Private health insurance company Oscar, which caught on quickly with individuals due to its tech-savvy image and simplified online offerings, has pulled out of two markets. As of this week, the firm will no longer offer individual market plans through the Affordable Care Act in Dallas-Fort Worth, Texas and in New Jersey beginning January 1, 2017.
Citing “uncertainties in those two markets” that would make it difficult to operate effectively, Oscar CEO Mario Schlosser outlined changes to their 2017 strategy in a blog post.
“We have grown faster than we ever expected, to a company that insures almost 130,000 individuals today. We are proud of the products and services we offer our members – pushing the boundaries of great member services and innovating at a high clip,” Schlosser wrote. “As an insurer active in the individual market, however, we face the same challenging market dynamics as do other companies – some larger, some smaller.”
Oscar, which was said to have been valued at $2.7 billion earlier this year, is sticking with its plans to expand in San Francisco, and is also continuing its fight in the individual markets in New York, San Antonio, Los Angeles and Orange County. The company will also begin to provide small group insurance across most of their 2017 markets.
For some, the news wasn’t exactly shocking, and perhaps painted a picture of the reality of changing the health insurance landscape. Modern Healthcare’s Bob Herman tweeted, “With this Oscar news, you have to wonder: are health insurer startups really that different from legacy carriers?”
In response, healthcare consultant Adam Okun tweeted about the possibility of too much faith being put in Oscar to begin with.
“I’m still trying to understand what VCs were thinking. Do they just hear words 'disruptive tech' and open wallets?” he wrote on Twitter.
Ryan McCostlin, of healthcare benefits brokerage firm Bernard Health, offered a more tempered insight with his tweet, “@OscarHealth hits ACA bumps in TX and NJ. Narrow networks are hard to build, esp in unfamiliar markets.”
While Oscar gained a swift following from both individuals and investors, it lost $52.2 million during the first half of 2016 on its 60,000 New York customers, and $15.5 million for that some group in the first half of 2015, Bloomberg reported last week.
Oscar was also losing millions on its 35,000 members in Texas, but the company expressed “hope to return to these markets as we carry on with our missing to change healthcare in the US.”
Oscar currently covers 7,000 people in Dallas and 26,000 in New Jersey. The company claims it will help members in the affected regions find coverage for 2017.
“We also look forward to seeing the individual market stabilize, allowing us to serve more people across the US in a meaningful way, while maintaining affordable pricing for consumers,” Schlosser wrote.
In an interview with Bloomberg News, Schlosser said the individual market isn’t working as intended, citing weakness to the way it was set up.
“We want to focus on the markets we understand well, we want to focus on markets where we have our own model in place,” Schlosser said.
Even though the company has been popular with young, tech-savvy individuals and investors, the recent move demonstrates Oscar isn't immune to problems faced by bigger rivals who have been in the business longer.