Dive Brief:
Verily, the life sciences arm of technology giant Alphabet, has reached a deal to sell its insurance subsidiary to Elevance, the payer confirmed to Healthcare Dive on Friday.
The subsidiary, called Granular Insurance Company, provides stop-loss insurance for employers meant to protect them from catastrophically high medical costs.
Terms of the deal were not disclosed.
Dive Insight:
Verily, one of Google’s sister companies under Alphabet, launched Granular in 2020. The company, then called Coefficient Insurance Company, offers self-funded employers stop-loss insurance, along with reinsurance and other data-driven risk management products.
A spokesperson for Elevance declined to comment on why Granular is an attractive acquisition for the company. But the deal signals that Elevance wants to build out its commercial products, potentially as a hedge against volatility in government programs like Medicaid and Medicare, which have seen margins plummet since the pandemic.
Currently, Elevance has 24.3 million members in employer plans (not counting BlueCard arrangements) — a little under half of its overall membership.
Demand for stop-loss products is also expected to increase as medical costs do, especially in pricey areas like specialty drugs.
Stop-loss insurance shelters employers from unexpectedly sharp increases in medical spending by reimbursing them above a certain amount. It’s generally used by self-funded companies that assume financial risk for their workers’ medical care.
Stop-loss can either be a very good or very bad thing for its issuer depending on how costs plan out. For example Cigna, one of the largest commercial insurers in the U.S, saw its insurance operating income plummet 47% year over year in the fourth quarter after it was hit with unexpectedly high stop-loss costs.
Alphabet does not report the finances of non-core “other bets” like Granular. However, the Granular’s has increased significantly in past years, according to reporting from The Information. The insurer brought in $201.3 million in revenue in 2022, per its Pitchbook profile.
Verily is offloading Granular in its latest operational restructuring as the business continues work to find its niche in healthcare. Various focuses for Verily in the past few years include continuous glucose monitoring, coronavirus pandemic response and, most recently, precision medicine.
