Can Oscar Revamp Health Insurance Markets?
There’s no shortage of presidential relations who leveraged their relationships to make a few bucks. Billy Carter hawked an eponymous beer and got a check from the Libyan government for ill-defined consulting services. Neil Bush joined the board of an Asian semiconductor company managed by the son of a former president of the People’s Republic of China despite having no expertise in the business. Beau Biden, of course, became a member of the board of a Ukrainian natural gas company with a similar lack of knowledge of the business.
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The Growth Of Oscar Health
Given this dubious record of cronyism, presidential family brother-in-law Joshua Kushner deserves credit for eschewing any political favors for his health insurance startup Oscar Health Inc (NYSE:OSCR) during the Trump Administration. Joshua began the company in 2012, well before anyone could conceive of Jared Kushner working in the White House; Joshua and Jared were co-owners of the holding company that started Oscar, although Jared stepped down before joining the White House.
Regrettably, however, the enterprise that is Oscar Health may ultimately prove to be as ephemeral as those businesses started by presidential siblings and offspring.
Since its founding in 2012, the company Oscar Health has grown to offer health insurance plans in 21 states, with its revenue just over $500 million in 2020. However, its ride has gotten a little bumpy of late. The company has yet to post a profit and its stock price since its initial public offering earlier this year has fallen one-third, from a peak of nearly $37 to the very $20’s in less than two months. Most established insurers experienced sizable price appreciation over the same period.
Part of Oscar’s troubles have to do with trying to break into a mature market with numerous deep-pocketed competition. Its business model calls for bringing a consumer-centric focus, replete with an easy-to-use app that allows customers to easily book appointments, to the market, which the incumbents have yet to attempt in any serious way.
Enrollees Are Not Happy
While it is ahead on the tech front, it has apparently struggled keeping its enrollees happy. According to three websites where customer reviews can be accessed by the general public, Oscar Health does not seem to be the industry disruptor that its founders envisioned when they started the company. The Better Business Bureau lists 26 negative reviews compared to two positive ones, while USInsuranceAgents.com lists 18 negative reviews compared to nine positive ones.
It will be tough sledding for Oscar Health to truly disrupt the market or even keep growing if its digital innovations don’t appear to drastically improve the customer experience over its competitors.
Oscar is trying to leverage the state marketplaces created by the Affordable Care Act, as well as the Medicare Advantage space in Florida. While these moves are sensible, others are trying to do likewise, which has increased the competition. A recent Kaiser Family Foundation report noted that the number of health insurance carriers has increased markedly in Florida, California and Texas, which are Oscar Health’s three biggest markets.
Additionally, some of Oscar Health’s competitors possess the ability to exploit economies of scale and other efficiencies from vertical integration between insurers and physicians/hospitals that are unavailable to Oscar.
Ferris Bueller once observed that life moves pretty fast. So far, Joshua Kushner has managed to keep up. His other business ventures have been successful so Oscar may yet work out: Thrive Capital’s investment in Instagram was a stroke of genius, and his firm Cadre seems to be doing well also.
But the health insurance market is unlike a social media startup, and Oscar’s investments have yet to evince any scalability. This may be a more difficult nut to crack.
About the Author
Hassan Tyler is a former legislative assistant to Senator Joe Lieberman
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