Payers

With Alphabet pouring $375M into Oscar, is Google coming for your healthcare data?

After CapitalG and Google Ventures invested in Oscar, now comes parent Alphabet with $375 million in tow for the health insurance startup. Does Google want your health data?

When it comes to healthcare transformation, the insurance marketplace has spawned quite a few tech-enabled startups aiming to redefine that complex and frustrating segment. Prominent among them is New York-based Oscar Health, and not just because co-founder Josh Kushner happens to be Jared Kushner’s brother. Spawned after the Affordable Care Act was passed, it began life a company offering individual insurance on the marketplace. Since then, it has made strides in the market by aligning itself with healthcare providers like the Cleveland Clinic.

The other insurance startup names that come up as examples of data-driven, consumer centric companies focused on reducing costs are San Francisco-based Clover Health and Minneapolis-based Bright Health.

However, Oscar is seemingly leaving behind its competitors at least temporarily. Its profile got pushed to the stratosphere Tuesday when the company revealed through a detailed Q&A with Wired that Alphabet, parent company of Google, just injected a cool $375 million into the company. YouTube founder Salar Kamangar, the CEO of YouTube and apparently a data expert, will be joining Oscar’s board.

“This investment will put Oscar well over a billion dollars in investment,” said Jodi Hubler, a managing director with Wayzata, Minnesota-based Lemhi Ventures, in an email forwarded by a representative. “What’s interesting to note is Oscar is not just innovating insurance, they also have projects where they’re building clinics, electronic health records, and claims systems. That is a big investment waterfront – literally racing against hundreds of other startups who are trying to do the same thing in each one of those categories, plus the incumbents.”

Alphabet’s investment, of course, is further proof that the consumerization of healthcare is a no passing trend. The terms of the transaction aren’t available as Oscar executives aren’t commenting, although, in the Wired interview, Oscar CEO Mario Schlosser stressed that Alphabet is a financial investor only with whom no patient-level data is going to be shared.

One expert observer of the market — who hailed the deal as a “validation” for this new consumer-focused, data-and-outcomes driven insurance model — declared that this cements his belief that Google is out to acquire healthcare data. It’s missing piece of the consumer puzzle.

“My suspicion is, as borne out by this transaction, [that] these tech companies will be able to take real risk on the populations because they are going to know more about these populations and be able to underwrite the populations far better than maybe some traditional healthcare companies,” said Michael Greeley, co-founder and partner at Flare Capital, a venture capital firm that has invested in Oscar competitor Bright Health, in a phone interview. “They want to continue to think about their portfolio of assets from YouTube to Search. They know an awful lot about us. They don’t know a lot about our healthcare conditions. This puts them into that space to have a more holistic perspective of who each of us are.”

This perspective is squarely at odds with patient privacy and in response to a question about respecting such privacy, Oscar’s Schlosser observed that Alphabet has “been an investor for the past three years and there’s obviously been no sharing of data before. That’s going to continue to be the case.”

Greeley wasn’t convinced when informed of this response.

“I think this is still the wild west of data privacy rules and the rules are  one or two or three years behind the reality of the markets,” he said. “I don’t think they have nefarious intentions but there is a little bit of a land grab for these datasets. There’ll be ways to anonymize around populations where they will be able to draw inferences on certain types of behavior.”

Previously, Alphabet’s growth equity investment fund – CapitalG – and GV (Google Ventures) have both invested in Oscar. No one at Alphabet’s press office immediately responded to a request to interview Kamangar who is joining Oscar’s board as part of the new investment.

The other piece of news that came out of Schlosser’s interview is that fueled by the new money, Oscar plans to enter the Medicare Advantage market by 2020. Today, it serves the individual and small employer market. [Medicare Advantage plans typically cover services like dental, vision and other health and wellness products that are’t covered by Medicare.]

That did not bother Vivek Garipalli, CEO of Clover Health, which sells insurance in the Medicare Advantage market and like Oscar, also has GV as an investor. Earlier this year Clover was reported to be having some trouble in meeting financial projections and satisfying customers.

“We welcome Oscar Health to the Medicare Advantage space. The increased competition to deliver better healthcare options is excellent news for America’s seniors,” Garipalli said in a statement emailed by a company representative.”Not only does Medicare Advantage provide an unrivaled opportunity to help American seniors live happier, healthier and longer lives, it is also a thriving market in which to run a successful business. Medicare Advantage is already a $200 billion industry, with more than a third of all Medicare beneficiaries – 19 million people – enrolled in an Advantage plan.”

If emerging startups companies aren’t too concerned with Oscar’s  (or at least aren’t showing it), neither should insurance giants like UnitedHealth Group and others, believes Flare Capital’s Greeley.

“I think there is a knee jerk reaction that the sky is falling that some industry commentators have,” he quipped. “Oscar has a small fraction of members compared with what the national insurers have.”

Meanwhile national insurers are not sitting idly either.

Take Unitedhealthcare, the aforementioned largest health insurance company in the nation. The Minnetonka, Minnesota company has made an investment in a new kind of health insurance company – Bind – that offers on-demand health insurance to employees of self-insured companies. Members get a core coverage based on existing health conditions, but can avail of  add-on coverage as health conditions — say, joint replacement — crop up. Kind of like the way you can add TV channels to your streaming TV service or cable network.

To Bind CEO, Tony Miller, his company is the alternative way to transform insurance as it brings an on-demand flavor to healthcare at a time when that experience is ubiquitous to consumers’ everyday lives.

“I have met with many insurance companies over the last two years as we were building Bind. Will it be easier for a platform company to disrupt health—which, by the way, is a closed ecosystem of data, by many, many regulations—or will it be easier for insurance companies to invest in all of the modern tech capabilities to rewire themselves as platform companies when it comes to health? What I see is an ecosystem that knows it is a race,” he said in an email forwarded by a representative. “If you were to disrupt the insurance industry, you do it with better products. And better experiences. What Bind did is say: how does a new modern tech approach change insurance products? That has to be the focus first; that is why we invented on-demand health insurance. In the end, we will all be measured on how viral our products are to consumers.”

Taken cumulatively, all these new ideas couldn’t come soon enough although they still have to prove their worth. Customer satisfaction with health insurance companies fell to a 10-year low in 2015 though have improved a bit in the last two years per the American Customer Satisfaction Index.

Photo: freedigitalphotos user Salvatore Vuono

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