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Oscar loses millions on Affordable Care Act plans

Startup insurer posts $92.4M loss in New York, $12.8M in New Jersey

Not unlike the large U.S. health insurers with which it is competing, startup Oscar Insurance Corp. is facing financial losses tied to operating on the Affordable Care Act exchanges.

In 2015, the company lost $92.4 million in New York, the state where it started out, Bloomberg reports. That was primarily because Oscar spent more on medical costs for its 52,800 members in the state than it took in through premiums, an issue experienced even by industry giants including UnitedHealth and major Blue Cross Blue Shield plans.

In New Jersey, Oscar's medical loss ratio was more in line with the standard industry target of spending about 85 percent of premiums on medical costs, Bloomberg notes. Yet the insurer still lost $12.8 million in 2015--mainly due to administrative spending and startup costs.

Like other smaller insurers that operate on the ACA exchanges, Oscar also struggled with the significant shortfall in the federal risk corridor program and having to pay into the risk adjustment program, the article says. It paid $28.3 million in New York alone into the risk adjustment program, which critics have said unfairly penalizes smaller plans to the benefit of large for-profit insurers.

Meanwhile, in the new state markets that it has entered, Oscar is offering more narrow-network plans based on agreements with select providers. This is a shift in its initial strategy of offering broad provider networks, yet echoes some of the moves other insurers are making to stem individual market losses. It has appeared to pay off in Texas, where the insurer gained 43,000 members in its first year operating in the state, FierceHealthPayer has reported, yet Oscar has struggled to gain a foothold in California.

Despite its losses in some states, though, Oscar is currently valued at $2.7 billion after closing $400 million in financing late last month.

To learn more:
- read the Bloomberg article

Related Articles:
In an about-face, Oscar turns to narrow-network strategy to reach enrollment goals
Insurers move to stem ACA losses--but at expense of consumers?
Is the risk-adjustment program unfair to small insurers?
Small, startup insurers hope to compete on exchanges