Health insurance upstart Oscar competes on telehealth, user experience

By Jonah Comstock
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screen568x568In May, Oscar, the New York-based individual-only insurance plan raised $80 million at close to a $1 billion valuation. That brought the company's total funding to $150 million. It's an impressive feat for a small startup attempting to compete in health insurance, which is so thoroughly dominated by huge legacy players.

At IBF's Digital Healthcare Innovation Summit in Boston, Oscar co-founder Kevin Nazemi spoke with Bessemer Venture Partner's Steve Kraus about how a focus on user experience -- and a fortuitous market opportunity in the Affordable Care Act -- helped catapult Oscar into the national spotlight. He also announced for the first time that the company will be expanding from just New York into New Jersey.

"We started the company because we, like everybody who’s insured, got our explanation of benefits and said 'This is everything but an explanation'," Nazemi said. "So we decided, why not do something about it? What if there was an insurance company that started with a blank slate and put the consumer first, building all the backend pieces, connected those in from the type of experience that we wanted?"

With the passage of the Affordable Care Act, Oscar found itself with a huge number of new individuals seeking health insurance. To coax those potential members in, the company focused on a user-centric design, easy to understand plans, and a telehealth component.

"That manifests itself in a simple experience, one where we try to help guide the consumer through the complexity of the delivery system," Nazemi said. "That complexity certainly doesn’t go away with our arrival. And then we add some novel elements where we try to move away from someone who is just a claims processor or the pipes, but be more like a go-to and a doctor in the family. That manifests itself in the ability for all our members to push a button and have a doctor call them back in seven minutes. It’s powered by the folks at Teladoc among others." 

Kraus pointed out that other health insurers also offer telehealth, as well as mobile apps, price comparison tools, and other features to help users access information. But Nazemi argued that there's a nuance to true consumer focus.

"It’s one thing to check the box and say 'You have telehealth', it’s one thing to check the box and say 'We have an iPhone app with the directory of the network', it’s another thing to put the consumer first," he said. "And the difference is, if you go to the major carrier’s tool for either of those, you have to know the name of around 64 different network names that all sound like the names of Native American tribes, before it gives you the access to the list of doctors, which you don’t know. They’re in the phase where all they've done is digitized the analog version of the book which is structured in that way and then jammed it in an iPhone app. Same thing with the telehealth — it’s there, but you have to download Flash and Netscape, which no one uses anymore, in order to save 15 minutes. And people just don’t do it. So then you’ve got the box checked, but you left the consumer in the dust."

The proof in the pudding of true user-centricity, Nazemi argues, is not whether the insurer offers tools but whether people use them.

"If you took the list of the feature set we have and you put it against a major carrier, they checked a lot of the boxes, to be fair," he said. "But then ask them what percent of the people visit your website or use those tools. And I can tell you proudly that over 90 percent of our members have a log-in. Over 70 percent have filled out a detailed health risk assessment. Because we didn’t frame it that way. We framed it around making the user experience customized, the way Facebook would."

Oscar has a long way to go to compete with the major carriers, and it remains to be seen if the company's high-touch business model will scale. But the metric they're competing on -- consumer satisfaction -- is a well known weak point for the health insurance industry, which Nazemi says has a net promoter score on par with the IRS. If Oscar manages to scale a health insurance plan that people enjoy interacting with -- so far they count just about 16,000 members -- they could give the big players a run for their money.