Google’s fastest-growing business is insuring companies against their workers’ health

I’ve heard people joke that Google only has a couple of successful businesses, primarily advertising. But it may have found another hit: insuring other companies against their workers’ potentially pricey medical care.

The Information is reporting that its healthcare company, Verily, more than doubled its revenue to become the biggest Alphabet subsidiary after Google proper — and that its health insurance business, Granular, is the biggest contributor to that growth. Granular’s revenue “rose nearly sixfold through the first nine months of last year to $151 million, from $27 million a year earlier,” writes The Information.

But Granular doesn’t sell health insurance to employees. It sells “stop-loss” insurance to employers who are worried that their own workers’ medical claims might hurt them.

See, not every company helps their employees pay for traditional insurance premiums where your doctors bill, say, UnitedHealthcare or Anthem or Aetna for your care (though those companies may be middlemen anyhow). Some think it’d be more cost-effective to “self-fund” and pay the medical claims of employees themselves.

Like AOL, whose CEO, Tim Armstrong, once justified cutting employees’ retirement benefits because it had to pay $2 million to help save two distressed babies. I guess AOL didn’t have stop-loss insurance?

Anyhow, Google / Alphabet / Verily’s Granular Insurance is one of many stop-loss insurance companies that promise to pay claims over a certain dollar threshold in exchange for its own regular premiums. Yes, that means companies that sign up are paying for insurance instead of paying for insurance — they’re betting that most employees won’t have enough claims to justify traditional insurance premiums but also betting that some workers might have huge ones.

What makes Granular different from other stop-loss providers? That’s less clear. The company advertises that “Granular uses an intelligent framework to better protect self-funded employers from the cost volatility of a workforce with diverse health-related needs,” but I think that just means it’s cheaper. I dug up some local government meeting materials from the San Joaquin Valley Insurance Authority in Fresno County, California, and they mostly seemed to be considering Granular to replace their existing stop-loss provider because the offer was competitive.

But perhaps it’s more competitive because Google thinks its data makes for more accurate bets. The San Joaquin Valley Insurance Authority notes that Granular would be providing its service alongside “Point6,” which appears to be this company that says it “brings actionable and integrated solutions focused on the 0.6% of the employee population that is driving 35% of employer healthcare expenditures.”

Either way, it’s not exactly the image that I typically associate with Google’s health efforts. Originally, Verily was most closely associated with the dream of a smart contact lens that’s long since been shelved.

Incidentally, the FTC just fined a company $1.5 million for sharing private health data with Google and Facebook.

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