Alphabet Invests $375 Million in Tech-Driven Insurer Oscar Health to Transform U.S. Healthcare Market

VCBeat (WeChat ID: vcbeat) has learned that on August 14, 2018, U.S. time, Alphabet, the parent company of Google, invested $375 million in the health insurance company Oscar Health. With this investment, Oscar Health’s total funding has surpassed $1 billion.

In a statement, Mario Schlosser, CEO of Oscar Health, said that Oscar plans to use the funds to expand its individual health insurance exchange and small employer markets, and to enter the lucrative senior health insurance market by serving individuals aged 65 and older. Oscar Health referred to this initiative as “Medicare Advantage for 2020.”

Alphabet and Oscar Health have maintained close ties in recent years. As early as 2016, Oscar and Verily, an Alphabet subsidiary, explored a partnership to manage healthcare coverage for thousands of low-income residents in Rhode Island. Although this proposal never came to fruition, Verily remains highly interested in the insurance industry.

In March this year, Oscar Health secured $165 million in financing led by Founders Fund. Capital G, an Alphabet subsidiary, and Verily, its life sciences division, also participated in the round. Reportedly, Oscar Health’s cumulative fundraising had approached $900 million at that time, with a valuation reaching $3.2 billion.

A few months later, Alphabet once again made a substantial investment in Oscar Health, acquiring approximately 10% of its shares. As part of this strategic investment, Google’s early employee and formerYouTubeCEO Salar Kamangar will also join the board of directors of Oscar Health.

Oscar Health's Historical Financing
 

Oscar Health is a technology-focused health insurance company headquartered in New York, United States. It was co-founded in 2012 by Mario Schlosser, Josh Kushner, and Kevin Nazemi (who has since exited). The three founders were classmates at Harvard Business School, and Josh Kushner is the brother of Jared Kushner, an advisor to President Trump.

In 2012, Kushner was hospitalized for a sprained ankle, and Schlosser also spent time in the hospital due to his wife’s pregnancy. At that time, the complex hospital billing system left both of them with a very negative experience. Inspired by this, they decided to found Oscar Health, aiming to transform the health insurance industry through telemedicine, healthcare-focused technological interfaces, and a transparent claims pricing system.

According to Mario Schlosser, CEO of Oscar Health,The company’s goal is to do for healthcare what Uber did for the taxi industry: leverage smart digital technologies to deliver faster, easier solutions for customers, and then use the collected data to build entirely new services that, in turn, generate even more data.

Oscar Health describes itself as “the first technology-driven health insurance company in history.” The company ranked 12th on CNBC’s list of the “World’s Top 50 Disruptive Companies of 2018.”The company integrates technology, supplier partnerships, and member experience to provide patients with clearer health insurance pricing, while also offering physicians more flexible payment options.

In recent years, Oscar Health has begun charging higher premiums and now offers a so-called “narrower network,” which uses technology to connect members with physicians, encouraging them to access a curated group of high-quality healthcare providers.On Oscar’s personalized platform, users can select their desired physicians through a doctor-matching feature. The platform hosts hundreds of in-network providers, ranging from primary care physicians and pediatricians to gastroenterologists and cardiologists.

Since 2013, Oscar has been providing health insurance services under the Affordable Care Act. The New York-based company has approximately 240,000 members this year and plans to expand into several new markets in 2019.

On April 25, 2017, Oscar announced its entry into the small-group insurance market, offering health plans in New York.

On June 15, 2017, Oscar announced a partnership with Cleveland Clinic to offer individual health insurance plans to consumers in five counties in Northeast Ohio.

On June 21, 2017, Oscar announced its intention to expand into other markets in Tennessee, Ohio, Texas, New Jersey, and California in 2018.

On July 12, 2017, Oscar announced that it would offer small-group health insurance to companies with up to 50 employees in the Nashville metropolitan area through a strategic partnership with Humana.

Currently, Oscar Health sells individual health insurance plans directly or through the Health Insurance Marketplace in states such as New York, Texas, and California. In 2019, the company planned to expand its operations to nine states, including Florida, Arizona, and Michigan.

Following this round of financing, Oscar Health’s plan to enter the Medicare Advantage market will position it against startups such as Clover Health and Devoted Health. In response, a spokesperson for Alphabet stated,“Alphabet has been investing in Oscar Health for years. We are pleased to further our investment to help Oscar enter its next phase of growth.”

At the same time, Oscar Health’s CEO Mario Schlosser also expressed great delight, “Alphabet’s involvement is a tremendous boon for us, as it truly allows us to focus entirely on the core model we have been building over the past six years: leveraging technology, data, design, and human expertise to create a fundamentally different healthcare experience. This is what we can achieve.”

“We can hire more engineers, data scientists, and product designers, as well as top-tier clinicians, to approach healthcare from different perspectives. This will accelerate our product planning. Second, we are launching new product lines, most notably our 2020 Medicare Advantage plan.”

“Oscar will accelerate the fulfillment of our mission to make the healthcare system truly work for consumers. We will continue to build out the member experience, lower costs, improve care, and bring Oscar to more people. As we enter the Medicare arena in 2020, we will deepen our expansion into the individual and small business markets,” said Mario Schlosser in an interview with Wired.