Can Oscar Succeed In Making Health Insurance Fun? Maybe Not Just Yet. But the Startup Is Shaking Things Up …

Last week  I went to a panel presentation sponsored by the group NYC Health Business Leaders on the rollout of New York State’s health insurance exchange.  Among the speakers was Mario Schlosser, the co-founder and co-CEO of the venture-capital-backed start-up health insurance company Oscar Health, which offers a full range of plans through New York’s exchange.

As NPR reported last month in a story about Oscar, “it’s been years since a new, for-profit health insurance company launched in the U.S.”, but the Affordable Care Act created a window of opportunity for new entrants.

Schlosser began his talk by giving us a tour of his personal account on Oscar’s website, www.hioscar.com.  Among other things, he showed us the Facebook-like timeline, updated in real time, which tracks his two young children’s many visits to the pediatrician.

He typed “my tummy hurts” into the site’s search engine and the site provided information on what might be wrong and on where he might turn for help, ranging from a pharmacist to a gastroenterologist, with cost estimates for each option.

Additional searches yielded information on covered podiatrists accepting new patients with offices near his apartment and on the out-of-pocket cost of a prescription for diazepam (which was zero, since there is no co-payment for generic drugs for Oscar enrollees).

As an audience member noted, none of this is new exactly.  What is new is to have this kind of data-driven, state-of-the-art user experience being offered by a health insurer.  Schlosser told the audience that Oscar’s pharmacy benefit manager and other vendors are providing the company with real-time data that other insurers have not demanded.


And, according to Schlosser, Oscar’s customers are responding.  Nearly all of them have used the company’s website.  A surprising five percent of them use the company’s website every day.

In addition to an improved user experience that incorporates increased price transparency, Oscar heavily emphasizes telemedicine, with the goal of giving every customer the feeling of having “a doctor in the family.”  As Forbes reported last year, Oscar has “a unique partnership with the telemedicine company TeleDoc” which will allow its customers to speak to a doctor at any time of the day or night without incurring any out-of-pocket expense.

With regard to the physicians in Oscar’s network, Schlosser explained that the company does not intend to incentivize or require physician compliance with quality measures, as some insurers do.  Oscar will instead use its core function—reimbursement—to encourage, for example, email and phone communications between doctors and their patients.

Oscar’s service area is currently limited to New York’s nine downstate counties, but the company hopes to expand.  It will be very interesting to see if it succeeds.  Schlosser emphasized that Oscar has its genesis in the frustration that he and his co-founders felt dealing with their previous employer-provided health insurance plans.

He joked about Explanation of Benefits forms that do anything but explain what your benefits are.  The idea of putting these frustrations in the rear-view mirror is a very attractive one.

In the end, Oscar’s success may hinge on its ability to earn and sustain its customers’ trust.  Will customers trust the advice given to them by an insurance company-paid doctor whom they have never met?  Will they trust that the physicians Oscar’s website directs them to are chosen with customers’ interests in mind?  Will they trust Oscar to use the additional data it collects in ways that serve, or at least do not harm, their interests?

An audience member’s joking reference to the National Security Agency—Schlosser responded with a smile that one of Oscar’s employees in fact did use to work for the NSA—suggests that I was not the only one thinking about questions of data and trust.

Kate Greenwood is a Research Fellow & Lecturer in Law at the Center for Health & Pharmaceutical Law & Policy at Seton Hall University School of Law. She is a regular contributor to Bill of Health.

This post originally appeared on Bill of Health and Health Reform Watch.

3 replies »

  1. John – good point – but with all due respect, New York state (where Oscar operates) is one of very few states that has done far far better in enrollment on the health exchange than was projected. They are at 122% of projected signups with over a month to still go.

    So your prospective defense that the Oscar guys will use wont work.

    here are the stats by state:

    I agree with you on their SEO capabilities….unless they dont want huge enrollment because they are worried about managing the actuarial risk of “all comers” so like the early 1990s HMO, they are making enrollment hard enough (enrollment centers for HMOs on the 3rd flr of NYC buildings with no elevators back in the day) so that only the most savvy users find them (ie the best risk – just like the folks who could climb 3 flights of stairs.

    Like I sad – I hope they make it but the history of new players in this area is not good – and especially those backed by tech money and founders who think that the world is one big algorithmic puzzle that their engineers can solve and that “beautiful” UI can fix everything. Not so in healthcare where the blood and guts of our current system kills most techies – even those with the best of intentions.

  2. 2 points for the skeptics.

    I think Oscar will counter that the numbers are reflective of the wider problems with the Obamacare rollout. They’ll argue correctly their low numbers are being caused by the same problems that are hurting everybody else. A business that is designed to basically plug in to the healthcare marketplace isn’t going to do very well if the marketplace is dysfunctional. And that’s probably a fair argument to make. That line of defense will be accepted. They’ll get more time.

    On the other hand, try doing a Google search for Oscar + Health Insurance or Oscar Health. You’ll find plenty of references to media coverage but no links to the vaunted site itself. Which is pretty much unheard of for an Internet start up, let alone one that’s counting on transforming the online marketplace for health insurance by reaching consumers over the Internet. This seems downright bizarre. Unless of course they’ve somehow managed to piss off somebody at Google ; )

    Maybe they’ve developed some sort of insanely clever Twitter/Facebook strategy ..

  3. I hope Oscar succeeds.

    But the early numbers are not encouraging.

    They have signed up approx 5000 people to date – that gives them 2% market share. even adjusting for the fact that they are only in downstate (NYC region) – that is still a trivial amount for all of the hype these guys generate about being consumer and web-savvy and search optimized.

    The counties they operate in cover nearly 2/3rds of the population of New York state. If they can only get to 2% here, I have to view this as yet another tech-funded failure in healthcare. How can it be that the not-for-profit insurer in their region has crushed them on enrollments – it violates the narrative that everyone wants slick web based tools to access their insurance.

    Actually – yes, everyone does want that. But the incumbent advantage in healthcare is strong and getting stronger in all parts of healthcare. And so Oscar wont work at the end of the day. They wont achieve the scale to provide their VC backers with a return.

    And remember folks- revenue is not the name of the game in insurance – it’s all about MLR and profits. The techies who run Oscar will no doubt push a revenue narrative to TechCrunch and VentureBeat. “Look at $400 PMPM x 8000 enrollments at the end of March, we will have year 1 revenue of $38M” But that’s not the right picture to be painting as the smart readers at THCB will understand.

    Put another way, if this was a pure tech company, 2-3 years into operations, if it had 2% market share, the VCs would be asking hard questions. But because many of the backers don’t understand health insurance, they will keep pouring money into this hoping for a better outcome at scale or in year 2.

    The data:

    NY Health Exchange: ~400k sign-ups as of 2 weeks ago.

    In December, NYS reported that 66% signed up for a QHP on the Exchange.

    They also reported that a mere 2% Oscar chose = 5,400 enrollments to date.

    Oscar has raised $70M to date with a current valuation of $340M. That works out to ~$10k of VC money for every person they enrolled this cycle.

    Put another way and a crude calculation – at $400 PMPM x 5% net profit margin at scale = $240 per year profit. It would take 42 months for Oscar to breakeven on this first batch of sign-ups.

    What’s the average duration on an insurance plan in the IFP market – certainly less than 3.5 years.

    So – unless there is a last minute change in trajectory, Oscar will end enrollment seasons on current pace with about 7 or 8 thousand signups and will struggle with cost of customer acquisition and churn and will burn through hundreds of millions before Khosla and his cronies figure out that this is a failed model.