Google Capital has invested $32.5 million in Oscar Health, a health insurance company using technology to make insurance simple, intuitive, and human with a valuation of $1.75B, The Wall Street Journal reports. The recent funding brings startup’s funding total up to $352.5 million.
Launched in 2013, Oscar Health’s quality network has more than 40,000 users in New Jersey and New York with plans to expand its coverage to California and Texas in 2016. The company’s business model is focused on signing up users through online exchanges that were created by the 2010 Affordable Care Act (ACA), rather than employers where the average customer pays $5,000 yearly.
High Growth = High Burn Rate
Oscar’s consumer-based business model is extremely costly and challenging as the company must prove it can offer prices that are competitive to their larger, more established insurance competitors. Investments in building new technologies and growing its engineer team also contribute to the losses. As a result, the company suffered $27.5M in losses in 2014, despite earning $56.9M in revenue. “You can generally get better discounts [from healthcare providers] if you have a lot of enrollment, and if you’re new you don’t have a lot of enrollment. That might mean you have to sustain some losses while you try to build enough market share,” said Gary Klaxton, vice president at the Kaiser Family Foundation.
