Mario Schlosser is used to giving tours of his company’s headquarters, and he’s used to the visitors’ reaction to it.
“Everyone who’s familiar with the world of health insurance says this has a totally different feel to it,” says the 39-year-old founder and CEO of Oscar Health.
The New York City office is located in the iconic 19th-century red brick Puck Building in Manhattan’s trendy Nolita district. In a large, breezy loft with white walls, red ceiling pipes, yellow cafeteria chairs and a few ping pong tables sprinkled around, employees wearing large headphones work on slick, silver laptops.
Oscar calls itself a health insurance company, but it is really a technology start-up. Founded in 2012, Oscar has stirred up the individual and the small group market, trying to redefine what health insurance looks like in the 21st century. The result is an insurer that works largely online and is as easy to navigate as an instant messaging or music streaming service.
“At Oscar, we want to make health insurance a good experience for the consumers,” says Schlosser, a German-born data scientist with degrees from Stanford and Harvard.
Also, while many health insurers stopped selling individual policies on several state exchanges because of the uncertain path of the Affordable Care Act, Oscar has taken a bet on the future of the embattled health care law, informally known as Obamacare. In 2018, the start-up plans to expand its existing footprint in New York, California and Texas; re-enter New Jersey, which Oscar left this year; partner with the renowned Cleveland Clinic in Ohio; and join forces with Humana health insurance to sell plans in Nashville.
Individual policies, the bulk of what Oscar sells, are marketed on exchanges in those states.
“And we’re gearing up for more in 2019,” says Schlosser.
While he declined to comment in detail about future expansion plans, he confirmed that Atlanta is on Oscar’s radar.
“We even had some early conversations with health systems and physician groups in Atlanta,” he says. “Atlanta is certainly on our short list.”
Georgia’s capital is a large, rapidly growing metropolitan area with a strong tech sector, a thriving business climate for start-ups, and plenty of young and creative talent — in short, a hot urban market.
“No question, Atlanta would seem like a market that’s well suited for Oscar,” says David Howard, a health economist at Emory University’s Rollins School of Public Health.
But Oscar is not the first to try and capitalize on Atlanta’s demographic and industry trends, Howard adds. Harken Health, a start-up launched by insurance giant United Healthcare, developed a concept combining health insurance and primary care. After only one year in business, Harken exited Atlanta and Chicago, its other urban market. It ceased operations altogether this year because it simply couldn’t convince enough consumers to sign up.
A Kushner, not a Trump
The story of Oscar may go differently, though, partly because the firm is under a unique spotlight due to its founder’s “ties” to the Trump administration.
Oscar’s co-founder is Josh Kushner, who is a supporter of Democratic causes but also the younger brother of Jared Kushner, son-in-law and adviser to Republican President Donald Trump. His venture capital firm, Thrive Capital, raised most of the $720 million invested in Oscar so far, and is determined to raise more. Oscar is named for Kushner’s great-grandfather, who was born in eastern Europe.
Josh Kushner met Schlosser while studying at Harvard Business School. The friends were determined to create a health insurance company based on innovative technology, with a user surface that works like a breeze – vastly different from the complicated, paper-chasing and often confusing conventional insurance products.
Oscar is still losing money, including $121.1 million in New York state last year. But its losses are shrinking. The privately held health insurer announced that in the first three months of 2017 it lost $25.8 million, compared with a loss of $48.5 million a year earlier.
Oscar is built around a smartphone app, which helps users find and compare physicians, directly schedule appointments and pay health care bills.
“You can press the ‘Talk to a Doctor’ button, and a physician will call you back within 10 minutes, to help solve smaller medical problems immediately,” Schlosser says.
The physician can simultaneously pull up the patient’s medical record and has all the relevant information at hand while speaking with the patient.
Concierge care teams — each made up of four Oscar employees, including one nurse — navigate members through the medical jungle by way of online or video chat, or even an old-fashioned phone call. They coordinate appointments with specialists or hospitals, and help patients sort through the administrative steps of care.
The majority of Oscar’s 105,000 members are young urban professionals. Fortune magazine calls Oscar a “hipster health insurance company,” a tagline that makes Schlosser’s teeth crunch a little.
“We’re not trying to make health care hipper,” he says. “We’re trying to make health care better.” Meaning leaner, cheaper, and easier to navigate.
He admits that Oscar’s hipster image has helped bring good people on board, young tech talent in particular. Many of the 500 Oscar employees have previously been with Google, Facebook, Yahoo, Spotify or Uber. Most would have never considered working for a health insurance firm, he says.
With all of the edgy, tech-savvy service elements that Oscar is trying to push, health economist Howard remains skeptical.
“Oscar has positioned itself as a consumer-friendly, easy-to-deal-with health insurer,” he says. “But what counts for the consumers at the end of the day is how much are the premiums, the co-pays and the deductibles? What does the insurance cover? And which physicians and hospitals are in the network?” He says Oscar falls short in the latter category.
While Oscar’s premiums, with an average of $400 per month, are neither the highest nor the lowest in the U.S., Oscar’s network of providers is still small.
“Any new health insurer entering the market is at a disadvantage when negotiating payment rates with hospitals and physician groups,” says Howard. “Simply because new insurers don’t have a lot of patients to bring to the table.”
It’s a scenario that seems like a Catch-22. But Oscar has tried to turn the dilemma into a virtue, Schlosser explains, by seeking “deeper relationships with fewer, more selected physician groups and hospitals.” Oscar pitches the narrow-network strategy as a “quality over quantity” approach.
The partnership with the Cleveland Clinic, which goes into effect next year, “is just the most prominent example,” Schlosser adds, “and the project where we do the most in terms of integrating technology and operations.”
The rationale behind this move could actually work, says Howard. “An insurer like Oscar would help larger health systems set up their own insurance structures, and really become more of a partner to health systems rather than a party that sits across the negotiating table.”
Another benefit for health systems would be that they could lock the insurer’s entire patient base into their hospitals and physician groups.
“If Oscar rolls out these partnerships successfully, it may have a future,” Howard says.
It’s a future that Schlosser insists is not clouded by battles in Congress over the Affordable Care Act. “The political development is, for us, largely neutral,” he says.
It’s a statement that’s not without irony, given the fact that Oscar was designed on the premise of the ACA exchanges, and that the ACA, or Obamacare, was the perfect launching pad for an insurance start-up like Oscar.
Not concerned about the politics
Schlosser never thought the ACA was going to go away in the first place. “A scenario where the administration pulls health insurance from 20 to 25 million people is very unlikely,” he says. “It would be morally reprehensible and politically not very smart.”
And indeed, after Republicans unsuccessfully tried to pass several bills to repeal and replace the ACA, a last-ditch attempt dubbed Graham-Cassidy now seems doomed also, so it looks like Obamacare will remain the law at least for the time being.
Schlosser insists that despite his Kushner connection, he doesn’t know more than anyone else about the political maneuvering around health care.
“When Josh and I meet, we don’t talk about politics,” he says.
After Trump was elected president last November, Josh Kushner was quoted in Forbes magazine telling his employees that, whatever his brother’s position, “I have no personal ties to this administration. I’m not responsible for their actions and won’t be able to get you special favors.”
Schlosser adds that Oscar’s idea of lean, web-savvy, data-driven and easy-to-use health insurance doesn’t need any secret diplomacy or string-pulling, and will work with or without the ACA.
“Of course, I’m an optimist,” he says with a smile. “After all, I’m in the insurance business.”
Katja Ridderbusch is an Atlanta-based independent journalist who contributes to German and American newspapers, magazines and public radio stations. She frequently reports about health care in the United States.