UnicoMarketing: Affordable health insurance for the self-employed now a reality, thanks to this new startup

Horsepower’s co-founders from L to R: Diego Jose Ramos, Hannah Crisostomo (C), and Jojy Azurin

How often do you hear about people who gamely talk about quitting their jobs to be their own bosses but then stop cold at the thought of losing the benefits that corporate life bestows on them? For most people holding back from taking the leap from employee to self-employed, one valuable benefit seems especially hard to let go of: health insurance.

Companies in the Philippines, particularly large ones, subsidize their employees’ insurance premiums. Outside this system, many self-employed individuals find that insurance is simply beyond their means.

Jorge “Jojy” Azurin knows this well, being a serial entrepreneur and Freelancer.com’s Philippine head and director for continental Asia. Azurin has been receiving feedback from many of the company’s millions of users about the need for affordable health insurance. He saw this as a red flag: how do you ensure the well-being of a sector that’s increasingly becoming a driver of the economy?

This motivated Azurin and co-founders Diego Ramos and Hannah Crisostomo to create a startup named Horsepower, which provides affordable health insurance packages for the self-employed and small- and medium-sized enterprises (SMEs).

A first of its kind in the Philippines, Horsepower is one of the new startups to watch out for this year.

Better than corporate rates

Health insurance is just one of the services Horsepower offers, but it’s perhaps the most valuable.

This is especially true in the context of the Philippines, where healthcare is paid for largely “out-of-pocket.” According to Ramos, a large portion of the population has no health insurance. Why? It’s expensive. Individual HMOs (health maintenance organizations), the most common type of insurance plans, are 50 to 100 percent more expensive than corporate rates. One prominent HMO, for instance, charges clients in their mid-20s up to PHP40,000 (US$895) annually for a plan. Those who do have HMOs often still need to shell out cash if they come down with a critical illness or need prolonged treatment.

“Until now, a lot of these services – ambulatory to convalescence, primary to tertiary – are still out-of-pocket because healthcare costs are just too high,” Ramos notes.

Latest data from the Philippine Insurance Commission and government and private health institutions support Ramos’ statement. The numbers show that in 2011, Filipinos spent over PHP430 billion (US$9.6 billion) for hospital expenses. Of the amount, the private sector accounted for 63.1 percent; government, 27 percent; and social insurance and grants, 9.9 percent. Of the private sector spending, 53 percent was out-of-pocket payments by households, while HMOs covered six percent; private establishments, two percent; and schools and other insurance plans, one percent each.

Ramos points out that their service “encompasses primary to tertiary care, including dental and cosmetic procedures, which are not offered by leading HMOs.” He claims that members can have 20 to 70 percent discounts on consultations and clinical and medical diagnostic procedures.

It took the team a year to come up with an actuarial model for health insurance. “A lot of our earlier models were rejected by healthcare providers. But last November, we finally formulated a model that’s even better than those offered to corporate workers,” says Ramos.

Ramos did not provide further details, saying all packages will be published on their site once they formally launch in two months’ time. “We’ll have tables of our healthcare packages on the website. Currently, we have more than 300 healthcare providers on our HMO, and we will end 2015 with 400.”

Horsepower brands itself as a “turn-key solution” for a one-man operation or a startup. Aside from health insurance, it offers other services such as online payments to government social security and pension funds, human resources and financing tools (accounting and time-tracking systems), and even advice on legal and tax issues.

“We want the entrepreneur to focus only on getting business and increasing revenue. We will handle the back-end for him,” says Azurin.

Azurin says these services come in packages priced at a minimum membership fee of below PHP1,000 (US$22.33).

“They will choose a certain membership level based on what they can afford or what their requirements are. As you go up, you will receive better services, bigger healthcare coverage, and more sophisticated entrepreneur tools,” Azurin says.

See: Beyond the office walls: large corporations increasingly hiring freelancers

A diverse team

The team brings an array of experience to this new startup. Azurin has been in the ecommerce industry for years, while Ramos has experience in healthcare delivery systems, having been involved in the crafting of an HMO in the ‘90s and the setup of health clinics in the metro. Crisostomo, for her part, was formerly a high-ranking official of multilevel marketing company Fern, the maker of the popular Fern-C vitamins.

“We are adopting the growth-hack strategies we used to build our other businesses,” Ramos says.

The founders have the backing of investors, who are betting on them and their idea. As they were fine-tuning the details of their operations, they were able to raise US$250,000 in October. “The investment was used to build the application for the services and finance the setup of beachheads in selected Asian countries. We are now discussing with providers and actuaries in those selected countries,” Ramos relates.

This year, the team aims to raise up to US$20 million to scale the business.

“Our investors are not technology-oriented. They come from shipping and real estate brick-and-mortar businesses, but they understand our vision of empowering the entrepreneurs and they believe in our platform,” Ramos says.

Marketplace full of entrepreneurs

One of the most interesting discussions on the way we work today is the rise of the self-employed or freelance economy. More people are pursuing flexible jobs and more companies are hiring on-demand labor. However, this comes with serious risks for workers, especially in terms of benefits and a social safety net.

Several trends are fueling the shift away from the traditional corporate setting: the recent recession forced many corporations to downsize and use freelancers, while technological innovations are making both businesses and professionals realize that plenty of work can be done remotely.

All this presented Horsepower with challenges as well as opportunities. The first task for the startup was creating an acceptable and affordable health insurance template.

“The challenge was to create an actuarial model that will satisfy the healthcare providers. Actuarians tend to be risk-averse. It is easy to identify and manage the healthcare risks of all employees of a single company. But how do you manage over 100,000 one-person businesses? Also, how do you come up with a comprehensive consolidated set of services when the minimum membership is only below PHP1,000 per year?” Azurin asks.

Scaling the business and going regional are the next hurdles that Horsepower will need to face.

“Focusing on one country will not achieve the economies of scale that we are envisioning,” says Azurin.

“We used data scientists to run several economic models and it validated that this business is only feasible when offered across several Asian countries,” adds Ramos.

Ramos says their healthcare model was designed based on the Philippine market, but it’s “similar” to other developing countries they plan to foray into.

Given the market demand, he says they expect to sign up at least 100,000 members in the Philippines in less than 15 months.

See: What the Philippine online freelancing industry needs to further grow

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