Oscar Health loses major tech customer amid integration challenges

Health First Health Plans, an early adopter of Oscar Health's tech stack, is pulling the plug on the project amid implementation challenges.

The Florida-based health insurer intends to terminate its deal with Oscar's information tech platform +Oscar and "transition the services from +Oscar to Health First, effective as early as January 1, 2023," the insurtech revealed in a Securities and Exchange Commission filing Tuesday. 

It marked Oscar's first full-service tech agreement but there were major implementation snags due to the complexity and size of the project.

Under a deal signed last year, Oscar was contracted to provide administrative functions and services for the insurer, along with giving it and its individual commercial and Medicare Advantage members access to Oscar’s technology platform. 

Oscar will lose out on up to $60 million in administrative services revenue this year. The company said it does not expect the loss of the contract to impact its earnings or net loss in 2022.

"The company is actively moving forward with the development and sale of +Oscar’s Campaign Builder, which is consistent with the company’s focus on new modular and Software as a Service offerings," the company said in the SEC filing.

Oscar "continues to be committed to growing the +Oscar business and continuing to serve current clients," the company said.

Earlier this month, Oscar Health said it was pressing pause on new deals for its technology platform for more than a year as it manages issues in integrating with Health First Health Plans.

Oscar CEO Mario Schlosser told investors during the company's second-quarter earnings call it planned to hold off on additional full-service deals for its +Oscar platform for the next 18 months. Oscar formally launched its tech platform business in April 2021.

The +Oscar tech stack aims to simplify administrative tasks and boost the member experience. 

The partnership with Health First was set to go live at the start of this year but faced significant challenges due to the complexity of integration, Schlosser said. Putting a pin in new deals allows Oscar to address issues with implementation without overextending its capabilities.

Chief Financial Officer Scott Blackley said on the August 11 call that Oscar is still negotiating potential deals in the space even as it focuses on addressing the implementation challenges, as there is a demand for such services.

The company is still pushing toward profitability and is focused on turning a profit in its insurance business by next year and overall by 2025. Oscar posted $1 billion in revenue for the second quarter and a net loss of $112.2 million, up from a $73.3 million loss in the prior-year quarter.