Founded in the summer of 2013 just before the launch of the Obamacare insurance exchanges, health insurance startup Oscar has earned a $1.5 billion valuation with 40,000 members across New York and New Jersey.
Although its annual revenue is currently just about $200 million, Oscar plans to expand into other states this year. And while it faces entrenched regulations and barriers to entry that favor incumbent commercial insurers such as UnitedHealthcare and Aetna, Oscar is making a bet that the future of health insurance belongs to the company with the best customer experience.
The different design and user experience is clear – from the “Hi, we’re Oscar” landing page to the minimalist “Get your quote” page. It takes less than a minute to provide basic age, income and household information before Oscar produces a simple array of choices. There is more in-depth information for each plan, but users are not overwhelmed with choices and information right up front. That is an important difference from many health insurance exchanges and plan finders on other insurance company websites. “As a user, you get the info you need to make your decision but not more,” said Oscar’s Head of Product, Eddie Segel, in an interview with First Round Review.
Oscar’s innovation extends beyond its user-friendly web and mobile design: the company gives members on-demand telephone access to board-certified doctors, intuitive symptom searching on the mobile app that suggests in-network providers. In January 2015, Oscar started offering free Misfit fitness trackers to all of its members, with a $20 Amazon gift card ($240 per year) for hitting activity goals each month. Co-Founder Mario Schlosser told Forbes in an interview that “It’s to prevent you from getting sick in the first place—get people to be physically active and push them to do more with financial rewards.”
The on-demand phone calls with doctors have been a pleasant surprise for some members. Said on user named Kassidy, an international television producer, on Twitter last month: “I just used an app to speak to a doctor, told him what was wrong, and had a prescription in 30 min. I love @OscarHealth so hard.” From another user named Madeleine, a genomics researcher at Harvard: “Got a med refilled just now through @OscarHealth’s doc-on-call & I’m high on the future. So easy, so much more efficient.”
In a moment of self-awareness, she added a caveat: “Sounding like an advert, I know.”
Because it is just two years old, the insurer has been able to hard-wire these patient services into its core activities from the start; its larger, more-established rivals are starting to provide similar services, but often just as small add-ons to their sprawling, less-flexible operations.
Oscar’s approach represents a dramatic shift in thinking from the existing world, where insurers focus on winning over corporate human resources departments for large-group plans, to the new, still-emerging world where individuals make more decisions about their healthcare and insurance than ever before.
The rise of centralized, search-and-compare insurance marketplaces, both from the government with Healthcare.gov and private companies with employer-specific exchanges, will change how all insurance companies think about and serve their customers.
How is shopping for insurance on an exchange different from the traditional employer-sponsored or broker-driven process? On an exchange, consumers can comparison shop with fingertip access to information about each plan: premiums, co-pays, deductibles, maximum out-of-pocket costs, in-network doctors and hospitals, prescription drug coverage and star ratings. Never before have so many consumers been able to access so much information about so many insurance plans.
Consider recent remarks from Joe Swedish, the CEO of Anthem, a large insurance company that offers private Blue Cross and Blue Shield plans and public Medicaid plans in 14 states. He said this: “We’re transitioning from business-to-business … to business-to-consumer. We believe that we’re moving into a retail world. What we want to build is stickiness. We build loyalty based on being a brand they respect—that is being a retail business.”
Anthem has good reason to change how it is perceived. Since 2013, the insurer has seen many of its small business customers drop their employees from the standard HR-negotiated health plans and point them toward the insurance exchanges. The employers are electing to provide “defined contributions” to help their employees pay for the plan that appeals to them.
Although the federal government has warned employers to avoid this so-called “dumping” of workers, and the trend is limited so far, Ezekiel J. Emanuel and other experts predict that the days of traditional employer-sponsored insurance are numbered. Even if we see just a small amount of the anticipated decline – from 60 percent of workers covered by employers to less than 20 percent – the health insurance industry will need to transform itself.
Where will see that transformation? First up: billing and payment. Most patients would agree that health insurance companies have room to improve confusing, even scary bills and simplify co-pay information. It should not take an HR benefits expert to understand what the patient is supposed to pay and what the insurance company is supposed to pay.
Next: consumers would appreciate an easier way to appeal denied claims. Even highly-educated professionals who study health policy for a living have trouble navigating the vague, intimidating waters of claims resolution. Consider the story of a Harvard master’s degree student detailed in this Atlantic article: “‘It took me hours of going over the insurance policy and hours of arguing with the insurance company over that insurance pamphlet,’ [Liz] said.” She was fighting Anthem over an erroneous $200 outpatient visit fee. Imagine what it would take to resolve a hospital stay, with multiple tests and procedures involved, with thousands of dollars in the balance? Who, especially among our most vulnerable patients, has time for that?
Finally, consumers would appreciate plans that offer flexibility and customization. People want insurance that takes their needs and preferences for different doctors and services into account, rewards health-promoting behaviors with discounts in the way that car insurance companies give safe-driving discounts, and enables people to switch their plans with ease. In short: policies built for a person, not a population.
Although all of these three changes – billing and payment transparency, easier claims resolution, and flexible customization – are against the interests of established insurance companies, these firms will be forced to meet their members halfway and earn their business with more customer-friendly practices. Failure to do so will leave the door open for startups like Oscar, or emerging “consumer-oriented and operated” (CO-OP) plans to enter the market and challenge them.
Insurers are becoming consumer-friendly after years of catering to private and public employers. Consumers will benefit from this change, but only if they become more vocal about what exactly they expect from their insurers.
NOTE: The views expressed here are those of the authors and do not necessarily represent or reflect the views of Healthcare, Inc. and HealthCare.com
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