Brightside’s CAC to LTV Thesis: Why Insurance Beat Cash Despite Higher Complexity

Brightside’s CAC to LTV Thesis: Why Insurance Beat Cash Despite Higher Complexity

The easy path was right there. Brightside had proven that consumers would pay cash for virtual mental health care. The product worked. Customers were happy. Growth was predictable. Brad Kittredge could have built a profitable cash-pay business without ever touching the complexity of insurance contracts, state-by-state regulations, or eighteen-month sales cycles.

Instead, he chose the harder path. And he did it because of a simple equation about customer acquisition costs.

In a recent episode of Category Visionaries, Brad Kittredge, CEO & Co-Founder of Brightside, explained the unit economics thesis that drove one of the most consequential decisions in the company’s evolution. The math was clear even when the execution would be brutal: insurance networks would deliver dramatically better CAC to LTV ratios than cash ever could. Here’s how Brad quantified his way into complexity—and why it paid off.

The Value Proposition Hypothesis

Brad’s thesis started with a basic insight about consumer behavior, not healthcare policy. When people need healthcare, they think about their out-of-pocket cost first.

“Part of thesis there was more people are going to want to pay with their insurance,” Brad explains. “And when you think about the value proposition, if you’re going to get healthcare, whether you’re going to pay out of pocket or pay with your insurance, obviously your out of pocket cost is just way lower with your insurance.”

This isn’t complicated. A patient paying $200 cash for a psychiatry session versus $20-40 with their insurance isn’t making a marginal preference decision. They’re making a 5-10x financial decision. The value proposition shifts dramatically.

But here’s where most founders would stop: acknowledging that insurance is more attractive to consumers. Brad went further. He translated consumer preference into a specific hypothesis about acquisition economics.

The CAC Thesis

Brad’s insight was that superior value proposition should translate directly to lower customer acquisition costs. If your product saves someone $160 per session, you should be able to acquire them more efficiently than when your product costs them $200.

“That translates back into this assumption or thesis that we could acquire those customers for a much lower acquisition costs, that our CAC would be much lower, and that our CAC to LTV ratio would be much more attractive inside the insurance networks rather than cash outside.”

Think about what this means in practical marketing terms. When someone searches for mental health care, the conversion dynamics change completely based on price. A $200/session cash price requires significant conversion optimization, trust-building, and often multiple touchpoints. A $20-40 copay with insurance? The friction drops dramatically.

Lower friction means:

• Higher conversion rates from the same traffic
• Lower cost per conversion
• Ability to be competitive on more expensive channels
• Faster payback periods
• Better unit economics at scale

Brad wasn’t just saying insurance would be nice to have. He was making a specific, testable prediction about acquisition economics that would determine the entire trajectory of the business.

The LTV Bet

The CAC thesis was only half the equation. Brad also believed insurance would improve lifetime value, creating a compounding benefit.

For chronic conditions like depression and anxiety, retention is critical. Patients need ongoing care, sometimes for months or years. The question is: what keeps them engaged?

With cash pay, every session is a conscious spending decision. Should I prioritize this $200 for therapy, or use it for something else? The constant financial friction creates natural churn points.

With insurance, the financial barrier largely disappears. The decision shifts from “can I afford this?” to “is this helping me?” When the main barrier to continued care is clinical value rather than cost, retention improves for anyone receiving effective treatment.

Brad also recognized that LTV in healthcare isn’t just about individual retention—it’s about contract durability. “We have a great LTV with insurance and great unit economics and revenue dynamics,” he notes. Once you’re in a payer’s network, you have access to their entire membership base, creating a more stable and predictable revenue model than individual consumer acquisition.

The Complexity Tax

None of this meant the insurance path was easy. Brad knew exactly what he was signing up for.

The US healthcare payment system is famously Byzantine. Each state has different regulations. Each payer has different contracting processes. Networks take months to set up. Billing systems are complex. Claims get denied. Cash flow timing changes completely.

For a small startup, this complexity is real overhead. It requires different talent, different systems, different processes. The question wasn’t whether insurance was harder—it obviously was. The question was whether the unit economics improvement justified the complexity.

This is where having a clear thesis matters. Brad wasn’t just hoping insurance would work out. He had specific predictions: CAC would drop significantly, LTV would improve, and the ratio between them would make the complexity worth absorbing.

Testing the Thesis

The beautiful thing about framing this as a hypothesis is that it’s testable. Brad could run the cash model, measure actual CAC and LTV, then compare those metrics once insurance contracts launched.

“We have dramatically lower acquisition costs because of the value proposition when we can accept someone’s insurance,” Brad confirms. The thesis held. The unit economics in insurance networks proved significantly better than cash.

This validation did more than justify the strategic choice. It created a moat. Once Brightside had proven superior unit economics in insurance, they could outspend cash-only competitors on customer acquisition while maintaining better margins. They could afford to build in more states, contract with more payers, and invest more in clinical quality—all because the core unit economics were stronger.

The Decision Framework

Brad’s approach reveals a framework for making complex strategic decisions in regulated industries:

Start with customer value proposition. How much better is your offering in each model? Not just features—actual economic value to the customer.

Translate to acquisition hypothesis. If model A offers 5x more value than model B, what should that mean for CAC? Be specific.

Consider lifetime value implications. How does each model affect retention, expansion, and revenue predictability?

Calculate the ratio. CAC to LTV is what matters, not either metric in isolation. A model with higher CAC can still win if LTV increases more.

Factor in operational complexity. What’s the overhead tax of the harder path? Is it linear or does it create leverage over time?

Make it testable. Structure your strategy so you can validate the hypothesis before going all-in.

The Market Size Trap

What Brad’s framework helps avoid is the market size trap—choosing strategy based on addressable market rather than unit economics.

Many founders would frame the insurance decision as: “Insurance gives us access to more customers.” That’s true but insufficient. Access to a larger market with worse unit economics is often worse than access to a smaller market with great unit economics.

Brad’s insight was to start with the economics, not the market size. He asked: where can we acquire customers most efficiently and retain them longest? The answer was insurance networks. The fact that this also opened up a larger market was a bonus, not the primary rationale.

This matters because in the early days, you need to prove the model works, not prove the market is big. Investors will fund businesses with great unit economics in mid-sized markets. They won’t fund businesses with poor unit economics in huge markets.

When Complexity Is Worth It

Brad’s decision offers a principle for founders facing similar choices: complexity is worth it when it fundamentally improves your unit economics, not just your market access.

Many founders avoid complexity because it’s hard. Brad embraced it because he had conviction that the underlying math would be dramatically better. That conviction came from thinking through the customer value proposition and how it should translate to acquisition and retention dynamics.

The lesson isn’t “always choose the complex path.” It’s “choose the path with better unit economics, even when it’s more complex.” There’s a huge difference.

Today, Brightside serves 135 million covered lives through insurance networks. But the decision to pursue insurance wasn’t about the size of that opportunity. It was about the unit economics of each customer within it.

Brad proves that the best strategic decisions aren’t about choosing between easy and hard. They’re about having clear hypotheses about unit economics and following the math even when the path is harder.

The sophistication isn’t in the complexity itself. It’s in knowing exactly why the complexity will pay off—before you wade into it.