On Jan. 1, 2014, the federal government will begin subsidizing millions of people’s health insurance purchases through Obamacare. “At that point,” warned Byron York, an influential conservative columnist with the Washington Examiner, “the Republican mantra of total repeal will become obsolete.”
Three years after the law passed, one year after the U.S. Supreme Court upheld it, and nine months after Republicans lost the election that might have allowed them to repeal it, the Washington conversation is still about Republicans’ rear guard actions to undermine the Affordable Care Act and profit politically from the damage.
But in a cavernous room in New York’s SoHo district, a group of entrepreneurs is working to render the entire Washington conversation over Obamacare obsolete. There, Obamacare is no longer a political controversy: It’s a business opportunity. And a trio of young technologists have raised $40 million to take advantage of it.
For Joshua Kushner, the epiphany came when he opened his insurance bill. “I realized I had absolutely no idea what it meant,” he said. “I’m overeducated. I run a growing business, but I don’t know what my benefits are, I don’t know what doctors or hospitals I have, I don’t know how to file a claim. So I picked up the phone and called 10 or 12 of my friends and asked if they had any idea how to navigate this amazing expense. None of them did.”
To Kushner, that signaled a business opportunity -- and a social one. The 28-year-old Harvard graduate is the founder of Thrive Capital, which invests in Internet and media companies, including Kickstarter and Instagram. “We hope to transform traditional industries,” he said.
But he was afflicted by the ennui that’s infected the latest crop of young coders. He quotes Jeff Hammerbacher, one of Facebook’s early employees, saying, “The best minds of my generation are thinking about how to make people click ads, and that sucks.”
So Kushner called his friend Kevin Nazemi, formerly of Microsoft Corp., and Mario Schlosser, of the Latin American social gaming giant Vostu Ltd., and they decided in January 2012 to take on one of the biggest, most hidebound industries of all: health care. The way to do it, they decided, was by transforming health insurance. “It’s just a beautiful vantage point for addressing these issues,” Schlosser said.
Starting a new health insurer is a nice thought, but an almost impossible task. At least, it used to be. That was before Obamacare upended part of the industry.
Come Oct. 1, all 50 states and the District of Columbia will open health insurance marketplaces (sometimes called “exchanges”) to serve people who don’t get coverage from their employer or a government program. The insurers in these online marketplaces won’t be able to discriminate based on existing conditions. They have to offer a core package of essential benefits and clear pricing information. And they’re about to see a flood of first-time customers.
In New York City, one of those insurers will be Oscar. That’s the name Kushner and his co-founders chose, hoping it would help humanize their company. “I don’t think we could do this without Obamacare,” Schlosser said. “You’d have to break into a market that’s been pretty ‘oligopolized’ with big insurers catering to brokers, agency houses and big employers. But now we have a direct connection to the consumer.”
The idea behind Oscar is that using your insurance should be as easy and intuitive as using your Facebook account or your Tumblr page. As Nazemi puts it, “We have a responsibility to take the friction and pain of engagement out of the process.” The experience is familiar to anyone who uses today’s leading social networks (the former head of engineering at Tumblr now works for Oscar). But for anyone who’s used the websites of Aetna or Cigna or Blue Cross Blue Shield, it’s something of a revelation.
Sign into your Oscar insurance account online and you’ll see a few carefully chosen options on a page that’s otherwise white and clean. At the top, you can type in your symptoms and be taken immediately to a guided set of options, including a button that lets you talk to a doctor. Click it, and a doctor will call you, wherever you are, whatever time of day it is, within 20 minutes. If you need to see someone, the site will offer a list of nearby providers, tell you which ones are recommended for your condition and tell you how much each is likely to cost.
It’s an elegant interface, but elegance isn’t its sole purpose. It’s built to funnel you toward the choices Oscar wants you to make. The same big-data methods at work in every major technology business are eagerly embraced at Oscar. Over time, the insurer hopes to get much, much better at knowing what people should do for a given set of symptoms and helping them decide to do that thing.
Schlosser tells the story of an analysis his team ran on a database of six years’ worth of anonymous medical claims. The team looked only at episodes that began with a headache and ended on the same day they started, which means no follow-up care was needed.
“Five percent of those episodes accounted for 35 percent of the costs,” Schlosser marveled. “The people in that 5 percent all ended up at the emergency room. That was probably people who had a headache on Sunday night at 4 a.m. when the doctor wasn’t there. If you could just take that issue and move it to a different layer of care, a nurse coming to visit you or going online with a televisit, that’s win-win-win. It’s a win for the consumer. It’s a win for the providers. And it’s more cost-efficient.”
That’s the larger ambition of the founders: to change health care by building an insurance website that people trust to guide them through their care decisions.
Will it work? Who knows? Plenty of starry-eyed optimists have tried and failed to revolutionize health care. Perhaps people won’t want to sign up with an insurer they’ve never heard of. Or perhaps Oscar’s website will prove glitchy and its care network unreliable. Or maybe Oscar will appeal only to the young and the techy -- in which case it’ll end up skimming off the people who need care least.
But the Oscar team is ready to try. They’ve attracted serious talent from the health-care industry, including Charlie Baker, the former chief executive officer of Harvard Pilgrim Health Care Inc., and Aran Ron, the former chief medical officer of EmblemHealth Inc. They’ve been approved for the New York City market, with premiums that are smack in the middle of the competition.
Whether new entrants such as Oscar can compete in the insurance marketplaces, and whether they will force incumbents to up their game in response, is the big test for Obamacare. If the marketplaces succeed, they could, over time, take over American health care. States can begin adding large employers to them in 2017, and already some Republicans are proposing plans to move Medicare or Medicaid beneficiaries into them in the coming decades.
It’s this opportunity to change American health-care forever -- an opportunity that carries the potential for both huge profits and huge social benefits -- that’s dominating the health-care industry and even parts of the venture-capital industry. And Oscar isn’t alone in trying to take advantage of it: Data released by the Department of Health and Human Services shows that a quarter of the companies applying to offer coverage in the federally run marketplaces are entering the individual insurance market for the first time.
The competition begins Oct. 1. Perhaps Washington can stop bickering over the politics long enough to pay attention?
(Ezra Klein is a Bloomberg View columnist.)
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