A growing number of startups think they’ve found a solution to employers’ rising healthcare costs: cash.

Sidecar Health launched its first comprehensive health plan for companies on Monday after launching its first plan for self-insured employers in early 2022. Cash-payment rival Sesame joined the employer race in February, launching a program aimed at small and medium-sized businesses. Friday Wellness Program said its membership grew by more than 300% year over year, in part due to a focus on employers looking to provide individuals with a stipend to buy insurance from the Affordable Care Act exchange.

According to a recent study, hospitals often set cash prices for common procedures that are lower than those negotiated by insurance companies. Research published in JAMA Network OpenBy taking advantage of these rates, Sidecar claims the new plan will save employers an average of 39% compared to traditional health insurers. Dan Korpman, head of business development at Sidecar, said direct payments also remove the administrative burden doctors and patients face in the traditional insurance industry.

The company already counts at least one Ohio-based company as a customer of its self-insurance plan, Coupman said. In Sidecar’s last funding round in January 2021, the startup was valued at more than $1 billion.

“The user experience is very much like Expedia,” Korpman said. “It’s really an experience you pay for pretty much anything else. You search for a price, buy care, go get care and pay for services.”

Founded in 2018, Sidecar bills itself as an insurtech company but does not offer insurance services. The company has launched a tech-enabled flat indemnity plan that pays consumers an estimated cash price per medical visit, letting them shop around for the best deal. It relies on new price transparency regulations to show consumers what nearby suppliers will charge and what Sidecar will pay. The company encourages individuals to use the information to allow patients to pocket any difference between their estimated cost and what the provider actually charges.

Sidecar’s plans don’t meet the ACA regulations for insurance, so the company can charge lower premiums. Failure to comply with the ACA also means that Sidecar may deny coverage to individuals with pre-existing health conditions, limit the amount of care it covers, and be unable to limit enrollees’ out-of-pocket costs.

Last November, the company launched its first ACA-compliant program in Ohio. Korpman declined to comment on how many members are in the Sidecar program.

Now, the startup is pitching the same product to employers, giving employees information on plans and provider pricing, and encouraging them to shop around for health care. The full insurance product for businesses is currently only available in Ohio, although the startup aims to expand the program to two more states this year. Self-insurance plans are available for companies nationwide.

To bridge the gap between the price Sidecar pays and the cost of employer plan members, Sidecar offers employees a health savings account by: Healthtech startup FirstDollar. It also partnered with virtual credit card Paytient to provide 0% financing for workers’ health plans and any expenses not covered by the HSA. Sidecar members are automatically approved for the service.

But the proposal to control membership fees through the HSA will leave many patients behind because individuals typically don’t put money into accounts when they sign up for insurance, and employers may not put all donations in immediately on the first day, Paul Fronstin said employees Director of the Health Research and Education Program at the Welfare Institute.

“If you’re one of those unfortunate people who happens to go to the hospital the day after you’re in the HSA program, that money won’t cover your deductible,” he said.

Sidecar’s new self-insurance product reflects recent hopes of several small and medium-sized businesses relying on drop their insurance companysaid Aaron Miri, senior chief digital and information officer and co-chair of the Health Information Technology Advisory Committee at Baptist Health in Jacksonville, Florida.

“Overall care costs are rising, overhead costs are rising, and it’s getting harder for small businesses to afford the ability to offer private insurance,” Miri said.

Miri said Sidecar’s move can only work in a competitive market like Ohio, where several nearby health systems compete with each other on charge executive rates and large commercial insurers lower their fees even further.

“The Midwest has these great health systems all around each other, so the price will be great so people can go wherever they want and get their allowance, and Sidecar knows ‘well, the price will be within reason’.” So they would Cover people,'” he said.