Come for the politics, stay for the snark.

Never entrust democracy to any process that requires republicans to act in good faith.

Thanks to your bullshit, we are now under siege.

Their freedom requires your slavery.

People are complicated. Love is not.

Not so fun when the rabbit gets the gun, is it?

It may be funny to you motherfucker, but it’s not funny to me.

Let’s delete this post and never speak of this again.

When someone says they “love freedom”, rest assured they don’t mean yours.

Accused of treason; bitches about the ratings. I am in awe.

Putting aside our relentless self-interest because the moral imperative is crystal clear.

We still have time to mess this up!

Republicans do not pay their debts.

A Senator Walker would also be an insult to reason, rationality, and decency.

Authoritarian republicans are opposed to freedom for the rest of us.

Let me eat cake. The rest of you could stand to lose some weight, frankly.

Just because you believe it, that doesn’t make it true.

A sufficient plurality of insane, greedy people can tank any democratic system ever devised, apparently.

I’d hate to be the candidate who lost to this guy.

We’ve had enough carrots to last a lifetime. break out the sticks.

Republicans are radicals, not conservatives.

rich, arrogant assholes who equate luck with genius

I’ve spoken to my cat about this, but it doesn’t seem to do any good.

Damn right I heard that as a threat.

Let us savor the impending downfall of lawless scoundrels who richly deserve the trouble barreling their way.

You are here: Home / Anderson On Health Insurance / The other Oscar thread

The other Oscar thread

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Last week, Oscar Health Insurance demonstrated a core competency: bragging for reasons that I can not quite figure out:

And then their financials dropped for 2017.

The startup lost $127 million on $229 million of revenue in 2017, according to newly filed financial documents. That equates to a somewhat higher net loss margin compared with Oscar’s $205 million loss on $426 million of revenue in 2016.

OOPS

Looking at their financials there is some good news. They actually brought in enough premiums to cover their net claims. This is a big deal. It seems like their narrow network in New York got their pricing to a reasonable level instead of an OMG horrendous level that they had for their first three years. The rest of their claims expenses have either reasonable or actually good growth rates.

However two things are still leaping out at me. The total administrative costs Per Member Per Month (PMPM) are ridiculously high. In New York and Texas, general admin is over $80 PMPM and total admin is well north of $100 PMPM. Administrative costs have to get lower or premiums have to increase significantly. Medical Loss Ratio (MLR) require that at least 80% of premiums go to claims related expenses. Administrative costs and profits can be no more than 20% of premium. That means a profitable firm has to keep its admin costs to no more than a quarter of its claims expense. Oscar’s admin costs are about half their claims expense.

The other thing that is a problem is the net premium decreased. This is most likely due to significant risk adjustment outflows. Some of that is just 2016 estimates being bad accruing to 2017 but still their model targets comparatively healthy/young/digital savvy folks which means risk adjustment outflow estimation should be a core business capability.

And again from Axios:

Flashback: Oscar CEO Mario Schlosser at the J.P. Morgan Healthcare Conference this past January: “Our business model is working.”

I just don’t understand what Oscar does differently than my former co-workers, besides lose a tremendous amount of money every year.  They think they can get their MLR in the high 80s for next year, which is where a well run, lean insurer can profit but they are anything but a skinny insurer.  Call me an old fuddy duddy but I am confused as to how they get to profitability with their admin costs as they are even assuming everything else goes right.

My spreadsheet here:

Reader Interactions

13Comments

  1. 1.

    dr. bloor

    Call me an old fuddy duddy but I am confused as to how they get to profitability with their admin costs as they are even assuming everything else goes right.

    Dude, it’s OSCAR. They’re DISRUPTIVE. They paid for those Clif bars and ping pong table in the board room with ApplePay.

  3. 3.

    Amir Khalid

    I have a suspicion that this Oscar outfit is trying to Uber-ise healthcare insurance.

  4. 4.

    evodevo

    How much is being drained in to Executive pay? is it disappearing into someone’s pocket/Cayman bank account? Sounds like a 2000’s internet company to me lol

  5. 5.

    Brachiator

    but still their model targets comparatively healthy/young/digital savvy </blockquote. "Healthy, young" I understand. But digital savvy doesn't tell me much? And do the plans offered meet Obamacare standards?

  6. 6.

    SiubhanDuinne

    Isn’t Oscar connected to Jared Kushner? Or am I wildly misremembering something I read somewhere one time?

  11. 11.

    Barbara

    I suspect as I have for a while that Oscar utilizes a lot of outsourcing service arrangements for things like claims processing or even ancillary services that either don’t reduce costs as Oscar scales up, or do so at a scale that Oscar has not been able to attain. Even much larger entities struggle to attain every pmpm advantage they possibly can. And Oscar is tiny.

  12. 12.

    PJ

    I had Oscar coverage for a year. They denied coverage for three or four ordinary procedures/tests/visits that were clearly covered under the policy. I contested each one, and won, but I wonder if they were doing that for every customer, the administrative costs of dealing with that internally and with the appeals process might outstrip what they would gain from the people who acquiesced to the initial denial of coverage.

  13. 13.

    Barbara

    @PJ: You are right that denying things that will almost certainly be overturned on appeal is a waste of resources, but it’s doubtful that this is the cause of the administrative overload. It’s more likely that Oscar is like many other smaller companies that need to rely on things like contractor sales agents instead of an employed sales force, resulting in a huge percentage of potential profits being directed at people just to obtain sales. Oscar’s pitch is so heavily technology related that it makes me think it is outsourcing other service arrangements in a similar fashion, while it tries to manipulate the money and the data with its so-called digital wizardry.

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