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More than 153 million people get health coverage through their employers. Oscar Health is banking on many of these companies ditching their traditional benefit plans and sending workers to buy insurance on their own.
For months, Oscar CEO Mark Bertolini has said that funds known as individual coverage health reimbursement arrangements, or ICHRAs, will drive Oscar’s next phase of growth. The arrangements, which date back to the Trump administration, allow employers to give their workers set amounts of money to buy insurance on the individual market, rather than companies buying coverage for workers as a group.
At Oscar’s investor day on Friday, Bertolini provided new details about the health insurer’s plans to capitalize on ICHRAs, as small employers frustrated with big premium increases look for ways to stabilize their own costs by shifting a defined portion to workers.
The company’s strategy is to create health plans that will attract people whose employers have chosen those arrangements, and save their companies as much as 15% compared with their prior plan, Bertolini said. Employees will have more plan choices when buying on the individual market, and small employers will experience more stable premiums, he said.
“ICHRA’s time has come,” Bertolini said.
It’s a large market of 75 million potential customers whose small and midsize employers could make changes to their benefit plans — much bigger than the 21 million people enrolled in ACA marketplace plans today, Bertolini said. As of March 31, Oscar had enrolled 1.4 million people in the individual market. Meanwhile, it has been shedding its smaller business lines, like small business and Medicare Advantage plans.
The strategy shift is by no means a sure win since ICHRA adoption has been slow to ramp up. The HRA Council, consisting of vendors and health insurers, including Oscar, estimates that more than 10,000 employers offer ICHRAs and other types of HRA plans, and more than 200,000 US employees, excluding dependents, have coverage through these arrangements.
The characteristics of individual market plans potentially have limited adoption, said Katherine Hempstead, a senior policy adviser at the Robert Wood Johnson Foundation. She said the plans tend to have narrower provider networks and are rarely preferred provider organizations, or PPOs, which have lower cost-sharing and don’t require primary care doctors to refer patients to specialists.
Because data on enrollment in ICHRAs are poor, it’s hard to know what the experience is like for people who enroll in them, she said.
For now, Oscar is in testing mode. It’s piloting projects with three ICHRA vendors — firms that help employers divvy up funds for workers to buy health insurance — to determine the best distribution and go-to-market strategies for different employer sizes.
Those types of vendors typically focus on selling to employers but aren’t involved in helping workers find the best alternative health plans. This “second-level sale” to employees is where Oscar comes in, Bertolini said.
“Our experiment is what can we do to have a more robust presence in the second-level sale and getting people on the right level of products so that we can maximize the savings for the employer over time,” he said.
Oscar’s aiming to roll out its ICHRA plans for 2025. Its executives didn’t lay out estimates for how many members they expect will enroll in the plans. Oscar is aiming to turn a profit on an adjusted EBITDA basis for the first time this year.