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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US Healthcare : What can it learn from the rest of the world

A few days ago I was chatting with a friend in Ohio, who happened to tell me about her colleague’s unfortunate road accident last September. My friend was having trouble with coming to terms with the financial consequences her colleague had to face due to medical bills post his treatment. The accident not only physically crippled him for the rest of his life but also left him in massive debt. His family had to eventually file for bankruptcy.

Millions of insured and uninsured Americans face medical bankruptcy each year. The issue is so serious that every 3 out of 5 bankruptcies filed in the US are due to medical bills. In addition, the US is the only developed country where cost of care can leave patients bankrupt.

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Source: The Commonwealth Fund

According to a recent survey conducted by The Commonwealth Fund, health care in the US ranks last among 11 other developed countries considered in the study. It lags behind most countries on parameters such as Quality Care, Access, Efficiency and Healthy Lives. Moreover, the expenditures in America are more than double the average of rest of the nations. This brings us to question what the US can learn from the best in the field. What are these countries doing right that enable them to achieve stellar results in quality and access while at the same time keeping the costs under control?

One of the key difference in between the US and rest of the nations included in the study is that all other countries have universal healthcare system. Intuitively, such a system might be considered wrought with long waits, delayed treatments and basic lack of compassion.  But the truth is far from it.  It has been proved time and again that universal healthcare achieves better results in quality and at lower costs compared to other systems. For instance, the NHS in the UK is one of the best examples of how universal healthcare system achieves healthcare goals of a nation within reasonable costs.

Furthermore, the hospital charges in the US are unregulated and far exceed the rest of the nations.  In countries like Switzerland, the government ranks hospitals from most to least expensive which then serve as a benchmark for hospitals and insurers on how much to charge for their services.

Data also suggests that there is a trend of over-testing and over-treating patients in the US compared to other industrialized nations. For example in UK, the Diagnostic Advisory Committee that has put in place guidelines to put in-check such practices.

Although there is no one nation that has perfected all aspects of healthcare delivery, it always makes sense to adopt certain models and features that have withstood the test of time. This is true especially when one is way off the mark from rest of the players in the field.