Billion-Dollar Valuation Touchdown: How a Group of 'Silicon Valley Insiders' Built a Different Kind of Health Insurance Company

On April 2, Bloomberg News reported, citing sources familiar with the matter, that Oscar Health had entered into a new round of financing negotiations with venture capitalists, pushing the company’s current valuation to over $1 billion. Notably, founded in October 2013, the company has been in operation for less than two years and currently employs just over 60 people. What has enabled this startup’s valuation to far surpass that of traditional insurance companies?

Last year, Forbes magazine reported on Oscar Health, stating, “Investors have assigned the company an inflated price-to-sales ratio of 11x—indicating that they view Oscar Health as a high-growth technology company rather than a traditional insurance provider, akin to the relationship between Tesla and Ford Motor Company.”

Indeed, compared with traditional health insurance companies, Oscar Health is attempting to inject a bit of “Silicon Valley thinking” into the health insurance sector. The company’s official website indicates that this upstart in the insurance industry has begun selling individual insurance plans through health insurance marketplaces in New York and New Jersey. This move capitalizes on the momentum generated by the Affordable Care Act. Under this legislation, the Obama administration established national health insurance marketplaces (operated by both state and federal governments), which have created substantial profit opportunities for businesses in the health insurance sector.

Among the founding partners of Oscar Health, only CEO Josh Kushner comes from a traditional venture capital background; the others possess strong technical backgrounds. One partner, Kevin Nazemi, is a former veteran and senior executive at Microsoft, while another, Mario Schlosser, is an alumnus of the MIT Media Lab. The company’s Chief Technology Officer, Fredrik Nylander, is a former executive at Tumblr, the pioneering microblogging platform.

Oscar Health offers a simple, user-friendly website featuring a “Find Care” tool similar to Google Maps and a search function that allows you to input symptoms in plain English. It also enables you to compare prices for services such as magnetic resonance imaging (MRI) and provides free, on-demand phone consultations with physicians.

Oscar Health’s products target the tech community and younger demographics. Oscar’s individual insurance plans cover a wide range of healthcare services, including medical consultations, telehealth visits with physicians, preventive care, and generic medications. On the Oscar Health homepage, the prominently featured conditions and services include pregnancy, depression, asthma, flu vaccines, back pain, and acne. Users can consult physicians by phone regarding illnesses such as the flu (Oscar states that online enrollment enables users to connect with a doctor within one hour). The website also offers a robust search function for finding specialists. Similar to other insurers, Oscar collects data on medical experts for performance summaries, while also leveraging this data to provide user recommendations.

↑ It is not difficult to detect a strong Silicon Valley geek vibe in Oscar Health’s advertising and marketing copy.

According to Fortune magazine, Oscar Health has further committed to attracting customers by promising a daily $1 rebate if they exceed their daily step goals, with the Misfit wearable step tracker provided free of charge.

↑ Oscar Health encourages members to exercise by partnering with wearable device vendors to reduce disease risk

Oscar Health, in less than a year since its establishment, has already acquired more than 16,000 customers solely through its operations in New York State. With each user paying an average annual premium of $4,500, this has brought Oscar Health’s revenue to approximately $72 million.

Although Bloomberg reported that insiders declined to be named and refused to disclose the specific amount of this funding round because the deal has not yet been officially announced, given that the company’s previous financing round reached $80 million in May last year, the amount raised in this round is likely to be substantial as well.

A remark made by founder Kushner in a 2013 interview may shed light on why this cool newcomer to the healthcare sector has grown so rapidly: “Because we have deep expertise in technology, data, and design.”

(This article is republished with authorization from Health Point.)