It's no easy task running any kind of startup--let alone one that operates in one of the most challenging sectors out there: Health care.

But that's exactly what Oscar, the health insurance company, has been doing since 2013. The New York-based company, co-founded by Joshua Kushner, Kevin Nazemi, and Mario Schlosser, hopes to simplify the mind-numbingly complex world of health care and insurance for consumers, using technology that sorts out care options and makes an otherwise opaque pricing process more transparent. It's also one of the first new health insurance companies in New York State in about 15 years, the founders say.

Though the sector is wracked with challenges, its message is nonetheless catching on. In the last year, Oscar's footprint has grown rapidly--expanding from New York to California, New Jersey, and Texas. It boasts 75,000 members, and with $350 million in venture capital, Oscar is now valued at $1.75 billion, landing it on this year's list of unicorns, named for companies with valuations in excess of $1 billion.

Besides Google Capital's $32 million investment in September, other Oscar investors include startup king-maker Peter Thiel and Goldman Sachs. Plus, the  young founders seem to be brimming with energy and ambition for the company. "We think we can keep up this pace of growth for some time," Schlosser says.

Oscar had its genesis in the confusing health care experiences of both Kushner and Schlosser. Kushner says he got the idea to provide consumers with more transparent health care options after receiving care for a broken ankle. Schlosser says he had a similar idea following the birth of his first child.

Their backgrounds in business and entrepreneurship also helped spur the company forward. Kushner is the founder of Thrive Capital, and co-founder of social gaming company Vostu, which he created with Schlosser in 2007.

As for Nazemi, he hails from Microsoft, where he was a marketing and global business manager. (Nazemi left Oscar in April, and Oscar had no for-the-record comment about why.)

It's launch time was also extremely well-timed: 2013 was the year the Affordable Care Act came into play, making consumers familiar with the idea of going online to state exchanges to get information about health care plans. "The ACA was a huge catalyst for us to come to market," Schlosser says.

At the same time, the company's appeal to Millennials and other modern users of health care has set it apart. Among its benefits are a fast online signup process that produces quick premium quotes, and automated services that allow customers to search symptoms and find local health care providers. Users can also access cost estimates before consumers go for appointments. In addition to free email access to physicians 24 hours a day, it offers consultations via telephone, no-cost generic prescription medication, and free wearable fitness devices.

"Oscar's message is around the need for health care access and information to be different and more comprehensible and easier for consumers," says Constance Sjoquist, a research director at Gartner who specializes in health care, but who does not study Oscar specifically. Sjoquist adds that the company has very smartly used technology to pull together items that had all existed before in the old world of health care, but not in one place. That includes consumer information on pricing, wellness programs, and various methods for accessing health care professionals and medical information, Sjoquist says.

Venture capitalists like John Backus, managing partner of New Atlantic Ventures, also give Oscar favorable marks--particularly as the health care industry has been slow to adapt to consumer needs, he says. 

"The whole area is ripe for innovation," Backus says. "Being presented with real time options at the point you have a [medical] problem is a huge change in the industry."

That's not to say that Oscar hasn't had its share of growing pains. 

Oscar reportedly had a $41.5 million loss through the first three quarters of 2015, on revenue of $85 million. (The company lists $117.2 million in hospital fees for the same time period, about double those for the full year 2014.) That compares with losses of $27.5 million in 2014.

"The individual marketplace is one where it would take few years before the exact level of medical risk and pricing needs can be determined," Schlosser says, by way of explanation.

In the meantime, it also has a growing list of competitors including other startups and large health insurance companies. The latter are intent on keeping their market share, understandably. They also see the Oscar model as one they can duplicate, says Sjoquist. (By way of comparison, the newly combined Cigna and Anthem has a reported 52 million members.)

But Schlosser says the company is prepared for its competitors, and it's positioned to grow and thrive.

"It was a huge bet a few years ago, and it was not clear if people would buy individual insurance plans, and whether we could elevate the experience of insurance," Schlosser says. "We have proven out that model now."

Published on: Dec 28, 2015