Transparent Healthcare: the Costco for health insurance

Betty Heiman was the owner of a radiology practice in Yonkers when she got a strange call from an orthopedist she knew. He was trying to arrange an MRI for his mother, who was uninsured. 'How much does an MRI cost?' he asked her. 'I have no idea.'

Heiman, 49, was struck by two facts at once: First, that the orthopedist had no sense of what the actual price tag was on a service he wrote prescriptions for daily; and second, that there was in fact no true price. What an MRI cost depended on what your insurance provider or Medicare was willing to pay. And for those without insurance, that lack of knowledge could easily torpedo someone's entire financial life. 'The uninsured person really faces three obstacles,' says Heiman. 'First, they have no idea what the things cost. Second, they have no safety net. And third, they have no ability to bargain.'

She called a lawyer. 'What if I wanted to negotiate prices on behalf of the uninsured, without actually being an insurance company?' The answer, she was told, was that there was no real legal precedent.

So, in 2009, Transparent Healthcare was born - with the goal of providing access to a health network with clear pricing that could be used by the undocumented, the uninsured, and even those with insurance that still faced massive deductibles. Its cofounder, Andy Rieger, was formerly Senior Director of Innovation and Business Development at United HealthGroup .

Here's how it works: You pay $39/month to Transparent (or $375/year), and both you and your family gain access to discounted prices at a wide network of doctors and medical facilities (as well as free video consulting with doctors via Teladoc, which just raised $50 million in funding). You must pay cash for each visit, which is part of the appeal to doctors who spend much of their profits on billing and collections. But you have the advantage of knowing exactly what your expenses will be before you go forward. In effect, Heiman's company is like a warehouse club; you're paying a subscription fee for access to discounts. 'We are Costco for health insurance,' Heiman says. The discounts themselves average approximately 20% off of the Medicare rate.

You'd think that following the Affordable Care Act, a company like Heiman's would be DOA. Who needs discounts when they have free healthcare? But estimates from McKinsey claim that, even despite the ACA, there are still going to be something north of 40 million people who don't have insurance. That's partly because of the states that have opted out of expanding Medicaid coverage, and also because there are so many undocumented immigrants who do not qualify. Transparent can also be used as a supplement to those who have insurance but still want to know their total costs before, not after, they finish treatment.

The site itself came out of beta earlier this year; for several years it was limited to 400 users to test the types of services that were most in demand. So far, Transparent has signed up about 4,000 people, mostly in the New York area. But Heiman says she expects 10 times that number within the next six to eight months, because the company is currently expanding into Atlanta, as well as parts of Florida and Texas. Transparent has recently raised $3.2 million, with the NYU Investment Fund as the lead investor, and will soon go for a $7-10 million round.

And although you would think that the insurance companies, who benefit from the opacity of pricing, would oppose the entire notion of a company called 'Transparent Healthcare,' Heiman says she is finding them willing partners because their discounts help a group of people who might otherwise have no relationship with the insurers. She says she will be able to announce a partnership with a major provider in the coming weeks.

Heiman got her start as a sales rep at Upjohn, where she worked on the launch of Rogaine, and thinks that her experience marketing directly to consumers will help Transparent succeed. She says she can help people who the system has failed - and also make money with a product that holds appeal for those on both sides of the political aisle, no matter which way the health care winds blow in the coming electoral season. 'We are a free market solution to the health care problem.'

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