Despite the fact that it is worth $1.5 billion, New York-based startup Oscar Insurance Corp. is going through some growing pains.
Last year, the insurer lost $37 million. And while it took in $56.9 million in premiums in New York, it dished out $66.3 million on doctors, hospitals and drugs, plus an additional $24.3 million on administrative expenses, reports Bloomberg.
The company expects the losses to continue into next year based on high administrative costs and low enrollment. But Oscar CEO Mario Schlosser tells the news outlet that the insurer has more than $230 million in the bank, and hopes to enroll 1 million customers within five years and to operate in up to 30 markets.
Oscar's strategy is to target young consumers who aren't as familiar with health insurance-related jargon. A user-friendly website allows subscribers to track and manage medical bills, and the insurer collects data from customers' office visits with doctors to analyze how much they cost.
What's more, the insurer doesn't sell in the bigger markets--it sticks to the individual market because it's easier to enter. Recently, Oscar announced plans to enter California's exchange, a move that may provide clues to whether the insurer actually provides breakthrough innovation that can turn the insurance industry on its head or if it just boasts smart and shiny marketing techniques, FierceHealthPayer previously reported.
The insurer eventually wants to sell plans to employers but needs to build relationships with brokers and expand its provider network. Additionally, covering Medicare and Medicaid consumers will be tricky, seeing as how UnitedHealth has about 1,000 times as members as Oscar, notes Bloomberg.
And recent consolidation throughout the industry won't make it easier for Oscar to move up in the ranks. That's because the bigger insurers like Anthem and Cigna "are able to use their scale to get better prices from hospitals and doctors, which is the biggest part of the premium," Bob Kocher, a venture capitalist at Venrock, tells Bloomberg.
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