Published On: Tue, Aug 11th, 2015

Oscar’s losses are huge but investors don’t care

How one insurance startup with only 40, 000 members is worth $1.5 billion.

(Left to right) Mario Schlosser,   Kevin Nazemi and Josh Kushner of Oscar

 

Three health insurance companies that launched in 2013 to win the business unleashed by Obamacare have been swimming in red ink ever since. In 2014, they lost a collective $138 million.

Yet one, Oscar Health Insurance, co-founded by Mario Schlosser, Kevin Nazemi and Josh Kushner, is valued at $1.5 billion.

Which is curious: The startup lost $27.5 million last year and an additional $11.4 million in the first quarter of 2015. Moreover, it has only about 40, 000 members.

Compare that with Cigna. The ­Connecticut-­based insurance giant has 14.3 million members—more than 300 times Oscar’s count. And yet, based on the $54 billion ­Anthem is paying to buy Cigna, the insurer is worth only 36 times ­Oscar’s valuation.

The disconnect between Oscar’s performance and what investors think it’s worth shows just how much the company is a product of the tech world, where venture capitalists in a frothy market are willing to pay a premium to get a piece of a promising startup. Oscar describes itself as a consumer-friendly disruptor of the staid insurance industry, but most of its valuation remains based on future performance.

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Crains New York, by Jonathan LaMantia

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