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Array Health CEO Jonathan Rickert.
Array Health CEO Jonathan Rickert.

The American healthcare system is undergoing massive changes, with new state and federal health insurance marketplaces now offering up more affordable ways for people to cover their medical costs.

But another type of marketplace — an online private health exchange — is also quickly gaining in popularity, and one Seattle company has just raised a good chunk of cash to help people navigate this new system.

Array Health today announced its first institutional funding ever, reeling in a $13 million round led by Noro-Moseley Partners, with participation from Vocap Investment Partners.

The eight-year-old company builds software that health insurers like Blue Cross and Blue Shield use to offer a private health exchange, which gives small and medium-sized businesses a way for employees to purchase personal insurance more effectively.

arrayhealth32In the past — and currently — those businesses would be forced to adopt a one-size-fits-all, company-wide insurance plan that was chosen by a committee or human relations director.

“We think that model is a dinosaur,” Array Health CEO Jonathan Rickert told GeekWire.

On the other hand, private health exchanges offer companies more flexibility and allow individual employees the freedom to pick what type of coverage aligns best with their needs. These types of exchanges are becoming increasingly popular, particularly with health plan premiums increasing as of late. Analysts predict that by 2018, approximately 40 million Americans will purchase health insurance through a private exchange — that’s up from about 3.5 million today.

Array makes money on a subscription-based model by selling branded private health exchange software to insurers, which in turn distribute the product out to employers.

With Array’s solution, companies can offer what’s called defined contribution plans. For example, a business could give a worker $800 dedicated to insurance each month and have them pick what coverage they need, whether it’s medical, dental, or something unique like disability or critical-illness coverage. Rickert said that this simplifys the administration process for employers, while also giving employees more control.

A mock-up of what an employee sees when using Array Health’s software.

“We’re all about empowering consumers to make the best health insurance and shopping decisions using our technology,” he said.

There are other companies doing something similar to Array, but Rickert said that they focus less on technology and more on making commission off the transactions between insurers, employers, and employees. Array, meanwhile, touts the fact that it focuses on the time and money that those three parties can save with its cloud-based software.

Employers can track their employees’ insurance coverage statuses.

“We don’t want to be in the business of becoming an insurance broker,” he said.

Array, which employs 70, has largely flown under the radar after launching back in 2006 as a startup that built one of the nation’s first multi-carrier insurance exchanges. But when the Affordable Care Act went into effect four years ago, the company saw an opportunity to license private exchange software to insurers.

It’s taken time for the healthcare space to adopt new innovations, Rickert explained. But now with more and more businesses realizing the benefits of a private health exchange, Array is seeing “unprecedented demand” that led to it bring in institutional money for the first time.

“This is a big event for us,” Rickert said. “We’ve built the company to the point where we’re ready to take advantage of a huge opportunity. It’s a very exciting time — not only for us, but also in healthcare.”

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