How data restructured Oscar’s approach to marketplace plans—and why that might not be a good thing

New York City
Oscar combined patient data with claims data to narrow its networks in New York. Some wonder if that approach could have long-term consequences.

After a rocky foray into the insurance marketplace, payer upstart Oscar appears to be finding its groove by using the data it’s collected since it launched in 2014 to optimize provider networks.

Oscar’s data-driven approach has been closely watched by the insurance industry, although it hasn’t always been lucrative. The company, which offers ACA marketplace plans in four states, lost more than $200 million in 2016, on top of the $121 million in losses in 2015.

RELATED: Oscar lost more than $200M last year

But Oscar has reimagined its approach by narrowing its provider networks, which served as a primary component of its New York marketplace plans in 2017. Oscar CEO Mario Schlosser has said he’s optimistic about the individual marketplace following his company’s transition to narrower networks.

Data has played a significant role in that evolution. By layering claims data with patient data, the company recategorized physicians based on quality and specialty skills and then used predictive modeling to understand how often people accessed specific health services based on where they lived. The insurer used that information to negotiate with providers and built a network that was more aligned with the precise needs of its members.

RELATED: Oscar's ties to Trump put it in tricky position

“We boiled the ocean of healthcare billing into something clinically relevant,” Nick Reber, Oscar’s vice president of network construction, told Wired.

Giving members fewer provider options seems counterintuitive, but so far, it’s working. According to the magazine, Oscar has maintained its market share of patients in New York and reduced its out-of-network costs by 0.6%. It plans to continue using its data-driven approach to quickly fill in provider gaps when necessary.

RELATED: Humana CMO explains why the insurer sees itself as a data analytics company 'more than anything else'

But others have concerns that this approach could be problematic if the rest of the industry follows suit. If other insurers use narrower networks to attract the healthiest populations, it “would create, in the worst case, the famous death spiral where healthier and healthier people drop out from large network insurers until only the sickest people are left,” Simon Haeder, a political scientist at the University of West Virginia told Wired.

RELATED: Oscar CEO makes case for narrowing NY network

Oscar executives don’t see it that way, noting that the data offers “precision and depth” to coverage that should be just as appealing to sicker populations.