Health Insurance

Big growth, big dreams for data-driven Obamacare insurer

Back in 2012, when a New York start-up named Oscar began preparing for the Obamacare market, it did so with seed funding in the "single-digit millions" and a nonexistent track record of selling health insurance, its CEO recalls.

On Monday, Oscar announced a sixth round of funding worth $145 million after the still-small insurer more than doubled its enrollment in the New York and New Jersey Obamacare markets during the recently concluded sign-up season.

The funding package values Oscar at an estimated $1.5 billion, nearly twice its prior valuation, according to a source familiar with the deal.

And it comes as the tech-obsessed company readies a number of new initiatives, including trying its luck later this year in the massive California individual insurance plan market. It is also seriously weighing selling group health insurance on its home turf, and seeking partnerships with health systems to share data and care management for customers as a means to control patient costs.

Oscar health insurance
Source: Oscar Health Insurance

"I think we've come very far, very quickly," CEO and co-founder Mario Schlosser told "We manage about $200 million in health-care spend right now."

Oscar is "incredibly happy" with its rising membership, which now stands at around 40,000 customers, Schlosser said. That's "about twice as high as we originally thought we'd be after two years of operation," he said, noting that it's been less than two full years since Oscar's Obamacare policies have been in effect.

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About 85 percent of Oscar's members are in New York City, Long Island and several counties just north of the Big Apple, with the rest coming from a handful of counties in northern New Jersey.

Schlosser said he believes Oscar now has 12 percent to 15 percent of the individual insurance market in the New York counties where it operates—a healthy level given the significant amount of competition the company has from longstanding insurers as well as hospitals that jumped into the Obamacare market. That market share includes plans sold both on the state-run health insurance market and in the so-called off-exchange market.

Now, "we want to grow across the board," Schlosser said.

Doing so will be easier with Oscar's new round of funding. The capital infusion, about $65 million more than the prior investment, was led by Peter Thiel and Brian Singerman from Founders Fun and Li Ka-Shing of Horizon Ventures. The Wellington Management Fund and Goldman Sachs also participated, as did prior investors in Oscar.

Schlosser said the money will be used primarily for building up the staff, which now stands at around 185 people—100 or so more than at the start of 2014.

California Dreamin'

The staff includes "people on the ground in California," where Oscar surprised people earlier this year by announcing its desire to sell insurance on the state-run Obamacare exchange Covered California.

"The plan is to be in California by next year," said Schlosser. If Oscar gets the green light from officials, it could sell 2016 policies on Covered California when open enrollment begins in November.

"It is the biggest individual insurance market in the country," Schlosser said. "That's kind of a fantastic place to go and do business."

Mario Schlosser, Kevin Nazemi and Josh Kushner (left to right), founders of Oscar
Source: Oscar

Oscar also already has a partnership lined up with "one big [health] system" in California if the insurer gets approval to do business there. That deal would include "doing a bunch of technological integration and data sharing," Schlosser said.

Oscar is eyeing similar arrangements in the New York area.

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The deals would involve Oscar's customers getting a preferred rate from health systems in exchange for the insurer encouraging members to use those systems, particularly for routine kinds of treatment. At the same time, Oscar and the health system would be exchanging data about the customers to coordinate care and make sure patients follow through on recommended treatment.

Oscar already does something along those lines with a program that tracks discharges of its customers from emergency rooms in real time. After a customer is released from the ER, they get a call from a nurse on staff at Oscar, and "in about 81 percent of cases we have an in-depth conversation" with the customer, Schlosser said.

In around 15 percent of such cases, he said, the nurse discusses "at least one issue" with the client, such as them not knowing which doctor they are supposed to see for a follow-up visit for their health concern.

And, "our nurses are in touch with all of our diabetes patients," Schlosser said.

Those calls, and the partnerships that Oscar hopes to foster with health systems, can help control a customer's health issues, which in turn reduces the amount of claims that the insurer will need to pay out.

'Wrist weightwatchers'


In a similar vein, Oscar in late 2014 began offering customers up to $20 per month in Amazon gift cards if they agreed to use a Misfit wearable fitness tracking device and hit a daily goal. That program is aimed at reducing the number of customers with high blood pressure, obesity, diabetes and other health issues that can cost Oscar money. Schlosser said 50 percent to 75 percent of eligible customers are using the devices.

"I'm wearing mine," Schlosser said during an interview. "And I earn my dollar a day. Not always."

Going group?

Oscar's obsession with data-driven solutions for health-care costs has earned it attention from fellow tech companies and suggested a way to expand business beyond individual insurance plans.

"We hear from a lot of technology companies and even companies close to" Oscar's SoHo offices in Manhattan, Schlosser said. "They complain that 'all our freelancers can buy Oscar and we can't.'"

Oscar now is considering selling group plans for companies, which is how most Americans get their health coverage.

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A move to the job-based insurance market, if it happens, would come first in the New York area, Schlosser said.

Even if it jumped into that business, Oscar would still be, for now, a relatively tiny player in a world dominated by large insurers such as Wellpoint, Unitedhealth and Aetna.

"The [health-care] industry collectively is 18 percent of GDP, and we're up against competition of hundreds of billions, if not trillions, in market capitalization," Schlosser said. "So from that perspective, I think we have a long way to go."