Posted on Monday, Jun 13th 2016
According to the US Department of Health & Human Services, about 10.2 million people are covered through the Health Insurance Marketplace under the Affordable Care Act. The Affordable Care Act has led to the mushrooming of several startups using technology in sectors related to healthcare. Oscar is one such startup that has made it to the Billion Dollar Unicorn Club.
New York-based Oscar is a health insurance company founded in 2013 by Joshua Kushner, Kevin Nazemi, and Mario Schlosser. It sells health plans to consumers through exchanges set up under the health law. For about $5,000 a year, members can access unlimited telemedicine, under which they call a service and receive a call back from a doctor licensed in their state. Most plans include free doctor visits and generic drugs and adult members get a free fitness tracker.
The idea for Oscar was born after Kushner and Schlosser had a brush-in with health care and felt that there was a need to provide a simple tech interface that would provide consumers with more transparent health care options. Around that time the Affordable Care Act also came into effect and helped the company take off.
Today, Oscar has expanded to California, New Jersey, and Texas and has 145,000 customers. It claims that its system connects doctors and patients faster than other insurance companies and its consumer-facing mobile app, website, and bills are easier to use and understand. At the back end, data from health visits helps refine the physician search.
Oscar is venture funded and has raised $727 million from investors including Fidelity Investments, BoxGroup, Breyer Capital, Formation 8 Partners, Brian Singerman, Google Capital, General Catalyst, Founders Fund, Lakestar, Khosla Ventures, Goldman Sachs, and Peter Thiel. Its latest round of funding was held in February 2016 when it raised $400 million at a valuation of $2.7 billion. An earlier round of founding in September 2015 had valued them at $1.75 billion.
Oscar is estimated to have revenue of about $750 million in 2015. However, it is still in the growing stage with huge operating costs and medical bills and with no profits in sight. In 2015, Oscar lost $120 million compared with losses of $27.5 million in 2014. It expects to expand into three or four new states per year, with each expansion setting it back by $20 million.
Initially, Oscar had to pay very high fees for access to the health networks of companies such as Magnacare in New York. With the expiry of these expensive contracts, it expects its costs to come down. Oscar is also pairing up with integrated provider networks such as Tenet Health in Texas and Providence in California to build cheaper platforms.
However, there is increasing competition from other startups as well as large health insurance companies. UnitedHealth Group Inc. has about 42.3 million customers nationwide, Anthem has 38.6 million, and The Blue Cross Association covers about 105 million Americans. Oscar has a long way to go.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
This segment is a part in the series : Billion Dollar Unicorns
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