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Bain Capital bets on healthcare with debut insurance fund deal

Bain Capital is jumping into the health insurance market, leading a $150 million commitment to newly established Medicare Advantage broker Enhance Health LLC.

“This will be the first investment out of a dedicated Bain Capital insurance vehicle,” said Matthew Popoli, a managing director with the Boston-based firm and the global head of its insurance arm. He said Bain Capital Insurance was established as a business unit earlier this year.

Enhance, led by Matt Herman as chief executive and based in Fort Lauderdale, Fla., is dedicated to marketing Medicare Advantage plans using digital systems to help clients sort out the best choices, Mr. Herman said. He previously founded and led broker Health Benefits Group Inc. in nearby Lauderhill, Fla.

The new broker is built around its software and a remote service model, where most interaction with clients is by phone, Mr. Herman said. He and other managers of the company, which has about 25 agents, also committed to invest in the business alongside Bain Capital. The agency’s goal is to help Medicare recipients sort out their health insurance options.

Many consumers covered by Medicare, the federal health insurance system set up primarily for Americans who are 65 years old and older, don’t comparison shop for Medicare Advantage plans, which generally offer expanded coverage such as prescription drugs as well as some vision and dental benefits, according to the Henry J. Kaiser Family Foundation, a research organization in California.

The array of choices and differences in available plans can be bewildering for consumers, and some 70% of Medicare enrollees in a recent survey said they didn’t try to compare alternative plans, the foundation said in a study released this week. Kaiser said the typical consumer has 39 Medicare Advantage plans to choose from, depending on their location. Some may have access to as many as 82.

“Most people don’t know what their options are,” Mr. Herman said. “Consumers are much better served to have a live agent walk them through this process” of choosing a plan.

“Enhance helps seniors navigate this landscape,” Mr. Popoli said. With commission rates capped by federal regulations, brokers are largely left to compete based on services they provide.

Enhance describes its approach as offering a “care navigation platform” for consumers, and Mr. Herman said the company will also help clients who have chosen a plan to obtain benefits when they need services from healthcare providers. He said the company’s goal is to reach run-rate revenue of $100 million within the next 12 months, with its initial focus on serving South Florida.

The plan market is getting increasingly crowded. The Kaiser foundation said there will be 3,834 Medicare Advantage plans available in the U.S. next year, up 8% from this year and a record number, meaning even more choices for many consumers. About 42% of Medicare beneficiaries, or more than 26 million people, are enrolled in such plans nationwide, usually through health-maintenance or preferred-provider organizations, the foundation said.

Mr. Popoli said the Medicare Advantage market remains attractive to new entrants, citing double-digit annual growth in the number of eligible consumers as more than 10,000 Americans retire every day. Often that life change means switching health insurance plans.

“We like the economics of the business,” Mr. Popoli said.

Bain Capital registered its first fund dedicated to the sector, Bain Capital Insurance Fund LP, with the Securities and Exchange Commission in late August without stating a fundraising target. It said at that point that it had not received an initial commitment.

Mr. Popoli, who previously led the insurance activities of Bain Capital’s credit arm, is also chairman of an insurance brokerage investment play that the credit arm set up last year with Keystone Insurers Group, saying it expected to deploy at least $500 million. The vehicle for that strategy recently changed its name to Keystone Agency Partners. But Mr. Popoli said Enhance isn’t associated with Keystone, which invests in property and casualty insurance brokers.

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