Oscar is able to get young and healthy people on an expensive network and high risk adjustment payments. I can’t figure out their business model past the buzzwords.
Oscar is incurring losses of roughly $145 Per Member Per Month (PMPM) in its biggest market. It is charging roughly $190 PMPM in net premiums. Some of the loss is due to risk adjustment (~$20 PMPM) as Oscar’s entire business strategy is to cater to tech savvy individuals who tend to be young and healthy…
I think there are two take-aways. First, I still can’t figure out Oscar’s business model.
Secondly, setting up an insurance company or expanding an incumbent carrier into new lines of business and new areas is tough.
Oscar’s strategy has been to use their web/mobile technology platforms to be the hip/cool/disruptive insurer for the next generation.
The market segment that both of these plans seem to be aiming for are people who are fairly young, active, technologically savvy and very healthy….
Assuming a hypothetical individual could be covered by both insurers for the same treatment, Centene is paying significantly less per service than Harken because Centene’s basing its provider contracts on Medicaid rates instead of commercial or Medicare rates.
Centene and other Medicaid like Exchange providers are targeting roughly the same type of population but since they are much cheaper post subsidy, they are probably getting a far larger population to amortize their fixed costs over plus any service that they do need to pay for, they are paying for at a lower rate.
From here, I am having a hard time seeing how plans that have a “lifestyle” component can compete against Medicaid like Exchange providers. Maybe it is different off-Exchange where everyone is paying full premium and “cheapness” is not a strong selling point.
I’ve been skeptical about Oscar as I can’t figure out their business model besides build a cool app and then profit???
Ohhh… no one has ever thought about medical management and early chronic care intervention. My cube wall mate spends 90% of her time working on our algorithms to identify members who are likely to be expensive before they become expensive so that we can intervene. …
Oscar is trying to go narrow network or quasi-TPA support for health systems that want to run a home host insurance product that should allow them to control costs. But those strategies are common. That is what I spent most of 2013 working on building hyper narrow networks for both Exchange and Commercial ESI. That is what my 11:30 meeting tomorrow is about.
And August from Bloomberg:
Oscar, which pitches itself as a tech-savvy alternative to traditional health insurers, plans to end sales of Affordable Care Act plans in Dallas, a market it entered this year, and New Jersey. It’s part of a more conservative approach by the New York-based company as it plans to introduce insurance products for businesses next year….
The company said it’s quitting New Jersey mainly because its network of doctors, hospitals and other health providers isn’t a “narrow network” — a relatively closed, but lower cost, group of providers that many in the industry see as a way to keep expenses down….
In the interview, Schlosser said the company’s new plans focus more on Oscar’s strengths, particularly narrow networks. Along with lower costs, using more narrow networks gives the company a larger role in coordinating the care of its customers…
By the end of next year, Oscar wants to begin offering health plans for larger employers, Schlosser said.
I have not been able to figure out Oscar’s business model. It was always a flashy app/front end with loads of good marketing and Venture Capital buzzword bingo, handwaving about disrupting the marketplace and then PROFIT!!!
The little bit about Oscar trying to go to the large group market segment is interesting as in some ways that is the easiest segment to operate. Bills get paid on time, there is no risk adjustment payment flows to worry about and the population is comparatively health with comparatively low variance. It is also a segment that is most inclined to want big networks and is the least price sensitive. It is a hard market to get into but a fairly easy market to set up the plumbing for.
But as the reality that being an insurer is HARD sinks in, let us all have a moment of silence for all of the now laid off underpants gnomes who have nothing to do between deploying cool frontward facing tech and PROFIT. They have a rough life so let us appreciate those gnomes.