Et Tu, Oscar? Are You Reinventing Health Insurance? Or, Just Repackaging an Old Plan?

Kim BellardThings seem to be going well for Oscar Health, the health insurance start-up that has been wowing investors and the media since it was founded in 2012.  Forbes reports that Oscar just raised $400 million in an investment round led by Fidelity, which effectively values Oscar at about $2.7b.  Oscar has expanded from its New York/New Jersey roots to now also include Texas and California, and expects that its current member base of about 145,000 to reach 1 million, in 30 markets, within five years.

So why do I fear that perhaps they are taking the wrong path?

I've previously expressed my concern that Oscar and some of its fellow health insurance start-ups might be more about repackaging than reinventing.  I'm more concerned than ever after Bloomberg reported that Oscar is adopting a new network strategy: moving to "tight, exclusive networks with hospitals."  Oscar CEO Mario Schlosser said: "The bet we made in going deep with a couple of health systems, I love what we’re doing there. We’ve got a very good blueprint now to go into new markets."

There's no secret why Oscar is taking this approach.  It's about cost, with the expectations that narrower networks yield cost savings.  McKinsey reported that almost half of exchange plans in 2015 were narrow, with over 60% being narrow in larger cities where such narrow networks are more feasible.  The jury is still out, but so far research is encouraging that narrow networks can, in fact, save money -- without, so far, adverse effect on quality.

Closer relationships with providers and the ability to offer lower premiums without hurting quality.  If that's what Oscar is after with its new network strategy, what's not to like?

Well, plenty.  For one, with this strategy Oscar isn't innovating; it is buying into the strategy that most other health plans are trying to adopt.  That doesn't make it a bad strategy, but playing follow-the-leaders certainly doesn't fit the cool yet disruptive image that Oscar has so carefully cultivated.

More importantly, it is the wrong strategy.  For Oscar.  For any health plan.  It is a strategy rooted in the 1990's, if not earlier.  In fact, as I've argued before, the whole notion of using a provider network at all is outdated at best, and potentially dangerous to consumers.

The argument for networks, especially narrow networks, is that health plans can drive better bargains by promising more volume to specific providers.  For most of the 21st century health plans seemed to abandon this principle, beaten by "any willing provider" legislation and especially by consumer demand for wider networks.  Now narrow networks are reviving this argument.

I don't have a problem with health plans driving hard bargains with providers, especially if those bargains are performance-based.  What I do have a problem with is forcing consumers to use those, and only those, providers (or risk severe financial penalties).

Health insurers have often been criticized for their "mother-may-I?" approach to utilization management, forcing providers and consumers to defer to the health plans' judgement.  Provider networks are another example of this mentality, and that becomes more and more true as the network gets smaller.

In essence, health plans are telling consumers that they should trust that the health plan knows which providers are best.  Making matters worse, telling consumers that they should only go to certain providers suggests that those providers are best at everything, not just specific conditions, and that is something that is rarely, if ever, true.

Not exactly an empowered consumer or a consumer-directed message.

Maybe it is true.  Consumers have shown precious little interest in comparison shopping when it comes to providers, either for cost or quality (despite a veritable cottage industry of transparency vendors).  It doesn't seem likely that any particular consumer could negotiate as good a deal as a health plan can on behalf of its members.  Neither of those mean we shouldn't still try.

I think it is great when a health plan tries to find the highest quality providers, and to get a good deal with them.  What I wish they would do, though, is say, "here's the data that demonstrates their quality, and here's how much we're willing to pay them to take care of you.  If you can find providers that are better, that's great; go to them, and we'll still pay the same as we'd pay the providers we recommend.  No hard feelings."

In other words, let the health plan act as the concierge, not the gatekeeper.

If a consumer goes to providers who charge more than the health plan would pay their designated providers, well, there's a price for choice; consumers might have to pay extra.  On the flip side, maybe the consumer should pocket some of the savings if they manage to find less expensive providers.

I wouldn't have an issue with health plans saying they'd reduce the amount they pay if the consumer goes to providers who have objectively worse quality/outcomes results.  In fact, they should.  The health plan should make such quality/outcomes information easily available to consumers, both so the consumers can make good choices and to reduce any surprises about payment.  That information might tier providers into quartiles or quantiles to help simplify things.

This approach might sound like reference pricing, because reference pricing is a start to where I think we need to go.  Reference pricing is still in the rough stages -- e.g., not enough conditions, not enough bundled payment options, and still not very easy for consumers to shop.  It has to improve, but, fortunately, one can see that happening.

I'd rather we put more effort into that than in narrowing consumer's choices.  We should be encouraging and empowering consumers to make better, more informed health choices, not taking choices away from them.

Noah Lang, CEO of Stride Health, told Fast Company, "Oscar is primarily a consumer experience company."  I don't think restricting choice of providers is a very good consumer experience for any health plan, and especially not for one like Oscar who prides itself on its member experience.

Oscar thinks this new approach is their future.  If so, their future may be as just another health plan.  And that'd be too bad.

Et Tu, Oscar? was authored by Kim Bellard and first published in his blog, From a Different Perspective.... It is reprinted by Open Health News with permission from the author. The original post can be found here.