- The health-insurance startup Oscar Health just came out with its full-year results for 2018.
- According to state insurance filings reviewed by Business Insider, Oscar lost $57 million in 2018, an improvement from a loss of $131 million in 2017.
- Oscar said it posted gross premium revenue of $1.2 billion.
- Oscar told Business Insider that about 257,000 people enrolled in its plans across nine states for 2019, up from the 239,000 it signed up for 2018.
- Oscar’s results are improving, and the startup is pursuing a new strategy to keep growing.
Oscar Health has officially cracked $1 billion in premium revenue.
The health insurance startup mainly sells insurance on the individual exchanges set up by the Affordable Care Act, and took in $1.2 billion in gross premium revenue in 2018. Oscar’s financial losses narrowed to $57 million, from $131 million in 2017, according to state financial filings.
Yet Oscar is facing slow growth, a big problem for a startup valued at $3.2 billion. The company nearly doubled its footprint for 2019, expanding into six new markets. Membership, though, increased by just 18,000 between 2018 and 2019, to a total of 257,000 people. That’s thanks in part to tough competition in some of the company’s new markets: Oscar signed up just 2,000 people in Arizona and 1,000 in Michigan in the individual market.
Prepping for the Medicare Advantage market
The financials and enrollment figures make it clear why Oscar is expanding its reach into a lucrative new market: Medicare Advantage. The Affordable Care Act’s exchanges have been challenging for health insurers, with a number leaving the business altogether. In the ACA, which is often called Obamacare, enrollees tend to buy cheaper plans, making it difficult for companies like Oscar to offer more expensive options.
In 2020, Oscar will start offering private health-insurance plans to seniors, which are known as Medicare Advantage plans. The company hasn’t yet said where it will sell those plans.
It’s an area startups and big insurers alike have been flocking to. For instance, Devoted Health launched its first plans in 2019 in Florida after raising more than $300 million from investors. Clover Health, a startup founded in 2014, now offers Medicare Advantage plans in seven states. The startups are competing with big, entrenched insurers like Humana, UnitedHealth Group, and CVS Health.
Oscar in August 2018 raised $375 million from Google’s parent company Alphabet, and said it would use the funds to bring its tech-backed health insurance plans to more people, including in Medicare Advantage. In total, the company has now raised more than $1 billion.
Oscar’s new chief financial officer, Sid Sankaran, said expanding into Medicare Advantage will be a focus of Oscar’s energy over 2020 and 2021.
“We know that that is a space with a lot of players, he said. “We’re thinking about how to scale and build that business.”
In 2018, Oscar offered health-insurance plans on the Obamacare marketplaces in New York, New Jersey, California, Ohio, Texas, and Tennessee. It also sells plans for small employers. For this year, the company expanded into six new markets across three states: Arizona, Michigan, and Florida.
The health insurer’s 2018 financials show its operations are improving. The company said it has managed to get medical costs under control, spending about 80.5% of the premium revenue it takes in from its members on medical care, down from about 95% the year before. That resulted in a net underwriting profit of $141 million in 2018, up from $10 million in 2017, Oscar told Business Insider.
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Those figures don’t include spending on investment the company is making in hiring new people or building out its technology, nor its marketing costs to get the word out about the plans.
Oscar’s financial results are affected by a reinsurance deal that the company entered into with the massive French insurer Axa. A portion of the premiums that Oscar collects are sent to Axa, and in return Axa agrees to share a portion of Oscar’s profits or losses.
When factoring in the money that was sent to Axa, Oscar took in about $725 million in premiums across its states in 2018, according the company’s filings.
In February, Oscar hired Sankaran, a former executive at the insurer American International Group, as its chief financial officer. Sankaran most recently served as the global insurance giant’s CFO and was chief risk officer as the company recovered from the financial crisis, when it was bailed out by the US government.
“I was raised in captivity in insurance and financial services,” Sankaran told Business Insider he likes to joke.
Sankaran officially starts March 1, but he’s been hanging out at the offices in Soho for the past month after dropping his kids off at school to get a feel for the place. He said what’s stood out to him about Oscar is the company’s focus on tech and making health insurance and medical care easier for members to access, particularly through programs like telemedicine.
Sankaran has a saying: “In insurance, you can trade off three things: profitability, growth, risk.” His goal at Oscar is to balance those three things to create a long term company. And given his experience at a larger company like AIG, his plan is to use his expertise to help scale Oscar.
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