“We’ve been reticent to jump into that individual marketplace, but the Medicare marketplace we think is perfectly suited for this type of option,” said Bob Sheehy, the company’s co-founder and chief executive officer. “We can offer better benefits for consumers at a better price.”

Startups are increasingly betting on Medicare Advantage, as they see a growing population of senior citizens opting for the privatized version of the government’s traditional Medicare program. That pits the young companies against major insurers like UnitedHealth Group Inc. and Humana Inc., which already have millions of customers in the government-funded program.

Investors have rewarded the newcomers. Startup insurer Clover Health, which offers Medicare Advantage plans in New Jersey, was valued at $1.2 billion in a recent funding round, Bloomberg reported.

Related: Fewer insurers offering ACA exchange plans in 2018

Closely held Bright Health, which sold its first health plans for this year, has already raised $240 million from investors, most recently announcing in June that it landed $160 million to help fuel its expansion plans.

Sheehy said Bright Health may also begin offering Obamacare plans in the Birmingham area for 2018, if it can gain enough clarity on health policy. Republican lawmakers are currently working to repeal and replace portions of the Affordable Care Act, often called Obamacare, fostering uncertainty about the shape of the markets next year.

Related: Medicare Advantage associated with more racial disparity, study says

To start its health plans, Bright Health partners with a local health system, which takes on responsibility for caring for the company’s customers. In Colorado, the company teamed up with Centura Health for its ACA and Medicare Advantage plans. It’s partnering with Arizona Care Network in Phoenix and Brookwood Baptist Health in Birmingham.

“We look for health systems that provide high quality care and have great reputations in the marketplace, and then build a health plan around them,” said Sheehy, who’s a former UnitedHealth executive.

Along with Sheehy, Bright Health’s founders are Kyle Rolfing and Tom Valdivia, both former executives at Definity Health, which was acquired by UnitedHealth in 2004.

“As we talk to health systems around the country, we think the time is right for this model as system are moving from patient health to population health,” Sheehy said. “People get better care, more affordable care, in organized delivery systems.”

The strategy is similar to one pursued by the startup Oscar Insurance Corp. as it enters new Obamacare markets. Oscar, which was valued at $2.7 billion in early 2016, is entering new markets for ACA plans in five states. In Cleveland, for instance, Oscar is partnering with the Cleveland Clinic to build its network and sell plans.

Sheehy said Bright Health is talking with more health systems to expand into additional regions over the next several years. The company also hopes to broaden its offerings in the individual insurance market once lawmakers finish overhauling the ACA, he said.

“Hopefully before too long we’ll have some clarity around healthcare policy,” Sheehy said. “We’re focused right now on Medicare Advantage, but ultimately we think it’ll be the individual market. That market needs to be served.”

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