Our post-election thoughts on health care | Oscar Rx | hioscar Blog | Oscar
Our post-election thoughts on health care
In light of the recent election, we 'd like to share a few thoughts about Oscar’s position on health care.
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MSMario Schlosser
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By Mario Schlosser and Josh Kushner, co-founders | November 17, 2016
Though the precise nature of these changes has not yet been determined, we believe it is important to set forth Oscar’s observations on the health care landscape. What will never change is this: Oscar believes that all Americans deserve health care coverage that is high-quality and affordable for everyone. This is both ethically right and economically prudent. We also believe that in order to achieve this, the cost structure of our health care system must change, and that the primary pathway to this is the facilitation of a diverse and competitive consumer insurance market.
Why we started Oscar
First, a bit of history is critical for context. We founded Oscar to catalyze in American healthcare the same positive market forces that have long existed across every other major consumer market: the need for a clear and differentiated value proposition, competition, and choice. Like everyone who engages with our health care system, we had experiences in which we needed high-quality care, but had no guide to help us navigate a bewildering maze: what care was appropriate for our needs, where should we go to get it, how good would it be, and how much would it cost?
America pays way more for health care than any other developed nation in the world and tends to be low on healthcare quality metrics. Costs vary wildly with little transparency and no connection to the quality of care that we receive. No other major industry is beholden to such bizarre economics, and yet healthcare is a fundamental necessity for everyone.
So we decided to start a health care company that would change this, using technology and personalized service to build an end-to-end health care experience that is designed to be seamless and simple, and one that optimizes for affordability and quality of care. Oscar provides a health care experience centered around what consumers want and need - or, as we put it in our earliest days: the kind of health care we would want for ourselves.
We formulated these core principles right from the beginning. Here is the opening slide from the first-ever presentation on Oscar, in October 2012, when we kicked off our licensing process in New York State.
In introducing the first U.S. health care market that incentivized a consumer-focused mindset and drove competition, the Affordable Care Act (ACA) undoubtedly helped us get off the ground. For the first time, insurers could sell directly to consumers, convince them of the quality of their product, and fight to keep them year after year - something we feel we are much better positioned to do than legacy insurers. From the beginning, we saw the ACA market as a gateway, but were much more excited about the shift it would precipitate across all health care markets - towards a focus on consumers. In our original plan, that always included eventually allowing individuals employed by businesses to buy Oscar (as we say internally, “everyone can get Oscar”), and indeed we will begin selling our innovative employer plans in California and New York in Q1 2017.
As more people were directly exposed to the unsustainable trajectory of rising health care costs, the ACA began to apply appropriate pressure to the economics governing the health care industry. Steep cost hikes that were once blurred by being taken out of people’s paychecks were highlighted by the influx of people paying these costs directly on the ACA’s individual markets. While the ACA has significant flaws, we believe the majority of this pain is a result of the preexisting faults of our health care system. Indeed, individual market premiums under the ACA in competitive states like New York and California have just now risen to the level where the Congressional Budget Office predicted they would be by 2017, while many of the ACA individual rates are similar to employer market rates for comparable products. Yes, those rates are very high - but that is a direct consequence of the fact that as a country, we spend almost 20% of our gross domestic product and our incomes on health care. It’s just harder to see for many people since it’s deducted from our salaries rather than taken out of our wallets.
What we've accomplished
Over the past three years, more than 100,000 have purchased our product, without having to grapple with entrenched employer-insurer relationships that have made the health insurance market so stagnant and unresponsive to market demands. This gave us the momentum and runway we needed to build a beautiful product. Our enrollment tools have revolutionized the experience of buying health insurance, making benefits and costs clear and navigable. Our plan designs have incentivized preventive care that is inexpensive and intuitive, so our members don’t feel they have to wait until they get sick to receive the care they need. Our app provides all the information and functionality necessary for someone to comprehensively manage their own healthcare. Our Concierge Teams - a fundamental reimagining of the role a health insurer should play in guiding its members through the healthcare system - have improved upon our already stellar customer service by providing each member with a dedicated Concierge team, empowered by comprehensive care management tools and powerful predictive care algorithms.
Below is another slide from our first internal presentation in October 2012. It lays out Oscar’s plan-of-action: replacing and rebuilding more and more of the components that combine to a vastly better end-to-end health care experience than anything that is possible today. For example, back in 2012, we’d already laid out our long-term plans for how to build provider networks, the details of which we have written and talked about a lot more this year, as we rolled out our new networks across all our markets. We have followed this plan since 2012, and we have indeed now built all of the components shown in this chart.
The fact that we command the most modern insurance and health care orchestration infrastructure in the country allows us to enable powerful features. We can pay physicians for calling members who just left the emergency room, in real time. We were the first insurer to make tele-visits free for everyone, and our members use them at five times the rate of people insured through their employers. Our algorithms identify a physician’s true specialization with four times the precision of the typical insurance company’s doctor finder. And so on. As a result, our net promoter score is three times the industry average and the most common answer people give when asked why they joined us is because their friends told them about Oscar.
The need for (and promise of) future health reform
Having operated in the individual market for the last 4 years, we have learned important lessons on what is working and not working under the ACA. Most importantly, the ACA ensures that more than 15 million people in the individual market (on- and off-exchange) now have health insurance, and can buy coverage regardless of pre-existing conditions. The more people have health insurance that they can afford and pay for, the better off we all are - otherwise people don’t get the care they need, and society ultimately has to bear the burden and the expense. Note, again, that despite the lack of insurance coverage for many people prior to the ACA, our health care system was the lone outlier costing 18% of GDP.
But despite the fact that the ACA brought insurance to many who needed it, it suffers from serious shortcomings in design. Any functioning insurance market needs everyone to participate, regardless of age and health status. The ACA tries to do that through a mandate to buy insurance, but its eventual design (and weak enforcement) of the mandate failed to spur the market growth that was predicted and ultimately necessary for a sustainable market. In many cases, it is easier to not buy insurance and wait to get coverage when a serious illness occurs, and even subsequently drop out of the market. At the same time, because the ACA is so prescriptive in how insurance plans have to be designed, plans that could better meet consumer demand are prevented from getting to the market.
What we love about the past four years is that, as an innovator in the space, we are able to compete on equal footing with incumbent insurers and entrenched interests. That is the power of a consumer-led, market-based model. As a result, there has been more innovation in the market in the last few years than in decades before - and not just from us.
But this promise of the ACA is undermined by critical issues in the administration of the program. The government has also not fixed or not funded ACA programs designed to help insurers deal with the uncertainty of the first few years of the market. Doing so could have prevented the plan withdrawals that have so destabilized the market. Because of these and other flaws, insurers have had to establish product prices before there was any reliable information on which to do so.
Any new government would have had to address these shortcomings. In addition, some of the current proposals being discussed would surely encourage more of the consumerization and individualization that are required to create real competition across the entire health care industry, and thus force necessary improvements. The opaque, slow-moving system we have today, where most consumers are unable to vote with their feet, is already on this inevitable and positive path. Now is the chance for this process to be accelerated.
For instance, some plans being proposed by Congressional Republicans would likely equalize the incentives that employers and individuals have to purchase health insurance. This would enable individuals to buy insurance with pre-tax dollars, just like employers have always been able to do. It puts the consumer in the driver’s seat across the health care market. An individual market that bars lifetime limits and denial of pre-existing condition coverage can be made to work through a smart combination of continuous coverage provisions and tax credits.
Conclusion
Since the earliest days of Oscar four years ago, we have been on a steady path to build a consumer-focused, technology-enabled health insurer. No matter how the industry evolves, it will surely move in the same direction. We are grateful that the ACA catalyzed a market that is responsive to this sort of disruption. In line with our original plans, we are now well positioned to sell quality health insurance across any product line. We have developed a strong reputation for providing an excellent health care experience, which has served us well as we have been executing our long-standing plan of bringing the Oscar experience to the many employers who want it. We have a long list of forward-thinking health care provider systems across the country that are working with us to deliver a modern care experience to new geographies and populations - and an even longer list of systems eager to join. Finally, we are fortunate enough to have strong investor support that will enable us to achieve our long-term expansion goals. The battle to improve American health care was never intended to be a speedy endeavor, and will remain critical despite policy changes. We’re in this for the long haul.
