| What Oscar Is Up Against (http://go.theinformation.com/152dc2) > After two years in operation, the financial trajectory is becoming clear, both in terms of the growth and the costs. In New York, the company projected a sevenfold increase in premium revenue next year to $399 million from 2014. But it also projects a loss of 12% of premiums, equivalent to $47 million, according to regulatory filings. ... > Oscar’s losses stem from two sources: higher medical costs as a percentage of premiums than rivals, and higher administrative costs, both of which are traditionally problems of scale in the industry. > In New York, it projected that 91.5 percent of premium revenues would be eaten up next year by medical claims costs, among the highest projected ratios in the state. That leaves little left over to pay for administrative costs, estimated to be 17 percent of premiums next year, or taxes and fees. Included in administrative costs are the company’s engineering and marketing costs. > History says insurance companies need at least 200,000 to 300,000 members in a state to be viable, according to Ash Shehata, a partner in KPMG’s health care practice; Oscar had 38,000 members in New York and New Jersey as of June 30, with plans to expand to Texas and California this year. ... > But Oscar believes it can succeed as a sustainable and profitable business with only 80,000 to 100,000 members per state, according to a person familiar with the company. Though scale is important to contain administrative costs, the person said, Oscar’s plan is to avoid playing the big insurance company game of using size to negotiate lower claims costs with providers. Instead, it will curb claims costs by partnering closely with select providers to exchange data. 'Partnering closely with select providers' is probably the same thing you're referring to - pre-paying facilities for services. |
This sounds dumb to me.