Cleve­land Clinic pairs with Os­car to en­ter in­di­vid­ual in­surance busi­ness

Modern Healthcare - - INSURANCE - By Shelby Liv­ingston

De­spite wide­spread in­sta­bil­ity in the in­di­vid­ual in­surance mar­ket, the Cleve­land Clinic is bet­ting that a nar­row net­work plan fo­cused on keep­ing pa­tients out of the hospi­tal is just what the doc­tor or­dered.

The Ohio-based health sys­tem last week un­veiled plans for a joint ven­ture with New York-based startup Os­car Health. Cleve­land Clinic/Os­car Health will of­fer in­di­vid­u­als cov­er­age on and off the Af­ford­able Care Act’s ex­changes at a time when most in­sur­ers are jump­ing ship be­cause of fi­nan­cial losses and uncer­tainty as they wait for the Trump ad­min­is­tra­tion and Repub­li­can-con­trolled Congress to make reg­u­la­tory de­ci­sions. One of Os­car’s founders, Joshua Kush­ner, is the younger brother of Jared and brother-in­law of Ivanka Trump.

“If you put a prod­uct out in the mar­ket that is less like tra­di­tional health in­surance and sick-care ori­ented and much more a con­sumer prod­uct that peo­ple want to en­gage with, that they like to tell their friends and fam­ily about, that pays them a dol­lar a day to walk steps and things like that, you are go­ing to at­tract . . . plenty of 25- and 35-year-olds who just want to have good health­care,” Os­car CEO Mario Schlosser said.

The plan will launch in 2018 in five north­east Ohio coun­ties. The clinic will han­dle care de­liv­ery, and Os­car will pro­vide the so­phis­ti­cated tech plat­form and in­surance op­er­a­tions ex­per­tise. The goal is to im­prove out­comes and keep costs down by putting pa­tients at the cen­ter of highly co­or­di­nated care, the com­pa­nies said.

Each plan mem­ber will be paired with a Cleve­land Clinic care team, in­clud­ing a pri­mary-care doc­tor, physi­cian as­sis­tants and other clin­i­cians, as well as an Os­car concierge team made up of a nurse and three care guides to help the pa­tient nav­i­gate the health­care sys­tem.

“Think about the ba­sic in­surance com­pany’s mem­ber ex­pe­ri­ence. The only time a mem­ber deals with the in­surance com­pany is when the in­surance com­pany doesn’t want to pay a claim,” said Joel Klein, Os­car’s chief pol­icy and strat­egy of­fi­cer. “There’s noth­ing like this (plan) that’s com­pa­ra­ble.”

Cleve­land Clinic has been flirt­ing with en­ter­ing the in­surance busi­ness for years. The 50-50 joint ven­ture takes some of the risk from the sys­tem be­cause the com­pa­nies will equally share in the losses and prof­its. Os­car Health, which has strug­gled with fi­nan­cial losses in the past few years, gets to align it­self with a renowned sys­tem that it hopes will at­tract en­roll­ment. Os­car now cov­ers about 105,000 peo­ple, and ex­pects a few thou­sand to en­roll in Ohio in the first year.

The chal­lenges of en­ter­ing the in­di­vid­ual in­surance mar­ket aren’t lost on the com­pa­nies, which be­gan dis­cussing a joint ven­ture in Fe­bru­ary 2016. Many in­sur­ers have jumped ship be­cause of heavy fi­nan­cial losses and an un­clear reg­u­la­tory pic­ture for the mar­ket’s fu­ture. Health in­sur­ers have been fil­ing rates in the past few weeks with­out know­ing, for ex­am­ple, whether the Trump ad­min­is­tra­tion will fund cru­cial cost-shar­ing sub­si­dies that help low-in­come Amer­i­cans af­ford ex­change cov­er­age.

Os­car has strug­gled with losses de­spite rais­ing mil­lions in ven­ture cap­i­tal. This year, it sold cov­er­age on ex­changes in Cal­i­for­nia, New York and Texas. It lost more than $200 mil­lion on plans in 2016 and $120 mil­lion in 2015. Os­car pre­vi­ously pulled out of ex­changes in Dal­las and New Jer­sey, and re­cently filed re­quests with New York reg­u­la­tors to raise its in­di­vid­ual rates in the state by 11% on av­er­age.

Cleve­land Clinic Chief Fi­nan­cial Of­fi­cer Steven Glass ac­knowl­edged those losses, say­ing the health sys­tem an­a­lyzed Os­car to fig­ure out its chal­lenges and helped come up with a plan that both think would be suc­cess­ful in the Ohio in­di­vid­ual mar­ket.

Cleve­land be­came in­ter­ested in Os­car’s fo­cus on tech­nol­ogy and user en­gage­ment back in 2012, when the startup launched. Cleve­land Clinic later in­vested in Os­car in 2014.

“We’re not of­fer­ing a con­ven­tional in­surance prod­uct,” Klein said. “We’re of­fer­ing some­thing very dif­fer­ent, some­thing that the mar­ket and con­sumers have not seen, and we think that’s com­pellingly at­trac­tive to peo­ple.”

The 50-50 joint ven­ture takes some of the risk from the health sys­tem be­cause the com­pa­nies will equally share in the losses and prof­its.

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