Today’s essay is the first of 2022 and it’s going to be a long one! I wrote Sound Scrappy which was the 2021 year in review to discuss the problems I am facing to deliver consistent content. I am very grateful to have received feedback from readers & friends. The feedback has helped my ability to improve my writing, learning and deliver value over time to you.
That being said, an announcement before we start today’s essay. I’ll be launching a new media product “Scrappy Out Loud”, the audio version of the essays.
The thought process is simple: help readers consume value in their preferred media of choice. I’ll relay more information with the upcoming days but if you want to be notified early, follow me on twitter for updates and easy consumable tech-business knowledge!
Let’s dive right into the essay.
We will cover:
Part I: Healthcare & Social Security
What is Healthcare?
Insurance
Prevention
Access
Care
The Healthcare System in France
Social Security in France
Supplementary Health Insurance & Problem Statement
Part II:
Enter Alan
Business Basics I: Products
Health-Insurance is the beating heart of Alan
Alan’s vision is to become the super-app of healthcare
Business Basics II: Business
Alan’s Radical Culture: Twitter Thread(Coming Soon)
Funding
Future Glimpse into the potential of Super-app
Part I
What is Healthcare?
Healthcare is a very broad and scary term. As human beings, we do not want to think about healthcare on a daily basis unless of course we operate or invest in the industry.
We ensure we eat well and stay active in order to distance ourselves from needing healthcare services. Unless there is an imminent threat in the near future, we try not to think about it. It’s one of the two prominent reasons why it’s hard to quit smoking and why the scary pictures on the cigarette boxes don’t work.
That being said, it’s important to understand the healthcare system and how it works. No matter if we need it in the short or long term, understanding something helps us leverage it to our advantage.
Let’s dig into the generic view of the healthcare industry.
In order to provide simplicity, we will categorise all healthcare products and services into four verticals:
Insurance
Investopedia defines it as a contract between a policyholder and an insurance company that allows the policyholder to receive financial protection or reimbursement against losses from an insurance company.
In terms of healthcare, the user pays a premium periodically to an insurance company. In return, the insurance company provides reimbursement for healthcare costs to the user. The reimbursement varies in cost, conditions and insurance coverage type.
Prominent problems associated with the current health insurance system are:
Paperwork
Users unaware of terms and conditions
Unjustified premium rates
Insure-tech is an emerging innovation aiming to solve the above-cited problems in the industry. We will be discussing insure-tech elaborately through the lens of an emerging startup in this essay.
Prevention
Prevention is a way humans can reduce the risk of contracting diseases. It is divided into three types:
Primary Prevention: A way to reduce risk by changing behaviour and lifestyle. For example, incorporating cardiovascular exercises in the lifestyle to reduce heart-related ailments. Vaccines are another type of primary prevention method.
Secondary Prevention: An early-stage diagnosis and treatment of an ailment. It helps in cost-effective and efficacious treatments.
Tertiary Prevention: A late-stage detection of ailments where healthcare workers and individuals attempt to arrest and reverse the ailment. Eg. a late-stage cancer diagnosis.
Pharmaceutical companies like Pfizer, GSK, Ipsen operate to build products and services in the prevention zone.
Access
What is the first thought we have when we get sick? How can we get medical aid? The ability to get timely and effective healthcare refers to access. Hospitals, doctors, nurses, medical infrastructure and even insurance policies are put in place to improve and facilitate access.
Access zone is monopolised significantly by governments but individual practitioners(clinics) and private hospitals also play a significant role.
Cure
The complete restoration of human health is the cure. It differs from treatment as it’s the procedures put in place for achieving a cure. Enablement and facilitation of cure is the end goal of every healthcare product and service.
Now, we understand the basics of the healthcare system horizontally. Every vertical mentioned goes complexly deep. The scope of Scrappy is to understand technology & business in the EU, and I will stick to my guns. We will explore how healthcare and insurance work in France, interpret the disruption of insure-tech in the pretty-perfectly crafted health insurance world in France.
I strongly believe that everyone should know this about healthcare! If you think your friends might not know this about healthcare:
The Healthcare System In France
While walking to your work next time, think about why you pay taxes and where does it go? In a perfect world, taxes are utilized by the appointed officials(government) to take care of our basic rights and needs. In a non-materialistic world, our basic needs are shelter, food + water and clothing. (Basic needs differ from basic rights). Unfortunately, we don’t live in a perfect world. As civilizations evolved, our basic needs have outgrown the three basic essentials of life.
For instance, babies upon birth are given flu shots and vaccines to prevent contracting diseases.
Numerous governments realise the importance of quality healthcare as a basic human right. It means, no matter who you are, you should get access to quality healthcare! France is one of the few countries in the world which has been able to build systems and processes to efficiently facilitate that.
If you follow or have ever followed the U.S election campaigns, “healthcare” is always on the docket. Barack Obama, the first black President of the United States laid huge emphasis on healthcare. He was successful in building a system leveraging compulsory health insurance(famously came to be known as ObamaCare).
No matter where you are, we understand two stereotypes about France. Paris is the city of love and you pay a lot of taxes in France. The country spends 11.8% of their Gross Domestic Product(GDP) on healthcare. It stands #25th overall in the world in terms of healthcare.
Residents of France pay tax which is split as 17.2% and 12.8%. The rate differs based on the legal status and income but on average, 17.2% goes towards social security.
The funds in the social security are utilised towards the following branches:
Sickness, maternity, paternity, disability, and death
Accidents and occupational diseases
Family allowances
Unemployment benefits
Old-age pension
Why France’s Social Security is Brilliant
State Planned & Operated
France has a non-profit national health insurance system (administered by the Social Security administration) with mandatory coverage for anyone who resides for more than 3 months in the country.
Health care insurance is not directly managed by the government but by an autonomous authority made up of representatives of employers, unions and the government. It is in many ways analogous to how Medicare is funded and managed in the United States.
Currently, employers pay 12.8 % of their salary to cover their employees. Employees pay a Social Security tax of 7.5% of their salary.
Quality over Prices
Health care fees for similar services offered by similar categories of physicians in the same area of France are the same. Competition does exist among physicians and among hospitals, but it is about the quality of medical care, not its price. The price is set by social security.
The Social Security administration negotiates all medical fees with national unions and organizations of medical providers. France is like a gigantic preferred provider network under contract with a single insurer.
Reimbursement
The French health care system does not usually cover 100% of medical fees, but rather a specific percentage depending on the kind of service, or the kind of medication.
In practice, however, everyone has personal Social Security cards (called “cartes vitales”) containing an electronic chip with personal information which can link directly to the central Social Security computers and automatically credit the reimbursement to the physician’s or the pharmacy’s account.
Social security has a fixed price for everything. For example, a GP one-time session for 25 euros, can cost higher but social security sees it only as 25 euros for a GP visit. Social security reimburses 70% of the charge and in that 70%, 1 euro is deductible, which means it has to be paid by the end-user. In turn, the end-user should pay 8.5 euros and social security refunds 17.5 euros.
The practitioners charging according to social security slabs fall under the category of OPTAM I and II. The OPTAM III category practitioners usually practice at a higher rate.
The compensation of 8.5 euros is where the supplementary insurance comes in!
Supplementary Health Insurance
As seen above, French healthcare isn’t 100% free. Users opt for supplementary health insurance to cover the additional expenses. In order to make the offer lucrative, depending on the type of complimentary insurance, it offers reimbursement for services not covered by social security like hospital private beds, special dental, medications, meditation, alternate medicine etc.
The problem statement is simple: Provide reimbursement for all kinds of healthcare services beyond social security.
If you are living in France, that is a lot of information in one place you just got! I mean, that deserves a subscription(it’s free), don’t you think?
I empathise with you that part I was super boring! bureaucratic stuff often is but I promise, it gets interesting in Part II!
Part II
Enter Alan
Alan is the first digital health insurance startup in France, founded in 2016 by Jean-Charles Samuelian-Werve(CEO) and Charles Gorintin(CTO). It is the first French health insurer licensed by the French Prudential Supervisory Authority (ACPR) after 1986. It’s 30 years of foundationally uninterrupted industry.
In 5 years of inception(by 2021), Alan has grown to 255k members with a churn rate <6%, 85% member growth, 161 million euros ARR(Anual Recurring Revenue) and an NPS of 66. The numbers speak for themselves but what makes it stand out in the increasingly crowded market of health-tech companies?
Business Basics I: Products and Services
Alan’s business model is one of the best I have come across in a very long time. Why?
Let’s scroll up to the time when we talked about how its the first French health insurer licensed by the French Prudential Supervisory Authority (ACPR) after 1986. Why would a tech company go through so much trouble?
a. Health-Insurance is the beating heart of Alan.
As we discussed above, French social security is pretty badass. Supplementary health insurance comes into play to compensate for social security falls short and the remainder of reimbursement.
The company tries to do its major business with other companies on a subscription basis. It allows them to:
Work on larger deal sizes
Reduce the cost of acquiring customers
Increase the lifetime value of deals
Build trust and brand value
Data & network effects
In order to increase value on the insurance product, it provides services like
Online contract signing
Paperless reimbursements
Payroll management which is reimbursement directly transferred to payslips of employees
Easy portability from current insurance plans companies is enrolled in
Alan also provides plans targeted at individuals, small businesses, hotels, restaurants and freelancers.
We started this segment with the question: why would a tech company start with an insurance company?
b. Alan’s vision is to become the super-app of healthcare
What are Super Apps? (In a nutshell)
Credit card companies have a term called: top of the wallet. It means users tend to use two banks at the most for the expenditures on a daily basis. Every bank aims at being on the top of the wallet of its users. Similarly, tech companies & investors understand that users don’t want to stack their phones with hundreds of apps. On an average, we use 9 apps/day and 30 apps/month.Some of them are daily use like Instagram and Whatsapp. Others are niche-specific like Amazon, Zalando, Alan etc. Tech companies build verticals in order to meet the demands of the user’s entire journey.
Hence, the goal of becoming a super-app.
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Alan’s beating heart supports the functions of verticals built on top of it.
In order to get reimbursement, users can simply upload the picture of the prescription and bills, the paperless mechanism allows them to get reimbursed in less than an hour*(74% of users reimbursed within an hour).
How do you become a healthcare super-app emerging from an insurance product? You focus on the customer journey of users. We discussed the different segments of healthcare as insurance, access, prevention and care.
Alan Map
The first step in access is finding medical practitioners around us. In most cases, it is driven by:
Proximity
Word of mouth from friends and family
Reference from other practitioners
Cost
Alan map allows end-users to view medical practitioners based on contracted or non contracted(OPTAM I, II & III: discussed in Reimbursements), cost accrued to users and proximity. In a way, it productizes the healthcare service.
Growth Opportunity I
In my opinion, there is more to the above mentioned 4 factors when we pick a medical practitioner. For instance, LGBTQ friendly, experience, user rating and more. Integration of these factors would help the end-user to make a more informed choice.
Growth Opportunity II
10 min grocery startups have seen exponential growth post the COVID crisis with investments amounting to $1.65 billion pouring into the sector in E.U. It’s only a sub-niche of a much bigger food-tech industry.
What could be the potential of virtual pharmacies?
Alan is well-positioned to enable virtual pharmacy orders as the paperless mechanism has to evaluate the authenticity of prescriptions for reimbursement. Although, in my opinion, it might not be the direction Alan wants to proceed in and the business of deliveries hasn’t been figured out by even niche players.
Alan Teleconsultation(In Collaboration with Livi)
Teleconsultation allows users to access healthcare services without leaving the comfort of their homes. Not only this but it solves the problem of unavailability of in-person appointments and time constraints.
The concept of teleconsultation has also been gaining steam with a lot of players in the market. The collaboration with Livi enables Alan to provide a seamless teleconsultation experience while extending to e-prescriptions. Teleconsultation and telemedicine exponentially improve the access of healthcare to users. The cherry on top: it is reimbursed by the French social security!
Alan goes beyond teleconsultation and brings users access to healthcare professionals on chat and video, available all week.
The entire vertical is termed Alan Clinic.
Continuing the development of super-app, Alan has built products in the “care” segment.
Alan Mind
The European mental health software market size is valued at 0.28 billion Euros as of 2021 estimated to be growing at a CAGR of 13.49%. The significance of mental health during COVID has emerged significantly.
According to a Statista report, the share of French people suffering from depression increased from 15.5 per cent on October 21, 2020, to 22.6 per cent on November 25, 2020.
The below chart shows how people have been coping with the increase in mental disorders. Adoption of meditation has emerged with 36% beginning the practice since the onset of the pandemic (survey of 1059 respondents).
Alan was the first insurance plan to reimburse meditation in 2018. It took further steps in that direction by the acquisition of digital therapy startup Jour for $20M in November 2020.
In the B2B model:
The app integrates with the insurance model by providing access to Jour to members.
The employees benefit from calls with therapists, mental well-being seminars and measures to improve the mental health of the entire organisation as a whole.
Up to four individual consultations are paid for by the employer which improves access and reduces cost borne by the end-user.
In the B2C model:
The mobile application is based on targeted educational content and techniques from behavioural and cognitive therapies. Pre-acquisition, the app had 2 million downloads worldwide with 90% of users feeling less stressed after usage.
The Jour app is still present as a standalone app while Alan Mind is an initiative that helps employees to get proactively involved in the well-being of their employees.
Growth Opportunity:
Alan Mind can be extended to niche-specific topics like men’s mental health.
1 in 3 men are committing suicide due to depression and there is a lot of stigma around this topic. The underlying thought from the stats shows that men are not very good at expressing their feelings and thoughts. Movember foundation raises funds around this issue.
A parallel topic Testicular cancer is also a very dominant issue in this category. A way to incorporate this feature into the insurance plan could be helpful. Although, there is selection bias because most of the men would never use this feature. Value-added service to solve this issue could be helpful.
The testicular cancer issue could be changed by doing workshops and camps by Alan in association with the company. It would be similar to that of Alan Mind’s current offering but a different niche.
Thinking of growth opportunities is a skill set you can develop! Interested?
Alan Baby
This one’s probably my favourite of all the stand-alone products Alan has built because it's distinct, represent an under-represented market and has the potential to grow exponentially.
An app to help parents before, during and after childbirth.
The concept is similar to Alan Mind where Alan Baby provides value with targeted informative content. It launched as a standalone product free for members providing coaching programs. Jean-Charles puts it as a “making bets on “too good to be true” experience helping members looking for practical advice to help them overcome their challenges”.
Alan’s Women’s Health Initiatives
Alan believes and practices radical transparency in its culture. It’s probably not very hard for the competition to figure out their next move in the market as everything is shared comprehensively on their blog. I will write a detailed view of the culture at Alan in the upcoming days as a Twitter thread. I would be grateful if you could hit that link & drop me a follow on Twitter!
In a nutshell, Alan practices:
Members first
Radical Transparency
Distributed Ownership
Personal & team growth
Fearless Ambition
Anyway, even after we are 2600 words in, I digress. The point was that Alan drops hints about future potential and what they are exploring to build. The exploration of data from media as a product to enable product development is as creative as it gets.
Since mid-2021, Alan has been teasing topics related to women’s health encompassing menstruation and ovarian cancer. The potential in fem-tech is beyond measurable. I can say that with absolute confidence without any metric because fem-tech was coined not 5 years ago(2017) by the founder, Ida Tin of the now-famous app Clue.
Let me illustrate two examples where Alan can venture into:
Alan femtech product feature for period flow and value creation
Period tracking for women. It could be included in the “care” niche.
The feature would allow tracking the period of women across the organization. It could allow employers to create value for women during these difficult times while breaking the stigma around periods.
Alan Mom (pre and post-pregnancy)
Women go through multiple changes during the pre and post-pregnancy period, eg. losing bladder control.
The feature could be an extension of Alan baby.
The feature would allow employers to educate women on how they can navigate this phase of their life.
It could also lead to possible collaborations with brands like Elvie for raising awareness on kegel trainers and Elvie pumps.
I wrote an essay on Elvie here where I discuss various problems women go through during this phase.
I have bombarded you with shameless prompts to share & subscribe throughout the essay, I promise this is the last one!
Business Basics II
Insurance as the beating heart with numerous stand-alone products is a stadium view of the business. How does it all come together though?
Every insurance company charges a monthly premium and a membership fee. Alan offers pink(42 euros/month), green(53 euros/month) and blue(85 euros/month) for small businesses. Individual offers at 63 euros/month with a preferential charge for children(up to 25) of 35 euros for the first two months, free post that. Each offer differs in reimbursement and coverage.
(Please refer to Alan’s website for definite & current prices).
How is Alan able to sustain stand-alone products when the premium is leveraged to cover the insurance?
This is where the value-added fee comes into the picture. For instance, employers who opt in to use Alan Mind, pay 5 euros/month per employee on top of the insurance plan.
All insurers work on the foundation of risk pooling. In simple terms, all the premiums are accumulated and a pool of funds is created. More the members, the lesser the risk for the insurer. Currently, Alan has 250k + members and growing. The future potential to support stand-alone products would only increase from here.
Initially, the plan was to write two essays: one explaining the healthcare system and another one explaining the business. Although, only the healthcare system isn’t the scope of Scrappy. As we have already crossed 3k words, I will be writing another essay to explain through numbers how Alan’s business model to build stand-alone apps makes sense in the longer run.
For now, we will discuss funding and a diagram of what Alan’s super app could look like.
Funding & Future
Alan was founded in 2016 and will celebrate its 6 year anniversary in Feb 2022. Alan is currently valued at €1.4 billion after its Series D round of €185 million. At the end of 2021, it had built an ARR of €161 million and grew its team to 460 people.
A glimpse through my thought process into how Alan’s super-app could look like:
Thank you for reading, see you in the next one!