Oscar – New Face of Healthcare Insurance?

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Almost a year back, The Economist covered an article on Oscar, a health insurance start-up which recently secured $145 M in venture funding. Below is the snippet of how the article started:

MOST Americans view health insurers only slightly more favourably than they do thieves. But a new insurance company, Oscar, wants to be an ally. “We didn’t start this company because we love health insurance,” explains an advertisement on the New York subway. “Quite the opposite, in fact.”

It’s no secret that healthcare insurance has been an extremely complicated, opaque and not a very consumer savvy business. A quick look at Oscar’s website changes that perception, even if it is for a short while.Browsing the website almost feels as if you are not shopping for insurance but for an uber-cool hi-tech gadget. Free televisits, free generic drugs, rewarding healthy behavior are some of the other unique ways the company is differentiating itself in the market.

While things do seem attractive, Oscar has its share of hiccups. In a more recent article by Fortune, the company’s founder opines on the harder aspects of disrupting a highly regulated and complex industry:

Oscar’s growth has not been without its growing pains, a term that startups use to describe the messes they make while disrupting. Over the summer, an Oscar user complained to the press about pricey bills for care that was supposed to be covered. That sort of thing happens often with regular insurance companies, but Oscar’s entire proposition is that it offers a no-surprise experience. In its colourful subway ads, the company promises to deliver “Health insurance that won’t make your head explode.” (The twee punch line: “And if it does, you’re covered.”) Oops.

Schlosser admits Oscar failed to properly communicate how deductibles and healthcare plans work to its members. “The healthcare system is astoundingly complex,” he says. Oscar customers can avoid unexpected payments by keeping in close contact with the company while receiving care. “There are uncontrollable traps in the healthcare system,” he says. “The complexity of this system is astounding and the immediate thing we can do to make sure none of this happens is have you come through us.”

Disrupting ain’t easy—especially disrupting something as highly regulated, complex, and sensitive as the safety net for people’s health. After 18 months in business, Schlosser says he’s less surprised by the complexity of insurance policies than he is of the unethical pricing practices from conventional health care providers. In any other industry, the billing tricks used by care providers would be “obviously fraud,” he says. Price inflation worked when health care costs were covered by employers with little visibility into the costs; now that more individuals are buying their own healthcare through the Affordable Care Act, Schlosser says there is “a total disregard that the member has cost-sharing there.” He adds: “That audacity is totally shocking and mind-blowing.”

In an industry that has long focused only on maximizing revenues and profitability, it’s great to note that the new player has the end customers as their top priority.Currently valued at $1.5 Billion, the less than two year old start-up has a customer base of 40,000. Compared to insurance giants such as UnitedHealthcare, BlueCross BlueShield, Aetna that looks like a minuscule amount. But it would be definitely worth following how Oscar scales and maintains customer-centricity, the aspect that is sorely missing in the incumbents.

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