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
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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.
7
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.
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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
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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.”
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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.
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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.
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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.
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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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