Oscar will leave 2 markets as insurance startup finds similar challenges as national payers

Oscar is leaving New Jersey and Dallas-Fort Worth and entering San Francisco in 2017.

Oscar health insurer

Oscar, a New York-based health insurance startup touted for taking a more tech and consumer friendly approach to healthcare in ways established national payers are racing to adopt and integrate, is rethinking its strategy and pulling away from New Jersey and Dallas-Fort Worth Obamacare health insurance exchanges starting in 2017. The move comes as the company refocuses its strategy towards small employers and echoes the headwinds more established, national payers have experienced as they navigate the challenges of conforming with the requirements of healthcare reform mapped out in the Affordable Care Act.

In a blog post, Mario Schlosser, Oscar CEO and Co-founder wrote:

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“Serving our members in Dallas–Fort Worth and New Jersey has been a privilege, and we believe everyone deserves access to quality healthcare. But there are uncertainties in those two markets that will make it challenging for us to operate effectively and continue to deliver access to quality healthcare to all of our members across the country. We hope to return to these markets as we carry on with our mission to change healthcare in the U.S.”

In an interview with Bloomberg, Schlosser said the company had 130,000 customers. In Dallas-Fort Worth it had 7,000 customers in its first year there, but it had 26,000 in New Jersey. It plans to stay in New York City, Los Angeles, Orange County and San Antonio. It will up shop in San Francisco next year. The lack of a narrow network in New Jersey led to the company’s decision to pull out of the Garden State and the unpredictable insurance market in Dallas prompted the exit from that market. So it’s a significant setback for a company that has raised so much, including $400 million in a round led by Fidelity, to gain a handful of cities.

The Record noted that the move by Oscar as well as Aetna to exit New Jersey leaves three regional payers offering plans to New Jersey residents, the same number as 2014. Among them are Horizon Blue Cross Blue Shield of New Jersey, AmeriHealth of New Jersey, an affiliate of Independence Blue Cross, and Health Republic of New Jersey.

Other startups in the health insurance sector have taken different approaches. They have targeted health benefits for employers such as Collective Health and LEAGUE. Bright Health, led by former UnitedHealthcare CEO Bob Sheehy, uses broker partners to offer its plan to consumers and public and private health insurance exchanges.