Strategy Teardown - Oscar Health

Focusing on customer experience and technology, what does the future hold for the next-gen US health insurer?
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Oscar Health insurer Upstart Oscar Strategy Teardown Patient Centric Vision CARE member
Focusing on customer experience and technology, what does the future hold for the next-gen US health insurer?
About Techcelerate Ventures

Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.
Oscar Health insurer Upstart Oscar Strategy Teardown Patient Centric Vision CARE member
2019
Oscar Strategy 
Teardown:   
How The Health Insurance  
Upstart’s Patient-Centric Vision 
Is Driving Its Expansion
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2
Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
Table of Contents
WHAT SETS OSCAR APART  
 
5
• 
CONCIERGE
• 
VIRTUAL CARE
• NARROW NETWORK
• 
CLAIMS PROCESSING 
OSCAR BY THE NUMBERS 
 
 
17
• 
ENROLLMENT
• MEDICAL LOSS RATIO
• NET UNDERWRITING PROFIT 
3
Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
Health insurance upstart Oscar has raised more than $1.25B to 
fund its goal to disrupt traditional health insurance by building a 
direct relationship with its members.
In simple terms, the company’s goal has been to put a human face 
on private health insurance. It aims to make its customers love 
health insurance — as opposed to seeing it as a necessary evil — 
and put Oscar at the center of people’s health and wellness needs, 
acting as their “healthcare guide.”
The company has weathered its share of challenges while burning 
through hundreds of millions of dollars: participation in the 
individual exchanges has been far lower than initially expected, and 
Oscar has faced an uphill battle in the small business market.
In summer 2018, news mentions of the company skyrocketed with 
the announcement of a $375M investment from Google parent 
company Alphabet. The tech giant now reportedly holds a roughly 
10% stake in Oscar.
Oscar has tried to disrupt health insurance 
with a focus on customer experience and 
technology, but has had trouble finding its 
market. As the company launches a third 
product offering in Medicare Advantage, 
we look at what its future could hold. 
4
Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
As Oscar matures, its strategy is beginning to take a new shape.
Our analysis finds Oscar is slowly managing to contain its costs, 
generating an underwriting profit in recent years by sending 
members to the lowest cost care setting, bringing key functions 
like claims processing in-house, and expanding its virtual care 
offerings. All three of these strategies will be important as Oscar 
hopes to gain success with its third product offering in Medicare 
Advantage starting in 2020.
But while Oscar is beginning to control its costs and improve  
its tech and experience, will this be enough to win out against 
existing incumbents and bring the company to profitability?  
And will its strategy of tight integration with doctors and hospitals, 
while limiting the number of in-network providers, win over  
enough consumers?
Using CB Insights data, we examine Oscar’s strategy, membership 
numbers, partnerships, and strategies for the future.
5
Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
Oscar set out with the goal of creating a patient experience that,  
in co-founder Josh Kushner’s words, is “like having a doctor in  
the family.”
This means providing access to care when needed, helping patients 
navigate the complex healthcare system, and avoiding unnecessary 
care and expenses.
OSCAR APP
Oscar’s app serves as members’ front door to the health system. 
It’s the medium through which members can interact with that 
figurative “family doctor.”  
Flush with cash, more startups than ever before are choosing to 
forgo the public market and stay private for far longer than in  
years past.
Through the app, members can access anything from 
medical records and lab reports to virtual care and physician 
recommendations. This “front door” approach differs from 
traditional insurers, who have a gained reputation as gatekeepers 
focused on limiting access to care, rather than widening it.
From the beginning, Oscar has highlighted its high-touch services, 
including telemedicine and an “Ask your concierge” feature that 
connects users with a health insurance advice team. Oscar 
dedicates a concierge team and a nurse to each individual to 
answer health questions and guide patients through the system. 
What sets Oscar apart
6
Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
When a member asks a question through the app, they receive a 
response from a member of their care team.
The company sees this high-touch model as a way of gaining a 
competitive edge, stating it routs 43% of members’ first visits to the 
doctor. This helps contain costs by keeping members in-network 
and out of costly emergency rooms.
Oscar also gives a dollar a day to members that hit step tracking 
goals, boosting its relationship while encouraging them to be 
more active. It tracks steps using an assortment of step-tracking 
wearables as well as Apple’s built-in step tracker in the iPhone and 
Google Fit on Android.
 
The tracker also gives members a reason to visit the app regularly, 
encouraging engagement and allowing Oscar to remind its 
consumers of the insurance brand, even when they’re not actively 
seeking healthcare services. Oscar claims 41% of its members are 
monthly active users of its web and mobile apps.
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Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
THE SHIFT FROM FEE-FOR-SERVICE TO VALUE-BASED 
CARE
The premise of value-based care can be boiled down to one goal: 
aligning incentives so all parties involved (patient, provider, and 
insurer) achieve the best possible outcome, delivering the best care 
at the lowest cost.
While the above goal may seem obvious, the healthcare system 
is currently set up so providers actually benefit from delivering 
unnecessary care. The fee-for-service model generates fees for 
providers based on the quantity of services they perform.
Patients, put in a situation where they only pay a fraction of the 
costs they incur to the healthcare system as a whole, also do not 
have a major incentive to reduce the quantity of care they receive, 
provided that extra care isn’t harmful. This concept is defined as 
“moral hazard” by economists, and is one of the drivers of rising 
deductibles across the insurance industry over recent years.
With a higher deductible, members have to pay more out of pocket 
before their insurance policy kicks in. The rationale is that members 
having more skin in the game will result in patients being more 
conscious of their health expenditures.
But while insurers are the ones that set out-of-pocket expenses 
to avoid “moral hazard” and disincentivize patients from receiving 
unnecessary care, they also bear the burden if a patient does not 
receive necessary care. When this happens, a patient could get 
even sicker and incur more costs for the insurer.
8
Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
CUSTOMER EXPERIENCE & CONCIERGE
Competing on scale, price, and distribution was always going to 
be difficult for Oscar, due to the sheer size of health insurance 
incumbents — but when it comes to customer experience, the 
company has seen opportunity to compete.
The health insurance industry at large is notorious for low net 
promoter scores (NPS). (NPS measures how many customers would 
recommend a product or service to friends.) Oscar, however, reports 
having an NPS that is 3x as high as the health insurance average.
To serve customers, Oscar aims to be a patient’s first touchpoint 
with the healthcare system, as opposed to an afterthought. And to 
do this, its concierge service is key.
Oscar’s concierge service works with members to offer them 
personalized value-based care.
 
Concierge grants members frictionless access to the healthcare 
system. Upon enrollment, each member is assigned a dedicated 
care team consisting of several care guides and a nurse. Each time 
a member contacts Oscar with a question regarding their care, 
someone on their care team answers. Over time, this familiarity 
9
Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
helps build trust between Oscar and its members.
Notably, Oscar’s Concierge team can guide members towards 
lower cost, higher quality care. When applicable, the team can 
direct members to nurses instead of doctors, or urgent care centers 
instead of hospitals. Surgeries at inpatient hospitals and outpatient 
surgery centers achieve comparable results, though surgeries cost 
significantly less in an outpatient setting compared to in a hospital.
In this model, care can be both lower cost and effective. According 
to CEO Mario Schlosser,
“If members of Oscar realize from the 
beginning that if they need a doctor, if 
they need help, they can come to Oscar 
first — they can go and search in the app, 
they can talk to their Concierge team, 
they can use us to make appointments, 
and we will take care of all of that. We 
will have the right data flows, the right 
tools, the right metrics, to make sure 
we hold the doctors accountable and 
make sure that whatever happens to 
you, whether it’s a small thing or a really 
big thing in your life, you’ll get the best 
possible care at the right point in time.”
10
Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
Oscar has had particular success in getting older and more 
clinically complex members to use its Concierge service. More 
than four out of five members above 55 or in the clinically complex 
category have utilized Oscar’s concierge.
11
Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
VIRTUAL CARE
Oscar’s telemedicine service also has the potential to help it cut 
down on unnecessary costs.
Oscar uses its app and Concierge services to push video 
appointments when appropriate, and its members use telemedicine 
5x more often than the national average, according to its latest 
annual report.
Using asynchronous messaging (where a message is placed in a 
queue, rather than immediately responded to), members can send 
a text or take a picture of their symptoms, and doctors can provide 
care or divert members to care. This allows a significant number of 
cases to be settled without even having to speak to a doctor. Ideally, 
this should result in patients with minor symptoms seeing fewer 
barriers to care.
For example, suppose a member wakes up with symptoms of 
pink eye. He may not want to inconvenience himself by making an 
appointment with a doctor or going to an urgent care center, instead 
opting to go to work without seeking care. While pink eye is not a 
major condition, it is highly contagious and can spread through an 
office rapidly.
But with Oscar, the member can take a picture of the condition, 
request a call with a doctor, and receive a quick diagnosis, all 
through Oscar’s app.
In addition to providing the patient with care, this system can pay 
dividends for small businesses that chooses Oscar as their insurer, 
preventing illness from spreading through the office and saving 
employees from missing mornings to deal with minor health issues.
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Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
The graphic below highlights three situations — pink eye, minor 
superficial injuries, and asthma — in which Oscar estimates it has 
leveraged telemedicine to save ~75% per episode compared to  
in-person visits.
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Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
NARROW NETWORK
A third way to cut down on costs is to ensure that members receive 
the best possible quality of care (thus avoiding repeat visits or other 
care needs). To accomplish this, Oscar has gone with the model of 
creating “narrow networks,” partnering with fewer providers in each 
area.
The benefits of a narrow network model can be seen in Walmart’s 
Centers for Excellence program. Through the program, Walmart 
pays for employees seeking certain healthcare services to travel to 
national “centers of excellence” (top medical centers like the Mayo 
Clinic, the Cleveland Clinic, Geisinger, and Johns Hopkins). This 
helps ensure care delivered is both high quality and necessary.
The results of the program have been so good to date that it 
has gone from an executive-only program, to being available to 
all employees on an opt-in basis, to a requirement for a subset 
of expensive procedures, such as joint replacements, cancer 
treatments, and transplants.
14
Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
As with Walmart’s model, Oscar builds most of its networks by 
partnering with reputable health systems in each market. For 
example, the company jointly promotes a plan with the Cleveland 
Clinic in the greater Cleveland area. Its partner networks also 
include the UCLA Health System in the Los Angeles area and Mount 
Sinai Hospital in New York.
There are additional benefits to partnering with a single provider. 
In cases where Oscar co-brands its plans, such as its partnership 
with the Cleveland Clinic, both payer (Oscar) and provider (the 
Cleveland Clinic) manage risk and are aligned with the patient to 
ensure quality and that costs are as low as possible, rather than 
maximizing fees.
In this type of arrangement, providers themselves encourage 
patients to receive care in the lowest acuity setting, because 
providers share in both the costs and savings derived from the care 
provided. Research has shown that patients have better outcomes 
and incur lower costs when their provider bears risk.
Oscar’s narrow network strategy can help it partner with high quality 
providers that might not join Oscar’s network if it were broader. 
Where Oscar may lack scale in a specific region, it can partner 
with a quality local provider with the promise that it will send most 
or all of its members to that provider — meaning that even if the 
total number of Oscar members is not massive, Oscar can still get 
quality providers at reasonable negotiated rates.
15
Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
CLAIMS PROCESSING
One function Oscar is bringing in-house is claims processing.
Most health insurers outsource large parts of their claims and 
process them in batches, and in its early days, Oscar did too. Now, 
to improve the customer experience, Oscar has begun to handle 
claims in real time.
Oscar CEO Mario Schlosser spoke about some of the company’s 
new capabilities brought about by its claims system in an interview 
with Wired:
“If we tried to give you a discount for 
where you get an MRI or for going to a 
doctor in off-peak hours … that literally 
wouldn’t work right now because the most 
common claims format … does not have 
a time of day field on the claim… To get 
to the point where we have the utmost 
flexibility in configuring smart incentives, 
in getting rid of weird authorization rules, 
in configuring more risk sharing and 
risk taking providers into the system, 
we thought we needed our own claim 
system.”
 
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Oscar Strategy Teardown: How The Health Insurance  
Upstart’s Patient-Centric Vision Is Driving Its Expansion
Oscar’s in-house claims system has other benefits as well. It sends 
information about patients in real time, keeps provider information 
up to date, and speeds up authorizations. The company now 
processes claims in an average of 6 days, compared to an industry 
average of about two weeks — an advantage that may attract more 
providers to Oscar’s network.
In its latest annual report, Oscar noted that it continues to build out 
its in-house claims system. It is working on more capabilities that 
will increase ease of use for members, providers, and the insurer 
itself, including:
• Real-time claims operations that will support point-of-sale 
integrations and provide immediate response to signals of 
fraud, waste, and abuse
• Real-time eligibility processes like enrollment processing and 
bill generation
• More accurate cost estimates for members searching for care
It’s important to note that Oscar spent several years and likely 
tens of millions of dollars in its effort to build out its new claims 
system. This was a big bet that will only pay off in the long term if 
the offerings the system enables are compelling enough to attract 
more patients and providers.
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