Startups, Payers

Oscar Health snags Google Capital. Will healthcare’s billion-dollar unicorn win by attrition?

In an industry that’s all about the money, Oscar Health got high-profile validation and a little cash.

Health insurance startup Oscar Health got rock-star validation on Tuesday when it told The Wall Street Journal that Google Capital had invested $32.5 million.

In Oscar terms, the money is small: Google Capital’s investment is less than 10 percent of the more than $350 million the company has already raised. It upped Oscar’s valuation, however, from $1.5 billion to $1.75 billion.

Still, read between the lines of what the announcement really means: winning in this market is a bloody, costly and ugly fight.

Google Capital’s investment simply means Oscar Health may be inching ahead of other upstarts.

Oscar positions itself as the technology-driven, consumer-focused alternative to the big health insurance companies. It serves as a matchmaker for individuals to get the perfect (and perfectly priced) health insurance policy, and then doubles down by offering fitness-trackers and telemedicine services.

It probably wasn’t a coincidence that on the same day as Oscar’s announcement The New York Times published an in-depth look at the roadkill of non-profit co-ops, for-profit companies and traditional healthcare players that have tried to make headway in the same space Oscar occupies.

The Times also noted that Oscar and fellow startup ZoomPlus are progressing – albeit inch-by-inch.

“It’s really difficult to build this business,” Oscar co-founder Joshua Kushner told The Times.

The Journal noted Oscar lost $27.5 million on about $57 million in revenue in 2014. The company blamed those losses on technology buildouts, adding: “The core business of delivering health-care services was operating at a profit.”

Yet keep in mind Oscar is burning through that capital while getting just 40,000 customers in two states: New York and New Jersey. It’s been working on getting into California and Texas in some form for most of the year.

Oscar is touting the Google Capital investment for both its dollars and synergies, according to The Journal:

Mario Schlosser, who co-founded Oscar in 2012, said part of his goal is to help fuel the adoption of new healthcare technologies developed by other companies. Google, whose Life Sciences arm is jointly developing a contact lens with pharmaceutical company Novartis AG that monitors glucose levels from human tears, could eventually work with Oscar to help distribute these types of new medical products to patients, Mr. Schlosser said.

“Google right now would need somebody to get these contact lenses to their patients and that somebody would have to have some economic incentive,” Mr. Schlosser said. “We can connect all those dots.”

But that is an end-game kind of synergy. This is a money and bodies game (or, to be more polite, a “covered lives” game).

Big health insurance companies, which are in all likelihood getting bigger, have deep pockets and can match anyone on price, which is for the moment what matters first to many consumers. They also know the sector and its thicket of regulations much better than any upstart.

So how long would it take for Oscar to get into 50 states? Or even 25?

Maybe the real question to ask is what I’m sure other Oscar investors asked long ago: How much money will it take for Oscar Health to acquire enough customers with its technology and fresh approach that Anthem will want to buy it, too.