Revolutionizing Small Business Healthcare Options
Arlo, a level-funded health plan and underwriting technology company, has secured $4 million in funding from prominent venture capital groups and angel investors. This marks the first public funding round for the startup that focuses on bringing value-based care and AI-powered underwriting to businesses with fewer than 100 employees. The investment round included participation from Upfront Ventures, 8VC, and General Catalyst.
The newly acquired funds will fuel Arlo’s expansion plans, specifically enabling the company to hire additional engineers and sales team members to support its growth trajectory.
Leadership With Insurance Industry Insights
Arlo is led by co-founder Jan-Felix Schneider, who previously served as a team lead at Palantir Technologies. During his time at Palantir, Schneider worked directly with insurance companies on value-based care initiatives and data analytics for claims processing.
“I saw how unsophisticated these payers are when it comes to using data and tech to control spend,” Schneider explained in an interview with Fierce Healthcare.
Addressing Gaps In Small Group Coverage
In the small group commercial insurance sector, companies typically fall into two distinct categories. While some insurers like Oscar Health are shifting their focus toward individual coverage health reimbursement arrangements (ICHRAs), Schneider argues these plans often deliver poor quality coverage at premium prices.
The market for level-funded plans—where employers pay a set monthly premium—remains dominated by traditional insurance giants like UnitedHealthcare and Aetna. Arlo faces competition from other health benefits startups including Gravie and Sana Benefits, while Centivo focuses primarily on businesses with over 100 employees.
According to KFF research, more than one-third of small businesses offering health benefits now utilize a level-funded plan structure.
Advanced Underwriting Technology As Competitive Edge
Schneider maintains that Arlo’s sophisticated underwriting system provides its key competitive advantage. The platform leverages machine learning to assess health risks and enables small employers to benefit from automation typically reserved for larger organizations.
“If you’re thinking about what makes up your premium, it’s always your claims,” Schneider noted. “Premiums are a function of the claims. If you want to save on healthcare costs, you have to address the claims.”
The executive contends that large, traditional carriers lack both the agility and incentive to reduce healthcare costs, particularly for their smaller clients. By contrast, Arlo emphasizes preventive care and partners with primary care practices to improve population health management.
Strategic Partnerships And Risk Agreements
Arlo has established risk agreements with healthcare providers and aims to develop long-term employer contracts. The company’s underwriting model allows for targeted investments in employee health improvements, such as better management of chronic conditions like diabetes and hypertension.
“With their underwriting technology, easy-to-use quoting for brokers, and a deep understanding of the small group market, Arlo is uniquely positioned to transform how small businesses access and manage health benefits,” said Kevin Zhang, partner at Upfront Ventures. “At a time when frustration with legacy carriers is high, Arlo is the right company at the right time to take on this $275 billion market opportunity.”
The startup has already secured a stop-loss partnership with Nationwide, serving as the company’s managing general underwriter (MGU).
Addressing Rising Healthcare Costs For Small Businesses
Small business owners currently face “substantially higher” insurance premiums compared to a decade ago, according to JPMorgan Chase research. Health insurance costs have surged by 33% since 2018 alone.
Schneider reports that Arlo currently manages “mid-eight figures” in premium volumes and underwrites for “hundreds” of employer groups.
“We are growing quite a bit because there’s such a strong demand for a solution that offers affordable health insurance for these small businesses who are getting hammered,” he explained.
Schneider also highlighted broader industry challenges: “I think there is this broken relationship with providers and health plans. They’re all just adding more AI tools to fight each other in the revenue cycle management world, and I think this is creating more waste and not solving any issues.”
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