Oscar Health eyes $6.7B valuation with upcoming IPO

Dive Brief:

  • Insurance startup Oscar Health could raise as much as $1.05 billion in its initial public offering, according to regulatory filings on Monday, following contracting revenue and rising losses last year.
  • New York City-based Oscar is planning an IPO of 31 million shares at an estimated price of $32 to $34 per share, placing the company at a market capitalization of $6.7 billion at the upper end of that pricing range, per Healthcare Dive calculations.
  • The eight-year-old company, which provides a technology-driven insurance platform, plans to use the capital to fund growth initiatives, management said Monday. Oscar will trade on the New York Stock Exchange under the ticker symbol OSCR.

Dive Insight:

Oscar Health bills itself as a new kind of insurance company, banking its millennial-savvy branding and tech platform will set it apart from massive industry peers like UnitedHealthcare or Anthem.

Since its founding in 2012, Oscar has received at least $1.7 billion from numerous investors, including Google parent company Alphabet. The insurer sells individual and family, small group and Medicare Advantage plans, along with telehealth offerings including a virtual primary care service, which has seen utilization skyrocket during the COVID-19 pandemic, according to the S-1 filed Monday.

Though Oscar is still a dwarf compared to other national plans, the startup has reported steady growth since its founding, especially in the individual marketplace set up by the Affordable Care Act. Oscar is currently the third largest for-profit insurer in the individual market based on membership, and expanded to the small group market in 2017 and MA just last year.

But even though Oscar added members to plans and expanded to several additional states in 2020, the company is dealing with flagging financial performance that could drag down IPO hype.

Oscar reported revenue last year of $462.8 million, down more than 5% from 2019’s top line. Expenses rose too, resulting in an operating loss of $402.3 million, compared to a smaller operating loss of just $259.4 million in 2019.

And Oscar, which hasn’t been profitable since its inception, saw its net loss snowball last year to $406.8 million, compared to a net loss of $261.2 million in 2019.

The startup announced in late December it was preparing to go public, the latest in a boom of healthcare IPOs as COVID-19 drove utilization of health products, especially those with a digital bent.

Oscar originally intended to raise just $100 million through its IPO, according to the original registration statement filed earlier this month, though the final figure will likely be significantly higher in light of Monday’s amended paperwork.

Co-founded by Josh Kushner, brother of former President Donald Trump’s son-in-law Jared Kushner, and Mario Schlosser, who currently serves as CEO, the company plans to use the fresh capital to repay loans and fund growth, tech development and capital expenditures.

One growth opportunity called out in the filing is inking agreements with third-party plans.

“We believe we are well-positioned to monetize our platform through risk-sharing partnerships or, even more directly, through fee-based service arrangements,” management wrote in the S-1.

Oscar signed a deal in January to take over certain administrative and back-end functions for Health First Shared Services, while giving members of its Florida-based plan subsidies access to Oscar’s technology platform starting in 2022.

The market opportunity for providing health insurance at a lower expense is vast, and only expected to grow due to the continuing rise of health costs and the growing prevalence of chronic diseases as the population ages.