Can Selling Insurance Directly to Patients Transform the Healthcare Landscape? Oscar Health's Consumer-Centric Approach and Product Innovation

On the sixth floor of the historic Puck Building in London’s SoHo district lies the headquarters of Oscar, a health insurance startup that has been selling individual health insurance plans for just two years. Sharing its name with the Academy Awards, Oscar’s office design is equally theatrical: the walls are as thick as two blackboards, the kitchen is stocked with kegs of beer, and the conference rooms are named after famous Oscars—among them, one door bears the name “Bluth,” a character from the TV series *Arrested Development*.

“We want to recommend the best health insurance concept to people—simple, thoughtful, and friendly.” This is the slogan printed on the wall bulletin board. Oscar is one of the upstart companies that has ambitiously sought to reshape the health insurance industry in recent years.The Affordable Care Act (ACA), enacted into law in 2010, has created unprecedented opportunities for businesses to transform the way Americans purchase and consume health insurance.



“The Affordable Care Act” incorporated health insurance into the mandatory coverage scope, giving rise to a monopolistic market. It led to the establishment of health insurance exchanges, providing a more accessible pathway for those who were previously uninsured. Meanwhile, it coincided with the widespread adoption of high-deductible health plans, which feature lower annual premiums but require higher out-of-pocket contributions, thereby encouraging consumers to make more informed insurance choices.

At the same time, it has begun to reward medical practices that prioritize service outcomes over service volume, using value as the metric. This approach establishes new incentive mechanisms for healthcare providers, creates financial incentives for medical personnel, and reduces unnecessary costs.

Five years after the passage of the Affordable Care Act, the question we face is how the health insurance industry should evolve. In recent years, two distinct approaches have emerged to address the conflicting interests among policyholders, insurers, and patients.

First, focus on the relationship between the policyholder and the patient to fully leverage transaction opportunities. Second, strive to strengthen the financial alliance between policyholders and insurance companies. Although both parties are seeking system improvements, their approaches should reflect innovation through distinct strategies, with careful consideration given to how insurers can be significantly impacted in the short term.

Oscar, which sells insurance directly to individuals, is the most prominent example of the consumer-facing model. In September, Google’s growth equity fund announced a $32.5 million investment in Oscar, bringing its total valuation to $1.75 billion.

From Oscar’s mobile-friendly web design to its rich animated advertisements and its official homepage link (hioscar.com), the company’s clear objective is to attract consumers by making typically hard-to-accept concepts more palatable.Having amassed over 40,000 members in New York and New Jersey, it plans to expand its operations to Texas and California in November.



Critics have questioned whether Oscar’s flexible marketing strategy is merely a veneer for traditional health insurance plans.However, Oscar’s CEO, Mario Schlosser, stated that the key to marketing lies in creating diverse types of insurance plans, adding, “We have a distinct advantage: a large member base.” This substantial population enables the company to implement innovative incentive mechanisms that positively influence patient behavior.For example, last year, Oscar began offering cash incentives to certain members for receiving influenza vaccinations. As a result of the monetary reward, the number of patients applying for vaccination doubled.

Oscar is also the first health insurer to offer its members free, unlimited access to telemedicine. Schlosser stated that this initiative has reduced unnecessary office visits and emergency room trips. Traditionally, diagnosing abdominal pain could cost insurers over $1,000; in contrast, a telemedicine consultation costs only $57. Meanwhile, patients pay nothing out of pocket, thereby avoiding substantial cash transactions.

“Our members are the ones truly using it,” Schlosser told me. “Although we pay for these consultations, overall it saves costs for the entire system rather than increasing spending.”

Despite this, the direct-to-consumer strategy presents its own challenges. For instance, companies must offer competitive pricing to gain market share.—This is a strategy that is difficult to sustain, particularly for startups, which lack sufficient capital to buffer their losses.

To enhance healthcare competitiveness, the government has sponsored numerous nonprofit “Consumer Operated and Oriented Plans” (CO-OPs), such as Oscar, which offers insurance plans on the exchanges. In September, regulators announced the closure of New York’s largest CO-OP, Health Republic Insurance of New York, after it incurred losses of $50 million in the first half of the year. To date, eight CO-OPs nationwide have shut down, primarily due to substantial financial losses and lower-than-expected revenue.

Another major limitation of the direct-to-consumer model is whether the market size is sufficiently large.Last year, only 7 million people purchased insurance through the exchanges. The Congressional Budget Office revealed that funding would hit a bottleneck within five years, falling below $2.5 million. In contrast, 15 million employees obtained insurance through their employers last year.

This imbalance could shift—for example, if more employers adopt “private” exchanges exclusive to their employees, providing fixed allowances to subsidize their insurance costs. A report from the Kaiser Family Foundation indicates that although only 2% of employees enrolled in private exchanges this year, one-fifth of workers are considering this model. Schlosser stated that by addressing “ground-level” employee needs, Oscar Health aims to eventually penetrate the employer-sponsored insurance market.



Although consumers often serve as the litmus test for products, allowing them to make autonomous decisions also presents challenges.“When I became a physician, I struggled with the two options provided by my employer, unsure which one to choose. Research shows that consumers often make poor decisions when faced with an abundance of choices. ‘Throwing your employees into an exchange does not align with a user-first philosophy. That is simply laissez-faire!’ said Ali Diab, co-founder of Collective Health. He emphasized that helping employees design and implement structured insurance plans is aimed at enhancing their work performance and productivity, rather than turning them into benefits experts.”

Perhaps the harshest criticism of consumer-centric strategies is that, despite all the hype, they do little to curb rising healthcare costs. This is because complex chronic diseases drive a significant portion of medical expenditures, and healthcare providers still control the majority of spending decisions related to disease management.

In 2013, a survey on healthcare expenditures led by the Agency for Healthcare Research and Quality (AHRQ) revealed that 5% of the population accounted for nearly half of all healthcare spending. To improve treatment outcomes for patients with serious illnesses and reduce costs, it is essential to adopt more flexible technologies and efficient, user-friendly communication strategies. These measures will also strengthen relationships with healthcare providers, facilitating a better understanding of how they adjust to changes in Medicaid policies and healthcare systems within clinical practice.

Translation: Liu Jianqiu

Editor: Zhang Nan