How do America’s health insurers resolve claims more efficiently and accurately in a system notorious for bureaucracy and rigid practice? Technology startup CoverSelfwhich is announcing a $3.4 million expansion of its seed funding round today, believes its software platform could be the answer.
Founded in 2021 by two healthcare veterans, Rajasekhar Maddireddy and Raghavendra Pawar, CoverSelf targets payers in the US system – the insurance companies that pay hospitals and other care providers on behalf of the patients they have treated. Currently, these insurers outsource the work of processing their claims and payments to third party providers. But, Maddireddy and Pawar argue, these salespeople have a financial incentive to reject claims again and again, perhaps simply because of a filing error, because they’re being paid to eliminate claims that insurers shouldn’t settle.
“These sellers often deny claims without even explaining why,” says Maddireddy. “The prevailing business model operates on a contingency fee basis, where sellers receive a percentage of fees based on the detection of incorrect claims or payments. This model initially served to limit overpayments, but as it expanded, providers began to suffer.”
The result, says Maddireddy, is that providers now regularly see perfectly legitimate claims rejected. This limits their finances and jeopardizes their relationships with insurers, whom they hold responsible for the problem. Some providers may eventually decide to stop offering care to patients with policies from the worst companies.
CoverSelf’s software aims to solve the problem by allowing insurers to outsource their payment operations. The tool automates much of the payment process, but also provides continuous feedback to insurers and providers about where claims errors are occurring. Actual claims can then be settled more quickly, with insurers retaining the ability to push back claims that need to be disputed.
“Payment integrity is absolutely vital,” adds Maddireddy. “And not just because every dollar we can pay to hospitals and care providers can be spent on treating patients.”
Bain & Company partner Ashish Singh, who advises the business, says CoverSelf’s solution is a good way to tackle a huge problem. “Having worked with many of the largest health plans in the US, I have seen firsthand the unmet needs and potential for improvement in their claims processes and payment integrity,” he says. “CoverSelf’s value proposition of empowering payers to take back control from third-party vendors is very attractive.”
CoverSelf believes it can both speed up the pace of claims processing and reduce costs for insurers, which could be passed on to policyholders. It has already deployed its software at two leading health insurance providers, where it says it processes 25 times more claims in the same amount of time as the insurers’ previous insurance providers. The two insurance companies are responsible for paying out $3.5 billion worth of clams annually.
These early successes have encouraged the interest of more insurance companies. Maddireddy says the business is in advanced negotiations with two other companies, which it expects to be in place before the end of the year, with three more clients to be announced in the new year.
Forbes first encountered CoverSelf in September of last year, when the business announced that it had raised $4.8 million in a seed round led by 3one4 Capital and BEENEXT. Both investors are participating in the further funding round that CoverSelf is announcing today, along with new venture investors Z21 and several entrepreneurs and health technology professionals.
The additional capital will be used to fund further product development, particularly in the area of productive artificial intelligence, as well as to pay for additional sales and marketing support as the business scales.
BEENEXT director Dirk Van Quaquebeke believes the potential market for CoverSelf is huge. Americans spend more than $4 trillion a year on health care, he points out, but more than $1 trillion of that can be attributed to excessive charges that stem from waste or abuse. “CoverSelf’s vision is to democratize the healthcare claims and payment integrity industry with a fully open and transparent solution built on a collaborative spirit,” he says.
At 3one4 Capital, Sonal Saldanha, vice president of investments, adds: “As payers begin to use CoverSelf, they will gradually need fewer third-party payment integrity vendors. ultimately, CoverSelf will be the only payment integrity platform anyone will ever need.”