Medefy Health lands $10M series A to help employees navigate complex health benefits

Navigating healthcare benefits can be a frustrating and confusing experience for most health plan members and employees.

"The average person has a hard time navigating their employer health insurance," said Matt Scovil, co-founder and CEO of Medefy Health. "They don't know what a deductible is, they didn't know what was covered, they didn't know what benefits they had access to under their employer's health insurance, they didn't know where they could go, they didn't know if their kid could get vaccinated here, if their medicine was covered over here, how much this knee surgery was going to cost. It's just very difficult. People also have access to virtually no tools to help."

This can lead to negative health outcomes as patients delay care over uncertainty about the cost of medical services or end up using the emergency room as primary care.

The process also can be frustrating for employers struggling with rising healthcare costs. "Small employers may have a wonderful, rich health plan but they have a really difficult time engaging their members at scale, helping them use that health plan correctly," Scovil noted. "They have struggled to get employees to utilize the plan correctly and trim costs." 

Scovil and his cousin Nathan Gilchrist launched Medefy Health in 2018 motivated by a shared nagging desire to make accessing health benefits less complicated. The company developed a mobile-first healthcare benefits navigation platform that offers real-time guidance from actual people, not AI-based chatbots.

The Tulsa, Oklahoma-based company has seen rapid growth and landed $10 million in series A funding to build out its tech platform, the executives shared with Fierce Healthcare in an exclusive interview.

Medefy also will use the funds to expand its teams. "We will be pouring a lot into product development," Scovil said. "We have such a low churn rate our employers are asking for more and more from the platform, more features, more tools, the market wants more features and tools, and we are doing our best to keep pace and exceed that. That's going to require more engineers, more product people, more sales and marketing. We'll be pouring investment into continuing to scale aggressively into the market."

Medefy executives declined to disclose the startup's valuation.

The round was led by Mercury Fund with participation from Advantage Capital.

Scovil conceived the idea for the startup while trying to figure out how much his optometrist was going to cost. "It was one of those in-the-shower ideas," he said.

There is a growing list of tech-based healthcare navigation companies but Scovil and Gilchrist insist that Medefy Health stands out by connecting employees with live care guides 24/7.

“There is an inherently human element to healthcare," Gilchrist said. "It's more important than ever to connect employees with real human experts as they determine how to make the best, most cost-effective healthcare decisions – decisions which greatly impact themselves and their employers."

Medefy's centralized platform helps employees identify the best quality care at a reasonable cost through personalized, proactive guidance. The platform connects members with a variety of digital tools as well as live, in-app benefits experts with an average response time of under 60 seconds, any time of day.

"We don't use chatbots. We don't use 1-800 numbers. We don't have hold lines," said Gilchrist, who has an engineering background and came on board as chief operating officer. "We don't have any of those traditional things that are front-facing. It is really in-the-moment guidance when that healthcare episode is actually happening to help them to make the best healthcare decision for themselves."

He added, "The care guide will walk them through that entire process and that might be something simple, like, 'What's my deductible?' or maybe it's something more complex, 'I need to get an MRI or I need to get a knee replacement'."

The quick response time is critical to help health plan members make care decisions at the moment, Scovil said.

"If people can't talk to someone right now to help make sense of it, then people were going to the higher-cost providers almost every time. But, if they can access someone fast, who knows everything about their company's health plan, 96% of the time they would choose a lower-cost, higher-quality provider," he noted.

The startup uses artificial intelligence on the back end to curate information for the care guides.

"We have AI that doesn't directly talk to the member, but it enables our care guides to engage many, many members at scale," Gilchrist said. "So we combine the back-end AI model with the kind of human-led front-end and we can get the member to choose the highest-value provider in the lowest amount of time. It's that kind of granular focus that we have on the member, on the response times, and then all powered by AI that makes this entire thing work extremely well. That sets us apart from the other people that are in the space who overlap with what we do."

The company also will use the fresh funding to expand its artificial intelligence capabilities to operate more efficiently at scale, executives said.

Medefy currently serves over 1,500 employers and their members, offering solutions to self-insured employers, insurance brokers, benefits advisors, TPAs and enterprise groups.

"There's a million digital health platforms on the market but one of the things that we find is that they're all clinically underutilized," Scovil said. "I think the reason for that is many of these other platforms went down the road of AI-facing algorithms, digital self-help tools and chatbots. These were all very 'scale-friendly,' but members didn't like the experience, so they didn't interact with them. Healthcare is an innately person-to-person connection. When you can connect someone who needs help with somebody who can help them, they will do that, if you make it easy for them to connect."

Medefy has demonstrated "industry-leading engagement by a substantial amount," Scovil added.

The company says its platform drives more member usage of their existing plans while controlling costs. Historically, plan members choose high-quality, low-cost care less than 30% of the time. With Medefy, that number increases to 94%, executives said.

Medefy’s member-first, on-demand platform delivers significant healthcare cost savings to patients and the businesses administering their health insurance.

"We have virtually no churn and a high growth rate," Scovil said.

The startup is addressing one of the most fundamental cost problems for a growing business, said Heath Butler, venture partner at Mercury, one of Medefy's investors. Mercury is an early-stage venture capital firm partnering with software entrepreneurs to drive innovation across Middle America.

"What got our attention in that space is the disparity between a knowledgeable healthcare consumer and the average consumer. The fact that Medefy is helping both a self-insured employer deal with one of their fundamental cost problems and also helping an average consumer deal with a complex issue was really interesting and exciting, and they figured out how to do it in a profitable way. Those types of opportunities are unique," Butler said.

Mercury targets SaaS, cloud, and data science/AI platforms and has, to date, created over $9 billion in value, according to Butler.

"We thought that unique blend of AI and human touch was the key to their high, industry-leading engagement levels and that was one of the things that stood out compared to the competition. It's real value that's being created for both the employer and the employee," Butler noted.

Medefy's rapid growth has coincided with a broader shift across the U.S. towards more transparent healthcare policies, with a particular focus on driving increased price transparency via the Transparency in Coverage Rule. That rule requires most group health plans and health insurance issuers to provide clear, accessible pricing information online about the items and services they provide. 

The company plans to continue to scale its existing offerings into new high-cost areas of healthcare, such as the rising costs of prescription drugs, executives said.

"We're at a unique inflection point because we have such high engagement with these employer populations. All these employers are coming back to us and saying, 'You have a captive audience now, what else can we add? We want you to focus on other parts of the health plan or other parts of the healthcare journey,'" Gilchrist said. "We have people beating down our door to produce more product faster and faster. That's going to be a heavy focus during the next 12 months to satisfy all those needs for them."