Oscar Health Care Insurance: The Comprehensive of Future Of Healthcare At A Reasonable Valuation

1. Introduction :

Oscar Health (NYSE:OSCR) is an insurance-tech company founded in 2012 after the passage of the Affordable Care Act. It aims to solve the problems created by the complexities and inefficiencies in the health care insurance industry through a user-friendly front-end and powerful algorithms that put the customer first.

2.Thesis of Oscar Health Care's insurance offerings :

Its stock has dropped over 80% since its IPO, for reasons that seem more related to broader market sentiment rather than any company-specific reasons. Oscar Health represents a lucrative opportunity for investors due to its low valuation, unique offering of consumer-facing insurance, growth potential from its SaaS business, macroeconomic trends favorable to the company, and consumer-facing brand that separates it from the big health insurance companies.

Oscar is changing the way users interact with insurance. A patient starts by first going to the Oscar platform and engaging with their Care Team, which has 6 experts, including a registered nurse, to help the patient understand what's covered under the plan. 

In addition, it is where they find doctors and specialists and scheduling appointments and follow-ups. Then, Oscar Health Care provides a good estimate of a patient’s costs before they go to the hospital. Many insurance companies don't offer this easy access to cost data at all; for companies that do, Oscar's tool is said to be the most advanced that exists.

Oscar Health Care analyzes data from previous hospital visits from other users, and is able to identify the best doctor to treat a certain issue (i.E. Oscar’s database will show one doctor as the best doctor for a broken ankle because he has successfully performed this surgery on 100 patients that year). The algorithm also tries to identify the most cost-effective provider to seek treatment. All of this information is calculated in Oscar’s backend and presented to users through their intuitive interface as well as their designated care team.

3.Oscar :

To further show Oscar’s move towards transparency, look no further than their $3 drug list, where users pay only $3 for the 88 most common generic drugs consumed - ordered on the app and delivered to users. To summarize, Oscar makes healthcare more efficient and transparent through their reliance on big data and a customer-friendly experience.

4. Macroeconomic trends :

One of the biggest tailwinds for the ACA market is the rise of the gig economy, which compromises individuals who operate as independent contractors. Without an official employer, these workers need to purchase their own insurance instead of being offered insurance from their work. Report says that as many as 55 million Americans are already gig workers. With workers increasingly seeking more flexibility in their work, estimates say that by 2023, half of the US workforce would be engaging in or have tried gig work. With only 594,000 members so far, Oscar has lots of room to grow from these secular tailwinds.

In the current healthcare system, almost 50% of health care insurance is issued by employers. When Americans change jobs every 4.2 years on average and their insurance is tied to their companies, their insurance inevitably changes as well. As a result, the average insurance member’s tenure is only 3 years. 

However, this presents a problem because it doesn’t give any incentive for the big established insurance companies to optimize their patients' healthcare for the long term. These sorts of structural mechanisms create an inefficient market, as seen by the rise of employer insurance premiums that have consistently outpaced the inflation rate.

In addition, this constant switching of insurance companies presents not only inconvenience for patients but also dangers. When patients have to switch insurance plans, they also lose their primary care provider who understands their conditions in depth. 

Furthermore, it would mean that patients need to personally keep track of their medical history and regimen. In terms of the health insurance companies themselves, not optimizing for long-term care could mean cutting back on costs like preventative care - because they don’t see a return on investment for insurance companies in a short time period. 

With Oscar Health Care Insurance, since people are not forced to change insurance plans when they switch jobs, it can instead optimize for the patient’s long-term health, ultimately leading to healthier patients and improved margins for Oscar (since insurance companies benefit when patients are healthier and require less care).

5. Oscar Brand :

All of the grievances and dissatisfaction associated with the current health insurance companies is what makes Oscar such a viable candidate to succeed. Although big insurance companies - with the immense capital that they have - are already trying to replicate some of the tech solutions that Oscar has incorporated, Oscar could ultimately pull ahead because of its consumer-focused brand that focuses on a patient’s long-term health. For example, Oscar pays members up to a dollar a day for completing their steps, directly incentivizing its users to be more active and healthy. It seems gimmicky, but these initiatives reflect Oscar's brand of truly looking out for the customers' long-term health. As a result, looking at customer satisfaction, Oscar has an NPS of 40, compared to a health insurer average of 3, according to Forrester Research.

6. Oscar's Health Care :

In addition, Oscar has already established itself as an app-based insurance company, meaning most consumers purchase Oscar with the notion that they should be maximizing the use of their software. Meanwhile, it will take longer and more nudge for buyers of traditional health care insurance to switch to their apps and reap the benefits that Oscar health members have. However, was believed although competitive pressures certainly exist, Oscar health care insurance can remain a niche healthcare provider and still reap impressive revenue – boosting its valuation – due to the sheer size of the market. The growth of the gig economy and the younger generation seeking the transparency and ease-of-use of Oscar provide enough tailwind to significantly boost its revenues.

7. Oscar Health - SaaS business potential :

One of the main selling points of Oscar is that it has been investing heavily into R&D for its platform in the last decade. The technology has been built, now it’s just up to Oscar to successfully cut deals. Oscar launched Oscar+ early last year, which is aimed at selling its software sub-stack to hospitals and other health systems. The end goal of Oscar is not becoming the biggest health care insurance in the United States. Rather, it seems content in capturing its share of the market, but expanding its offerings and revenue through Oscar+ to other health insurance systems and hospitals.

8. Hospitals :

Although progress has been slow, the government is incentivizing hospitals to switch from a traditional fee-based model to a value of care model. Previously, hospitals were paid for how many procedures and patients they served, but a value of care approach means that hospitals are compensated for how effective their treatment is. Making this transition requires much more emphasis on looking at patient data, something that Oscar has built the infrastructure for.

Another reason hospitals want to partner with Oscar is its frontend: the user experience it offers, the virtual visits and care team, transparency with understanding costs, and ease-of-use of finding the right doctors.

9. Payers :

Oscar Health's technology is equally sought after by its competitors. Cigna, one of the biggest health insurance companies in the nation, partnered with Oscar to launch its insurance for small businesses. The partnership utilizes everything that’s available on the Oscar’s platform and connects them with the vast networks that Cigna already has. In their Q4 2021 earnings call, Oscar reports that one of their clients saw a savings of 20% after leveraging Oscar. This partnership shows the strength of Oscar’s proprietary tech and that it's fundamentally very valuable.

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