For a very long time, health-insurance advertisements, like health-insurance companies, were stolid and relatively predictable things. There was the one with the clip art of the smiling doctor (signifying wisdom and confidence), and the one with the photograph of the proud old stone building (permanence and trustworthiness), and the one with the attractive and toned young people exercising (sign up with us, and this could be you forever).
Then, last October, a new breed of health-care ad began cropping up on the subway. The tone was Nickelodeon meets Manhattan Mini Storage—cuddly cartoon avatars and exceedingly clever copy, intended to make New Yorkers feel good about cottoning on to the in-jokes. In one, a man bear-hugged by an overaffectionate grizzly seeks help for a broken pelvis. Another reads: “Get a bright, articulate doctor to call you without having to join a dating site.”
The campaign was the work of Oscar, which bills itself as the first new health insurer in New York in 15 years and the only “tech-driven” insurance company in the country. Subscribers are mailed their membership cards in the same type of box as an iPhone and issued a profile that, à la Facebook, organizes medical information in reverse-chronological order. There is a search engine that accepts commonsensical queries (“My tummy hurts”) and Google Maps–based software that ranks in-network health providers in a person’s immediate area. If someone prefers to speak to a doctor directly, he can click on a link, and a professional will call him back in less than an hour.
The company launched last year and was founded by three business-school buddies: Joshua Kushner, brother of Jared, son of Charles, and the founder of the VC firm Thrive Capital; Mario Schlosser, a computer scientist and former McKinsey man; and Kevin Nazemi, a veteran of the health-care division at Microsoft. Although the trio says that Oscar would have come into being regardless of the political climate, its launch was purposefully timed to coincide with the rollout of the Patient Protection and Affordable Care Act, otherwise known as Obamacare—legislation that requires every American to have insurance or else pay a significant tax penalty and prevents insurers from denying coverage to anyone, regardless of preexisting conditions.
Before Obamacare, insurers sold the bulk of their plans through HR departments or licensed brokers. But the Affordable Care Act created a series of state exchanges, where you can compare various plans and purchase insurance directly. In New York, 16 companies compete on the exchange. Thirteen are deeply entrenched players, from Fidelis Care to WellPoint, the largest insurer in the state. One is the freshly founded nonprofit cooperative Health Republic. Another is North Shore–LIJ CareConnect, a provider-owned insurer. And then there’s Oscar.
The company has generally attempted to shill its plans, which are currently available only in the city and surrounding counties, the same way it might advertise a hot new piece of tech hardware. The boutique design firm Doberman was hired to help create a website; a series of cartoon shorts, starring the aforementioned bear and his pelvically compromised companion, was done in collaboration with the production company Hornet Inc. And in the run-up to the open-enrollment deadline, a pair of Obama 2012 operatives were brought onboard to oversee a canvassing campaign.
Meanwhile, with the help of VC cash—Peter Thiel’s Founders Fund alone ponied up $30 million—and a small army of engineers and site architects poached from Tumblr, Google, Facebook, and Spotify, Oscar has built an infrastructure that it brags is faster and more efficient than anything used by the big, publicly traded insurers. “There’s this joke that if you were blindfolded and brought to a health-insurance company, you’d think you were in a paper factory,” says Kushner, who has a propensity for talking in complete Zuckerbergian paragraphs. “We see a lot of inefficiencies. A lot of low-hanging fruit. We like to say, ‘Okay, what if we started over with a completely blank slate?’ ”
In a very real sense, Oscar is a harbinger of health care as it is likely to exist in the era of Obamacare: aggressively marketed, conspicuously consumerist, bristling with “functionalities” that digital natives understand and appreciate. Call it insurer-as-capital-B-Brand. “Not all of these companies are going to succeed,” says Charles P. Friedman, the director of the Health Informatics Program at the University of Michigan in Ann Arbor. “But even if they don’t, they will have brought a new spirit of disruption to the health-care field.”
Oscar’s headquarters in Soho is high-ceilinged and decorated in standard-issue start-up chic: white walls, esoteric European board games on the shelves, tangles of wire underfoot. On the day I visited, most of the senior employees were huddled around a long banquet table, with the middle-aged insurance guys at one end and the designers and coders at the other—a division referred to internally as the suits and the hoodies.
“When I first got here, I was head-to-toe in Brooks Brothers, with a tie,” Dave Henderson, the head of insurance, confessed sheepishly. “That was the world I’d come from. Now take a look at me.” He pointed down at an open-collared oxford. “Sometimes I’ll even wear jeans.”
Behind Henderson, on an LCD display, blinked the enrollment figures for Oscar: roughly 16,000 subscribers, good enough for an estimated year-end revenue of $72 million. That’s more than double the number of subscribers Oscar had originally forecast, and considering what industry expert Gary Claxton calls “the high barriers for entry for new insurers”—the networks to build, the reserves you’ve got to have in the bank (Oscar needed $25 million for New York alone), the Byzantine licensing—the company was off to a respectable start.
I followed Kushner, Nazemi, and Schlosser into a conference room overlooking Houston Street. Kushner grabbed a keyboard and pulled up his personal Oscar profile on a projection screen. In interviews, he often says that the idea for the company was born when he attempted to parse a particularly complicated bill from his old insurer. “I’m overeducated,” he told me, “and I had no idea what it all meant. So I thought, Okay, how can we take technology, data, and design and make this transparent and easy to understand?”
He gave an example: A few weeks earlier, he’d felt some rawness in his throat that he was worried might be strep. Using his Oscar iPhone app, he put in a request with his doctor, who phoned him back in 15 minutes. The doctor, Kushner recalled, “asked me to stand in front of a mirror and look at the back of my throat. Did I have white spots on the back of my throat? I did. He said, ‘I’m going to prescribe you Amoxicillin.’ ” (Oscar has stressed that the call feature is not intended for ongoing care nor major medical conditions. “We’re not going to treat diabetes by phone,” Nazemi told me.)
Kushner’s profile displayed the details of his “visit,” along with notes from the doctor, reminders about follow-ups, and warnings about possible drug interactions. “Health insurers, in the past, signed up customers and then did everything they could to avoid them,” Kushner concluded, handing off the controls to Schlosser. “Our ambition is to do the opposite.”
Schlosser and Kushner met at Harvard Business School and, in 2007, along with a few other friends, started Vostu, a Latin American gaming company—a kind of south-of-the-border Zynga. At Oscar, Schlosser’s role is one of chief programmer and designer—the leader of the hoodies. As he pointed out to me, the types of technology that Oscar utilizes are well established, if historically siloed. For instance, an individual might sign up for a service like MyMediConnect or Microsoft HealthVault, platforms that can be used to track and store personal medical data. “In those cases, though, you go to your doctor and ask him for your records or your claims, and then you’ve got to plug it all in,” Schlosser says. “The nice thing here is that you don’t have to do anything—you go to the doctor, and it all comes back to us directly and seamlessly.”
It was impossible not to be impressed by the presentation in the same stunned and respectful way you’d be impressed by any number of cutting-edge technologies, from a smartwatch to a newfangled video-sharing portal—it was pretty, and it looked like the future. But it was also impossible not to be a bit unsettled by the implications. For instance, is it wise to trust so much of our health history to the cloud? Is the Silicon Valley ethos, with its premium on sharing and openness—and as a corollary, the steady monetization of personal information—really compatible with the health-care system? (Schlosser told me that the servers that store Oscar’s subscriber information are several times more secure than regulators mandate; he added that Oscar would never sell user data in any way.)
Perhaps most vitally, is the whole thing stable? No matter how much is said about big insurance companies and their garbled paper bills and their bad allergy to innovation, those same big insurers are durable. They have deep foundations. Oscar, on the other hand, has had to cobble together its operation from preexisting bricks: Dave Henderson (he of the open-collared oxford shirt) brought in lawyers with Albany connections to help navigate the certification process; claims are being processed by a company out in Cincinnati; in-house software crawls the state database for pricing info on local doctors. And rather than attempt to build its own network of providers, Oscar has piggybacked onto the shoulders of MagnaCare, a network that extends across New York and New Jersey.
According to Deanne Kasim, an analyst with IDC Health Insights, the formula for a profitable insurance company is actually pretty basic: Income from monthly premiums minus health-care costs minus operations costs equals bottom-line profit. Assuming a company can keep the costs down and the premiums up, the whole thing can be tremendously lucrative. “I think Oscar has got a shot, especially if they continue to stress transparency and being very up-front with consumers,” Kasim says. “But the bottom line is going to be the same with any small health-care company: How well are they able to manage risk over a long period? If they can’t do that, then all the technology in the world won’t help.”
Obamacare sign-up is structured on a series of open-enrollment periods. The first extended from last October to March 31. According to the Urban Institute, during that time, 8 million people signed up for insurance; by 2016, the hope is to enroll 9.5 million more for a total of 17.5 million.
The next enrollment period will begin in November and end in February 2015. For the Oscar team, the upcoming months will be used to shore up the existing infrastructure and explore expansion possibilities, almost certainly to New Jersey and, maybe after that, California and the rest of the West Coast. For the time being, and perhaps only the time being, Oscar has the tech-heavy version of the New York insurance market cornered. “You’ve got a situation where there’s a legal imperative to have insurance, and you’ve got a bunch of people flooding the marketplace for the first time without the relationships with established companies,” says Claxton. For new insurers, “this is a very big opportunity.”
So Oscar must continue to innovate to stay ahead. Outside the conference room, back at the big banquet table, Schlosser pulled up a chair next to Eddie Segel, the head of product. Segel had worked with Schlosser at the hedge fund Bridgewater Associates, crunching numbers. Today he was poring over usage statistics from Practice Fusion, a cloud-based medical-records company. The hope was to find a small group of doctors in the Oscar network that leaned on Practice Fusion particularly heavily; later, Oscar would reach out to those (presumably forward-leaning) doctors and inquire if they might be interested in “further integrating with us,” as Segel put it.
That integration might take the form of sharing not just clinical records but X-ray and MRI charts via the Oscar software. “It’s an interesting thing—we’re an insurance company, and we pay the claims, right?” Schlosser said. “But there’s a next step, which is where we don’t just help you manage your health care but we guide you to care. And then there’s a third step, where maybe we provide some of the medical care ourselves. Maybe we set up our own MRI.”
He caught himself. “Right now,” he said, smiling, “we’re very much in the first bucket, and doing a little of the second, and none of the third. But maybe we progress over time. That’s the hope, anyway.”