Oscar Health’s narrow-network strategy yields first-ever profit

Health insurance startup Oscar Health posted a profit in the first quarter of 2018 after expanding its footprint and growing membership in the individual insurance market.

The quarterly profit—the first Oscar has reported since launching five years ago—signals that the health insurer’s strategy of creating narrow networks through partnerships with major brandname hospital systems may be a winner.

Oscar serves members in six states and partners with heavy hitters like Cleveland Clinic; Tenet Healthcare Corp. in Dallas; and Mount Sinai Health System and Montefiore Health System, both in New York City. It enrolled 252,000 individual members in 2018 and 240,000 paid their premiums; that’s up from about 100,000 members in 2017, when it operated in three states.

Oscar recorded a net profit of $7.4 million in the first quarter and premium revenue of $312 million, more than three times what it reported in the prior-year period. The insurer said it is on track to generate $1 billion in premium revenue this year. In the first quarter of 2018, Oscar reported a medical-loss ratio of 70%, up substantially from the 95% loss ratio for full-year 2017 and 120% in 2016. The ratio represents the percentage of premiums spent on medical care and quality improvement activities. The lower the figure, the better for the insurer.

Oscar previously blamed its historically high medical-loss ratio on individual market instability and the failure of the federal government to pay health plans the funds owed them under the ACA’s risk-corridor program. Oscar CEO Mario Schlosser has said that his goal is to maintain a 2018 loss ratio somewhere in the 80s, which would be more in line with its peers. ●