When insurance industry relies on an uncontrollable factor

When it comes to a startup company, there is an in-depth level of strategic planning and market analyses that are required to understand the risks and potential for success. The Bloomberg Businessweek Article, “Cute Ads Only Go So far,” breaks down the strengths, weaknesses, opportunities and threats of health insurance startup Oscar.

To be profitable, the health insurance industry relies on an uncontrollable factor – healthy customers. Since the health of customers cannot be guaranteed, Oscar is relying on long-term strategic planning and the support of long-term investors. Oscar founders wanted to take the confusing system that is health insurance and bring an easy, understandable insurance provider to the market. To do this, they had to complete the strategic planning process to ensure they could survive in an established industry. The components of strategic planning aim to determine the objectives, strategy and planning for marketing, production, finance and human resources. Oscar founders developed a way to streamline the insurance process with an app that connects the customers to the medical providers quickly, eliminating the frustrations of finding in-network providers. Financial planning was a crucial part of the Oscar startup and the founders were backed with hundreds of millions of dollars.

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In the competitive industry of health insurance, Oscar is targeting the new market of “young, tech-savvy customers” that are buying health insurance due to the Affordable Care Act. The advantage of the Affordable Care Act for Oscar is that in addition to health insurance being mandatory, Oscar is easily accessible to its target market through insurance marketplaces. Oscar is streamlining the healthcare experience with an app that brings ease to the process of connecting customers to in-network providers. In addition to a manageable billing process, Oscar provides an analysis of the cost of doctors and the results of care to finds savings for the customer’s future healthcare needs by pointing them to the best doctors. Oscar brings something unique to an industry that has not seen much change over time.

The article questions the potential for success and can be used to identify the four parts of the SWOT Analysis for Oscar. Oscar’s strengths are the tools that use advanced technology to deliver a quicker and better customer experience, something that is important to their younger target market. Oscar’s weakness is that compared to other health insurance providers, it is only available in two states.

The article points out that, “Oscar doesn’t sell insurance in the biggest markets for health insurance: employer plans, private policies for the elderly and Medicaid programs for the poor.” Limited options can make potential customers hesitant, especially with a startup. Oscar’s technology is available at a time when people, specifically the young adults in the target market, view technology as a determining factor in their decision making. Since Oscar offers a unique experience, they are set apart from other insurance providers.

The biggest threat for Oscar is that consolidation of other providers is creating bigger insurers and bigger insurers can use their scale to get better prices from health providers. Based on the article, Oscar has already started converting their strengths into opportunities. Oscar is expanding to two more states and the growth of the company may reduce any hesitation about the startup. To address the threat that comes from big insurer’s lower rates, Oscar struck a deal with select physician and hospital groups to share the risks of treating the patients. If costs are lower than estimated, the hospital keeps some of the savings and if costs are greater than estimated, the hospital shares some of the bill. These deals, according to the article, is Oscar’s best chance for success. Oscar has used the simplicity and accessibility of the app in their advertising. The article points out the simplicity of Oscar’s advertising stating, “Oscar has plastered messages about how its insurance ‘looks like the rest of the internet’ throughout New York City’s subway system.

” The article then points out the hard facts of the first two years since Oscar started up. They have had a rough start, with a $37 billion loss. The company has attributed the loss to several factors including expansion costs, new hires and admin expenses. Additionally, 200 of their 40,000 customers were very ill and accounted for roughly half of Oscar’s payouts in medical charges and the company has projected losses for another year.

With those kind of numbers, it’d be easy to assume that Oscar is on the road to demise, however at the time of this article, the opposite is true. Oscar proves that strategic planning is crucial, especially in a startup, evidenced by it being valued at $1.5 billion and having more than $230 million in the bank. While the article points out that Oscar has yet to prove that it can take advantage of opportunities brought to it through Obamacare, the founders have their eyes set on long-term results that show over time healthcare costs can be reduced.

Oscar is still expanding, despite its $37 million loss and at a time that large insurance providers are consolidating, further proving the necessity of strategic planning.?