How do America’s health insurers resolve claims more efficiently and accurately in a system that is notorious for bureaucracy and sharp practice? Technology start-up CoverSelf, which is today announcing a $3.4 million extension of its seed financing round, believes its software platform could be the answer.
CoverSelf, founded in 2021 by two health sector veterans, Rajasekhar Maddireddy and Raghavendra Pawar, is targeting payers in the US system – the insurance companies that pay hospitals and other care providers on behalf of the patients they have treated. Currently, those insurers outsource their claims and payments processing work to third-party providers. But, argue Maddireddy and Pawar, these vendors have a financial incentive to reject claims over and again, perhaps simply because of a filing error, because they are paid to weed out claims that insurers should not be settling.
“These vendors will often deny claims without even explaining why,” Maddireddy says. “The prevailing business model operates on a contingency fee basis, where vendors receive a percentage of fees based on the identification of incorrect claims or payments; this model initially served well to curb overpayments, but as it expanded, providers began to suffer.”
The result, Maddireddy says, is that providers are now regularly seeing perfectly legitimate claims rejected. That is constraining their finances and jeopardising their relationships with insurers, which they hold responsible for the problem. Some providers may ultimately decide to stop offering care to patients with policies from the worst-offending firms.
CoverSelf’s software aims to resolve the problem by allowing insurers to in-source their payments work. The tool automates much of the payments process, but also provides constant feedback to insurers and providers on where claims errors are cropping up. Genuine claims can then be settled more quickly, with insurers retaining the ability to push back on claims that do need to be disputed.
“Payment integrity is absolutely crucial,” adds Maddireddy. “Not least because every dollar that we can pay out to hospitals and care providers can be spent on treatment for patients.”
Ashish Singh, a partner at Bain & Company, who is advising the business, says CoverSelf’s solution is a neat way to address a huge problem. “Having worked with several of the largest health plans in the US, I have seen first-hand the unmet needs and improvement potential in their claims and payment integrity processes,” he says. “CoverSelf’s value proposition of empowering payers to take back control from third party vendors is very appealing.”
CoverSelf believes it can both speed up the pace of claims processing and reduce insurers’ costs, which could be passed on to policyholders. It has already put its software into operation at two leading health insurance providers, where it says it is processing 25 times’ more claims in the same time window as the insurers’ previous outsourced providers. The two insurers are responsible for paying clams worth $3.5 billion a year.
These early successes have encouraged interest from more insurers. Maddireddy says the business is in advanced negotiations with two other firms, which he expects to onboard before the end of the year, with three further clients on target to be announced in the new year.
I first met CoverSelf in September last year, when the business announced it had raised $4.8 million in a seed round led by 3one4 Capital and BEENEXT
The additional capital will be used to fund further product development, particularly in the area of generative artificial intelligence, as well as to pay for additional support in sales and marketing as the business scales.
BEENEXT managing partner Dirk Van Quaquebeke believes the potential market for CoverSelf is huge. Americans are spending more than $4 trillion a year on healthcare, he points out, but more than $1 trillion of this can be attributed to overcharges stemming 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 with a spirit of collaboration,” he says.
At 3one4 Capital, Sonal Saldanha, vice president, investments, adds: “As payers start using CoverSelf, they will progressively need fewer external payment integrity vendors; ultimately, CoverSelf will be the only payment integrity platform anyone will ever need.”