How Much Can Apple Gain By Partnering With Insurers To Sell Apple Watch?

by Trefis Team
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Apple is reportedly in talks with multiple insurers, discussing possible ways to subsidize the cost of the Apple Watch for seniors on Medicare Advantage plans. If the discussions come to fruition, it could prove to be a win-win, allowing Apple to bolster Watch sales while potentially helping insurers lower their healthcare costs. In this note, we try to size up the potential market for the Watch among seniors on Medicare Advantage plans.

View our interactive dashboard analysis How Much Revenue Can Apple Watch Garner From Medicare Advantage Market By 2020?. You can make changes to our projections to arrive at your own estimates.

Win-Win For Apple, Insurance Companies

With the latest Apple Watch Series 4, Apple has added features such as fall detection and the ability to detect irregular heart rhythms, helping seniors better monitor their health and wellbeing. Moreover, as the watch collects real-time data relating to a users heart rates and movement, it could allow insurance companies to put together a more accurate picture of a patient’s health, enabling them to refer patients to requisite care in a timely fashion, reducing the chances of emergencies and lowering costs. The Apple Watch could also motivate users to lead more active lives. While these features could be very useful to many senior citizens, the price of the latest Apple Watch starts at about $400, making it unaffordable to many seniors. By working with insurance companies, Apple could figure out a way to get its wearable device onto the wrists of more senior citizens in a cost-effective manner.

Medicare Advantage Is A Large, Fast Growing Market

While some insurers such as UnitedHealthcare have worked with Apple in the past, offering free Apple Watches to customers who meet walking goals, deploying the Apple Watch in the Medicare market could add more value to both Apple and insurers. Medicare Advantage plans typically allow senior citizens to receive their Medicare benefits through a private, Medicare-approved insurance company. Moreover, Medicare members enrolled in private plans typically have lower churn levels, giving insurers more reason to invest upfront to leverage longer-term gains from these customers. There were 20.4 million people enrolled in Medicare Advantage plans as of 2018. These plans accounted for 34% of Medicare beneficiaries as of 2018, up from 22% in 2008, and the number could expand further with major insurers announcing expansion plans.

How Much Revenue Can Apple Garner From This Market?

If we assume that there are 21 million enrollees on Medicare Advantage plans by 2020, and that Apple is able to sell watches to about 20% of them, it would translate into about 4.3 million incremental Apple Watches shipped. If we assume an ASP of about $350 per watch, it could imply additional revenue of about $1.5 billion for Apple. While this is a drop in the bucket compared to Apple’s $250 billion-plus in annual revenue, breaking into the market could potentially help Apple expand deeper into the healthcare space with new products and services.

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