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You are here: Home / Anderson On Health Insurance / Only took a decade

Only took a decade

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OSCAR Health plan, did something that I had long been skeptical it could do.

It turned a profit in the 1st quarter.

Net Income: $178 million, a $217 million improvement year over year.

It only took 10 years and lighting several billion dollars on fire trying to reinvent the wheel instead of being a fairly boring insurance company that gets decent provider contracts from hospitals and crushing its admin expenses to a level that is sort of kind of reasonable instead of obscene. It also benefitted massively from higher interest rates as it has a big cash pile accumulated for future risk adjustment payments that is collecting interest. The interest gains are most but not all of the profits. But hey, insurers are investment vehicles with weird cash policies — so not screwing this up is a good thing as they could have invested in Beanie Babies or DJT Media instead of Treasuries.

2016 Dave got this one wrong — OSCAR if it tries to be a modestly competently run insurer without the technobabble can be profitable — but it only took a decade and lighting several billion dollars on fire to focus on the competent part.

Reader Interactions

11Comments

  2. 2.

    Snarki, child of Loki

    “Lighting billions of dollars on fire” seems to be a techdude thing.

    Maybe they should all go to Burning Man Cash and let more people enjoy the spectacle.

  4. 4.

    LeftCoastYankee

    The idea that rich investors throwing tons of cash at arrogant tech bros who refuse to learn the existing business, until the time they learn that business (or at least make money) is somehow efficient is truly insane.

    Organizational tech is not consumer tech, but “something something Steve Jobs…”

  5. 5.

    TBone

    Founded in part by Jared Kushner’s brother Joshua.  Doesn’t want to pay for old people claims anymore, moving into the younger people claims market. Olds are “unsustainable.” Revenue streams, doncha know.

    The company is exiting the Medicare Advantage market due to unsustainable provider relationships, which could impact its product diversity and revenue streams.

  6. 6.

    TBone

    A report by the New York Times in October 2017 speculated that Oscar Health had ties to Saudi Arabia. That month, Jared and Joshua Kushner visited Saudi Arabia’s Crown Prince Mohammed bin Salman within days of each other. Despite Jared severing ties with Thrive Partners when he began working for the Trump administration, these coordinated visits raised questions about his ability to be impartial on Saudi affairs. Five months after Joshua’s visit to Saudi Arabia in October 2017, Oscar Health announced a $165 million round of financing.[18]

    While a spokesman for Kushner said that Oscar Health’s management didn’t know of direct investment by the Saudis, he declined to disclose if Saudis had invested in Thrive funds. He only confirmed that Thrive hadn’t received money from any Saudi parties since the presidential election. In May 2018, Jared Kushner disclosed $8.2 million in capital gains from Thrive funds.

    Ptuey I feel dirty.

  7. 7.

    Anoniminous

     

    With 30 or 40 trillion in cash and cash equivalent floating around the Invest-O-Sphere seeking return losing 10 or so billion is no big deal, a big nickel.  They just use the loss to eliminate any tax due & move.on.

  8. 8.

    Fraud Guy

    I guess they could stay solvent longer than the market could remain irrational.  I mean, they ended up solvent even though the market remained rational.

  9. 9.

    Keaton Miller

    Hey, they didn’t just light several billion dollars on fire, they purchased (and created!) bespoke data at reasonable rates! Even the wake they threw up in the insurance business should produce at least a couple of decent papers…

  10. 10.

    BradF

    Im glad you posted on this. I thought of your past posts on Oscar when the news hit. New CEO, yes, but if its just RA float earning interest, the fundamentals are still a sinking ship. What changed in their business model? Are they a different company with a techie approach or more of the same a la UHC and friends?

    Brad

  11. 11.

    David Anderson

    @BradF: Some of it is interest rate float, a lot of it is that they are actually pricing to risk adjustment and cut back substantially on their administrative back-end (ie all the programmers and software developpers that were going to make them the hot new thing)

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