Oscar Raises $80 Million On an $800 Million Valuation

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Oscar, a New York-based health insurance company, announces that it has raised an additional $80 million in funding. The round was led by Joe Lonsdale of Formation8, with participation from returning investors Khosla Ventures and General Catalyst. The new funding brings Oscar’s total raised to $120 million.

Since it’s January 2014 launch, Oscar has attracted 16,000 paying customers. It’s offering is marketed as a technology-rich experience that makes finding and paying for healthcare simple. Oscar covers not only traditional care, but also incorporates free telehealth services to connect its patients with physicians. Its website promises a one-hour turnaround to have a doctor on the phone to speak with a patient, free of charge.

When customers need to be seen in the office, Oscar is covering that for free as well. Finally, Oscar is incentivizing medication adherence and the use of generic prescriptions by providing them for free. The company also provides free vaccinations. Between free primary care visits, free medications and vaccinations, and free telehealth services, Oscar has clearly designed itself around the idea that convenient preventative care should be at the center of its business model, and that there should be no barriers, either financial or logistical, between customers and effective preventative care.

Oscar is pursuing an interesting model and time will tell if providing easy access to low-cost outpatient healthcare will drive down the amount of high-cost inpatient services used by its customers. Because Oscar is a technology-focused company, it is likely that their customer base will be younger than that of its competitors Aetna and UnitedHealth. There is an inherent cost advantage for Oscar if it can attract a primarily younger demographic, as younger people tend to require less healthcare overall.

The technology-focused approach to health insurance is being driven by a team of technology industry leaders. Oscar has been steadily poaching engineers from Google, has hired a Tumblr VP as their CTO, and has recruited Microsoft’s former director of healthcare. Oscar’s board of directors includes Vinod Khosla, a legend in the health IT VC market that certainly knows a winning business model when he sees one.

Oscar is reporting that each of its 16,000 customers pay an average $4,500 annual premium. This puts Oscar’s revenue at $72 million per year. The company is private, and so it does not have to disclose costs or net income, so there is no way of telling if it is running in the red, or if it has found a profitable new insurance model. The new funding will be used to add to its internal team, and to expand out of New York, an important step in its overall growth strategy.


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