Oscar Suspense In Health Coverage?

Covered California made it official last month: After two years in the wilderness, UnitedHealthcare will return to the state's individual insurance market and begin selling health plans on California's exchange later this year.

Not much can overshadow news about the nation's largest insurer -- except maybe a story about one of the smallest.

Hi, Oscar.

That's the clever framing that founders of the buzzed-about startup health insurer Oscar have used for their website (hioscar.com) and advertisements. Covered California recently confirmed Oscar will start selling plans in Los Angeles and Orange County.

But can Oscar's services live up to its press clippings? And is the New York-based company ready to compete in a brand-new market, more than 3,000 miles away from its home base?

California's exchange is infamous for its selectivity; unlike nearly every other exchange across the country, the number of plans participating in Covered California actually shrunk last year.

"Choice is important," Covered California's director Peter Lee said at a January 2015 board meeting. "But adding more plans that are either not by price, network, or design substantially different is not necessarily an advantage for consumers."

Yet Oscar's entrance into the California market seems almost preordained.

CEO Mario Schlosser and his co-founders have a Silicon Valley pedigree -- they have youth, Harvard degrees, and experience with firms like Instagram, Microsoft and Vostu. They're backed by venture capitalists like Peter Thiel.

"Oscar was created by people with a background in technology," co-founder Kevin Nazemi wrote to the Covered California board in January 2015, as the company began to lay the groundwork for its arrival. "Oscar's founders were frustrated with the available health insurance choices and thought there was a better way to provide health insurance coverage."

But as Oscar starts to introduce itself to Californians, there's still a big question about the company: How much is skillful marketing, and how much is actual breakthrough innovation?

For instance, CEO Schlosser touted Oscar's "unique set of features for its customers, including 24/7 telemedicine and incentivized health and fitness goals."

Many insurers are debuting or have already launched their own wellness services, too.

More than a few New York-area customers have complained that Oscar's smooth packaging hasn't always delivered a similarly smooth experience with the healthcare system. Some customers have warned that they were misinformed about Oscar's provider networks and copays.

It's tough to know how much stock to place in Oscar's grouches. Despite all the disgruntled online reviews, Oscar's mediocre 2.5 stars on Yelp in New York are downright luxurious compared to the one star for United Healthcare and other insurance companies.

But experts agree that Oscar will face at least one major challenge in California: How can the company compete in a state that's already dominated by a handful of health insurers?

"We still have a problem with the degree of concentration that the top four insurers have," California Insurance Commissioner Dave Jones said, pointing out that Anthem, Blue Shield, Health Net and Kaiser Permanente, are collectively responsible for 94% of all enrollment on Covered California.

Oscar's advertising strategy will be interesting to watch. The company gained awareness in New York City thanks to ubiquitous, clever advertisements in the city's subway; Southern Californians aren't known for their love of public transportation.

And in the growing retail insurance market, where customers often shop by price, Oscar is not slated to have the cheapest plan -- or the biggest, most recognizable name. That could scare away some would-be customers.

"I agree that Oscar's price may be prohibitive for many people, but they may have decided to compete on network and choice," said Dylan Roby of UCLA's Center for Health Policy Research.

He pointed out that Oscar does have one ace in their hole in Southern California: They're including UCLA Medical Center in their network. The pricey hospital had been left out of nearly every other Covered California plan.

"They are an EPO plan," Roby added, "so perhaps they will try to draw the smaller group of people who want UCLA doctors and no gatekeeper as would occur in an HMO product."

Dan Diamond is an executive editor with the Advisory Board Co. A version of this article was published at CaliforniaHealthline.