Devoted Health, a start-up health insurer targeting seniors with its private Medicare plans, says it is the first to offer Apple Watch as a fitness benefit to its members.
Devoted, which was founded by brothers and serial entrepreneurs Todd and Ed Park, is attempting to differentiate itself in an increasingly crowded market of Medicare Advantage plans through its focus on "world class technology," according to its website. Devoted was valued at $1.8 billion when it raised $300 million about a year ago. The company will offer up to $150 off the cost of an Apple Watch for its members.
More than 20 million Americans over the age of 65, and growing, are currently enrolled in a Medicare Advantage program. These plans, which are run by private companies, are approved by Medicare to cover seniors' health, typically with more flexibility and a broader array of benefits. Overall, the market is expected to generate more than $350 billion in annual revenue by 2020, according to the consulting firm PwC.
For Apple, working with Medicare Advantage plans offers a big potential boost to device sales because seniors are increasingly adopting smartphone technologies and therefore might be interested in a smartwatch.
Apple has been courting this population by introducing features and services that are intended to be beneficial to older users, such as fall detection and heart health monitoring.
Moreover, Medicare Advantage plans have more of an incentive to embrace consumer-facing technologies as they tend to retain members for longer than commercial plans, and are therefore looking for ways to invest in members' long-term health and wellbeing.
Wearables are still a nascent technology, and studies are underway to assess whether they are moving the needle on healthy outcomes. But for these plans, offering Apple Watches as a fitness benefit might be a way to sign up and retain members interested in staying active later in life, where there are proven benefits to healthy eating and exercise.
Apple has been talking to plans like Devoted for months, as CNBC previously reported, about subsidizing the cost of Apple Watch. It is also working with commercial insurers, like Aetna, as well as life insurers such as John Hancock, as part of their programs to help members access an Apple Watch.
For Devoted Health members, the subsidy will go a long way towards covering the cost of a device. The Apple Watch Series 3 is now available for $199, and later versions sell for $349 and up. Devoted just updated its marketing materials to show that it will cover $150 per year in cost for "wellness bucks for classes, programs, and wearable devices like an Apple Watch."
Wellness Bucks, according to the company's marketing materials, involve a reimbursement up to that amount to the member for the purchase of the device, and/ or participation in fitness classes or weight loss programs. Those who do not have a smartphone can opt for the fitness class, rather than the Apple Watch, which is a more commonly-offered benefit.
Apple declined to comment on its collaboration with Devoted.
In a statement, a spokesperson for Devoted Health said the company is moving to give its members "the tools they need to keep healthy outside of the doctor's office."
"We are pleased that CMS agrees that there is a wide variety of ways that older Americans can keep healthy, including fitness and nutrition classes, and activity monitoring devices such as the Apple Watch," said Devoted Health spokesman Kenneth Baer. "We are thrilled to be the first Medicare Advantage plan to collaborate with Apple, and give our members the chance to use their Devoted Health Wellness bucks towards purchasing an Apple Watch. Using innovative technologies to improve the quality of care is core to our mission."
Health experts say that Apple likely benefited from recent changes to the rules set by the Centers for Medicare and Medicaid Services (CMS). These changes, introduced earlier this year, allow plans to offer a greater flexibility of benefits, which have a reasonable expectation of improving the overall health of the member.
For a plan like Devoted Health, which is still early in its rollout and currently has about four thousand members signed up, offering Apple Watch as a benefit is a way to set itself apart. Devoted has aggressive plans to scale to more than 100,000 members by 2023, according to a pitch deck obtained by Business Insider. Devoted is only available in in Florida, but the company has indicated that it will expand to other states like Texas in the coming years.
"The recent (CMS) rule change is driving the move," said Ari Gottlieb, the founder of A2 Strategy Group, which specializes in health insurance. "While many larger plans have been slow to adopt new benefits, this is an example of how challenged, start-up plans are seeking to create differentiation in the market to drive enrollment growth."
Several of the other Medicare Advantage plans contacted by CNBC said they are also considering an Apple Watch fitness benefit.
"MA plans will want to utilize this information," said Bob Sheehy, the CEO of Bright Health, which offers Medicare Advantage and other plans. "Bright isn't offering Apple Watch right now, but I could see us over time bringing on additional data sources as part of the whole equation of caring for a member."
A spokesperson for Clover Health, a tech-backed insurer, said the company, which serves more than 40,000 members, "remains open to it (Apple Watch) and are keeping a close eye on it and will reevaluate as more data comes in."
Oscar Health, another venture-backed insurer, says it will offer a fitness benefit in 2020 that includes a Fitbit but not an Apple Watch.
Anthem and Humana did not return a request for comment.