NCPA - National Center for Policy Analysis

Oscar and the Changing Health Insurance Landscape

September 30, 2015

The health insurance industry has been burdened by the complexities of the Obamacare exchanges and established providers are seeking to consolidate. Meanwhile, regulators worry that consolidation will reduce competition and choices for consumers, says senior fellow John R. Graham of the National Center for Policy Analysis.

In this environment, a new insurer has emerged, its name is Oscar. This company is an upstart which focuses exclusively on Obamacare exchanges. It has also attracted a lot of coverage in the business press both for its innovation and its highly pedigreed investors such as Google Capital.

The health insurance industry is currently in a precarious political position because, for the time being, taxpayers bear the losses health insurers suffer in Obamacare's exchanges.

In addition, because the exchanges were poorly designed, they motivate insurers to compete by offering plans attractive to healthy people but the opposite happens, they enroll sick people instead.

  • Oscar came into existence specifically to compete in the exchanges.
  • In 2014, the company's revenue was $56.9 million, of which it lost $27.6 million and appears to want to make it up on volume.
  • Currently offers plans only in New York and New Jersey but plans to expand to other states.
  • It offers many remarkable innovations on its website and yet it still has to find a path to profitability.
  • One issue it has to address is how to attract an increasing pool of healthy applicants.

Maybe Oscar simply hopes to show more established insurers how to attract individual subscribers, and sell itself to the highest bidder once the exchanges become a profitable business. However, that is not likely to happen because at the moment there is not political will to fix the exchanges.

Source: John R. Graham, "Oscar and The Changing Health Insurance Landscape," Forbes, September 23, 2015.

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