Cleveland Clinic jumps into insurance biz with Oscar Health

While many health insurers are fleeing the individual market, health system Cleveland Clinic is jumping into the insurance business head first with the New York-based startup Oscar Health.

Ohio's Cleveland Clinic and the tech-focused Oscar said Thursday they are launching a joint venture health insurance company that will offer individuals coverage on and off the Affordable Care Act's exchanges at a time when most other insurers are jumping ship because of financial losses and regulatory uncertainty perpetuated by the Trump administration and Republican-controlled Congress. One of Oscar's founders is Joshua Kushner, the younger brother of Jared and brother-in-law of Ivanka Trump.

Despite the instability of the market, Cleveland Clinic and Oscar are betting that a narrow network plan focused on keeping patients out of the hospital with help from care coordinators will keep their product afloat.

"If you put a product out in the market that is less like traditional health insurance and sick care-oriented, and much more a consumer product that people want to engage with, that they like to tell their friends and family about, that pays them a dollar day to walk steps and things like that, you are going to attract … plenty of 25- and 35-year-olds who just want to have good healthcare," Oscar CEO and co-founder Mario Schlosser said.

Starting January 2018, Cleveland Clinic and Oscar will together offer individual coverage in five northeast Ohio counties. The renowned Ohio system will handle care delivery, and Oscar will provide the sophisticated tech platform and insurance operations expertise. The goal is to improve outcomes and keep costs down by putting patients at the center of highly coordinated care, the companies said.

Each plan member will be paired with a Cleveland Clinic care team, which includes a primary-care doctor, physician assistants and other clinicians, as well as an Oscar concierge team made up of a nurse and three care guides to help the patient navigate through the healthcare system.

"Think about the basic insurance company's member experience. The only time a member deals with the insurance company is when the insurance company doesn't want to pay a claim," said Joel Klein, Oscar's chief policy and strategy. "There's nothing like this (plan) that's comparable."

Cleveland Clinic has been flirting with the idea of entering the insurance business for years. The 50-50 joint venture takes some risk of the move away from the health system, because the companies will share equally in the losses and profits. Oscar Health, which has struggled with financial losses in the past few years, gets to align itself will a renowned system that it hopes will attract enrollment. Oscar now covers about 105,000 people and expects a few thousand to enroll in Ohio in the first year.

The challenges of entering the individual insurance market aren't lost on the companies, which began discussing a joint venture in February 2016. Many insurers have jumped ship because of heavy financial losses and an unclear regulatory picture of market's future. Health insurers have been filing rates in the last few weeks without knowing, for example, whether the Trump administration will fund crucial cost-sharing subsidies that help low-income Americans afford exchange coverage.

Oscar too has struggled with losses despite raising millions in venture capital. This year, it sold coverage on exchanges in New York, California and San Antonio. It lost more than $200 million on plans in 2016 and $120 million in 2015. Oscar previously pulled out of exchanges in Dallas and New Jersey, and it recently filed requests with New York regulators to raise its individual rates in the state by 11% on average.

Cleveland Clinic Chief Financial Officer Steven Glass acknowledged those losses, saying the health system analyzed Oscar to figure out its challenges and helped come up with a plan that both think would be successful in the Ohio individual market. Regardless of what happens with the ACA public exchanges, Glass said, "There's still going to be individuals out there that are interested in buying products."

Schlosser said the individual market would surely be different in the future, but is betting it will be "a good market to deliver health insurance in."

Cleveland became interested in Oscar's focus on technology and user engagement back in 2012, when the startup launched. Cleveland Clinic later invested in Oscar in 2014. "We were very intrigued about a technology platform that focuses on how the provider can better engage with the patient," Glass said. Cleveland Clinic has been focused on expanding its telehealth capabilities, and Oscar's mobile-friendly platform allows patients to set up a telehealth visit in minutes, he said.

"We're not offering a conventional insurance product," Klein said. "We're offering something very different, something that the market and consumers have not seen, and we think that's compellingly attractive to people."