Oscar Health is halting individual market insurance sales in Florida weeks before the end of this year's open enrollment period, the company announced Monday.
New Florida customers will not be able to sign up for the insurtech’s health insurance exchange plans beginning Tuesday. In accordance with federal law, existing members will be able to renew their Oscar Health coverage anytime during the annual sign-up period, the company said in a news release. Regulators in Florida or elsewhere have not implemented corrective action plans for Oscar Health, a company spokesperson wrote in an email.
“This temporary pause in Florida is the result of proactive steps Oscar took in light of other market exits to ensure that our projected membership does not exceed the company’s targets for 2023 and allows us to maintain our strong financial position,” the spokesperson wrote. Oscar Health aims to achieve profitability in its insurance arm next year and overall profitability by 2024, the company previously advised investors.
Under the Affordable Care Act, a health insurance company may pause enrolling new exchange customers if it reports to authorities that it does not have the finances necessary to pay claims. Insurers must still ensure existing members have guaranteed renewability of coverage, however. The Florida Office of Insurance Regulation and the Centers for Medicare and Medicaid Services did not respond to interview requests.
Before Oscar Health can begin selling products to new customers in Florida—its largest market—the insurer will have to demonstrate to state and federal regulators that it has sufficient capital reserves, said Zach Baron, associate director of the Georgetown University Law Center’s health policy and the law initiative.
“Presumably, it's not just going to be flipping a switch back on. There would be some type of review and back-and-forth to make sure that they're not going to be in this situation again," Baron said. “It's really up to the regulators. My sense is they don't like to make a lot of operational changes in the midst of open enrollment.”
Federal regulators typically pause insurers’ enrollment during sign-up periods because of data errors, such as incorrect information about cost-sharing requirements, provider networks or benefits, said Tricia Beckmann, director of Faegre Drinker Consulting and a former CMS regulator. “It’s just like a corrective action plan,” she said.
A corrective action plan usually is the penultimate step before regulators push an insurer to exit a market. The federal government hasn't ordered a health insurance exchange carrier having financial problems to stop enrolling new policyholders since the early years of the marketplaces, when many cooperative health insurance companies experienced severe financial difficulties that led most to eventually shutter, Beckmann said.
Oscar Health began working with CMS during the third quarter to manage its membership during open enrollment to a level that "enables us to prudently manage our capital,” the company wrote in its quarterly filing to the Securities and Exchange Commission on Nov. 9. Oscar Health decided to undergo this process with regulators after other exchange insurers exited Florida, the company wrote in its filing. Rival insurtech Bright Health Group announced in October that it would be ending its exchange business in Florida and 14 other states.
Oscar Health is not working with regulators to pause its exchange enrollment outside of Florida, the company spokesperson said. The insurtech was co-founded in 2012 by Joshua Kushner and Mario Schlosser, and primarily operates as an unprofitable exchange carrier in Florida, Texas and California.
Nearly 60%, or more than 637,400, of Oscar Health's 1 million members are located in the Sunshine State. The insurtech has lost $117.4 million so far this year in Florida, nearly double the $9 million it lost there during the same period a year ago, according to state financial filings.
“If you're a health insurer and your capital position is so tenuous that you have to stop people from enrolling in your plan, should you really be allowed to enroll people overall?” said Ari Gottlieb, an independent healthcare consultant at A2 Strategy Group. “That's a question that no one has answered because we're operating on the fringes of regulatory oversight. This notion of multibillion-dollar startup insurers coming to market and growing aggressively just hasn't been something, historically, that regulators have had to be concerned with.”
Oscar Health’s pause on Florida membership represents one of a number of recent steps the insurer has taken to limit growth.
The company almost entirely shuttered its Medicare Advantage business this year, abandoning all of its plans except a single product in Broward County, Florida. That plan is marketed with Memorial Healthcare System in Hollywood and Holy Cross Health in Fort Lauderdale, which is part of Livonia, Michigan-based Trinity Health. The two Florida hospitals jointly own 50% of the co-branded plan.