Snapshot

The health insurance sector is increasingly adopting technology-driven solutions to enhance customer experience and operational efficiency. Oscar Health has positioned itself at the forefront of this transformation by establishing itself as the first health insurance company built around a comprehensive technology platform focused intensely on member experience.

Oscar’s target customers span a wide demographic, including families needing versatile coverage, adults with chronic conditions who maintain regular contact with their care providers, and small businesses in search of appropriate benefits packages. The company caters to the individual and small group markets under the Affordable Care Act’s defined tier categories. This approach helps meet the diverse healthcare needs of consumers in various life stages and circumstances.

Oscar Health’s approach is not just about providing insurance; it’s about creating a supportive ecosystem that fosters better health outcomes. The company uses its own cloud-native technology platform to support its insurance business and empower healthcare providers and payors through its +Oscar service offerings. This tech-first strategy enables the company to adapt swiftly to changing regulations and market conditions, ensuring they deliver high-value services efficiently.

Currently, Oscar Health is in a strong growth phase; with over 1.3 million members now utilizing its robust technology infrastructure, the company continues to focus on scaling its operations. Oscar’s strategy centers on enhancing user experiences, applying its technology across the healthcare system, and consistently introducing new products to the market. All while aligning to broader trends in healthcare including the shift toward consumer-driven care, increased digital engagement, and personalized healthcare solutions.

Background

Established in 2012, by Harvard Business School classmates, Mario Schlosser, Joshua Kushner, and Kevin Nazemi, Oscar Health was designed to provide the type of health insurance its founders wanted for themselves, emphasizing accessibility, affordability, and quality. The company launched in 2014 in response to the Affordable Care Act’s new marketplaces and individual mandate. In its inaugural year, the company secured 16,000 members. Before long it had expanded its services to cover New York, New Jersey, California, Texas, Arizona, and Ohio

By 2016, membership had grown to 145,000 at which time Oscar set up a concierge team to enhance its member services. A year later, the company further diversified its offerings by entering the small group insurance market in New York, along with Nashville through a partnership with Humana. Expansion into new segments continued in 2020, as Oscar launched health insurance plans for small businesses in partnership with Cigna.

In 2021, Oscar Health went public, raising $1.2 billion, as the company’s growth continued. Over the years, Oscar has made ongoing adjustments to its market strategies and operations entering and exiting jurisdictions where appropriate, as it manages its now one million-strong member base.

Leadership

Mark T. Bertolini took over as chief executive officer in 2023 from co-founder Mario Schlosser who transitioned to chief technology officer. As former Chairman and CEO of Aetna Inc., Bertolini led the company’s transition from a traditional health insurance company to a consumer-oriented health care company focused on delivering holistic, integrated care in local communities. Before joining Aetna, Bertolini held executive positions at Cigna, NYLCare Health Plans, and SelectCare Inc., and he was formerly CEO of Bridgewater Associates, one of the world’s largest and most successful hedge funds.

As CEO, Mario Schlosser led Oscar from inception to serving over one million members across its health plans. Now as CTO, he leads product and engineering, improving the company’s technology platform for the future and continuing to set the strategy for the +Oscar product line. Before Oscar, Schlosser also co-founded the largest social gaming company in Latin America, where he led the company’s analytics and game design practices. Prior to that, he was a Senior Investment Associate at Bridgewater Associates and worked as a consultant for McKinsey & Company in Europe, the U.S., and Brazil.

Customer

Oscar Health has differentiated itself in the health insurance market through a strong emphasis on technology and member experience. The company’s offerings are specifically designed to make healthcare more accessible and affordable, leveraging a robust technology platform to enhance service delivery.

Oscar’s product range includes individual and small-group health plans, which are available through both exchange and off-exchange channels. These plans are categorized under the Affordable Care Act’s metal tiers: Catastrophic, Bronze, Silver, Gold, and Platinum. Each category is defined by different levels of coverage and cost-sharing between Oscar and its members, allowing consumers to choose plans that best fit their healthcare needs and financial circumstances. The company targets a diverse customer base, from individuals and families to small businesses, ensuring that each demographic finds a suitable health insurance solution.

The individual market primarily serves people purchasing insurance independently rather than through an employer. These customers often include self-employed individuals, freelancers, and those without access to employer-sponsored insurance. On the other hand, the small group market caters to small businesses seeking to provide health benefits to their employees, covering firms with up to 50 full-time employees in most states, and up to 100 in other states.

In addition to traditional health insurance, Oscar has extended its reach with the +Oscar platform, which serves both providers and payors. This platform features the Campaign Builder, an engagement and recommendation engine that leverages data analytics to enhance care management and patient engagement. The technology underpinning +Oscar enables the delivery of personalized interactions and real-time insights, benefiting approximately 500,000 client lives.

Oscar’s network includes a selection of high-quality providers, ensuring that members have access to effective and affordable care. These strategic partnerships with recognized health systems further enhance the quality of care available to members.

Through its sophisticated use of technology, Oscar Health not only streamlines interactions within the healthcare system but also gains insights into individual health needs, allowing for better cost management and improved health outcomes. This technology-driven approach results in high levels of member engagement and satisfaction.

Thematic

Oscar Health is primed for further expansion as it actively pursues several strategic priorities that aim to combine growth initiatives, operational efficiencies, and a commitment to enhancing user experiences and healthcare outcomes.

Technological advancement remains at the core of this strategy. The company has developed a proprietary, cloud-native technology platform that spans all critical domains of healthcare insurance operations, including claims and utilization management. This technology empowers members to make informed healthcare decisions and allows Oscar to effectively manage healthcare costs.

To date, automation initiatives, such as enhanced IVR systems and AI-powered secure messaging, have improved member services and efficiency during open enrollment. While new AI features and capabilities are continually being integrated into the platform to enhance user engagement and operational efficiency.

Through initiatives like Pharmacy Benefit Manager savings and enhanced payment integrity efforts, Oscar is improving its Medical Loss Ratio, which measures the percentage of premium revenues spent on medical claims and activities to improve healthcare quality. With disciplined pricing strategies and comprehensive care cost management, further improvements are anticipated, underlining the company’s desire to enhance profitability.

Oscar achieved a major milestone by reaching insurance-company EBITDA profitability in 2023. Building on this foundation, it is now targeting total-company EBITDA profitability in 2024. Consequently, the company is seeking to leverage and enhance its technology offerings, particularly through the +Oscar platform, to increase its market capabilities. New products are being added such as tailored chronic illnesses, while to address a growing Spanish-speaking member base the company now offers a specialized experience for Spanish-speaking members.

Looking ahead, Oscar sees Affordable Care Act (ACA) markets as the fastest-growing segment, with over 21 million individuals enrolled through exchanges as a significant opportunity. However, there is also a focus on expanding beyond ACA markets to include a broader customer base such as employers and employees.

Financials

Oscar Health has delivered a solid upward trajectory as the company’s revenue has surged from $456.2 million to $5.7 billion over the past four years following triple and double-digit year-over-year revenue growth.

In 2023, premiums earned increased by 47% year-over-year to $5.7 billion, primarily driven by the impact of deposit accounting for quota share reinsurance agreements and a decrease in risk transfer per member as a percentage of premiums.

Oscar’s insurance operations saw significant improvements in 2023 as a result of targeted rate increases and disciplined pricing strategies along with total cost of care initiatives. Additionally, lower distribution expenses and higher net premiums due to reduced risk transfer per member also saw adjusted EBITDA losses significantly narrowed by $417 million year-over-year to just $45 million. Net losses also showed a considerable improvement, decreasing by $339 million to $271 million.

The strong performance has continued into the first quarter of 2024 as total revenue hit $2.1 billion, up 46% year-over-year, driven primarily by higher membership, rate increases, and lower risk adjustment as a percentage of premiums. Adjusted EBITDA of $219.3 million significantly improved by $168.2 million year-over-year. While net income of $177.4 million also drastically improved by $217.1 million year-over-year.

Looking ahead, management anticipates total revenue for FY24 to be in the range of $8.3 billion to $8.4 billion, in line with consensus estimates, and continuing strong year-over-year growth of almost 43%. Moreover, total company adjusted EBITDA is expected to be between $125 million and $175 million. Analysts are also expecting full-year earnings per share to record a loss of $0.16 for FY24, representing an 86% improvement from the $1.22 loss in FY23.

Risks/Competition

The highly competitive health insurance market is marked by frequent regulatory changes, technological advancements, and shifts in consumer expectations. It is also shaped by ongoing industry consolidations and strategic alliances, and a constant evolution in medical care capabilities.

Competitors in Oscar’s market vary significantly by region and the specific segments they serve. In the small group market, Oscar primarily competes with national carriers and local Blue Cross plans. In the individual market, its main competitors are other national and regional carriers, Medicaid-focused insurers offering products through the Health Insurance Marketplace, and local Blue Cross plans.

However, Oscar differentiates itself by forming strategic alliances with high-quality healthcare systems rather than contracting with all available systems and providers in a given area. This approach enables the company to integrate more closely with providers using its technology, often securing more favorable reimbursement rates and fostering higher quality care. Consequently, it maintains a strong advantage due to the diversity and pricing of its health plan offerings, the extent and quality of its provider network, and coverage comprehensiveness.

Conclusion

With a clear trajectory towards profitability and sustained growth, coupled with strategic expansion into new markets and continuous innovation in health tech, Oscar Health presents a compelling thematic that aligns with broader trends toward digitalization and personalized healthcare solutions.

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