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Case Code: ITSY099
Case Length: 14 Pages
Period: 2016-2018
Pub Date: 2020
Teaching Note: Available
Organization : Oscar Health
Industry :-
Countries : United States
Themes: Technology in Health Insurance/IT in Healthcare/Disruption/Health insurance
Case Studies  
Business Strategy
Human Resource Management
IT and Systems
Leadership & Entrepreneurship

Oscar Health`s Narrow Network: Disrupting Health Insurance

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What made Oscar different from other insurance companies was its customer-centric business model. The company began to evolve a business model that could satisfy members after every interaction. While most big insurance companies focused on employers who paid the bills, and providers, who charged for their services, Oscar started directly dealing with customers. Traditional insurance companies “don’t think about the customer relationship,” said Schlosser. When Edward Segel (Segel) joined Oscar in 2013 as Head of Product, his team made an effort to make health insurance effective and effortless for the customers. ..
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Oscar’s journey was not a smooth one during the initial period of its operation. A series of financial losses strained the company. The company went through difficult times for the first two years (2015 and 2016), reporting disappointing financials. In 2015, the company lost US$115 million and it left ACA markets in New Jersey and reduced its presence in Dallas in 2016. (Oscar returned to New Jersey later, in 2018). The company lost a lot of money in some areas, like Dallas and New Jersey, where regulatory conditions made insurance coverage particularly expensive. “It’s a combination of some things we could’ve done better, and some things we [couldn’t help],” said Schlosser. ..


After the consecutive losses made by the company, Schlosser realized that they would have to come up with some solution to reduce costs. Oscar’s contracting director, Mike Kopko, and his team planned meetings with hospitals and clinics to build their own network and to get rid of the 30% surcharge for renting an out-of-network provider. But they faced difficulties in this as health providers, consolidated over the years, held all the power to set treatment prices. New insurers had no option but to take whatever they could get...


Since its founding, Oscar had raised more than US$800 million from venture capitalists, estimating its valuation at US$3.2 billion in 2018, compared to US$2.7 billion in 2016 and US$1.5 billion in 2015. With this valuation, Oscar looked extremely expensive on a price-to-sales basis (valuation divided by annual revenue),..


While Oscar boasted of a consumer-facing plan with an emphasis on technology and virtual care, it struggled with high administrative costs. The higher expenses it incurred on creating a seamless experience on the provider end faced problems due to increased administrative cost burdens. ..


In spite of the political turbulence, Oscar remained focused on its long-term vision for a simpler, easier, and more affordable healthcare system. “This kind of relentless focus on building what consumers want means that Oscar can withstand and adapt to new environments – both as we scale deeper into the individual market and begin to grow beyond it. […],” Schlosser said. Kushner was optimistic about the company’s future when he said that while Obamacare offered a great opportunity..


Exhibit I: 2018 CNBC Disruptor 50 Companies
Exhibit II: Patient Protection and Affordable Care Act
Exhibit III: Healthcare Costs of Oscar vs. UnitedHealthcare in 2015
Exhibit IV: Oscar’s Medical Loss Ratio vs. Its Peers in 2017
Exhibit V: Price/Sales Multiples: Oscar More Expensive (in USD billions)
Exhibit VI: Largest Insurtech Deals made Worldwide in 2016, by Deal Value (In million USD)