When serial entrepreneur Mario Schlosser’s wife was pregnant with their first child, the couple confronted the same questions that many first-time parents face: Who is the right OB/GYN to guide them through the pregnancy? Which is the best maternity ward? How much is the birth going to cost? And, for later, who is the right pediatrician for the baby?
“As a consumer of healthcare, for a while you wonder, ‘Am I stupid?’ or ‘Am I missing something?’” Schlosser told me. “You try desperately to figure out how this healthcare system works, and which physician to go to and what the costs will be, and you realize that no, it’s not you that’s stupid. It’s the system that’s stupid.”
He was already noodling with the idea for Oscar, a healthcare startup that aims to disrupt an entrenched industry by focusing on the customer experience, leveraging technology to make buying and using health insurance easier and, well, friendlier. The company launched in New York in 2013, expanding to New Jersey and then Texas late last year.
Now, with the open-enrollment deadline for health insurance just days away, the company has been plastering Los Angeles with its cute cartoon ads on billboards and buses. Oscar came to L.A. in November and started insuring area customers on Jan. 1.
The website certainly is slick. (There’s also an app.) Schlosser walked me through a demo, illustrating how easy it is to sign up (just enter your zip code and a few details about your family), select a plan with simplified explanations and start looking for a doctor (type in “asthma” or “It hurts when I pee.”) The system shows a few options, including your primary care physician, a specialist, urgent care or the emergency room and the estimated costs for each, then helps you make an appointment. Or you can request a doctor to call you for free.
Once you’ve seen or talked to a doctor, the visit is recorded on Oscar, as well as any prescriptions, and your account becomes a clearinghouse for all your healthcare information: your doctor appointments, drug prescriptions, emergency-room visits, insurance claims, etc., giving both you and your doctor access to your complete health history. That’s a stark contrast to the way it works for many patients now, who might go in for an annual checkup without their PCP having any idea they were in the ER the week before.
“The company came out of a personal desire to have a better user experience … [from] not just your insurance company but healthcare overall,” Schlosser said.
Like Schlosser and his pregnant wife, Oscar co-founder Joshua Kushner, managing partner at Thrive Capital, had a similarly confounding experience when he sprained his ankle. Kushner’s mother found the emergency room so complicated, she compared it to emigrating to the U.S. through Ellis Island, and the partners ended up naming their company after Kushner’s great-grandfather, who entered the country through the iconic immigrant gateway.
Oscar currently serves about 125,000 customers. (By way of comparison, the largest health insurance companies like Anthem have memberships that number in the millions.) The company isn’t profitable yet, losing $27.5 million in 2014 on revenue of $56.9 million, according to an estimate the company provided to New York’s insurance regulator.
But investors are bullish: Oscar has raised $327.5 million from the likes of Founders Fund, Google Capital and Formation 8, according to CrunchBase, and is reportedly in the midst of raising another round led by Fidelity that could value the company at $3 billion, per Fortune. (Schlosser wouldn’t comment on the report, saying, “There’s nothing to announce there yet.”) Oscar’s parent company Mulberry Health has authorized the sale of up to $400 million in new “Series A8” stock last week.
In the meantime, Oscar is aiming to gain a foothold in a city obsessed with another Oscar — the bald, naked, gold statuette handed out at the Academy Awards. Schlosser said the company selected Los Angeles as its fourth market because it’s big, with a lot of uninsured potential customers, and innovative.
“It’s a market were you want to roll out innovative product first and get feedback and get them excited about it,” he said.
Rather than building its own network of providers, Oscar partners with local healthcare systems, hitching its wagon to Providence Health & Services in L.A. The Seattle-based company has facilities in the South Bay, Westside and San Fernando Valley.
Because health insurance companies know a lot about their customers — their doctors, prescriptions, procedures and, frankly, bills — Schlosser believes they should give members more healthcare guidance.
“If we can build an insurance company that can position itself as the entry point to healthcare, meaning you come to Oscar first if you need help — whether it’s help finding a doctor, help with a claim, help with a benefit, whatever it is — that would be a powerful model that we ourselves would want to buy,” he said.
Date: January 27, 2016