Health Startup Oscar Hires A Google Exec After Posting $100M Losses On Obamacare Exchanges

Is the popular New York-based startup Oscar a tech company or a health insurer? It's both, the company will tell you, and in the notoriously tough health insurance field, it has a lot riding on this dual nature.

That's one reason Oscar hired Alan Warren, a veteran Google engineer, as its chief technology officer Tuesday, a few weeks after it announced more than $100 million in losses from plans sold on Affordable Care Act exchanges in New York and New Jersey.

"What really puts us into a category of one is that, in this industry, we are by our DNA a technology company," the company said in blog post announcing the hire. "Having technology in our DNA means .... solving problems through ingenuity and invention, not through process," it said, so that "members have the best possible and most transparent experiences as they navigate the normally opaque world of health care."

By bringing in Warren, who headed engineering for Google Docs and Google Drive, Oscar would capitalize on his "technical and scientifically brilliant mind," the company said. Since its inception in 2013, the company has built a host of data structures, systems and guided workflows to help it manage patient care and predict their needs. In essence, Oscar says it is "revolutionizing" health insurance by solving technology problems, in a way that leads to "better care" at a "lower cost."

But that task constitutes "a challenge of unprecedented complexity," Mario Schlosser, Oscar's CEO, wrote in September. And Oscar's approach cannot necessarily protect it from systemic problems in the healthcare industry at large.

The company, which sells plans only through exchanges created under the Affordable Care Act in New York, New Jersey and parts of Texas and California, will still have to contend with issues like sicker-than-expected patients enrolling in Obamacare plans. This problem has plagued other, more established insurers as well, to the extent that Humana, UnitedHealth and Aetna have cut back on plans sold on Obamacare exchanges or threatened to pull out entirely.

As a newcomer in the insurance industry, Oscar has struggled to develop large enough networks of doctors that could give it more power to negotiate prices, Schlosser told Forbes. For example, in 2015, it spent 75 percent of its revenue from premiums on hospital costs, compared to the 63 percent paid out by the largest U.S. health insurer, UnitedHealthcare.

“Initially we wanted to fix the consumer experience in health insurance and make it more transparent and easy to understand,” Oscar co-founder Josh Kushner told Forbes in February. “Over time we’ve learned that doesn’t only include the front-facing tech product.”

Warren's job will be to lead a team of 55 engineers building the technical structures behind Oscar, as the company looks to dramatically expand its enrollment from 145,000 members to 1 million. Those engineers have been drawn from the likes of Facebook, Spotify, Tumblr and, of course, Google, according to Oscar's former chief technology officer, Fredrik Nylander, who left the company in the fall.

The idea was to pluck experts from outside health insurance to solve the industry's biggest problems with fresh ideas — to disrupt it by harnessing "the unique power of technology," Nylander said in August 2014. Others see similar promise in this idea; in February, Oscar was valued at $2.7 billion.

The company hopes that despite the larger issues within the industry, its losses will decrease as it scales up and expands — and perhaps some tech disruption will help, too.