Q&A with Jay Sheehy, Chief Underwriting Officer
Building on a storied career in leading underwriting teams for some of the biggest health insurance carriers, Jay Sheehy joined the people-focused Gravie team with a shared vision for disrupting the healthcare industry. Since coming on board in 2021, he hasn’t looked back.
Jay, tell us about Gravie’s approach to underwriting.
We take a forward-looking view of underwriting, leveraging our Surgical Underwriting® approach and innovative risk and probability models. We’ve focused on building our strategies, models and policies without any historical experience or looking to the infrastructure considerations of other companies in the industry. Their approach uses different technology and traditionally looks at past claims history and trending it forward. What we have been trying to do through our technology and our risk models is take an array of different information from multiple sources, and make sure we’re looking out the front windshield, not the rearview mirror. Our actual results continue to demonstrate our strong growth and financial performance.
What are some of the unique ways Gravie looks at risk?
We have a more sophisticated approach to predicting where claim liability will be that allows us to have far more accurate year-over-year ratings. We leverage external data, machine learning, innovative models and differentiating approaches. Highlighting one of these strategies – Gravie’s Surgical Underwriting approach comes into play when we’re looking at known liabilities. These in-depth reviews using technology, detailed medical information and sophisticated probability models enable us to dial in a pricing far more accurately for prospects and existing clients.
A simple example: someone has an appendectomy that costs the plan $35,000. You only have one appendix, so you’re not going to go in and have that done again. It’s not a future liability. Someone might argue that there will be another person with an appendectomy, but that’s an unknown liability. You’re counting it twice if you keep it in both buckets. For high claimants with ongoing plans, we’ll dig in to understand where they are in their treatment plan. Perhaps someone’s completed their rounds of chemotherapy and is in remission. We take that into account and price to where we think they’re going to be in their costs. The goal for us is to get as accurate as possible in our predictions, rather than being overly conservative.
Who benefits by Gravie predicting risk so precisely?
Our ultimate goal is to predict risk and price our offerings more accurately so we can share any savings with our customers. On average, employers save 15% when switching to Gravie and these savings are compounded with our lower-than-average annual rate increases. Gravie also offers rate caps to new customers to reinforce our confidence in our rating. Rate caps aren’t unique to Gravie but our commitment to them is, along with the results achieved. In my time with other carriers, I had 15-20 conditions that had to be met to honor the rate cap that was set in place for our customers. At Gravie, there is only one reason why we would not honor the rate cap: if there was a claim we didn’t know about when pricing the opportunity originally that then emerged and was determined to be ongoing in the future plan year.
We have one customer, granted this is an extreme example, who is a business owner at a 65-life company whose partner had a cerebral aneurysm – a blood clot in her brain that led to a stroke. She incurred $348,000 in the first plan year. She was well-treated in the hospital, is now taking medications and doing her follow-up. After getting the care she needed and adhering to her treatment plan, our probability models predicted she had an 89.9% probability of incurring $10,000 or less over the next two years. So even though we lost money on that group in that year, we understand that’s what our customers are paying for – insurance for when bad things happen, and our models tell us she will not be going over the stop loss threshold for the next two years. This customer was floored that we honored the second year rate cap and is telling everyone they know about Gravie. Every other carrier would have found reasons not to honor that rate cap, but now we have a customer for life.
How are members benefiting from Gravie’s unique approach to underwriting and plan design?
With Comfort®, we’ve removed barriers to getting care – offering 100% coverage on 85% of people’s encounters with the healthcare system. A few days in the hospital may cost $30,000-$40,000. By covering routine care, we encourage our members to get the care they need, take their medications, and manage their conditions — thus avoiding those more costly claims. The benefits packages we offer have a much higher actuarial value than standard HSA and co-pay plans, offering better benefits at more reasonable costs. Our plans are designed in a way that everyone wins when the member gets healthier.
In my career, I’ve heard people theoretically talking about health plans like this, but no one has ever had the courage to actually bring them to market. Until now. At Gravie, we took the risk and it’s working – for the member, their employers, the broker that sells the plan, and for Gravie, so that we can sustain this model for the long haul.