Capital Structure and the Mission-Driven Startup

I can’t think of a better mission than ensuring Americans receive the healthcare that they are entitled to - not because healthcare is a right but because the terms are what’s spelled out in the explanation of benefits for the plan they, their employer, or the state pays for.

Most Americans get healthcare through insurance. Whether the premium is paid by an employer, the government, or the individual, the vast majority of care in this country runs through a private insurer.

And when we say government-sponsored care? That’s mostly insurance-covered, too. Marketplace plans? Insurance. In fact, 54.8% of older Americans - those 65 and up - receive their care through insurance-managed Medicare Advantage healthcare plans, and 84.8% of the poorest Americans - or those who are disabled - receive their care through insurance-managed Medicaid programs.

And the model effectively manages cost for the insurer. Insurance companies are paid a flat rate per enrolled person. They profit by spending less on care than that rate. That is the entire model.

As part of this cost management, 850 million insurance claims are denied a year. Less than 1% get appealed.

This results in two problems:

1. The profit model of health insurance runs counter to the approval of most insurance claims.

2. A correction mechanism exists to restore balance to overzealous denials, but it is rarely used.

These problems combined result in a system that aggressively denies claims for medical care and relies on patients and their care providers to check these denials and course-correct when appropriate. The cause of denial can vary - each type of denial has a different rate of success. It’s estimated that of the 850 million denials a year, only 6% involve an actual dispute about medical necessity. 16.6% are due to administrative/clerical error, and the remainder is due to benefit design. Meaning, the dispute is a question between the patient and the insurance provider over what the patient’s purchased plan actually covers.

Not every denial will get overturned, and the correction mechanism requires time, energy, and wading through customer service sludge - but of those denials submitted, roughly 75% are overturned.

That’s a system with a design. The friction between denial and appeal is not incidental to how health insurance works. It is how health insurance works.

Now, there are limits. Some procedures are prohibitively expensive. Some devices come at a premium when more basic options exist. Healthcare is a paid-for service, and what a plan covers has boundaries. The question of where those boundaries should fall is philosophic and political, not one that can be resolved here. That’s a Problem 1 question, an insurance industry profit model question, and the answer is beyond what any startup can provide.

But Problem 2 is different. When a patient’s care is clearly covered, and the claim is denied anyway, that’s a software and AI problem. Assume the care that a patient seeks is clearly covered in their explanation of benefits: a person twists their ankle and goes to the ER. Their EOB states one price, but while they were expecting a bill, their entire ER visit was instead denied.

Three startups are tackling this problem with AI. Same end user, same mission. But the similarities end there.

Claimable

• Co-founded in 2024 by a physician, a VA data scientist, and a mother who fought erroneous hospital billing after her infant daughter’s death.

• $10MM in Seed VC

• Charges patients $39.95 per appeal

• 4000 appeals filed, 75% reversal rate

• Pivoting to Pharma because their investor said on the record, the “consumer model doesn’t work.”

**Claimable’s pivot to pharma may solve the revenue problem. But if drugmakers are paying for appeals, insurers will push cheaper alternatives, and the denial cycle restarts. The business survives. The problem doesn’t. This is what I’ve called the Route problem. The buyer you choose reshapes the company in its image. But before you choose the buyer, you choose the capital.

Counterforce

• Launched by CareYaya Health Technologies founder Neal Shah after his wife’s $32,000 cancer denial

• $280K in grants. No venture capital. Research partnerships with UPenn and Duke

• Free for patients and clinics today

• “Thousands” of appeals filed, 70% reversal rate

• Future plans to monetize clinics, companies, and the licensing insurance claims database being built

FightHealthInsurance

• Launched by a girl and her dog, and a couple of years of rage. The girl is a senior OSS engineer at Snowflake and has held similar roles at Google, Apple, and Netflix.

• $10k self-funded. No outside capital.

• Core web app code is open source. A professional version called Fight Paperwork targets medical practices and health systems.

• At least 300 submissions, unclear reversal rate

• The founder explicitly refused VC. No plans to scale beyond what nights and weekends allow.

What makes this case study a commentary rather than a look-back is that it is a real-time experiment in company creation. Where the people living these different approaches to building a mission-driven company have to decide what kind of company they want to be in 10 years. As the brief profiles suggest, each has already decided whether they are on a path to sell in 10 years, to build something that will last, or to build something that can run in perpetuity. Something that will outlast me as the founder - a tool, a codebase - and give it away to the next person angry enough to pick it up?

This decision dictates the benchmarks you must meet, the mechanisms for funding available to you, and the term sheet you’ll ultimately sign.

But already we can see that the paths each has chosen are causing them to shift the role they’ll be able to play in driving this change. These are the quests nobody chooses, which I wrote about here. The markets where the money is invisible, the buyer is hostile, and the exit isn’t obvious. I’ve written about why founders avoid them and about the buyer architecture that shapes them. This piece is about the step that comes before both: the capital you accept determines which routes remain open and which ones close. These three companies made that choice. The rest is physics. And the variable that limits or unleashes their efficacy isn’t the technology or the mission - it’s the capital.