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The Future of Oscar Medical Insurance in California

by John Hansen

After Leaving Dallas and New Jersey, What Is the Future of Oscar in California?

In a meeting with Oscar California Healthcare Sales Leader, Dennis Negron, on Wednesday, August 24, I asked him why the carrier is pulling out of the Dallas and New Jersey markets. I wanted to know how stable the company was going to be in California.

Recently, we found out that UnitedHealthcare was pulling out of the California Health Exchange. In light of Oscar Health Care leaving Dallas and New Jersey, we wanted some assurance that they would be sticking around in California.

Oscar Is Ready to Compete in 2017

Our agency, Health for California Insurance Center, only sold 31 Oscar medical insurance plans during the 2016 Open Enrollment. We focus on selling the Covered California plans, and they just weren’t very competitive this year in the on-exchange market.

Negron not only assured us that Oscar California would be competitive, but he said that they would be very competitive. In 2017, they would offer the cheapest health insurance in San Francisco and Orange County in the off-exchange market.

In Los Angeles, they would only be beat as far as price by Molina Insurance and the LA Care Health Plan. However, they would still be the cheapest non-HMO plan available in LA.

Smart Move to Leave Dallas and New Jersey

Negron felt that in both cases these were smart moves for the Oscar health plan, so that they can focus on markets where they will be the most successful.

In New Jersey, Negron said that they didn’t have the “membership or the membership potential” to build their own networks, so they had no control of claims. This made it impossible for them to be profitable and to make their model work.

In Dallas, they found the Texas state exchange to be difficult to work with. He said that all carriers except for Blue Shield and Blue Cross had left the exchange. This created a risky situation where Oscar medical insurance was in “danger of attracting a lot of people very fast.”

Any smart startup knows that growth is good, but too much growth too fast can wipe out a fledgling company. Still in its infancy, Oscar could not take the risk of continuing in the Dallas market, at least not at this time.

Planned Financial Losses

In 2015, Oscar Medical Insurance experienced losses of around $100 million. Negron said this was expected by the company.

When you’re a startup, especially in the health insurance industry, and nobody knows who you are, it costs a lot of money just to build some name recognition. So, the health plan was not surprised by the financial loss in 2015.

Their investors were not surprised either. Negron added that Fidelity, knowing about the losses in 2015, was still willing to invest $400 million in this startup health insurance company.

Oscar’s Vision is Very Much Alive

The leadership in the company has learned that they can’t implement their model successfully by just using someone else’s networks. They have to do the legwork to build their own networks and process their own claims. Otherwise, they just can’t be profitable.

Oscar is a high tech, high touch medical insurance company. And, they can only do well, especially this early in their history, in certain markets.

They weren’t forced out of Dallas or New Jersey. They chose to leave. They couldn’t at this time make their vision come to life, so they decided to cut their losses and focus on the markets where they would be successful.

The Future of Oscar in California

We are impressed with Oscar Health Insurance. They left Dallas and New Jersey for good reasons. They learned from those experiences. And, we feel that the information and experience they gained in those markets is going to make them more successful in California.

Dennis Negron is excited about Oscar California moving into San Francisco, and so are we. The Bay Area is going to be a great market for them. There is a young, affluent, tech-savvy population in San Francisco that is going to love this health plan.

We expect Oscar medical insurance to be very successful in San Francisco, and in future years we expect them to expand to additional markets in Northern California. We think they may end up moving into more populated areas like San Jose and Sacramento in the near future.