Buzzy health startup Oscar is making a big bet on a crucial change to how you get your healthcare. The CEO shared how he thinks that will happen.

Lydia Ramsey,Zachary Tracer

Jan 16, 2020, 23:43 IST

Buzzy health startup Oscar is making a big bet on a crucial change to how you get your healthcare. The CEO shared how he thinks that will happen.

Oscar Health CEO Mario Schlosser thinks a big shift is coming in how Americans get their health insurance.
Schlosser thinks that over time, fewer people will get their health insurance through their jobs.
"I do think this will over time lead to a gradual then sudden disappearance of the employer market," Schlosser said during a presentation Monday at the J.P. Morgan Healthcare Conference in San Francisco.
Oscar currently sells insurance on the individual exchanges set up by the Affordable Care Act, to small businesses, and to seniors via Medicare Advantage plans. The company on Monday announced a partnership with Cigna to expand small-business insurance sales.
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Oscar Health CEO Mario Schlosser is keeping an eye out for a fundamental change in how Americans get healthcare.

For many Americans, their employers are the ones picking up the tab for their healthcare. More than half of the non-elderly population is covered by an employer-sponsored healthcare plan. Schlosser said he thinks that's not always going to be the case.

"I do think this will over time lead to a gradual then sudden disappearance of the employer market," Schlosser said during a presentation Monday at the J.P. Morgan Healthcare Conference in San Francisco.

He pointed to the introduction of the Individual Coverage Health Reimbursement Arrangement that allows employers to provide workers with pre-tax dollars they can use to go out and buy health plans on the individual exchanges or Medicare, rather than paying for group health plans.

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Unraveling employer-provided health insurance

Ideally, that could increase the number of people buying health insurance on the ACA's markets, making plans more affordable, he said. But it'll take some initial employers to pave the way and convince other companies that it's a feasible way to provide health coverage, he said.

"There's just so little logic for employers to be in the insurance markets that they've been in for the last 80 years," Schlosser told Business Insider in an interview on the sidelines of the conference. "That logic's going to eventually unravel."

Changing the way Americans get their healthcare isn't an easy task, even as employers are spending more on health insurance premiums than ever. Companies are reluctant to make big changes to the insurance that they give their workers.

"I think there's a system in place that employs millions of people, that for millions of people works really well. That's the employer-funded healthcare system." Progyny CEO David Schlanger, whose company works with self-insured employers to provide fertility benefits, told Business Insider.

Oscar expanded significantly for 2020

Oscar sells insurance on the individual exchanges set up by the Affordable Care Act, to small businesses, and to seniors throgh Medicare Advantage plans. The company had 235,371 members as of September 30, slightly more than the company had in 2018.

In 2020, the company expects to have 400,000 members and make $2 billion in gross premium revenue, Schlosser told investors on Monday.

That's in part because of the new markets it's entered in in 2020, offering private Medicare Advantage plans to seniors in New York and Houston. The company's also selling Obamacare plans in 12 new markets for this year, including in four new states.

Oscar has raised more than $1 billion from investors enticed by its promise of a new tech-driven approach to health insurance. In August 2018 it raised $375 million from Google's parent company, Alphabet.

Oscar's health plan collaboration with Cigna

During the presentation, Schlosser said that Oscar and health insurer Cigna would be joining forces to offer health plans to small businesses. The companies plan to identify four markets to enter by the end of 2020.

"This will let us go faster to more markets," Schlosser said.

He cited issues Oscar's had in the past in the small-employer market, such as challenges building networks of doctors and hospitals. For instance, if an employer based in New York had a few employees who lived in Connecticut, where Oscar doesn't have a network, it couldn't offer the plan to those employeess.

Eventually, the plan is to use the relationship with Cigna to offer small business coverage nationally, Schlosser said

"I think we can become one of the dominant small group players," he said.

The Cigna partnership helps demonstrate that Oscar's tech is modular enough that the company might be able to sell parts of it to different users, Schlosser said.

"We're still building all this stuff for ourselves," Schlosser said. "The first client is still Oscar."

For Cigna, working with Oscar helps the insurance giant sell to small companies with fewer than 50 employees. Cigna hadn't previously targeted those companies, an executive said.

"What this does is bring a fully insured choice to that 1 to 50 small group marketplace," Julie McCarter, vice president of product solutions at Cigna, told Business Insider.