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Disrup)nghealthinsurance?

Na)onalUniversityofSingaporeMT5016-BusinessModelsforHigh-TechProducts,A/Prof.J.FunkNov2015TerenceDeffenu A0147215LJessicaMariaTeguh A0056967LLooJian-Ju A0134495YSunJing A0120104J

1. US Healthcare Insurance: The state of the industry

2. Oscar Health Insurance

3. Value Proposition

4. Customer Selection

5. Scope of Activities

6. Value Capture

7. Strategic Control

8. Recommendations & Conclusions

2

Outline

1.USHealthcareInsuranceTheStateoftheindustry

3

VALU

ENETWORK

4

Traditional Health Insurance Intermediate in the Healthcare Value Chain

Sources:TheWorldFinancialReview–TheBusinessofHealthcareInnova)on:ConvergenceinTheh]p://www.worldfinancialreview.com/?p=1451/

VALU

ENETWORK

Traditional Health Insurance Value Network

High Barriers to Entry

•  Residents may not buy policies from insurers located outside of their state.

McCarran-Ferguson Act

•  Universal Access - Insurers must offer and provide health insurance for all applicants

•  Rate Bands - Limits insurers’ range of policy premiums

Regulations

•  Minimum amount of capital for the insurer to avoid insolvency

Risk Based Capital

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Opportunities: Obamacare

OBAMACARE: Obama Administration's Affordable Care Act (2010, effective from 2014) shifted the health insurance market from a B2B focus to a B2C

•  It gives consumers more control over which plan they choose

•  It requires individuals to have health insurance, or face penalties, starting in 2014 and increasing through 2016.

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Opportunities: Obamacare

“Common-sense insurance market reforms should be i m p l e m e n t e d t o i n c r e a s e compet i t ion and improve options for consumers as well. Such a t ru l y compet i t i ve marketplace would have the power to keep health insurance costs lower and quality higher.” Alyene Senger, 2013 (Heritage Foundation)

Competitive Pricing depends on the number of suppliers available. South side of the U.S has lack of health insurance carriers in Obamacare exchanges

Source: http://www.heritage.org/research/reports/2013/11/obamacare-insurance-exchanges-and-the-lack-of-competition

Sources:h]p://www.economist.com/news/business/21600147-a]empt-change-americas-most-arcane-industry-be]er-geek-guide-insuranceh]p://www.usatoday.com/story/tech/2015/06/24/oscar-uses-tech-to-make-consumers-less-grouchy-about-health-care/29150055/

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Opportunities

Sources:h]p://www.cdc.gov/nchs/data/nhis/earlyrelease/earlyrelease201506.pdf

U.S. health care costs is 2X more expensive compared to other rich countries Health Insurance cost keeps increasing •  Results : 40% forego the

health insurance plan Health Insurance Market Value of $750B in 2015, expected to grow annually by 1.8%

Opportunities

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Private Insurance

2. Get Receipt Back

1. Go to Clinic

3. File Claims

4. Confirmation from the Clinic

5. Long process before approval

6. Payback to The Insured (Very Long Processes and Time).. May Take Months

●  High complexity on health insurance claim process

Opportunities

2.OscarHealthInsuranceAbriefoverview

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Simple, Smart & Friendly "We wanted to build a company that was like having a doctor in the family"

Oscar ADV: https://www.youtube.com/watch?v=WZJMk2HEU1s

•  Technology-Based Healthcare Insurance Company •  Launched in 2013 after ‘Obamacare’ •  Founders: Josh Kushner, Kevin Nazemi and Mario Schlosser (CEO), all from Harvard •  Current Markets in US: New York, New Jersey, California, Texas •  Funding: “Billion Dollar Startup” •  Valuation: US$1.75B

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The Company

Notable investors: General Catalyst, Goldman Sachs, Li Ka-Shing, Alphabet

•  Revolutionize health insurance through technology, data and design

Mission Statement

•  Better plans, lower costs •  Better healthcare •  Better experience

What Oscar Offers

•  Expand to become a national insurer and compete with the established old big players

Vision

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Mission, Offer, Vision

Sources: www.hiOscar.com http://www.npr.org/2014/01/03/259432738/this-is-not-your-parents-health-insurance

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Better Plans, Lower Costs

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Better Healthcare: Network Effects

Using geofencing technology, Oscar members can choose amongst a list of available and relevant doctors based on the patient’s location. Geo-fencing (geofencing) is a feature in a software program that uses the global positioning system (GPS) or radio frequency identification (RFID) to define geographical boundaries.

More doctors = More choice for

Insured + Greater Convenience

More Insured = More potential customers for

doctors

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Better Healthcare: Telemedicine In Oscar, Telemedicine is a core value-added service •  Cut down Oscar expenses •  Beneficial for both parties, doctor and patient as below

Better Experience 1. Short Claim Time due a digitalized process:

Claims are processed within 20 mins without troubling the insured 2. Simple Sign-up Steps:

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Better Experience 3. Billing made simple ●  digitally printed/less paperwork ●  more readable to the patients ●  faster and more efficient process for the

doctors to key in due to technology

Oscar Bill Statement

Traditional Bill Statement

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Wearable Technology for monitoring

Incentive for being healthy and active •  Oscar takes a calculated risk by giving cheaper

health insurance if the insured is living a healthy lifestyle

•  Rewards for staying active with a free wearable tracking device

•  Partnership with Misfit Inc.: wearable given free to the insured, to track and monitor the insured’s lifestyle

•  Partnership with Amazon Inc.: to provide gift cards in exchange for meeting health goals

Compe)torsSomeexamples

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Traditional Companies

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Competitors

Type CompanyExample MainMarket ValueProposiDon

Tradi)onal B2B(Mainprofitfromemployers)

Nego)atelowerpricesusinglargescaleofdemand

CO-OP Individual Non-profit

Startup Individual(Elderly) Data-drivencare

HealthSharingProgram Individual(Healthy)

Lowerriskcustomers,non-

profit

•  Mostly Traditional – UnitedHealth Group, Fidelis Care

•  Highly Competitive •  Market leaders

possess relatively small market shares

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Competition in the NY state

Figure shows market share of the New York Health Insurance Industry in 2015 Source: http://info.nystateofhealth.ny.gov/sites/default/files/2015%20NYSOH%20Open%20Enrollment%20Report.pdf

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Example: Average Pricing in NY, 2014

MarketShare Company Catastrophic Bronze Silver Gold PlaDnum

19% HealthRepublic $212.73 $307.12 $387.42 $438.69 $515.81

17% Fidelis $189.86 $323.75 $409.66 $501.60 $606.0315% Metroplus $323.38 $365.30 $392.41 $432.28 $484.1314% Empire $186.20 $391.97 $456.39 $544.32 $645.529% Emblem $202.83 $342.88 $396.87 $474.68 $570.858% MVP $238.09 $460.56 $598.90 $720.93 $850.193% Healthfirst $317.38 $379.41 $444.40 $519.47 $615.543% Oscar $217.95 $341.95 $422.41 $489.98 $570.422% United $418.93 $685.49 $803.68 $950.36 $1,121.38

DataSource:Informa)onSource:h]p://www.capitalnewyork.com/ar)cle/city-hall/2014/09/8552029/tracking-premium-changes-new-yorks-health-exchange

Oscarpricingiscompe))veandsome)meslower

Value Proposition

• Saves time and simplifies selection process by comparing 13,000+ plans from 180+ carriers

Customer base

•  Individuals Market

Value Capture

• Fee for service/Commission/Referral Signed agreement with Federal Government to access the Federal electronic data hub to automatically determine tax subsidy eligibility and amount of subsidy

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Complementary Services

- Online Brokers

3.ValueProposi)on

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Economic

• Lower Insurance Premium

• Affordability

Functional

• User Experience

• Fast • Network

Psychological

• Simple Process

• Health Coverage Assurance

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Customer Needs

Unserved & Articulated Need

Convenience

Cost

Oscar provides value to the insured: ●  a simple technology interface for consumers ●  unprecedented benefits (e.g. three free doctor

visits, free generic prescriptions, a home nurse visit after giving birth and telemedicine)

●  a broad and deep provider network (40,000 physicians are in it so far) at prices comparable or lower than the rest of the market

●  transparency and a great customer service

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Value Proposition

Oscar brings value to healthcare providers: ●  Save time by automating the claim

confirmation process ●  Connect to a wide network of patients ●  Allow differentiation through review

system in platform

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Value Proposition

Customer–Centered Health Insurance: target on “Individuals” and not only “Employers”. This will allow Oscar to learn and know individuals’ needs in-depth so as to serve them better

Bring Simplicity resulting in Higher Convenience and Lower Cost by leveraging the telemedicine technology and predictive data analytics intensively (i.e offer customized pricing plan by analyzing the wearables tracking result, not merely on historical health records)

Integrated software platform to quickly and easily find a doctor, indicate one's question and make an appointment or speak directly to a doctor within 10 minutes of one's request

Oscar keeps track of the patient’s medical history so they can access their past prescriptions, lab work, and office visits without the hassle of making phone calls and completing lots of paperwork

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Value Proposition Leveraging technology and data to make insurance simple, intuitive and human compared to traditional competitors

Price

Simplicity(Sign-Ups&Billings) Customer

Service

Innova)veness

HealthServicesIntegra)on

Middleman/InsuranceAgent

BrandReputa)onHealthTracking

DoctorConsulta)onService

OscarHealthInsuranceTradiDonalHealth

Insurance

NewDimensions

Oscar

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Strategy Canvas

DataAnaly)cs

Oscar offers a better value proposition because it integrates technology to make the health insurance simple, friendly and human

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VP Recommendations

• WhatOscarofferscandisrup)ve.Tradi)onalhealthinsurancepopularityissolowthatasanewentrant,Oscarshoulddifferen)atethemselvesasacustomer-centricinsurer

SuperiorValueProposiDonvs.CompeDtors:Usability,Speed,PsychologicalFriendliness

•  Simple,easytouse•  Sharedatabetweendoctors,hospitalsandpharmacies•  Integratedmedicalhistory

UnifiedplaVormnetworkforallthehealthcareplayers

•  ThedatathatOscarownisoneoftheirmostimportantassets.Partneringwiththerightcompanieswillprovidebenefitstothedevelopmentofnewproductsfrombothsides

Datatotherightpartners

4.CustomerSelec)on

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Customer Selection Lead Users

Millennials/ Generation & Tech – Savvy

Individuals (B2C)

New Families

New Jobs, Freelancers

Not eligible for •  Medicaid •  Medicare

Target Specific Markets, starting

from NY & NJ

Why Oscar targets this customer segment? •  Healthy people → Lower Risk & Lower Cost

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Customer Selection

Manydidnottakeinsuranceatall(around$45million)MostcomefromtheYoung(18-34y.o) Sources:

h]p://www.usnews.com/news/health-care-index/ar)cles/2015/05/07/us-news-health-care-indexh]p://www.aecura.de/Comparison-private-health-insurance/Problems.html

Source: http://dupress.com/articles/the-future-of-health-care-insurance-whats-ahead/

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Customer Selection

SizeofIndividualMarketincreasingamerObamacare

Source: http://kff.org/private-insurance/issue-brief/data-note-how-has-the-individual-insurance-market-grown-under-the-affordable-care-act/

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Customer Selection

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CS Recommendations ●  Quickly expand in states with high population density

to increase the customer base, supported by a large network of doctors

●  Luxury plans for rich people promising premium treatment and fastest response while keeping the easy and technology-focused user experience

Once the US individuals market is conquered, adapt sales division and attack: ●  Groups ●  Employers: According to S&P Capital IQ, by 2020, 90% of employees

with employer-sponsored insurance are expected to shift to individual coverage. The easy access to health insurance exchanges following the Affordable Care Act (or ACA) is expected to lead to employers paying a stipend for employees to pay for health insurance rather than sponsoring the plan themselves.

5.ScopeofAc)vi)es

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Agenda

Integrated Services

Health Insurance Technology

Tele- medicine

VISI

ON

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Integration

In Vertically Disintegrated Industry •  Oscar does not hire the medical practitioners,

like doctors. Oscar partners with them to obtain lower costs

•  Oscar does not produce and does not own the wearables

VALU

ENETWORK

Oscar Value Network Customers, Collaborators, Suppliers

MoreIntegratedServicesbetween

Healthcare&HealthInsurance

VALU

ENETWORK

Value Network Traditional Insurance vs Oscar Customers, Collaborators, Suppliers

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VALU

E N

ETW

OR K Oscar Value Chain

Health Plan Core Processes

Finance, Legal, Compliance/Regulatory, Quality/Audit, Human Resources, 3rd Party Wearables Technologies Support Functions

▪  Product ▪  Sales ▪  Marketing ▪  Actuarial ▪  Underwriting

Health Plan Functions

▪  Network ▪  Care management ▪  Medical Informatics ▪  Telemedicine

▪  Enrollment ▪  Billing ▪  Benefits ▪  Claims ▪  Service

Establish & Manage Customer

Relationships Market & Promote

Products Perform Pricing & Risk Management

Develop & Manage Products

Perform Care Management

Develop & Maintain Provider Network

Data Analytics and Reporting

Provide Customer

Service

Manage Membership &

Accounting Manage Benefits &

Claims

T E CHNO L OG Y

Technology & Data Analytics •  software platform plays an essential role in Oscar’s activities because it’s

the main enabler of all the functions of the plan, from the data to the customer relationships to the providers network

Marketing & Communication •  the design is crucial to customer growth and engagement

Customer Services •  membership, accounting, claims, relationships, services

Provider Networks •  developing and maintaining them is a strategic activity that cannot be

underestimated

Products Development and Risk Management 46

Scope of Activities

•  Sales/Brokers:cans)llrelyontradi)onalbrokerstoa]ractothercustomers

•  Finance•  Legal•  HumanResources•  WearablesandInternetofThings•  HealthEducaDon•  RuralunservedareasacDviDes

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Collateral Activities

•  Managed Care Organizations to access their network of providers. Healthix (NY), Qualcore (NJ)

•  Technology Infrastructure: Amazon Web Services

can save cost through a pay per use model •  Selected Providers : CVS Caremark for pharmacy,

Value Options for behavioral health/substance abuse, Davis Vision for pediatric vision and Healthplex for pediatric dental

•  Recognized Hospitals: e.g. UCLA in California •  Wearables companies for biometrics informations:

Misfit 48

Current Partnerships

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Recommended Partnerships

Google: • Alphabet invested in Oscar’s capital. This investment will lead Oscar to have

better deal in using Google Cloud Platform at better prices as compared with Amazon (Amazon Web Services)

• Chance to leverage Google Analytics for better web analytics • More digital devices: by having its own health insurer, Google has a

platform from which it can distribute drugs and devices (products from the alliances with Dexcom (DXCM) and Novartis (glucose monitor lenses))

Apple: •  iPhone iOS is one of the major players of the smartphones market • Partnership with major players will enforce Oscar recognition

featured in the Apple Store integrated in the Apple’s Healthkit Platform

• Apple too will benefit from a synergy between the two companies.

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Recommended Partnerships

GEHealthcare:●  GE sells and maintain big machines for hospitals, collecting data

including monitoring and diagnostics and operations intelligence. Combining these data with Oscar would help improving clinical, financial and operational outcomes for the healthcare industry.

●  Contractual agreement with healthcare providers based on services, quality of treatment, and prices.

SelectedNetworkandProviders:

UniversiDesandResearchcenters,PharmaCompanies: ●  Providing data for the development of science and new

products to get more revenue and increase the base and the brand reputation

6.ValueCapture

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$2.7 trillion in expenditures on Health Plans

$580.0 B

$286.7 B $952.6 B

$1172 B

$305

.1 B

$305

.1 B

Individuals

Government

Employers Health Plans Providers

▪  Health plans consume 15.2% of the

$1172 billion that flow through insurance providers’ doors (2012).

▪  As cost pressures in the US healthcare system continue to rise, the pressure to reduce this spending will continue to intensify.

Source CMS

Healthcare Money Flow

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Value Capture (Current)

Subscription Gift Card

Data

Uncovered

Covered

Government

Providers (Doctors, Hospitals, Pharmacies...)

Individuals

Visits,Assistance, Prescriptions

Subsidies

ACA

Matchmaking

Lower Risks Discounts on scale

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Value Capture (Current) ●  From the Insured

Main Revenue: Subscription Fee Model Monthly Premium In future : Personalized pricing plan depends on the customer’s risk. Healthier person gets lower premium fee

●  From Oscar’s Data Identify Risk → Lower Cost → Offer lower price Oscar could determine that an unexpected sedentary period in a person’s life, maternity, depression or even just an out of pattern resting heart rate recorded from the user’s fitness tracker is more than sufficient to triple a person’s health insurance costs. In future : Sale of data to pharmaceutical or advertising companies ●  From Healthcare Providers

Discounts for scale of demand

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Value Capture (Future)

Subscription Gift Card

Data

Uncovered

Government

Providers (Doctors, Hospitals, Pharmacies...)

Individuals & Employers

Subsidies

Research

Matchmaking Covered

Visits,Assistance, Prescriptions

Advertising

Discounts on scale

Wellness Programs

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Value Capture (Future) ●  Data play the biggest role

Partnering with Google (and Apple) to become an integrated platform for all the players of the network, Oscar can capture value from all the elements of the chain. Advertising for health products, revenues from the development of new drugs and new services, development of new IoT devices for the home or wearables, care management for the providers. The possibilities are endless.

7.StrategicControl

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No Brand Recognition • A newly built start-

up • Have no Prior

Experience on Health Insurance Industry

Limited Area of Expansion • Only New York

and New Jersey

Simple, Fast, Integrated

Service

Cheaper Option than existing health insurance industry • Cheaper consultation fee with

telemedicine →Claim Is cheaper → Oscar can provide lower cost

•  Its “Simple Plan” give one-time payment for insurance and health treatment. Besides, it adopts “no copays” method

Lower Capital Expenses •  Fewer Human

Resources •  No Brick-and-

Mortar Store

Google has faith in

Oscar Health Insurance

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Strength vs. Weakness Leveraging technology and data to make insurance simply, intuitive and human compared to traditional competitors

“Google Bets on Insurance Startup Oscar Health” Source: http://blogs.wsj.com/digits/2015/09/15/google-bets-on-insurance-startup-oscar-health/

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Competitive Advantage

•  Agility to innovate with emerging technologies

Starting small

•  Early Mover Advantage

Speed to Market

•  the Oscar process-based innovation •  But may not be sufficient to stay ahead if not supported by a rapid

scale

Customer-centric service provider

De-Facto Standard

•  integrated platform to hand the complexity of the healthcare system

Oscar platform can estabilish as a front-end

Proprietary Algorithm to calculate personalized fees and risks

Control of the Closed Architecture: Proprietary Communications System between doctors, patients, insurance and hardware

High Barriers: the barriers to entry in the insurance market are high for rising costs on one hand, but on the other hand they are lowered due to the industry’s vertically disintegrated nature.

Privacy and Security: a potential breach could affect negatively the brand reputation, so they must be protected

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Sustaining Profitability

Higher Switching Costs

•  for patients: retention, fidelity, user experience not exchangeable •  for brokers: ease and convenience for them to work with Oscars, building

good relations •  for doctors: efficient platform to work anywhere anytime through

telemedicine, getting more patients by Oscar’s network effects

Advantages and promotions for new users and families that contribute to the network effects, for active members that contribute with contents, marketing and word of mouth

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Sustaining Profitability

8.Recommenda)ons&Conclusions

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Crossing The Chasm

Things to do to Fix Healthcare  •  Serve as the bridge between new tools and consumers

“In the first half of 2014, venture capital investment in digital health grew by 176%, spawning new consumer-centric companies with interesting approaches to consumer health. But there’s a chasm between these unscaled point solutions and the consumers who could use them. Payers can bridge the gap, using Amazon-style analytics and personalization to better understand consumer types and then connect them at the right place and time to the best-suited offerings. Better yet, payers don’t need to build the bridge themselves: A growing set of powerful consumer-engagement platforms are moving along this path.”

Can they win consumers over? •  Some consumers have had negative experiences with insurance → Key Success for

Oscar by bringing much better experiences, such as: more convenience, personalization, 24/7 support for doctors and coordination of care

• Make health insurance industry more efficient, effective, humane, and sustainable.

Source: What the Insurance Industry Can Do to Fix Health Care (Sukanya Soderland, 23 December 2014). Harvard Business Review.

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Priority Matrix for Consumer Engagement

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Opportunities: After Obamacare Launch

Source: http://www.nytimes.com/interactive/2015/10/31/upshot/who-still-doesnt-have-health-insurance-obamacare.html?_r=0

The area where Medicaid has not expanded to the State, the

uninsured level goes up

(as shown in Area not outlined in Black)

•  Continue expanding to other States, benefiting from the favorable wave of ObamaCare

•  New opportunities in the areas with lower competitors (the South and Southwest area of the U.S)

•  Financial evaluation is a MUST, to minimize the risk and sustain the growth

ExpansioninotherpartsofTheUnitedStates

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After the chasm: recommendations

Expansionincompaniesinsurances(B2B)• Attack B2B market with: deals, direct sales to companies to provide

insurance to the target employers.

Expansioninotherinsurancemarkets• Expand and attack new markets other than healthcare market, such as:

home ins., car ins. , life ins., leveraging on the experience gained from the healthcare market.

• Only applicable once Oscar has extremely strong network effects [Long-Term Plan]

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After the chasm: recommendations

Spend more in Advertising •  In marketing with Digital Advertising and Third Parties Recommendations

(Influencers, Blogs, Tech Magazines)

Continue to award virtuous behaviors • Healthy behaviors should be always encouraged and rewarded with

discounts, as they not only serve as a promotion tool but also minimize the risks and operating costs. It is a win-win solution for both the insured and the insurance companies

Manage Chronic Diseases and provide the data to pharma companies and researchers, in change of revenues of new drugs? • Another way to capture value can be to provide a centralized hub for

providers to better manage metrics that are linked to improved health outcomes for people with chronic diseases. A possible tradeoff could be “patients data and tracking” in exchange of percentages from the selling of newly developed drugs.

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After the chasm: recommendations

Continue to be always One Step Ahead of Competitors •  Exploring partnership to improve its telemedicine to telehealth •  A big company can imitate

Expand and strive to provide better services to build trust and lock-in the customers (The importance of Network Effects)

Get more fundings •  Increase the capital to enter in the new market and absolve any needed

regulation

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ThankYou!Ques)onsTime

WebReferences•  http://www.hioscar.com/ •  http://graphics.wsj.com/billion-dollar-club/ •  http://blogs.wsj.com/digits/2015/09/15/google-bets-on-insurance-startup-oscar-health/ •  http://www.economist.com/news/business/21600147-attempt-change-americas-most-arcane-industry-better-geek-guide-

insurance •  http://www.zdnet.com/article/how-oscar-is-using-cloud-and-big-data-to-disrupt-health-insurance/ •  http://www.bloomberg.com/news/articles/2015-09-03/for-health-insurance-startup-oscar-cute-ads-only-go-so-far •  http://www.wired.com/2015/04/oscar-funding/ •  http://fortune.com/2014/12/09/oscar-health-insurance/ •  http://www.businessinsider.com/oscar-raises-145-million-at-a-15-billion-valuation-2015-4/ •  http://www.crainsnewyork.com/article/20150810/HEALTH_CARE/150809883/oscars-losses-are-huge-but-investors-dont-care •  http://www.usatoday.com/story/tech/2015/06/24/oscar-uses-tech-to-make-consumers-less-grouchy-about-health-care/29150055/ •  http://www.lowcosthealthinsurance.com/who-are-the-top-10-health-insurance-companies-by-market-share/ •  http://www.unitedhealthgroup.com/About/default.aspx •  https://www.simplyinsured.com/about •  http://techcrunch.com/2015/04/20/oscar-145m/ •  http://techcrunch.com/2015/06/30/simplyinsured-series-a/ •  http://www.nytimes.com/2015/04/21/business/dealbook/oscar-a-health-insurance-start-up-valued-at-1-5-billion.html •  https://www.ehealthinsurance.com/ehealthinsurance/benefits/ifp/NY/NYOscar_Consumer_Brochure.pdf •  http://www.forbes.com/sites/greatspeculations/2015/09/16/googles-oscar-deal-could-be-game-changer-for-diabetes-

management/ •  https://www.ehealthinsurance.com/ehealthinsurance/benefits/ifp/NY/NYOscar_Consumer_Brochure.pdf •  http://www.wsj.com/articles/google-backs-startup-oscar-health-insurance-1442374756 •  http://marketrealist.com/2015/02/affordable-care-act-hurts-managed-care-industry/

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