans. 

“That to us is really the holy grail,” Garipalli said. 

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