Mark Bertolini contributed Oscar Health After taking over as CEO of the health insurance company a year ago, the company began to make profits. Now, he says the company’s next phase of growth and profitability will focus on expanding into the employer market.
The effort will include “focusing on the 71 million lives lost among small group and middle-market employers, where the majority of employees purchase excess coverage to care for a small number of patients in the group for a certain premium,” Berto Rini explained up front.
“We have a huge opportunity to create a whole new market,” he added.
This is not a new concept. When the Affordable Care Act exchanges were launched a decade ago, analysts predicted that employers would forego the complexity of purchasing group insurance and instead adopt Individual Coverage Health Reimbursement Arrangements (ICHRAs), which provide employees with cash to purchase their own ACA plans.
Bertolini said the market never took off because insurance companies weren’t focused on lowering costs for employers or their workers.
“What we have to do now is do the plan design and underwrite that group. So we can put employees in the right plan — like the ultimate flexible benefits plan,” he said.
Entering the employer market is part of Oscar’s strategy to expand its membership from 1.5 million to about 4 million by 2027.
Ahead of its analyst day presentation, the company set a target for annual revenue growth of about 20% over the next three years and earnings of $2.25 per share in 2027.
Focus on PBM contracts
After eight years as CEO of Aetna, Bertolini has a deep understanding of how large insurance companies and pharmacy benefit managers operate. Earlier this year, he compared his Oscar role to being on a pirate ship, preparing to disrupt a Spanish galleon laden with gold.
Last year, he helped Oscar negotiate better terms for its pharmacy benefit manager (PBM) contract. CVS Health Caremark unit, which he said helped Oscar control the cost of medical care in the plan.
Oscar Health’s contract with CVS Caremark runs through 2026.
Mark Bertolini speaks at the CNBC Evolve New York event on June 19, 2019.
Astrid Staviaz | CNBC
Over the next year, Bertolini will be watching how California health insurer Blue Shield implements its potentially disruptive PBM model.
Blue Shield contracts with a smaller PBM for most of its drug benefits in an attempt to control costs for its members. It will use Mark Cuban’s cost-plus drugs and Amazon pharmacies as its preferred pharmacy network starting in 2025.
“I think the PBM model is outdated,” Bertolini said. “They need to start being honest with their customer base and say, we’re going to pass all the (savings) that we create through the scale of the organization directly to you. If they make that leap, whether it’s through insurance premiums, whether it’s through insurance premiums, Through the dispensary itself, then I think they can stay.
The three largest PBMs in the United States—CVS’s Caremark, Cigna expression script and UnitedHealth Group Optum Rx — Its business has come under increasing regulatory scrutiny. Last year, all three launched more transparent pricing models for insurance and employer customers.
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