Still the New Kids. But Growing Up Fast.

With their heavy reliance on technology and consumer-friendly focus, newer health insurance companies such as Oscar Health and Bright Healthcare are striving to upend traditional health insurers, attracting billions in investment funding in the process.

“They have a much more well-developed digital platform compared to existing insurers,” says Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation. With it, she adds, they are “trying to improve the game.”

The relatively new players in the health insurance market offer “a retaillike experience for members” and primarily operate in the individual and Medicare Advantage markets, says Tom Cassels, president of Rock Health, a venture fund focused on digital health. Their websites are slick, airy and appealing, he says. “They are very different from the mainline incumbents,” such as UnitedHealthcare (UHC) or Anthem, Cassels says. “They’re the next-generation, consumer-friendly plans.”

Boris Kheyn-Kheyfets, senior manager at the consultancy Deloitte, says the companies “have invested significantly in creating a superior customer experience” and strive to steer consumers to the appropriate site of care — whether that care is delivered in person or remotely. That has left some traditional insurers “asking if they can replicate some of these capabilities or license some of these capabilities,” Kheyn-Kheyfets says.

Oscar has teamed up with Cigna to offer insurance for small businesses in an attempt to unite Cigna’s extensive provider networks and Oscar’s customer-service focus. Those small group plans are available in parts or all of four states: California, Connecticut, Georgia and Tennessee.

In April, Oscar announced it was launching +Oscar as a way to sell its full-stack technology platform to other payers and providers. The move opens the possibility of Oscar becoming as much a technology vendor as a health insurer. The pitch from Oscar is that +Oscar will deliver “end-to-end health plan services with the administrative efficiency of far larger health plans” and let smaller provider-sponsored and regional health plans “overcome scale disadvantages and lower administrative spend, driving improved profitability.”

Oscar, Bright Health and some of the other newcomers are bringing some sparkle to what remains a rather staid part of the healthcare sector. Their shiny new thingness can lead to some loss of perspective. The UHCs, Aetnas and Cignas have millions of members and billions in revenues. Oscar and Bright Health, which are the largest of the new entrants, have about a half-million members each.

Finding their niches

Oscar, which has gotten the most buzz, was launched in 2012. One of its co-founders is Joshua Kushner, the younger brother of Jared Kushner, the son-in-law and former senior adviser of former President Donald J. Trump.

“Oscar came out of the gate with a different business model,” appealing directly to consumers, Hempstead says. And its customers came to “look to their insurance company as a source of information,” which can be appealing to younger consumers, who tend to be more tech savvy.

The New York-based payer has focused most of its attention on selling individual plans both on and off the ACA exchanges, but more recently has also been active in the Medicare Advantage market. Its individual plans are now available in almost 300 counties in 18 states, including New York, California and Texas. Nearly 530,000 consumers have signed up for coverage this year.

Oscar tends to offer plans in urban areas when it enters a state, expanding to suburban and then more rural regions as it builds its network of providers, says Alessa Quane, the company’s executive vice president and chief insurance officer.

Starting this year, the insurer is also offering virtual primary care with $0 copays. “In a year when people didn’t go out very much, there’s certainly something to be said for having that option,” Quane says. The virtual primary care is offered by both English-speaking and Spanish-speaking providers, and almost 40% of patient utilization came from Spanish speakers. The payer has found members with chronic conditions have been more likely to use virtual primary care. Adherence to recommended care has been high, with consumers filling 80% of prescriptions and providers having received a member satisfaction score of 99%.

Another new company entering the individual insurance market is Friday Health Plans, founded in Denver in 2015. It is small compared with Oscar and Bright Health, having only 70,000 members. Most of Friday Health’s plans offer primary care visits, mental health counseling, telehealth visits and generic drugs at no cost to members. Friday Health acquired Colorado Choice, a local health plan, to test its concept, says its CEO, Sal Gentile.

Since its initial success, Friday has expanded into three other Western states, offering plans in the small group as well as the individual market. Like many smaller businesses in sectors dominated by larger companies, Friday Health prides itself on offering, in Gentile’s words, “high-touch customer service,” and the company says it picked its name because it wants to be “the Friday of health insurance — consistent, dependable and a breath of fresh air.” Gentile says the company works to solve its members’ problems in just one phone call.

Although the major insurers have reentered or expanded their presence in the individual market in 2021 after previously pulling out or reducing their efforts, Gentile says he thinks Friday’s focus on that niche gives them an advantage.

Bright Health, which also sells coverage in both the individual market and Medicare Advantage, was co-founded in 2016 by the former CEO of UHC, Bob Sheehy. He told CNBC in 2018 that after UHC pulled out of most of the individual market, he “started the company with a vision to catalyze the individual marketplace. “

Bright Health is now selling plans in 50 markets in 13 states. The Minneapolis-based payer also owns about 40 primary care clinics and says it provided care to more than 220,000 patients either in person or virtually last year.

This year, Bright Health has gone on a bit of an acquisition spree. In January, it announced it was planning to acquire Central Health Plan of California, which serves 110,000 Medicare Advantage members. In April, it acquired Zipnosis, a telehealth platform provider. Financial terms of the deal were not disclosed.

Investors are showing some confidence in these new insurers. In April, Friday Health announced it had signed an agreement to receive $100 million in equity investment and $60 million in debt financing. Friday Health’s membership grew by more than 400% from 2020 to 2021, and the insurer will use the additional funding to expand to new markets, Gentile says, with plans to expand to three to five states each year.

Google’s parent company, Alphabet, invested $375 million in Oscar in 2018. When it went public in March, Oscar priced its shares at $39 and the price had dropped to $34.80 when the market closed. The market hasn’t been too kind to Oscar since. The share price has been on a downward trajectory so far, falling into the $20-$25 range. Still, its market capitalization is north of $4 billion. But again, a dose of perspective: That is about 1% of UnitedHealth Group’s market capitalization.

Bright Health is preparing for its own IPO. According to the company’s June 15 Securities and Exchange Commission filing, it plans to sell 60 million shares at $23 per share, which would raise about $1.3 billion.

“I’m kind of glad they’re doing IPOs,” Hempstead says of Oscar and Bright. “It’s easy to imagine them being acquired” by a traditional insurer otherwise. IPOs “are better for competition,” she says. “I think it’s better for the market.”

Susan Ladika is an independent journalist in Tampa, Florida, who writes about business and healthcare.