Startup insurer is cautionary tale of ACA difficulties, experts say

Despite billing itself as a revolutionary insurance company, the unit ended up with more than it had bargained for on the ACA marketplaces.

Life & Health

By Lyle Adriano

While it had good ideas in mind, the Affordable Care Act (ACA) severely underestimated the number of sick individuals eligible for individual health insurance coverage. This oversight greatly cost insurers participating in the markets, with some of them even electing to pull out of the federal markets to avoid losing any more.

Oscar Health was one of those companies adversely affected by the ACA, and it now serves as a cautionary tale to those companies joining the federal marketplaces.

A recent feature on The New York Times put a spotlight on the company; an ambitious insurer founded during the onset of the federal health care law in 2012. Company founder Joshua Kushner even remarked that by utilizing technology to promote affordable care and provide consumer-friendly coverage, the company could “turn the industry on its head.”

The feature noted that at its height, Oscar had attracted 135,000 customers—with nearly half of those customers in New York State.

Despite its popularity, Oscar ended up losing 15 cents for every dollar of premium it collected in New York. It lost a total of $92 million in New York State last year and another $39 million in the first three months of 2016.

Companies like Oscar made the mistake of setting the prices of their ACA plans too low to make a profit with. Another insurer mistake the feature identified was that the companies wrongly assumed that they could offer the same plans that they have provided through employer-based coverage, which feature broad medical provider networks.

“The market is over all too low in price,” said Oscar Health chief executive Mario Schlosser. “We, like everybody else, have priced in a very aggressive way.”

What nobody expected was that the market was smaller than anticipated—12 million signed up for coverage in 2016. Moreover, not a lot of employers have dropped their health insurance, which kept many healthy individuals off the individual market. Worse, the ACA mandated that all participating insurers to cover for customers with pre-existing conditions—conditions that make them high-risk clients.

These oversights cost many insurers dearly. Although a number of fortunate insurers have managed to turn in a profit, companies like Oscar are still figuring out how to work the system.

Oscar touts its technological savvy as a means to manage patients’ health better than the competition. It has even created medical teams assigned to groups of patients, allowing for easier and faster intervention when the data flags a potentially dangerous condition.

Despite its best efforts and novel ideas, Oscar was still struck by the same issues other insurers on the exchange experienced. If it plans to adapt and turn in a profit, it will have to approach the ACA differently.


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