Oscar Health CEO Mario Schlosser may have stumbled into the health insurance industry out of sheer dumb luck, but now that he’s in, he’s convinced that his company has found some key solutions to healthcare’s cost concerns.
Those same elements could also put the insurer on the path to profitability. The keys to Oscar’s business model revolve around three elements:
- Using real-time data to get actionable insights in front of members and physicians.
- Building narrow networks to drive down costs.
- Personalizing care through a four-person concierge team assigned to each member.
Those features have matured over the years, allowing the company to fine-tune its use of data analytics and develop risk-sharing partnerships with high-profile organizations, including the Cleveland Clinic, Humana and AXA.
“The fact these extremely sophisticated organizations say, ‘Oscar has something I cannot find anywhere else—which is technology and member engagement—and I trust Oscar with how they do the work,’ that’s an extremely powerful thing and that wouldn’t have happened two years ago,” Schlosser said during an interview with Bloomberg.
Sharing the risk 50/50 with those partners allows Oscar to get the best price on healthcare services, he said. Additionally, the insurer leverages real-time data from multiple sources to connect its concierge team with patients after an ED or physician visit to coordinate follow up care or provide medication reminders. He said Oscar’s concierge teams communicate regularly with 90% of its most complex members, 75% of which use chat functionality.
Thanks to @cornell_tech Dean Dan Huttenlocher, @OscarHealth CEO Mario Schlosser, @BloombergTV's @ScarletFu & @Bloomberg Intelligence's Senior #Healthcare Analyst Justin Bowers for last night's excellent #CTechBBG discussion about the evolving health insurance industry! pic.twitter.com/gDDZcWOluE— Tech At Bloomberg (@TechAtBloomberg) January 25, 2018
But Schlosser, a tech entrepreneur who co-founded a social gaming platform, essentially stumbled into the health insurance industry. When Oscar co-founder Joshua Kushner initially approached him about the idea, he rejected him.
“I literally told him, I said, ‘Go hire McKinsey,’” Schlosser said he told Kushner in 2012, referring to the global consulting firm. “This is the kind of thing where I don’t know what the differentiation would be, I don’t know anything about insurance, really. I know it kind of sucks for everyone I know … but it seemed like the type of thing where you have to put the pieces together in a very tight operationally orchestrated way.”
But soon after, a Supreme Court ruling upheld the Affordable Care Act, and Schlosser quickly realized a new individual market was emerging in New York that provided a unique opportunity for new entrants. Oscar launched a year later with more than $727 million in venture capital funding.
Since then, Oscar has navigated disappointing financials. The company lost more than $200 million in 2016 alone and managed to stem the bleeding in the first half of 2017 with just over $57 million in losses.
But Schlosser said Oscar hit its stride last year, backed by a big drop in its medical loss ratio, which declined from 120% in 2016 to 95% last year, “with a straight line to the mid-80s” moving forward. That shift prompted “underwriting profits for the first time,” he said.
“Our medical loss ratio would have been 85% [and] we would have made money if the stabilization programs had worked as intended—if they hadn’t played games with that stuff,” he told Bloomberg.
He added that Oscar weathered its worst year—2016—largely unscathed. Despite posting its worst medical loss ratio, navigating an unstable marketplace and watching the election of Donald Trump “who wanted to kill the market we’re in,” Schlosser said the company has found it’s groove by combining technology with narrow networks and robust partnerships.
“All these things happened at the same time basically, and yet somehow no one left Oscar over that,” he said.