(Bloomberg) — Oscar Insurance Corp., the startup backed by Silicon Valley investors, posted losses in New York, Texas and California in the first half of the year, the latest example of insurers both large and small losing money in new markets created by President Barack Obama’s health care overhaul.
In New York, Oscar’s biggest market, the loss widened to $52.2 million from $15.5 million in the first half of 2015. The insurer also lost $12.9 million in California and $17.9 million in Texas, according to state filings, after starting to sell plans in Dallas, San Antonio and the Los Angeles area this year
Oscar’s not alone in recording large losses from sales of Obamacare plans to individuals. The biggest U.S. health insurers are all losing money on them, with UnitedHealth Group Inc., Humana Inc. and Aetna Inc. retreating from the market. While those insurers are posting profits from other business lines, New York-based Oscar doesn’t have other markets to fall back on.
In all three markets, Oscar spent more on medical costs alone than it received in premiums from members. Insurers typically try to spend about 85% of their premiums on costs like doctors, prescription drugs, and hospitals. That leaves some funds to cover administrative expenses and for profits.
Oscar lost $105.2 million in its New York and New Jersey businesses for all of last year. At the time, the company said some of the losses were from startup costs. The New Jersey filing for the first six months of this year wasn’t available. A spokeswoman for Oscar at Derris & Co. didn’t respond to requests for comment.
Oscar is sharply limiting the number of doctors and hospitals in its New York network for next year to help control costs. The company says the tighter network -- built around Montefiore, Mount Sinai and Long Island Health Network — will lead to better, more coordinated care for customers. It’s similar to the strategy that the insurer has pursued in expanding to California and Texas. The company also is boosting rates and got permission from New York regulators to increase premiums in the state by an average of 20% for next year.
“There will be some health care critics, entrenched in their views on an outdated system, who will say we are only changing our network to improve our bottom line,” Oscar Chief Executive Officer Mario Schlosser said in a July blog post announcing the change in New York. “We are launching the Oscar in New York that we have been building towards since our early days — an Oscar that delivers the very kind of end-to-end services we want for ourselves and our loved ones.”
Oscar’s investors include the venture capital firm Founders Fund, Google Ventures and Goldman Sachs Group Inc. In February, the company was said to have been valued at $2.7 billion in a funding round, in which it raised $400 million.
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