New player in California’s health insurance marketplace carving out young, tech-savvy niche

Among the new entrants to the Covered California health insurance marketplace is an East Coast insurer called Oscar, a company that seeks to distinguish itself with its tech-savvy approach to health care. Oscar, which currently sells policies in New York and New Jersey, is poised to expand west by offering health plans in Orange County and parts of Los Angeles County.

The company made a splash when it launched on the East Coast. A 2014 New York Times profile explored the company’s distinct approach, calling it “Silicon Alley’s challenge to the staid business of health insurance.” Oscar, reporter Julie Creswell wrote, “has the new-era tech pedigree to become the Spotify, Airbnb or Uber of health insurance.”

To better understand what makes Oscar distinctive, Reporting on Health interviewed Cynthia Burghard, a research director for IDC Health Insights, who has decades of expertise in health care delivery and insurance.

As health care is striving to be more convenient — a trend evident in the urgent care center boom — Oscar is marketing itself to consumers who want quick and convenient health care services, she said.

“The whole notion of convenience and being able to interact with a health insurance company as easily as you can place an order on Amazon is very appealing,” Burghard said. “That’s appealing in general, but particularly on the two coasts where there’s a high level of expectation and demand.”

Oscar prides itself on its user-friendly interface, where patients can shop for a doctor online or see a timeline of their recent visits, prescriptions or lab work. There’s also a free fitness tracker that offers financial incentives for customers who meet their daily goals – up to $240 a year, according to the Oscar web site.

The most distinguishing feature of the new company, though, is the level of physician responsiveness. Oscar customers can hit a button on a mobile app to request a call from a board-certified doctor. Shortly thereafter, they receive a call from a physician, who can call in a necessary prescription or otherwise advise the patient. As this USA Today article explains, some symptoms can be quickly diagnosed with a doctor’s call, “resulting not in costly ER visits but quick trips to the pharmacy.”

Oscar's tech-heavy message, including its personalized search engine for members and mobile-friendly services, made the insurer attractive, a Covered California, spokeswoman told California Healthline. But, as reporter Dan Diamond wrote, “Although Oscar CEO Mario Schlosser says the insurer has a "unique set of features for its customers, including 24/7 telemedicine and incentivized health and fitness goals," other insurers already provide similar services. Anthem, for example, offers its own 24/7 telemedicine program and other insurers already have wellness services as well.”

That might be true, but it’s underestimating the power of perception, said analyst Burghard.

There is a long-standing reputation that follows “big conglomerate” companies such as Anthem, whereas clever marketing is adding to Oscar’s reputation as the more nimble, convenient start-up. And while other plans are offering services such as fitness trackers, the onus is often on the employer to be the middle man. Oscar is appealing directly to the consumer, Burghard said.

But not every individual consumer may fit Oscar’s target audience. They are clearly catering to millennials who are doing everything on their phones and can’t understand why other insurance carriers can’t simplify the process, Burghard said. That’s a smart move since that population is generally young and healthy with few chronic, expensive health conditions.

“While the millennials and those that will follow represent a good demographic for [a company] like Oscar, does it reek a little of cherry-picking and not taking on the really hard stuff — the seniors and the Medicaid patients and others?” Burghard said. “There is some notion that they’re riding high now because they’re enrolling young, tech-savvy millennials and they’re generally healthier than those of us way past that generation. How long will they be able to ride the crest of that wave?”

For now, Oscar is indeed riding high. Just 16 months after going live, the company joined “the elite group of start-ups known as unicorns, or those with billion-dollar valuations,” The New York Times Dealbook reported in April.

There’s a disconnect between Oscar’s performance, though, and that high investor valuation, reports Crain’s New York Business. The high valuation is based on expectations of future performance, not today’s losses and still relatively low enrollment figures. That divide “shows just how much the company is a product of the tech world, where venture capitalists in a frothy market are willing to pay a premium to get a piece of a promising startup,” wrote Jonathan LaMantia.

Oscar also has experienced some well-documented consumer glitches, such as misleading provider networks and copays, something Burghard attributed to underestimating the complexity of health care and how benefits are managed.

As Oscar expands westward, they’ll also have to deal with consolidation in the insurance marketplace and the law of large numbers. Large enrollee numbers help insurance behemoths manage risk while keeping premiums competitive. Oscar’s smaller size could work against them in that regard. And, while Oscar gives out fitness trackers, it doesn’t yet offer the broader capabilities around managing chronic illness or disease that larger insurers may provide.

But in an industry that can often be frustrating to consumers, Oscar’s innovative approach will likely help it court its millennial target base on both coasts, Burghard predicts.  

“I think their whole approach is refreshing: they want to be consumers’ best friend in health care,” she said. “And no one else in health care is operating that way.”

[Photo by Michele Ursino via Flickr.]