It’s been eleven years since the passage of the Patient Protection and Affordable Care Act, popularly known as ObamaCare, and it seems America is no closer to solving the problem of how to provide simple and affordable health care. Despite promises to the contrary, the government framework imposed on insurance markets has largely failed to reduce prices or increase consumer choice (if you like your plan, you can’t keep it), and with Joe Biden in the White House, we’re unlikely to see any efforts towards deregulation or decentralization any time soon. As usual, it’s up to individuals to find a way out of this mess.
Fortunately, individuals can be pretty resourceful. Just as Uber succeeded in making an end run around taxi monopolies and Airbnb offered much-needed competition to hotel chains, we’re starting to see signs of private, app-based health insurance as well. Oscar Health is an early entrant into this nascent market, relying heavily on telemedicine and negotiated prices with health care providers to insure its clients. In 2018, CNBC listed Oscar Health as one of its top 50 most promising “disruptors.”
But all is not well with the fledgling company. Struggling to make a profit, Oscar Health recently launched an IPO in an effort to raise badly-needed funds, but found its stock price quickly falling below the initial offering. It has had trouble attracting customers, perhaps due to fairly severe limitations on doctor and hospital choice, and currently insures just over half a million people.
So what’s the problem here? If competitive, private, app-based companies are the solution to our nation’s health care woes, why isn’t this one working any better than it is? There are probably a couple of reasons for this. First, it’s not at all clear that insurance per seis the right market to try to disrupt in the first place. One of the criticisms of ObamaCare has always been that, while it does increase insurance coverage, it does very little to improve access to health careitself. What people need is not better insurance, but greater choice and lower costs for care. It may be difficult indeed to convince consumers to abandon their current insurance provider in favor of a small upstart, but this would be a much lighter lift if such a company could provide direct access to reasonably-priced doctors without the need for insurance at all. We’ve seen something like this starting to emerge in the form of health sharing plans, but these have yet to embrace the high-tech approach favored by Oscar.
Second, the way in which Oscar Health has structured itself around so-called “skinny bundles” has been unattractive to consumers. The idea is to keep costs down by negotiating prices with a small network of doctors and hospitals, but the result is that patients are saddled with perilously few choices about their health care providers, mirroring the unpopular model of an HMO that many have already tried and found grossly wanting. Third, Oscar Health may suffer from a PR problem related to the fact that the company was cofounded by Josh Kushner, and has been publicly assisted by Jared Kushner, whose association with the Trump Administration no doubt leaves a bad taste in some consumers’ mouths.
The market is a discovery process, and we are admittedly in the early stages of exploring the ways in which new technology can help provide better access to health care. To be sure, Oscar Health is part of that process. Perhaps the company will overcome its difficulties and emerge as a major player in a few years, but more important than the fate of any individual firm are the lessons that we can take from its successes or failures. Ideally, we would want to see a diverse and competitive market for similar services, with the successful ones persisting while the failures quietly disappear. Oscar Health may not have cracked the code yet, but we can certainly profit from observing its efforts and drawing whatever lessons we may from them. For now, we may be optimistic that sooner or later someone is going to figure out how to do health care right, in spite of the stubbornly unhelpful efforts of government bureaucrats.
