Sana announced Monday that it extended its $20.8 million series A financing round to include an additional $20 million in funding, nearly doubling the round to $40.8 million.
The Austin-based insurtech startup hopes to disrupt the health insurance industry by providing small and medium-sized businesses with health insurance plans that are 20 percent cheaper on average.
The company is able to offer lower prices because it is a vertically integrated company that, by brokering and administering plans, is able to cut out middle-man costs.
Sana also reduces costs by using technology to auto-adjudicate claims, automate back-end services and create an intuitive enrollment process that reduces the need for customer support calls.
Sana’s insurance is currently available in Arizona, Oklahoma, Texas, Illinois and Kentucky.
Sana CEO Will Young told Built In that a portion of the new funding will also go toward expanding insurance coverage into new states.
Young said hundreds of companies use Sana’s insurance plans, and its customer base has grown by 140 percent in the past year.
Sana has 130 employees, up from 90 at the beginning of 2021 and 50 at the beginning of 2020, Young said. The company has an office in south Austin, but two-thirds of the staff is remote. Sana is currently hiring, with plans to reach a headcount of 150 employees by the end of the year.
Sana is also using a portion of its funds to open a primary care clinic in Austin, where most of its customers live. The clinic is expected to open by the end of the year. Young said the clinic will start with one full-time physician but more staff will be added to adjust to demand.
Sana’s foray into medical care is rooted in the company’s belief that healthcare needs to move away from a fee-for-service model, which incentivizes care providers to bill for tests, medications and procedures, toward a value-based approach, Young explained. This not only eliminates the incentives for unnecessary services but also encourages providers to adopt a more holistic approach with longer appointments and follow-up conversations with their patients.
“A lot of the problems in our healthcare system are because the incentives between providers and patients are misaligned,” Young said. “The clinic is a step in the direction of us incentivizing doctors to just do what's best for patients, regardless of what services get billed. We have set it up as a direct primary care clinic, where we pay a fixed amount to the clinic per member per month, and then the clinic just does what's best for the patient. It eliminates a lot of the waste and perverse incentives that are part of the normal fee-for-service environment.”
The payer-provider model — where companies provide both insurance and care — is not common among large healthcare companies. Young said he is inspired by Kaiser Permanente, a large payer-provider based in California.
“I think we would like to be a next-generation, tech-enabled version of that in time,” he said.
The Series A extension strengthened Sana’s relationship with its existing investor, Gigafund, and brought in new strategic partners such as American Family Ventures, Breyer Capital, JAM Fund and Harmon Brothers Ad Ventures.
Katelyn Johnson, managing director of American Family Ventures, said in a statement that small businesses are in need of Sana’s affordable, high-quality health insurance.
“Sana is bringing much-needed innovation to the overlooked but massive small and midsize business segment through their level-funded product and revolutionizing the care options and benefits that these companies can provide to their employees,” Johnson said.
