Oscar uses tech to improve health care
NEW YORK — Technology has turned everything from shopping to transportation into a one-click, mobile-driven breeze. But can it really improve one of the most onerous experiences extant: health care calls and claims?
Oscar not only believes tech can, but the health insurance start-up — which currently operates in New York and New Jersey — is quickly amassing the customers and venture funding to prove it.
"Your relationship with doctors and insurance companies should work as simply as the rest of the Internet," says co-founder Joshua Kushner. "Typically, insurers amass customers and then avoid them. But we want consumers to engage with us, because the right kind of care gets you healthier, faster."
Oscar's website and app hammers that point home. Signing up is as easy as answering a few multiple choice questions. There are discounts for being active, which is tracked by a free wearable. Customers get two free primary care visits a year and free generic drugs. All plans are the same, except that a higher premium gets you a lower deductible. And the company says it has approximately 40,000 doctors in its New York network, and 30,000 in New Jersey.
As for doctor responsiveness, Kushner — a Manhattan real estate scion whose brother, Jared, is married to Ivanka Trump — taps the Oscar app to request a call from his doctor, then minutes later grins as his physician's voice comes on the line.
"People seem to like what they're getting, because a third of new business is coming from member referrals," says Kushner, who christened the company after a relative whose name was changed from Joshua to Oscar at Ellis Island, the confusing immigration hub that he likens to the health care system. "It's time for change."
The spotlight burns bright on health care, thanks to both the Obama Administration's Affordable Care Act as well as a perception that U.S. health care costs — nearly $3 trillion or 20% of GDP in 2013 — are out of control.
The assumption that there are profits to be had in a consolidated and more streamlined business explains both Anthem's $47 billion bid for rival Cigna as well as venture capitalists increasing health care investments 250% last year, to $308 million.
And that number is set to increase considering that Oscar alone has netted some $300 million in funding, thanks to a $145 million April Series B round led by Peter Thiel's Founders Fund that values the startup at $1.5 billion.
Oscar banking on shift in choice
Oscar is by no means huge. It says it currently has signed up 15% of all New Yorkers who are insured — approximately 40,000 individuals — but that its numbers had tripled during its last enrollment period in January and February. That's a fraction of the tens of millions nationally who use employer-provided plans.
Nonetheless, those members generate $200 million in annual revenue for Oscar, some 85% of which is used to pay for care. The company aims to expand to California and Texas this year.
But Oscar's end game isn't just to be a trusted provider for those millions of e-lance economy workers without company plans. Rather, CEO Mario Schlosser is convinced we're about to see a shift akin to "when pension funds were replaced by employer-contribution 401K plans, with the power of choice shifting to employees."
Health care companies large and small "know they have to reinvent themselves" in an Obamacare world," says Deanne Primozic Kasim, research director for IDC Health Insights.
"More and more employers want to pass the decisions about health care to consumers," she says. "In the past year, many tech vendors I deal with have been asking about Oscar. They feel it's the wave of the future."
Kasim cautions that while upstarts are good for goosing a staid industry, they also assume the huge financial risks associated with health care coverage. "It all comes down to how a company such as Oscar can manage the cost of care," she says.
That's why Ali Diab, CEO and founder of Collective Health, has thrown his tech-health hat into the employer ring. The 2-year-old start-up, which has raised $38 million to date, is in beta with a few large companies to serve as their health plan administrator, using tech to synchronize company options and doctor connections.
"Oscar's doing great work, but we just felt that to change health care at scale you had to bring these technological innovations to big companies," says Diab, who started his after a rare intestinal surgery initially led to denied claim payments.
"If you look at the history of health care, the big changes are always driven by employers," says Diab.
Tele-advice can replace costly visits
But whether the customer is a freelance bike messenger or a Fortune 100 company, the goal of tech remains to "delight the consumer and give them a greater ROI (return on investment) for their money," says Bryan Roberts, partner at Venrock, whose portfolio includes health-tech plays such as Grand Rounds and Stride Health.
"Health care remains antiquated from a tech perspectives, but that's changing," says Roberts. "When you look at Oscar, you see someone's taken the care to design a delightful interface, which is very different from the current customer experience."
CEO Schlosser, who is familiar with a less convoluted German health care system, remains convinced that Oscar "can provide every American with a service that is fundamentally better than what they have now."
He eagerly fires up his smartphone and scrolls through the medical history of his infant daughter, such as the time when she was vomiting and had a fever. In most cases, her symptoms were diagnosed with a quick doctor's call, resulting not in costly ER visits but quick trips to the pharmacy.
"So much money in our system is simply wasted," he says, pulling up a chart that shows 91% of calls to Oscar doctors about "Bronchitis" were resolved on the phone, for which Oscar pays physicians $57 (compared to up to $230 for an ER visit) and the consumer pays nothing.
"The U.S. health care system is twice as costly as those in other rich countries," says Schlosser. "And it doesn't have to be."