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Health insurance startup Oscar raises $145M to support push into California, Texas

The young insurance company Oscar has completed just one open enrollment and the New York based insurer only moved into its second state — New Jersey — at the start of the year. But its $145 million extension of its Series A fundraise gives it a valuation of $1.5 billion, according to a source close […]

The young insurance company Oscar has completed just one open enrollment and the New York based insurer only moved into its second state — New Jersey — at the start of the year. But its $145 million extension of its Series A fundraise gives it a valuation of $1.5 billion, according to a source close to the company. A source close to the company claimed that the funding would be used to hire staff and support sales and marketing as part of its push into Texas and California.

Peter Thiel and Brian Singerman from Founders Fund led the round. Li Ka-shing of Horizon Ventures, the Wellington Management Company and Goldman Sachs also participated, in addition to all previous investors, according to a statement on its website.

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A Deep-dive Into Specialty Pharma

A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.

The source said the company hopes to participate in the open enrollment in California and Texas towards the end of 2015 and be part of the health insurance exchanges in those states next year.

At the end of open enrollment last year, it had 17,000 members. But since then it has grown to 40,000 members. Among some of its offerings are unlimited access to board certified doctors, mainly by phone. The source added that members could now take photos using smartphone to illustrate their medical issues and send them to physicians in their network. As an example, she said they could take a picture of a sore throat, although it’s unclear how effective that kind of image would be.

About two thirds of its members aged 18 and over make use of the Misfit Wearable tracking device to monitor their activity, according to the source. She said since December they have logged 2.5 billion steps.  In exchange for using the trackers, participants can earn as much as $240 worth in Amazon gift cards.

Last year, Oscar raised $80 million and added about 100 staff. Asked how many staff it would be adding to support its expansion, the source said its staff growth rate would be similar but cautioned she couldn’t add more details beyond that. Currently it has 185 staff.

Given the enormous complexities of regulation insurers have to contend with and the variations in each state, it’s far from certain how long it will take Oscar’s founders to justify the strong valuation.

Our sister publication Dealbreaker also wrote about Oscar in a post here.

Update: This post has been updated to reflect that the company’s fundraise is an extension of its Series A round, not a Series B round.