With another round of venture capital, Oscar Health Insurance is getting ready to enter new markets and try to become more than just a niche concierge health plan.
New York City-based startup insurer Oscar has received $145 million in venture capital, led by Peter Thiel and Brian Singerman at the Founders Fund and with contributions from Horizon Ventures, Wellington Management and Goldman Sachs. Oscar's health plans, featuring free telemedicine, personalized online help and no copays or coinsurance, currently have about 40,000 members in New York and New Jersey, and the company is eying an expansion to California and Texas.
The latest funding comes after some $150 million from the same backers over the past two years and gives Oscar a valuation of around $1.5 billion--on a par with UnitedHealth Group's first quarter profit this year.
Oscar is now in the "unicorn club," as Silicon Valley insiders classify the minority of startups who could fetch 10 figures upon an IPO or acquisition. It is the only insurance company, and among a handful of healthcare startups to reach such a milestone.
"Oscar is fixing and humanizing healthcare through the use of technology, design, and data," said the Founders Fund, whose portfolio also includes Airbnb, Facebook, Lyft and SpaceX.
Whatever the end payout investors are expecting from Oscar, in the near-term, the company is positioning itself as at once ambitious and altruistic.
"We are a revolutionary disguised as the ultimate insider, an insurance company," said Oscar co-founder and CEO Mario Schlosser as part of new video series.
Schlosser, a native of Germany who previously worked at McKinsey and Bridgewater Associates, created Oscar in 2013 with Kevin Nazemi, a former Microsoft product manager, and Joshua Kushner, a Goldman Sachs private equity alum who now runs Thrive Capital.
"Our most recent round of financing will ensure our continued dedication to service and innovation for our members," said Schlosser. "It will allow us to grow our staff, create new products and extend our plans to new members across the country."
Oscar has a lot of expectations to live up to, as New York's first new insurer in more than a decade, as a company run by 30-somethings and as a health plan being marketed as nothing short of awesome.
Along with free primary care visits, 24/7 telemedicine and generic drugs, Oscar members can use a personalized search engine for cost information across ailments and treatment options, and earn financial rewards for walking if they sign up for and wear a Misfit wearable tracker.
"We make the rules so we can simplify them," said Schlosser, arguing that programs such as the fitness incentives serve as a differentiator between Oscar and the old guard.
"Many insurance companies don't think they should invest into your wellness as a member, because they think you leave them too quickly. Bit of a Catch 22, because if you don't invest in people they probably will leave you too quickly."
Oscar has had retention problems, though, suggesting what could be the company's greatest barrier to growth--competing on price with the Blues and for-profit nationals. Price largely, if not entirely, drives membership, Schlosser acknowledged.
"We had a few people who left us at the end of 2014, not many but there were some. We called them all up and we asked them, 'What were we missing?'" Schlosser said.
"I loved Oscar like no other, but I got a better rate with a competitor," one member told the company. "We're talking about $30 a month or so," Schlosser said, comparing Oscar's rates with others.
"This small dollar amount was so important for members that they turned away from us, even when they liked our service. Which means we will be successful as a company next year and 50 years from now, if we can get our prices down. If we can't do this, we will eventually just be an elite, luxury niche concierge plan, which is not the business we want."