Oscar, a New Health Insurer, Raises $30 MillionMonday, 13 January 2014 09:23
Most of the darlings of the last few years have been consumer-focused start-ups, like Instagram and Warby Parker. But a group of investors, including the venture capitalist Joshua Kushner, are doubling down on a bet on health insurance.
Oscar, a health insurer co-founded by Mr. Kushner, has raised $30 million in new capital from existing investors, the firm plans to disclose this week. The financing was led by the Founders Fund, the venture capital firm co-founded by Peter Thiel. It also includes Mr. Kushner’s firm, Thrive Capital, Khosla Ventures and General Catalyst Partners.
Open for business since October, the company has grown rapidly. The newest fund-raising round, which ome after an initial round of about $35 million, values the insurer at roughly $340 million. Mr. Kushner will remain chairman, while his co-founders, Kevin Nazemi and Mario Schlosser, will run the firm day to day.
It’s an unusual bet that technology can transform one of the stodgiest industries around: health insurance. While Oscar’s fundamental business model doesn’t upend the traditional insurance industry playbook, the three are betting that a service provider can thrive on being friendlier and easier to use.
“Our ethos and mission is to create a good consumer experience,” Mr. Kushner said in an interview. “We wanted to create an experience like having a doctor in the family.”
For now, Oscar only serves New York City and a few other counties in lower New York State. But Mr. Kushner said that the firm was aiming to eventually expand across the country, a process made easier by already being licensed in one state.
Oscar still charges deductibles and monthly payments. But the company focuses on offering other services intended to make life easier for patients, including free generic drugs, free calls to doctors and a handful of free primary care appointments.
The start-up also focuses on design and technology, including an online search function that lets patients type in their symptoms in natural language, then being steered to a doctor that suits their needs.
To Mr. Kushner, such services are meant to undercut the idea of insurance companies as faceless middlemen. “People just don’t have a relationship with this kind of entity,” he said. “The existing players don’t care about satisfying the customer.”
The company’s services are currently available only through New York State’s health insurance exchange, though Mr. Kushner said that the technical troubles of healthcare.gov haven’t hurt business.
It’s unclear whether a shinier, friendlier insurer can translate into profit, though Mr. Kushner said Oscar already had thousands of customers and tens of millions of dollars in revenue.
While the company has already raised more than $75 million in its short existence, people briefed on the matter said that it wasn’t because of a high cash burn. (About $29 million of the insurance provider’s initial fund-raising was set aside for reserves; meanwhile, employees are trying to save money by taking steps like painting the walls of the company’s headquarters themselves.)