Starting next year, people in three Bay Area counties will have the option to choose a health insurer that goes by its first name, touts its mobile app and is backed by Silicon Valley venture capitalists.
Oscar Insurance Corp. which markets itself simply as Oscar made its California debut last year in parts of Los Angeles and Orange counties, and will expand into San Francisco, San Mateo and Santa Clara counties to provide coverage in 2017.
Oscar, which has about 135,000 enrollees nationwide, was founded in 2012 by three Harvard Business School graduates including Josh Kushner, brother of Donald Trump’s son-in-law Jared Kushner. Launching first in New York, it has tried to appeal to younger, tech-savvy consumers as a lower-cost option in the marketplaces created by the federal Affordable Care Act.
But despite its high-tech hipster pedigree, Oscar has had only modest enrollment in Southern California and has experienced some financial struggles.
Company officials declined to comment for this story, but plan to offer more details later. Still, they confirmed the enrollment of about 5,000 Californians in 2016, just over 2,000 of them in Covered California, the state’s health insurance marketplace. That’s far less than 1 percent of the nearly 1.6 million state residents enrolled through the exchange.
Oscar, valued at $2.7 billion after raising $750 million from investors including Fidelity Investments, has also struggled financially. Company officials confirmed that Oscar lost $92 million in its home state of New York last year and $39 million in the first quarter.
Health insurance experts welcomed the entrance of a new company in California, especially since the nation’s largest health insurer, UnitedHealth Group, will no longer sell Covered California policies next year in the limited regions it operates in. The insurer, which said in April it would stop offering plans through Affordable Care Act exchanges in most of the 34 states where it offers coverage, said it has been losing money on those policies.
Oscar has positioned itself as a trendy startup, one that appealed to Millennials and others seeking affordable health insurance in the new marketplaces, which started operating on Jan. 1, 2014.
But Robert Laszewski, a former insurance executive and critic of the Affordable Care Act, said the new entrant misjudged the marketplace.
He said Oscar focused on younger, healthier consumers without realizing how policies built into the law would require them to help stabilize the markets by making payments to the insurers who took on those older, sicker people.
“They really haven’t understood the mechanisms of Obamacare and have gotten themselves into financial problems,” said Laszewski, president of Health Policy and Strategy Associates in Alexandria, Va.
Oscar, which will be among the 11 plans offered next year in Covered California, is also expanding in the state in an inauspicious time.
Last week, Covered California announced its 2017 rates will jump a weighted average of 13.2 percent statewide. Exchange officials blamed the jump on several factors, including the rising cost of medical services, drugs in particular, and one-time adjustments to the end of two federal programs that stabilized rates.
Dylan Roby, assistant professor of Health Services Administration at the University of Maryland School of Public Health, said Oscar’s enrollment numbers in Southern California were likely dampened by higher premiums and limited health provider offerings.
Oscar, which also debuted in Texas last year, did well in the Lone Star State with its lower-price plans, but the company missed its mark with relatively higher-cost plans falling somewhere in the middle of the pack in Southern California.
“If you are selling an expensive plan with a narrow insurer network, you won’t be able to enroll as many people as low-cost plans with broader networks or high-cost plans with really broad networks,” said Roby, also a faculty associate with UCLA’s Center for Health Policy Research.
In San Francisco, Oscar’s preliminary 2017 unsubsidized rates of $483 a month for a 40-year-old man in a midprice plan make it costlier than Kaiser Permanente’s $444 plan, but cheaper than Anthem’s $543 offering and on par with Blue Shield of California’s PPO at $484.
While Oscar may be able to bank a bit on the coolness factor, Roby said price and network are the keys for success. “I think the perception as a ‘cool’ and high-tech plan will only go so far in San Francisco,” he said.
Date: July 25, 2016