What is Oscar Health
This company is a health insurance provider for medicare as well as individuals without corporate insurance. Furthermore, it seeks to create a tele-health service for customers to find specialists, get drug refills, and get free 0$ consultations easily. Oscar claims to save consumers & businesses money through a tech-insurance where businesses have access to easy bill payments and adding/removing employees through a dashboard.
2020 Has been a great year for insurance-tech companies, such as Lemonade and Metromile. It’s even been a great year for tele-medicine companies, such as Livongo and Teledoc. These gargantuan runups in stock price have shown positive market sentiment within these business sectors due to covid. While Oscar Health has not yet released its’ S-1, let’s take a look at what it’s potential is in terms of expansion, market cap, and product market fit.
Oscar Health Features
Signup Process 👍
Oscar Health creates an easy sign up form for users to find a health insurance plan based on multiple factors. This is much simpler than filling out a form for millennials and the younger generation.
Pricing 👎
Compared to competitors in the same sector, Oscar is rather pricy as well.
With the average insurance premium cost per month being 491$ across the U.S and 516$ for Oscar Health, doesn’t have an edge in what they claim in saving consumers money. Incumbents win pricing wars for now, but we’ll have to check back in a couple of months to see if Oscar Health is able to lower prices further, similar to insurance companies like Lemonade.
Customized Doctor 👍
Oscar Health has partnered with Cigna to allow users to search for doctors in certain fields for healthcare services. This is a key advantage for millennials who would like top tier access for certain services. Furthermore, in a yelp like style, the map offers ratings for each DO and pricing. This is likely to help consumers compare doctors as well as promoting doctors with great care and avoiding those without, a feature that has long been missing in healthcare. Word of mouth is great for those familiar with the area, but fails for individuals unfamiliar.
0$ Preventative Care 👍
Oscar Health has preventative care as well as virtual visits all for the out of pocket cost of 0$ for the consumer. Usually, insurance plans charge a small out of pocket fee for visits, but these preventative visits could save the consumer a lot of money as preventing is always cheaper than curing. Flu shots and seeing an OBGYN are also free nice perks.
EPO Type Health Insurance👍👎
EPO is what Oscar offers, meaning if you use their hospitals, you are covered and any visits to hospitals out of network means you’re forking the entire cost. It’s much cheaper than a PPO plan, but if you plan to travel a lot, a PPO plan may be more suitable, albeit higher cost. Thus, for home bodies, EPO plans are perfectly fine and have a cheaper premium.
Low Customer Complaint👍
Oscar has also been rated well by some of the largest ranking companies and has an A- from the Better Business Bureau (BBB)
Oscar Health has a high satisfaction rate from customers, indicating great product features and ease of use.
Total Addressable Market
The U.S Health Insurance industry is a 1.2 Trillion dollar industry with many fragmented companies. With a CAGR of 5% from 2015–2020, this sector continues to rise.
These companies own a small percentage of this widely fragmented industry.
The leading company, United, has a total of 130 million customers while Oscar Health trails with ~420,000 at a 2 Billion Revenue. Roughly 94% of members are individual members with the remaining 6% being business. While still small compared to incumbents, this company is growing at a rapid 50% rate in both revenue and membership. This growth is staggering considering they only had 70,000 members in 2017. However, with this staggering growth, a net profit margin of ~8 to13% in the health doesn’t yield a high return.
Even if Oscar Health were to continually grow at 50% for the next 5 years, they would arrive at ~3 million consumers by 2026. With 14.2 Billion in revenue and NPM of 8% the company would arrive at a profit of 1.12 Billion. Assuming profitability, if Oscar were still growing, a 50 PE ratio would generate a market cap of 56 Billion in 2026.
Thus, depending on their IPO price, this full stack insurance company seems quite attractive if ipo doesn’t jack up their valuation. However, with a 3.2 Billion valuation in 2019 and recent ipo companies, such as Airbnb causing a 2.5X valuation increase, if Oscar Health were to IPO at a ~8 Billion Market Cap, this would result in a 47% CAGR return on stock price. However, this is assuming a 50% annual growth for 5 years, which is highly unlikely. Nevertheless, this high growth tech insurance play seems like a great option for tech savy millennials and the network effect of rating doctors may play a great role in its’ value!