Yahoo Finance Oscar Health announces ex-Aetna CEO to take over in April
Health insurance industry veteran Mark Bertolini is taking the helm of tech-based insurer Oscar Health (OSCR), and aims to turn the 11-year-old company profitable in just a year.
Oscar was founded in 2012 by Mario Schlosser and Joshua Kushner (Jared Kushner's brother) as a tech-based health insurer following the passage of the Affordable Care Act (ACA). It was largely waived off as a small player at the time by legacy insurance executives — including Bertolini.
"I was one of those early deniers, yes. But having spent time with Josh and Mario...I am now convinced that this is a place that can really, ultimately, begin that change in health care that we've found so elusive in the industry over the last 40 years," Bertolini told Yahoo Finance.
Bertolini laid out three key tenets for the company in a call with investors Tuesday, including digitization, individualization, and personal care.
He believes that the pandemic has given the company an opportunity to capitalize on its tech-forward strength, as more customers are now comfortable with the use of telehealth and health care services broadly.
Oscar set a precedent of pairing free telehealth for members, which is now being utilized across the health care industry by insurers, physicians, and especially online pharmacies.
And now, Bertolini said, there is room to grow beyond just primary care needs and into tertiary, more complex and specialized services.
Bertolini was previously CEO of Aetna, before selling it to CVS (CVS) in 2018 for $70 billion. He thinks Oscar already has what it takes to dominate in an increasingly tech-savvy and consumer-focused health care market.
That's why Schlosser, the current CEO, will be moving into the newly-created role of president of technology, where he will focus on AI and new computer language models that can enhance the company's tech stack.
"The rest of U.S. health care is going to look more and more like the market we are already in," Schlosser told Yahoo Finance.
'Left turns and right turns'
Oscar's journey as an individual insurance market player has been rocky.
It has moved in and out of geographical markets — not unlike major insurers in the ACA market — and has also shifted its focus around from individual markets to Medicare Advantage to the employer space and now back to individual markets.
Schlosser said the company was the first in the space and began with a Silicon Valley background.
"With that came a lot of left turns and right turns that were not always the right ones," he said.
Schlosser acknowledged that the founding duo was learning to navigate the complex health care system as it was building out the company, but believes the company is ready to scale.
"I think its a gift to be able to go through all this, even with a falling stock price," Schlosser said.
Until 2021, the company was privately owned, and had a variety of backers including Google (GOOG, GOOGL) parent Alphabet. The company went public two years ago, but has consistently traded lower than its IPO price of $39 per share.
Oscar began with the intention of lowering costs in health care, increasing quality of care, and making members happy. It has overwhelmingly succeeded in the last category, with a Net Promoter Score (NPS) of 47, while the industry average is in the low single digits. NPS is a metric used by companies to gauge customer loyalty and satisfaction based on a single question poll.
In other areas, it has seen slow progress, but been slowly gaining steam. Oscar currently serves less than half of all U.S. states and has around 1.2 million members.
The company has largely been perceived as catering to a younger and healthier customer base — which is why its Medical Loss Ratio (MLR), or ratio of premiums charged to medical expenses, has been on the higher side.
The ACA set up the MLR requirement for health insurers to spend 80%- 85% of their premium income annually, or be forced to rebate funds to customers if it fails to meet that threshold. Oscar has had some quarters where it is near or over 100% MLR, and in 2021 had an MLR of 89%.
Schlosser said that is in part because it chose to operate in urban areas first, where it penetrated the younger, healthier market more easily. Oscar's first market was New York City. Schlosser recognizes that he needs older and more complex patients to sign on to succeed.
Individual market potential
Bertollini said he sees still sees opportunity in the individual market for Oscar. That would be a radical change from the current thinking, which emphasizes large employer group plans and the volume of patients they bring with them.
Bertolini is banking on Oscar's high customer satisfaction as a way to corner the individual market.
"That means we are valuable to the customer base. That is an opportunity to move customers to our company," he said.
"Maybe even, all the way to the point where employer-sponsored insurance is not as valuable to people as individual coverage could be," he added.
Follow Anjalee on Twitter @AnjKhem
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