Manhattan insurance startup Oscar Health has raised another $165 million from investors, the company's chief executive, Mario Schlosser, and co-founder Joshua Kushner, wrote in a blog post. The funds will help the company expand to more markets and invest in the technology platform it uses to interact with members and lower their health costs.
"This infusion of capital will help us accelerate the pursuit of Oscar's mission: giving consumers the kind of affordable, high-quality health care they deserve," Schlosser and Kushner wrote.
Oscar, which has raised more than $800 million in all, will use the new funds to replicate its strategy in four to five additional cities per year. In each, it will partner with one or more major health systems to "secure competitive prices." Better reimbursement rates are possible because Oscar creates so-called narrow networks, which limit choice and drive patients to its partners' hospitals and doctors.
In New York, its partners are Mount Sinai Health System, Montefiore Health System and the Long Island Health Network, which is anchored by Catholic Health Services. In northeast Ohio, it recently partnered with the Cleveland Clinic.
The round was led by Brian Singerman and San Francisco–based Founders Fund, with investment from two subsidiaries of Alphabet, Google's parent company: Capital G, its growth equity investment fund, and Verily, its life sciences research organization. Other participants included 8VC, Fidelity, General Catalyst, Khosla Ventures and Thrive Capital, a Manhattan investment firm created by Kushner.
The investment brings the company's valuation to $3.2 billion, according to a source with knowledge of the company's finances. It was valued at $2.7 billion when it last raised money, in 2016.
The insurer has 235,000 members who continue to pay premiums in six states, including New York and New Jersey. It expects to generate $1 billion in gross premium revenue this year.
The company, headquartered in the Puck Building in SoHo, has become a major employer in New York's burgeoning technology sector, with 380 of its more than 700 employees working locally.
Oscar was founded in 2012 but began selling plans to individuals who don't have employer-sponsored insurance in late 2013, when the Affordable Care Act's insurance marketplaces opened. It sells plans on that exchange and directly to customers. Last year it launched offerings for small businesses.
The company aims to make using a health plan a less painful experience by leveraging technology. Members receive free 24/7 telehealth calls and are connected to a concierge team made up of a nurse and customer service representatives.
But Oscar has yet to generate a profit. It lost $127 million in the three states where it sold plans last year on $390 million in gross premium revenue.
Oscar said it is generating more revenue in premiums than it is paying out in medical claims. But administrative expenses are wiping out its profitability.
In a recent interview, Schlosser said the insurer is better-positioned now that it is processing claims internally and building its own network of doctors and hospitals—two functions it had initially outsourced. Those investments have prepared Oscar to grow, but in the short term they have eaten into profits.
"We didn't build the organization for managing 200,000 members," he said, noting that Oscar will soon be able to process claims for 3 million members.
"Oscar raises $165 million with backing from Alphabet companies" originally appeared in Crain's New York Business.
