It's easy to see why health insurance is one of the industries most in need of disruption. It's also easy to see why most entrepreneurs would be crazy to try it. But Mario Schlosser and Joshua Kushner, the co-founders of Oscar Health, seem to be having some success at it.
The most recent proof point: a new $165 million funding round, led by Founders Fund. Other investors included 8VC, Verily Life Sciences, Fidelity, General Catalyst, Capital G, Khosla Ventures, and Thrive Capital. The investment values Oscar at $3.2 billion and brings its total amount raised to $892.5 million.
Schlosser and Kushner got the idea to start a health insurer while sitting in a coffee shop in New York in 2012. Schlosser, once a visiting scholar at Stanford University, had recently been asked by investors to leave the gaming company he'd founded. He was thinking he was ready to pull back a bit.
But Kushner's idea to start a health insurance company resonated with him, partly because Schlosser's sister, back in Germany, was a pediatric nurse working in an intensive care unit. Plus, Schlosser's wife was pregnant, and he was getting a new appreciation for how difficult the U.S. system of healthcare could be. He knew there had to be a better way. Most insurers weren't seriously targeting the individual market, but the Affordable Care Act would require individuals to buy insurance. "Overnight, in downstate New York, about one million people would come into the market who didn't have insurance before," Schlosser said during an event held at Bloomberg headquarters in January. (Kushner's brother's father-in-law, President Donald Trump, is now trying to dismantle the Affordable Care Act.)
Schlosser and Kushner believed that clever use of technology could drive higher engagement between a health insurer and its customers. That engagement would allow the insurer to better steer the patient in their care--reminding them to get a prescription filled, for example, or to schedule a follow-up appointment after a surgery--which would lead to both efficiencies and improved care. Oscar now uses what it calls "narrow networks" of hand-picked physicians to deliver the majority of care to its customers.
Oscar says in a blog post that it achieved a so-called underwriting profit--it collected more in premiums than it spent on patient care--in 2017. This year, it's projecting $1 billion in revenue and about 260,000 members. It's also partnered with well-known healthcare institutions, such as Cleveland Clinic and Humana, to offer co-branded insurance. "You won't get these [narrow] network designs without the member engagements," said Schlosser at the Bloomberg event. "You won't get the member engagements without the technology. That's the trifecta that we have."