I've explored it a bit as a prospective customer, entering my information and seeing various plans. I'm curious about how Oscar works on entering these markets and what they do to make their plans distinct or stand out among the options. Am I thinking about it incorrectly? Do customers mostly buy their health insurance through exchanges, or do they use brokers, and does Oscar focus differently to attract brokers? Could you unpack that for me?

If Oscar can negotiate and partner with a single provider, they can offer the lowest price point in the marketplace. Initially, they aim to be the lowest silver plan to attract the most members. They achieve this through tight partner coordination and sometimes by adding quality bonuses to the contract to supplement some of the discount given on the per-click rate.

Can you describe what a quality bonus is and how it might work?

There are two ways of approaching this. One is through the medical loss ratio, or MLR. I'm sure you're familiar with that. With MercyOne, they can set up a quality or incentive payment. If they keep the medical loss ratio of their population under a certain percentage, they receive a bonus from the shared savings. The target is usually around 85%, and they aim to get it between 85% and 75%. If it goes below 75%, it enters rebate territory, which is difficult to operationalize for the company. They want to show they're providing coverage to their members, so it shouldn't be too low, but lower than the target.

Can you describe what a quality bonus is and how it might work?

The other portion involves less cash payout and is based on quality targets, like keeping A1Cs under a certain percentage, ensuring a certain number of cancer screenings, and adherence to heart medications. Those types of HEDIS measures or what are called gap closures. The target bonuses are usually less than the MLR. For example, MercyOne had an MLR bonus around $5 million, but their quality bonus was under $1 million.