Oscar Strategy Teardown: How The Health Insurer Is Beginning To Hedge Against Obamacare

We examine Oscar’s strategy, numbers, partnerships, and future in this analysis using CB Insights data. The full analysis appears on our research page.

Oscar has raised more than $700M, with the aim of disrupting health insurance by building a direct relationship with customers.

In simple terms, the company’s goal has been to put a human face on private health insurance. It aims to make its customers love health insurance — as opposed to seeing it as a necessary evil — and put Oscar at the center of people’s health and wellness needs.

The company has weathered its share of challenges while burning through hundreds of millions of dollars: Oscar has struggled to find its footing in the US healthcare market for individual coverage, and has faced an uphill battle in assembling a network of doctors and hospitals.

As the company moves into its fifth year of operation, Oscar’s strategy is beginning to take a new shape.

Our analysis shows Oscar is slowly managing to contain its costs by integrating with hospitals, bringing key functions like claims processing in-house, and improving the health of its customers.

The biggest risk to Oscar remains the uncertainty surrounding the health insurance marketplaces known as exchanges, which are operated by the states. The exchanges were the pillar of Obamacare, or the Affordable Care Act, which sought to bring coverage to millions of Americans who did not have health insurance through their employers.

Health insurers including Oscar have found it difficult to eke out a profit from plans they offer on the highly regulated exchanges. At the same time, the current US administration is hostile to the Affordable Care Act and is taking steps to undermine it through legislation and regulatory tweaks.

In this landscape, Oscar has clearly begun to hedge against its former focus on individual plans and the exchanges.

Oscar has begun moving away from Obamacare in two ways: by integrating more directly with doctors and hospitals, and also by beginning to offer group plans through employers.

Meanwhile, it has also doubled down in care services, significantly expanding telemedicine and concierge teams as well as launching its own primary care clinics.

But while Oscar is beginning to control its costs and improve its tech and experience, will it be enough to win out against existing incumbents and bring the company to profitability? And will its strategy of tight integration with doctors and hospitals, while limiting the number of in-network providers, be appealing enough to consumers?

TABLE OF CONTENTS

• Enough of an edge? Oscar’s focus on customer experience
• Oscar Mobile
• Oscar Onboarding
• Oscar’s vertical integration with hospitals and internalization of functions
• Claims processing
• Hospital networks
• Telemedicine and primary care
• Oscar by the numbers: revenue and membership
• Oscar hiring analysis
• Oscar: future directions

Enough of an Edge? Oscar’s Focus on Tech and Customer Experience

When Oscar began rolling out its product in 2014, the company touted simplicity above all else. Josh Kushner (one of the co-founders) said in 2014:

“Our ethos and mission is to create a good consumer experience. We wanted to create an experience like having a doctor in the family … The existing players don’t care about satisfying the customer.”

Competing on scale, price, and distribution was always going to be difficult due to the size of incumbents. However, Oscar saw its edge in customer satisfaction, where the health insurance industry as a whole has an ultra-low net promoter score (NPS) of 12 out of 100.

(NPS is a measure of how many customers would recommend a product or service to friends. For context, companies like Apple boast NPS scores of 70 or more.)

Oscar, unlike its peers, prioritized customer experience, brand, and simplicity. It outlined its rules for simplicity in a 2014 deck (excerpted below):

The same year, Oscar filed a patent for “Modeling Healthcare Costs” that showed preliminary views of the company’s user interface and experience. Again, this demonstrated its focus on simplicity, but also on price transparency. An oft-cited complaint against health insurers are their confusing statements, with murky information around reimbursements and payouts. Oscar’s UI sought to address that.

OSCAR MOBILE

Since then the company has maintained this focus on the customer experience. In its latest app overhaul, the company emphasized the fact that limiting options actually improves functionality and increases usage.

From the beginning, Oscar has highlighted its high-touch services, including telemedicine and “Ask your concierge,” a health insurance advice team. Oscar dedicates a team of 3 concierges and a nurse to each individual to help answer health questions and guide patients through the healthcare system.

The company sees this high-touch model as a way of gaining a competitive edge, stating 35% of all first-time doctor visits for members go through concierge teams. Oscar aims to be a patient’s first touch point with the healthcare system, as opposed to an afterthought — and is doubling down on this intiative, as we talk about later.

One recent addition to the Oscar home page is a step count tracker. Notably, Oscar gives up to $240/year to members that hit step tracking goals, boosting the company’s relationship with clients while simultaneously encouraging them to be more active.

The tracker also gives members a reason to visit the app more regularly, encouraging user engagement and allowing Oscar to remind its consumers of the insurance brand, even when they’re not seeking healthcare. Oscar claims a third of its total members used the app in September 2017.

Oscar announced its step-tracking reimbursement as one of its differentiators in partnership with Misfit Wearables in 2014. Today Oscar tracks steps using an assortment of step-tracking wearables as well as Apple’s built-in step tracker in the iPhone and Google Fit on Android.

Oscar has a high satisfaction rate for its app, receiving relatively high ratings, especially compared to competitors. While Oscar has an average app rating above a 4.0 since last August, UnitedHealth and Anthem’s were 1.9 and 1.5, respectively, during that time period.

OSCAR ONBOARDING

Even beyond its app, Oscar boasts streamlined processes. Oscar’s online onboarding and price quote tools ask easy-to-answer, straightforward questions:

1. My zip code is _______
2. I’d like to cover _______ (yourself or dependents)
3. I’m ______ years old
4. I make $_________ with __ people in my tax household
5. Tell us about your health and we’ll recommend a plan for you. Your answers will have no impact on rates. (see below)

Following the questionnaire, Oscar shows a selection of plans and their details (benefits, rates, etc.). Notably, everything within this onboarding process remains within Oscar’s website, in contrast with several other major insurers — like Aetna or UnitedHealth — that outsource parts of this process to third parties like healthinsurance.com and ehealth.

This idea of bringing everything in-house to fully control the patient experience is a recurring theme in Oscar’s strategic moves.

Oscar’s Vertical Integration with Hospitals and Internalization of Functions

When Oscar began, it focused on the exchanges and geographic expansion, moving to multiple counties in New York, New Jersey, Texas, and California within two years. In order to do this, the company outsourced many back-office functions, including claims processing, and also turned to companies like MagnaCare for their networks of hospitals and providers rather than developing its own.

This turned out to be a more expensive strategy, and additionally made the customer experience worse, since Oscar had to rely on the legacy processes of third parties.

In the last couple of years, Oscar has spent a considerable amount of resources to instead create its own tools, networks, and primary care channels. This is actually outlined as part of the company’s 2012 internal deck, which discussed starting Oscar with a focus on the user interface and slowly expanding down the “healthcare stack,” incorporating wellness programs and later its own provider network.

CLAIMS PROCESSING

One of the functions Oscar is bringing in-house is claims processing. Most health insurers outsource large parts of their claims and process them in batches, and Oscar did too in its early days. Now, to improve the customer experience, Oscar wants to handle claims in real-time.

The company’s goals for this system are stated below (taken from their blog):

• Reduce errors
• Better monitoring of data to ensure up-to-date information
• Eliminate denied or delayed claims
• Tighter fraud and abuse monitoring to prevent unnecessary bills for members

In its first few years of operation, Oscar received many complaints due to unexpectedly high bills and out-of-network surprises. Oscar’s new claims system seems geared to making sure members are not caught off-guard with bills, reduce billing errors that might cause sticker shock and resolving billing issues quickly.

The new claims system is also supposed to send information about patients in real-time, keep provider information up-to-date, and speed up authorizations. Considering some prior authorizations could take weeks, speeding up this process is necessary if one of Oscar’s key differentiators is to excel in user experience.

The company plans to roll out this new system in 2018.

Find the rest of the analysis on the CB Insights Research Page, including revenue and funding numbers, key partnerships, and where the company may go next.