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In Conversation with Scott Walchek, CEO of Trov

By Tricia Kemp, General Partner, Oak HC/FT

 

What is Trov?

Trov is a technology company providing on-demand insurance for single items. We enable people to insure the things they want, when they want, for the duration they want – entirely from an app on a smartphone.

Trov is the largest emerging insurance company that takes no balance-sheet risk – much like Uber is the largest taxi company but owns no cars, and Airbnb is the largest hospitality company but owns no property. We are a full-stack reinvention of the insurance value chain.

 

What was the genesis of Trov?

We created Trov by applying technology to the intersection of people and their possessions.

Along the “arc of possession”, Trov exists between the poles of acquisition and dispossession, where there’s a whole lifecycle of utility that nobody has applied technology. We believe that is where Trov’s opportunity exists.

For decades, enormous investment and technology has been poured into the acquisition and dispossession of goods, with companies like Amazon, eBay, Alibaba, Craigslist, etc. But Trōv is designed to help people benefit from the information about the things in their lives – after acquisition and before dispossession. We imagine a time when everyone will have a Trōv – populated with the information about the things they own – and will uniquely benefit from that information. Our first unique benefit is on-demand insurance for single items.

 

How is Trov changing the way consumers think about property insurance?

A great analogy is iTunes. When Apple launched the service, they changed the way people acquired and consumed music by disassembling the album into separate parts, allowing people to buy individual songs. Not only did they invent the technology to do that, but they also created an entirely new marketplace – all while serving an emerging generation of consumer seeking greater control through technology.

Trov is attempting to do the same thing by disassembling the insurance policy covering all their contents and enabling individuals instead to cover a single or select few assets. If you only care about your camera, laptop, or bicycle, you can use Trov to protect just those items, rather than buying a blanket policy that encompasses all your possessions. It’s like buying that single song instead of the complete album.

Traditional insurance policies are typically rigid and the policy is always active, which extends the time and increases the cost of coverage. Trov’s insurance platform offers a solution for those who want to choose when to protect single items and keep costs low.

 

What is the most common item people are insuring through Trov?

Because we’re focused on millennials, we’ve figured that the things our consumers care most about are the possessions that connect them to their world. That starts with consumer electronics: smartphones, laptops, tablets, headphones, and gaming consoles. Photography gear is also an important category.
Soon, we’ll support other categories in response to user demand. For example, jewelry and unique watches.
The average consumer covers two items, usually their smartphone and laptop. Smartphones are the number one item because they are automatically added to Trov and serve as a digital repository for all the information about your possessions – including metadata around the purchase, retailer, retail replacement value, etc. One of our current development tasks is focused around removing the category limits so that users can cover more types of items.

 

Trov first launched in Australia and the UK, and is now expanding rapidly across Asia and Europe. How are you able to enter so many different markets?

Our objective has always been to find strong local partners to help us navigate the market-entry process and overcome geographic or cultural hurdles.

We initially partnered with primary insurers to launch in Australia, the UK, and Japan – via Suncorp, AXA, and Sompo, respectively. The model of launching individual partnerships in each market – and with primary insurers that have their own consumer-facing brands to protect and promote – brings with it massive hurdles that are more protective than expansive. So, we more recently formed a partnership with MunichRe to enable growth globally across Europe and Asia.

Because MunichRe is a global reinsurer without a direct-to-consumer brand, we can drive our expansion more efficiently by leveraging their footprint, balance-sheet strength, and regulatory relationships. This can all occur more quickly than growing one market or one partnership at a time.

One of our core advantages is the ability to enter a market relatively quickly and inexpensively. Since we’ve built the complete stack of technology required to support all aspects of the insurance value-chain, and our tech is entirely cloud-hosted (AWS specifically), we have a time-to-market advantage that, compared to incumbents, is more cost effective.

 

What are your future ambitions for Trov? What features are you launching?

We are pursuing two additional, complementary lines of business. The first is a private-label (B2B2C) product line that is leveraging our platform to support on-demand, micro-duration, unbundled opportunities for auto, home, and small business insurance. This will be a white-labeled or co-labeled offering for existing insurers and financial institutions to brand applications that we build for them.

The second opportunity we are pursuing is what might be called insurance-as-a-service, through which our unique proposition and technology can be embedded in other companies’ apps or operating systems to benefit their service offering or user experience. We’re excited about both these opportunities.

 

Compared with banking, insurance has been relatively slow to innovate and digitize. Why is that so?

There are many reasons why insurance is slow to embrace transformative technologies. But specifically comparing banking and insurance, I think the frequency with which we engage with insurers plays a role.

Banking is a daily engagement, and banking products – from loans to checking to savings – involve daily or frequent transactions. Companies and consumers are reminded regularly of the benefits and potential for technology within those banking interactions. There are also several early innovators who jumpstarted banking technology, like PayPal.

Conversely, consumer touchpoints for insurance are opaque and infrequent – more typically on a yearly basis. But now that the world is going the direction of the smartphone, and consumers are living their lives and consuming services digitally, it’s logical to apply the same banking engagement model – unbundled, digital, and on-demand – to insurance.

 

If I weren’t a CEO I would be…

Traveling and in the water more frequently….

 

What’s on your desk right now?

I don’t have a desk.

 

What is your favorite source for news?

My kids

 

What’s a great piece of professional advice you’ve received?

The most important job for a CEO is to create an environment where employees can feel safe and thrive professionally.

 

What one piece of advice would you offer to an entrepreneur?

Be comfortable with change. Where you think you’re going directionally is unlikely to be where you ultimately end up. So, embrace optimism and resilience. The optimism enables you to believe in what you’re doing every day; the resilience is there when the optimism gives out.

Newsroom

Interview with Dr. Ezekiel Emanuel, Venture Partner, Oak HC/FT

By Annie Lamont, Managing Partner, and Andrew Adams, General Partner, Oak HC/FT

Why did you decide to expand your medical and academic career into the private sector?

Being at the forefront of change in health care in the U.S. means engaging with venture capital and the startups that are driving that change.

Academic research and public policy development have a tremendous impact, but we are now at a moment when the private sector is responding quickly and leading significant health care changes. The sector is at an inflection point, driven by recognition of the importance of chronic illness and the inefficiency and low value of much of health care, combined with important changes in payment.

The private sector is leading that response, and to be engaged and help shape change requires working in the private sector—specifically in venture funds. That’s what attracted me to Oak HC/FT, which has been at the forefront of innovation in health care for over 15 years and has a peerless team under the leadership of Annie Lamont and Andrew Adams.

 

What areas of healthcare are generating the brightest opportunities currently?

Fully 84% of all health care spending in the U.S. goes toward chronic illnesses. Within that, some of the most important areas of spending include behavioral health and end-of-life care.

For instance, behavioral health—care for patients with depression, anxiety, and serious mental health problems such as schizophrenia or bipolar disorder—is the fourth largest area of health care spending. Chronic care, behavioral health, and end-of-life care have traditionally been ignored by medicine, but they are among the most important areas of opportunity. So, the areas with the best opportunities happen to be the same areas that have been at the margins for the last 70 years, yet command some of the most health care resources.

 

What are some of the companies you are working with?

I work closely with Annie, Andrew, and the Oak HC/FT team across several areas, especially advising existing portfolio companies as well as opining on prospective investment opportunities.

Chronic care, behavioral health, and end-of-life care are the areas where I am particularly active, so I tend to spend the most time with Oak HC/FT portfolio companies within these areas.

Village MD, which provides primary care solutions, is a company I have profiled in my book, “Prescription for the Future,” and I serve on its Board. It has some important innovative practices other physician groups can learn from, such as its programs on rooming patients and home care.

Similarly, I am working with Quartet, a mental health company that is trying to develop what I think of as a virtual collaborative care model to link physicians and their patients with behavioral health specialists. Interestingly, it is also trying to bring performance evaluation to mental health, which has not happened previously.

I am also working with Aspire, a palliative-care company that is trying to put into place all the recommendations on improved end-of-life care that the medical establishment has never been able to implement. I started my career working on end-of-life care when it was not fashionable; not even a recognized area of research. Over the years, the field has developed important ideas on how to improve care for patient likely to die. For instance, focusing care on patients not just in the last days of life but beginning palliative care earlier to elicit preferences for end-of-life care and handling symptoms months, if not a year, before they die. This makes the transitions to the dying process much less abrupt and gives time for the patient to adjust and acclimate to dying at home. But such recommendations have rarely been widely implemented. Aspire is dedicated to bringing these optimal end-of-life care practices to patients. We are working with them to analyze and publish their data on quality and on cost savings.

These are a few of the interesting companies I am involved with through Oak HC/FT.

 

What is “Prescription for the Future” about?

The subtitle for the book gives a clear picture of the book’s subject: The 12 transformational practices of highly effective medical organizations.

The premise of the book is that the U.S. health care system is going to have to change to deliver higher-quality and lower-cost care consistently. So, I went about examining outstanding medical organizations—from smaller physician practices to larger multi-specialty groups to Medicare Advantage plans to whole-health systems—to elucidate what they did to deliver high quality and reduce cost.

We identified 12 different practices ranging from changing scheduling to chronic care coordinators to community health workers, which are key to transforming care delivery to consistently higher quality and lower cost. In the book, I delineate the specific steps medical organizations can take to implement these practices successfully. For instance, I found all groups that achieved successful chronic care management followed the same five basic steps. This leads me to be optimistic that over the next decade the U.S. can achieve much better care, especially for patients with chronic illnesses.

Importantly, we found that no single medical organization did all 12 transformational practices. So, even among the very best practices in the U.S. there is still room for significant improvement.

 

If you were to triage the industry, what would you prescribe as the most urgent and critical care priorities?

The single most important pre-requisite for transformation is payment change. Physicians, hospitals, health systems, and all the other providers need to be incentivized to change how they deliver care–to focus on higher quality and lower cost. This requires moving away from fee-for-service payment toward what are called alternative payment models, such as bundled payments for an episode of care or capitation. Fortunately, this is happening—especially through MACRA, the new health care bill that changes how physicians are paid, and through payment changes being implemented by private insurers.

A second important prerequisite is data on where physicians are using resources and the outcomes of their patients. One of the biggest changes since the managed care efforts of the 1990s is that the U.S. system has a lot more data on the performance of the system and physicians to guide transformation.

I lay out several other important pre-requisites in the book, such as leadership and governance. I note that no medical organization can implement 12 transformational practices all at once. So, I indicate a few tiers of practices.

The top priorities and most urgent transformational practices to implement are: 1) open-access scheduling; 2) chronic care management and co-locating chronic care coordinators with physicians; 3) performance measurement and improvement, so physicians and other providers can see how they are performing relative to national benchmarks and their local peers from whom they can learn; and 4) site of service to create referral relationships with other higher value specialists and hospitals.

 

Can transformation occur despite the current political impasse and efforts to repeal the ACA?

As I note in the book, almost everyone in the health care system thinks transformation is inevitable. For one thing, private payors and the public are demanding more affordable care regardless of the status of the ACA. This will drive transformation.

Much of the drive or pre-requisites also go beyond the ACA in terms of changes in government payment to physicians through MACRA, the Medical Advancement, and CHIP Reauthorization Act. MACRA abolished the failed Sustainable Growth Rate (SGR) formula for adjusting Medicare payments to physicians. It was replaced with payment that incentivizes physicians to shift off fee-for-service payment to more alternative models. Regardless of what happens to the ACA, MACRA will stay and push the transformation I described.

 

What is high value care and how do we achieve it?

High value care is composed of two parts: higher quality of care and lower costs. We achieve it by improving the health care delivered to patients and lowering the costs of delivery.

As I mentioned, 84% of all health care spending is devoted to chronic illness. In addition, 10% of patients with chronic illness account for nearly two-thirds of all spending. So, if we want to improve quality and lower the cost of care we need to improve the care of patients with chronic illnesses. That means we must prevent the exacerbations of chronic illness: prevent patients with congestive heart disease from gaining too much fluid and developing extreme shortness of breath; patients with chronic obstructive pulmonary disease—emphysema—from becoming short of breath; patients with diabetes from developing infections and gangrene; mitigating the side effects cancer patients develop from chemotherapy.

This is the key, and the key to achieving this is identifying the high risk 10% of patients, having chronic care coordinators co-located with physicians actively reaching out, and managing these patients by ensuring they are taking their medicines and following other recommended interventions. It also requires standardizing care so patients are receiving the best care as defined by the best physician experts on these diseases.

Medical organizations that follow these and other care practices can achieve high value care, typically by lowering visits to the emergency room and hospitalization rates by up to 40%.

 

What are some of the most notable advances you are seeing around care delivery and patient experience?

What makes me optimistic is that there are so many advances being tried and constantly improved by different medical organizations.

One critical improvement is open-access scheduling. This means physicians start every day with between 20% and 50% of their appointment slots open—i.e. unscheduled. So, if a patient develops a problem they can be seen in the office that same day and treated by someone who knows them and their entire medical condition, instead of being sent to an emergency room where they are treated by someone who does not know them or their medical problems. This also enhances patient satisfaction.

Another important advance is for patients with high social needs and few social supports–poorer patients often on Medicaid. Having effective community health care workers is a huge advance. These health care workers find out what these patients need and want, and then help them obtain services and social connections. They help patients get housing, food, job training and jobs, or just find activities, like bowling and sports, that connect them and bring them some joy and happiness. These community health workers become social supports for the patients. And this frequently reduces use of the health care system for what are otherwise social support problems—lowering hospitalization rates and other uses of the system.

Similarly, adding behavioral health to regular medical care is a fundamental advance we will see more of in the next few years. Patients with chronic illness who have co-morbid depression or anxiety are so much more expensive to care for. Important advances are efforts to provide these patients mental health services that are integrated with their regular care. When done well, this helps patients overcome their depression or anxiety and thereby lowers their use of health care services and costs. It is a classic win-win situation.

I could go on and on because the book is filled with scores of these advances being implemented by different medical organizations.

 

How do you escape work and clear your mind?

I don’t know about escaping work and clearing my mind. I find that when I am relaxing I am often thinking about work on another level.

I love to run, bike, and kayak. Recently, I spent three days navigating 50 kilometers by kayak in the Norwegian fjords around Alesund. The area has some of the most magnificent scenery in the world. Two weeks later, I biked 65 miles from Harper’s Ferry to Washington D.C. I learned a lot about the John Brown raid of 1859 on that trip.

I am about to embark on another fun project: making a world-class chocolate bar. I am partnering with a chocolatier and we are traveling to Madagascar to procure beans, and then will go into the lab and make a fantastic chocolate bar. That will be super fun.

I also love to cook. A few years ago, I was a chef at a pop-up brunch restaurant. That is hard work but fun. I love to throw dinner parties and make new dishes.

I am also an avid reader. My brother, Rahm, and I trade titles we have read. We both love history books as well as great novels. I just finished “The Good Lord Bird” by James McBride about the John Brown raid. I am reading John Steinbeck’s “East of Eden”, and just started the book about Winston Churchill, “Hero of the Empire”.

One day I want to write a history book of a great, but forgotten American physician and revolutionary war hero, Joseph Warren.

Newsroom

In Conversation with Josh Geballe, General Manager of Core Informatics, part of Thermo Fisher Scientific

By Andrew Adams, General Partner, Oak HC/FT

What is Core Informatics?

We are a software company that helps scientists generate insights that improve human health and our quality of life. Scientific research and clinical testing generate huge amounts of data that need to be collected, organized, and analyzed. We give scientists a cloud-based platform that helps them gather and analyze that data more efficiently to identify everything from new therapeutics to treat or cure disease, to new sources of renewable energy and improve food supply.

 

Laboratories are traditionally a place for instruments and research.  How is technology now playing a role in the way labs and research are managed?

Today, scientific organizations are dealing with several significant changes, which we call the biopharma nexus of forces. For example, the growing use of next-generation sequencing technology to drive precision medicine and targeted therapeutics, or the increasing practice by large companies to use third-parties for their research and development.

Historically, many challenges were addressed with point products, but those products are not designed for the new research modalities and business models we see today. Fortunately platforms can be leveraged to provide a much more efficient and scalable approach. That’s what we’re doing in the scientific domain: leveraging lessons learned from other enterprise software verticals and companies – for example, pioneers like Salesforce.com – and bringing a platform-based model to the scientific community to help them navigate the changes they’re experiencing.

 

Core’s products apply to a diverse range of industries – from pharma to food to manufacturing.  What challenges do these industries all have in common that you can address?

All those different industries rely on the same scientific principles, grounded in chemistry and biology. That is critically important. At an abstracted level, they all conduct research and development in similar ways: conducting experiments; generating samples; moving those samples through a workflow; and analyzing the results to inform decision-making.

Our platform is designed with that abstraction in mind, which gives us the flexibility to serve multiple markets.

 

You were recently acquired by Thermo Fisher Scientific.  What drove the decision to sell?

Thermo Fisher Scientific is the world-leader in serving science, and they have relationships with just about every scientific organization in the world. The acquisition immediately expanded the ability for us to bring our platform to the market. More strategically, Thermo Fisher seized the opportunity to leverage our platform to help drive its strategy to become the leading digital science company in the world, and to dramatically increase automation, efficiency, and productivity for their clients. We’re incredibly excited to be helping craft and execute such an ambitious and important long-term strategy.

It’s also important that being part of such a large company increases our access to talent as we continue to grow our team, and provide greatly expanded career paths for our current team, which we’re very excited about.

 

You come from a corporate background, having previously worked at IBM in various roles spanning technology, finance, and strategy.  How did you make the leap from a major multinational to a smaller, startup company?

In many ways, the change from a large multinational to a startup is less than one might expect. The principles about how to build a team, how to drive solid execution, and how to deliver financial results are very similar.

One big difference is not having all the big-company resources and infrastructure at your disposal. Similarly, it is important to embrace the challenges of wearing many hats, including constantly needing to learn new things, and coping with the extra stress of running a small business.

 

You ran for public office right out of undergraduate school.  Are you still interested in public service?  What do you think public office has in common with leading a company?

My interest in public service lies in my continuing belief that there’s a real need to reinvent how government operates and the role it can play in driving economic development and providing a safety net for people who are displaced by the rapid pace of change in our economy.

There are many more stakeholders and constraints to deal with in public service, but I think there are similarities, including the importance of being bold in setting your goals and strategy, challenging the status quo of how things are operating today, and inspiring people to help drive necessary changes.

 

If I weren’t a CEO I would be…

Involved in public service; likely not running for office again, but trying to help solve critical challenges we are facing, specifically in Connecticut. I love this state. I think it’s a fantastic place. But clearly, we have some challenges at the state level that would be fun to try to help solve.

 

What’s on your desk right now?

Very little. I believe less is more, so I keep a very clean desk. I have a MacBook, a cup of coffee, and my phone. That’s it.

What is your favorite source for news?

Recently, Twitter has become my favorite source for news. I think if you curate a good cross-section of people and publications, you can follow the twitter feed and stay abreast of what’s going on in the world, as well as other interesting reports and topics.

 

What’s a great piece of professional advice you’ve received?

Don’t be afraid to take big risks.  I think entrepreneurs are the people who drive the bulk of the innovation and forward progress that we enjoy as a society, and it’s been a great experience being part of our Core journey with our cofounders, Anthony Uzzo and Jim Gregory, who quit their jobs started this company in a garage in back of the local Stop and Shop 13 years ago. Risk taking is central to our company’s success, and our success in society broadly.

 

What one piece of advice would you offer to an entrepreneur?

If I picked just one, it would be to be in touch with customers. If you understand your customers – what’s important to them; what their priorities are; and how you can best help address the pain points – that’s how you learn and improve and help build a successful business.

Newsroom

Launching Oak HC/FT II – Our View from the Room Where It Happens

By Oak HC/FT Co-Founders Annie Lamont, Andrew Adams, and Tricia Kemp

The art of the trade

How the sausage gets made

We just assume that it happens

But no one else is in

The room where it happens.*

Here’s our view from the room where Oak HC/FT II happens:

A couple months ago, we began raising our second fund to further our efforts around partnering with promising tech-enabled Healthcare and FinTech companies. Today, we’re announcing the launch of this $600 million fund to continue supporting leading entrepreneurs with their attack on quality issues, inefficiencies, and poor customer experiences that persist across the multi-trillion-dollar Healthcare and Financial Services markets.

Instead of waiting for elected leaders in Washington to advance legislation around these two important sectors, we’re working with the most promising private enterprises to tackle the biggest issues head on –high drug costs, treating patients with complex medical conditions, modernizing payment systems and insurance frameworks, and reducing financial fraud/waste/abuse. Complexity is an understatement in Healthcare and FinTech, but challenge ignites the spark of so many opportunities. We’re confident our approach and the strategies of our companies will prevail regardless of political agenda or regulation.

When we founded Oak HC/FT three years ago, our mission was to build on our 15 years of experience and partner with world-class entrepreneurs using technology and data to tackle complex problems in Healthcare and Financial Services. That’s exactly what we achieved with our first fund, having backed leading companies like Aspire Health, Hometeam, and VillageMD that are improving medical care and reducing spending; Quartet Health, US HealthVest, and Axial that are better managing high-cost populations; Limeade, LDI, and Maestro Health that are improving health and spending for employers; Feedzai that uses machine-learning to reduce financial fraud; Poynt, Urjanet, and FastPay that are streamlining payment data and processing; and Trov and Insureon that are modernizing insurance delivery. With our second fund, we will continue searching across the United States and Europe to identify attractive opportunities that advance our mission in these sectors.

In addition to working with great entrepreneurs, we’ve also been fortunate to partner with talented colleagues. Since closing our first fund in 2014, we’ve assembled an amazing team of professionals to provide unparalleled support to our companies. In Healthcare, we added Dr. Zeke Emanuel, Nancy Brown, and Chris Price who all bring peerless industry expertise. That talent has been matched on our FinTech team with Anil Aggarwal, Jonathan Weiner, and Michael Heller. Add-in our long-time Technology Partner, David Black, and our next generation of professionals in Matt, Vig, Oivind, Jack, and Andy, and it’s tough for any entrepreneur to find a team better equipped to scale Healthcare and FinTech businesses and solve problems.

We are also fortunate to have assembled an exceptional group of investors – many long-time supporters of our strategy and a few new relationships that offer fresh perspectives and strategic insights.

In short, we’re bent on building strong teams and great companies. It is especially rewarding to see the businesses we’ve worked with in the past continue their growth – either as public companies or as innovation engines for larger companies, as evidenced by our recent exit, Core Informatics.

Creating Oak HC/FT and growing the firm has been an absolute blast. There is nothing better than waking up every morning to work with our unmatched team and exceptional entrepreneurs – all passionate about improving Healthcare and Financial Services. Building a portfolio and helping our companies and investors succeed will always be an adventure. We are excited to continue this journey, and we are grateful to our investors for their support with today’s Oak HC/FT II fund launch.

 

*Lyrics from “The Room Where It Happens” by Lin-Manuel Miranda © 2015.

Newsroom

WSJ: Stand Up for ObamaCare, CEOs

This article originally appeared in The Wall Street Journal on Jan. 3, 2017 7:08 p.m. ET 

By Annie Lamont and Ezekiel J. Emanuel

One company’s managers think repeal would raise its health-care costs by hundreds of millions.

America’s CEOs might not admit it in public, but the Affordable Care Act—aka ObamaCare—has been good for business. Company benefits managers have watched as the double-digit premium increases under President George W. Bush slowed to a crawl. Venture funding has flooded into health care, boosting startups and stimulating innovation. This is the progress President Obama is trying to preserve as he meets Wednesday with Democrats on Capitol Hill in a strategy session about how to protect the health law.

To take a single benchmark, look at families who receive insurance coverage through an employer. Between 2001 and 2008, their average premium jumped nearly 80%, according to annual survey data from the Kaiser Family Foundation and the Health Research and Educational Trust. Under President Obama, the increase was only 36%. This represents real money: If the Bush-era rate of inflation had continued through 2016, each of these families would be spending about $5,000 more on annual premiums. For employers, the savings open the door to hiring more workers or raising wages.

At the same time, investment in medicine has boomed. Between 2011 and 2015, venture funding for health care—including biotechnology and medical devices—totaled approximately $62 billion, according to figures from PitchBook. In the four years before the Affordable Care Act, the total was $47 billion. New companies are working to improve everything from primary care, to home palliative care, to the management of mental health. These innovations are now beginning to realize cost savings.

The Republican plan to repeal and replace the Affordable Care Act threatens to reignite health-care inflation. First, this approach produces significant uncertainty in the market. The GOP has promised immediate repeal, but the talk of what would replace the health law—and when—is vague. “I don’t want to set a time limit that this has to get done by this certain date,” Rep. Kevin McCarthy, the majority leader, said in late November.

It is easy to repeal ObamaCare’s subsidies and the mandate to buy insurance, since that can be done with only 51 Senate votes using the “reconciliation” procedure. But enacting a replacement is harder, maybe impossible, since it would require 60 Senate votes to overcome a filibuster. Insurance companies hate uncertainty and respond by raising rates to hedge their risk.

A second problem is “cost shifting.” If Republicans repeal and replace the Affordable Care Act, millions of Americans will probably lose their insurance. The replacement proposal offered by House Speaker Paul Ryan would lead to four million fewer insured people by 2026, according to a review by the Center for Health and Economy. Nine million could lose coverage under the replacement plan offered by Sen. Richard Burr, Sen. Orrin Hatch and Rep. Fred Upton, according to scholars from Rand Corp.

The bulk of these newly uninsured would be low-income Americans who can’t afford private coverage despite the tax credits built into Republican plans. But such people will still be treated when they get sick. Though they cannot pay for it, they will still receive care at hospitals, urgent-care outlets and doctors’ offices. These costs will be rolled into the line item “uncompensated care”—which is ultimately paid for by higher prices on everyone else.

The Affordable Care Act has helped minimize this cost shifting. Specifically, the law’s expansion of Medicaid cut hospitals’ uncompensated care by roughly a third from 2013 to 2014, according to a study in Health Affairs. At the University of Pennsylvania Health System, bad debt—the accounting term for bills that are written off when patients can’t pay them—decreased from 6.1% of revenue in 2014 to 3.9% last year. Taken nationally, a drop that size is worth nearly $25 billion a year.
The GOP’s plans will reverse these incentives. Republicans want to send Medicaid back to the states using block grants. More important, they want Washington’s contribution to Medicaid to grow more slowly than the actual costs. A 2014 analysis by the Bipartisan Policy Center estimated that Rep. Ryan’s plans to block-grant Medicaid would reduce federal funding for the program by $160 billion in 2022.

State legislators are likely to respond in two ways. They can tighten Medicaid eligibility to reduce the number of recipients, which will increase the ranks of the uninsured. Or they can cut the rates that Medicaid pays to hospitals and physicians, who would make up the difference by increasing prices on everyone else.

Critics of the Affordable Care Act argue that when previously uninsured people gain coverage through Medicaid, they tend to use expensive emergency-room services. But people who have just gotten coverage can’t be expected to become sophisticated health-care consumers overnight. The use of the ER suggests they have unmet medical needs. Over time they can be educated to develop standard relationships with physicians. Even factoring in this greater use of ERs, however, the per person costs of Medicaid have decreased since 2010 after adjusting for inflation.

Businesses know all this. In response to the GOP’s call to “repeal and replace” ObamaCare, one Fortune 100 company with hundreds of thousands of employees is developing two HR budgets. The first reflects the status quo. The second factors in the higher prices Americans will face if more people become uninsured. Although these estimates aren’t final, the company thinks its health-care costs could rise by tens of millions of dollars in a single year if the Affordable Care Act is repealed and replaced.

President Obama’s health law really has been good for business. Republicans’ plan to dismantle it will take the country back to an era of high health-care inflation. If only CEOs would say as much before it is too late.

Ms. Lamont is a managing partner of Oak HC/FT, a venture fund investing in health care and financial services. Dr. Emanuel is vice provost for global initiatives, as well as chairman of the Department of Medical Ethics and Health Policy, at the University of Pennsylvania.

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