Now, the New York-based insurer is returning to North Texas to sell individual and family health plans on the exchange created by the Affordable Care Act.
In an interview, Oscar CEO Mario Schlosser said the company negotiated more cost-competitive contracts with local providers, so it can attract customers and keep the company on the path to profitability.
Oscar’s return to the Dallas area signals that it has the confidence to grow, even as lawmakers and presidential candidates debate changes that could shake up the health care market. It also indicates the startup is serious about competing in Texas, which has the highest uninsured rate in the country. The company has 260,000 members across the U.S., with about 1 in 4 living in Texas. It sells insurance in Austin, San Antonio and El Paso. It’ll tack on two extra Texas metro areas in 2020: Dallas-Fort Worth and Houston.
Oscar is expanding to 12 new markets and six states in 2020, its largest expansion since it was founded in 2012. It will be in 15 states and 26 markets, and will start selling Medicare Advantage in Houston and New York City.
It isn’t the only insurer in growth mode. Thirteen companies that compete in the individual marketplace are entering at least one new state in 2020 and none have announced they’re exiting a state, said Rachel Fehr, a research assistant who studies health reform and private insurance for the Kaiser Family Foundation. She said the companies have remained profitable despite policy changes — such as the repeal of a mandate that required most Americans to buy insurance or pay a fine.
“It’s definitely a stable market, despite uncertainty,” Fehr said.
In Dallas-Fort Worth, Oscar will offer about a dozen different insurance plans on the exchange for 2020. Oscar has signed contracts with Methodist Dallas and Medical City. It has deals with HCA Healthcare, the country’s largest hospital system and Medical City’s parent company, in other markets.
The last time Oscar was in the Dallas market, it partnered with Tenet Healthcare and Baylor Scott & White Healthcare System.
Oscar dropped out of the individual marketplace in the Dallas area at the end of 2016, after Aetna and Scott & White Health (a plan offered through the Dallas-based health care system) announced plans to withdraw from the marketplace. Oscar had between 7,000 and 8,000 members in the Dallas area in 2016.
Schlosser said the company had to make tough choices. At the time, he said, the company’s medical claims were about 20% higher than the money it brought in from premiums.
It also decided to drop out of the New Jersey market, but returned in 2018.
“We thought we had something that had started working,” he said. “But we had to make sure we focused first on getting the medical costs to the point where the business was sustainable, frankly. That is where the medical costs now are.”
Oscar isn’t yet profitable, but narrowed its net losses from $131 million in 2017 to $57 million in 2018. In Texas, losses dropped from $47.6 million in 2017 to $16 million in 2018. Schlosser said the company will become profitable in the next two years.
Virtual visits, customer care
The tech-focused health insurer was born in 2012, two years after Congress passed the Affordable Care Act. Schlosser started the company with Kevin Nazemi (who has since exited) and Josh Kushner, brother of President Donald Trump’s son-in-law, Jared Kushner. They named the company after Kushner’s great-grandfather to give it more of a human touch. The company has raised $1.25 billion, including a $375 million investment from Google’s parent company, Alphabet.
With the health care exchanges, the co-founders felt they had a compelling new way to pitch customers. The startup was shaped by their own health care headaches, too. Schlosser, a computer scientist by training, was frustrated by the lack of data as he and his pregnant wife prepared for their first child. Before his wife went to the hospital to deliver, he said, he decided to do his own research on doctors’ c-section rates.
Oscar is designed to buck the way customers often interact with their health insurance company: On a phone call when they’re angry or confused about a bill. With its smartphone app, Oscar encourages more frequent interactions, so it can nudge members toward healthier habits, lower cost medications and better care. Each member is assigned a small group of employees, called a concierge team, that can answer questions.
It uses several strategies to keep costs down. It offers free, round-the-clock telemedicine to reduce needless doctor appointments and emergency room visits. It encourages members to stay healthy by offering Amazon dollars when they stay active. And it steers members toward less-expensive drugs by offering a list of common prescriptions for $3.
“The thing we are best at is member engagement,” Schlosser said. “Do people turn to us when they have an issue? When they have a question?”
He said the approach is working. He said about two-thirds of Oscar’s pinkeye cases have been managed through a virtual visit with a doctor. And for about 40% of Oscar members’ visits to a new doctor, the company has been the source that has recommended that doctor, he said.
It has a feature that aims to get ahead of a common complaint, too. If customers are going to be billed more than $200 out-of-pocket for a claim, they get a message ahead of time that offers to answer questions.
Schlosser said Oscar and insurers on the exchange must pay attention to something that’s overlooked by many “sleepy incumbents”: customer service.
“If you hate your insurance company and you get it through your employer, you’re out of luck,” he said. “You can’t go to your employer and say, ‘Please, for the thousand people who are at this company with me, can you please change companies? I had a bad experience.’ That’s not going to happen. But in our market, you can vote with your feet.”
“In my view, that’s how all of health care should work and how all of health insurance companies should work,” he added.
Back with a splash
Oscar grew to $1.2 billion in annual revenue in 2018. Two years ago, it began offering Oscar for Business in select markets. The employer-based health coverage is available to companies with up to 100 employees in New York, New Jersey, Nashville and Los Angeles. It has 17,000 members covered through the plan.
Oscar will compete with other companies on Healthcare.gov in Dallas, Collin and Tarrant counties. Three companies — Blue Cross Blue Shield of Texas, Celtic Insurance and Molina Healthcare — participated in the exchange in Dallas and Collin counties in 2019. Two companies, Blue Cross and Celtic, competed on the exchange in Tarrant County in 2019. Open enrollment on Healthcare.gov begins Nov. 1.
Texas is a significant business opportunity for health insurance companies, but it’s a challenging one. Nearly 18 percent — or 5 million — of Texans did not have health insurance in 2018, according to U.S. Census Bureau data. That’s higher than any other state and double the national average of about 9%.
While some states have encouraged signups with outreach campaigns and other approaches, Texas has taken the other tack. It is one of 14 states that have not accepted funding to expand Medicaid. It set strict rules and required additional training for navigators, people who help in the community with health plan sign-ups. And Texas Attorney General Ken Paxton is leading a challenge of the ACA in court.
That means companies like Oscar have had to field their own ground game to persuade Texans to sign up for health insurance — especially those who are young, healthy and feel they can go without it.
Oscar has a Texas office in Dallas with about a dozen employees who work in sales, growth and clinical review, said Kyle Estep, market director for Oscar’s central region. It opened in 2015.
Estep said the company, originally known for catering to hipsters and freelancers, has a diverse customer base that includes lower-income families, middle-age professionals and grandparents.
In recent weeks, Schlosser visited with insurance brokers in Dallas. And Dallas residents will soon see the Oscar brand on billboards and ads on streaming services, such as Netflix.
“We’re going to really try to make a splash in Dallas and reintroduce ourselves to the market in a very convincing way,” he said.