Hip insurance startup Oscar Health now struggling to keep head above water

New York City-based health insurance startup Oscar Health was once lauded as a disrupter among its more traditional contemporaries. With its quirky branding and emphasis on simplicity, it was coined the "hipster" health insurance company poised to "make health insurance suck less."

Now, Oscar is struggling, showing the challenges of keeping a business afloat in the state marketplaces created under the Affordable Care Act, The New York Times reports.

Oscar — valued at $1.75 billion as of February — currently offers plans in New Jersey, New York, California and Texas, having just debuted in the latter two this year. The insurer has gained 135,000 customers, about half of them in New York State, and it has had success with some of its technology efforts, according to the report. But Oscar lost $92 million in New York State last year and another $39 million in the first three months of 2016, The New York Times notes.

Oscar, like other companies, initially saw the potential of millions of new customers added to the individual market by the ACA, according to the report. But, the report notes, things have not turned out as expected, after insurers put prices on their plans that have turned out to be too low to make a profit. The individual insurance market has also been smaller than federal officials hoped, with 12 million signed up for coverage in 2016. Additionally, under the ACA, insurers must cover people with pre-existing conditions, despite expense.

Last year, only a quarter of insurers who sold individual policies on the exchanges appear to have made money doing so, according to the report, which cites a preliminary analysis from consulting firm McKinseyHealth insurance giants such as UnitedHealth Group have stopped offering individual coverage through ACA marketplaces in some states. Additionally, heavy financial losses have caused 12 of the original 23 health insurance co-ops created under the ACA to close. And just last month, a 13th co-op, Ohio's co-op, announced it is closing.

Even with the heavy losses, the individual market is not necessarily ready to fall in, The New York Times reports, as some insurers, including large companies like Anthem, plan to stay committed to the market, and some insurers have made money.

But the turbulence may prompt many insurers to seek double-digit percentage rate increases and tighten their networks, according to the report. Oscar, for instance, recently requested to raise rates by a weighted average of nearly 20 percent for 2017, the report states. Regulators will make a decision regarding the rate increases in August.

 

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