Struggling insurance upstart Oscar is making a long shot bet on a Trump-era program to fuel growth

Last year, the company hired Mark Bertolini, a veteran insurance executive who previously helmed Aetna, to help turn things around as its new CEO. Oscar is projecting it will post a profit, on an adjusted basis before costs such as interest and taxes, for the first time this year.

Now, Bertolini is mapping out Oscar’s next big bets. At the top of the list is this little-known Trump-era policy, which offered employers a new way to give workers health benefits. But it’s a risky bet because the strategy has never taken off among employers.

The policy, which went into effect in 2020, allows companies to give workers pre-tax money to buy health insurance on their own in the individual-insurance market, including on HealthCare.gov. In industry jargon, the employers fund individual-coverage health-reimbursement arrangements, or ICHRAs. It’s supposed to save employers money because they can set how much they want to fund workers’ accounts without worrying about insurers raising their premiums.

Speaking at the J.P. Morgan Healthcare conference on Wednesday, Bertolini said Oscar sees a big opportunity to expand its business by selling insurance plans to people with these health-reimbursement arrangements.

“We believe ICHRA’s time has come, and we believe we have a different approach than most other people in that marketplace, and that will give us an advantage and growth in 2024 and 2025,” Bertolini said, according to a transcript from AlphaSense.

So far, though, employers have been slow to switch up their benefits strategies. There’s not much data as of now that shows how many people have bought coverage with one of these arrangements. One estimate put the number at about 100,000 to 200,000 people in 2022.

The HRA Council, a group of companies that want to expand the use of the arrangements, analyzed 10,000 employers offering the HRAs and similar accounts in 2023. The council said those employers represented “hundreds of thousands” of workers plus family members and that many more employers than this have implemented HRAs.

Still, that’s a far cry from the more than 10 million people the Trump administration projected would be enrolled in ICHRAs by this year.

“They still represent a negligible part of the market and it isn’t clear why they might suddenly take off,” Ari Gottlieb, a consultant who tracks health insurers’ finances, said.

Oscar has struggled with deep losses

Oscar, like other young health insurers that went public in 2021, has struggled with deep losses, and some of its big bets haven’t panned out.

Last year, the insurer put one of its major growth strategies — selling its technology platform to other insurance companies — on ice after having problems rolling out the tech. It pulled out of several states and largely exited the business of selling Medicare Advantage plans to seniors after failing to gain a foothold in that market. The company, which primarily sells Affordable Care Act, or ACA, plans, lost $610 million in 2022.

Bertolini has been trying to get the insurer out of the red. The company raised its health plans’ prices and renegotiated contracts with healthcare providers and vendors — including its pharmacy-benefit manager — to lower expenses. Oscar currently sells plans in 18 states. It expects to have 1.3 million ACA members this year, Bertolini said Wednesday.

In the first nine months of 2023, Oscar’s net loss was $120.8 million, improved over the year before, and its revenue was $4.4 billion. The company hasn’t yet reported its financial results for the full year.

Bertolini is betting the economy will push employers to change up their benefits strategies

Individual-coverage HRAs represent one way the individual-insurance market could theoretically grow, giving Oscar room to grow.

But even Bertolini acknowledged that employers haven’t rushed to dump their group plans in favor of giving workers money to shop for coverage. He argued that will change, though, as employers look for ways to save money as they wrestle with inflation and higher healthcare costs.

Bertolini said that Oscar now has just 240 members who bought coverage using health-reimbursement arrangements. In the future, Oscar plans to design specific health plans that cater to those types of customers. Bertolini didn’t say how much membership Oscar expects to gain from HRAs.

Some other insurers are also hoping to win HRA business. Centene, which is among the biggest sellers of ACA plans, said in December that it had 13,000 health-plan members who bought coverage with HRAs.

“There’s a lot of interest, more interest now than there ever has been,” Bertolini said.