One of the most ambitious startup insurers, a self-described "better kind of insurance company," may soon start selling in some of the nation's largest markets, including the world's technology capital.
Oscar Health Insurance, a venture-capital backed New York City-based health plan, is applying for a license in California and is planning to enter the state insurance exchange, Covered California. The company is also considering selling in Texas, which has a tech hub of its own in greater Austin.
The first new insurer in New York in more than a decade, Oscar was founded in 2013 by three 20-and-30-something entrepreneurs and has received $174 million in venture capital from Silicon Valley veterans Vinod Khosla and Peter Thiel, among others.
With plans featuring free generic drugs, no copays or coinsurance, telemedicine and personalized online service, Oscar is trying to offer a new kind of health insurance experience to consumers, even while borrowing some conventional strategies like tiered and narrow provider networks.
After expanding to New Jersey for 2015, the company has some 30,000 members and is now eying expansion on the West Coast, expecting to appeal to progressive consumers and those in the technology industry.
"We seek to participate in Covered California because we share your goal of enhancing competition among health insurance plans and improving consumer choice by offering a different model of coverage," wrote Kevin Nazemi, Oscar co-founder, in a letter to the exchange's board.
"We recognize that the board seeks to strike a balance among those plans that went into the market in the first year and plans that now seek to enter," he continued. "However, a newly-created company such as Oscar is different than a company that chose to sit out Year 1." Nazemi was hinting at Covered California executive director Peter Lee's expressed reluctance to let UnitedHealthcare enter the exchange after it exited the state's individual market in 2013.
In addition to its position as a startup, Nazemi made the case for letting Oscar sell in Covered California because it offers a "distinct alternative" in its products.
Oscar members, the company boasts, can use a personalized search engine for cost information across treatment options and have 24/7 access to online and phone consultations with doctors. Members can also earn financial rewards for walking, if they sign up for and wear a Misfit wearable tracker.
Oscar was founded by Nazemi, a former Microsoft product manager, Joshua Kushner, a former Goldman Sachs private equity associate, and Mario Schlosser, a former McKinsey consultant and computer scientist who's now CEO.
Since its founding, Oscar has been heavily marketing its health plans and its digital services to individuals and young families buying their own coverage, as well as mulling employer-based plans and expansions into other states.
While Oscar's creation was a prescient response to consumer dissatisfaction with health insurance, its entry into markets like California and Texas may now be somewhat urgent -- lest traditional insurers beat them in the game with their own efforts to bring consumers price transparency, web-based support and value-added services