MOST Americans view health insurers only slightly more favourably than they do thieves. But a new insurance company, Oscar, wants to be an ally. "We didn't start this company because we love health insurance," explains an advertisement on the New York subway. "Quite the opposite, in fact."
Oscar is the brainchild of three young men, Joshua Kushner, Kevin Nazemi and Mario Schlosser, who love technology instead. Six months ago it began selling insurance in New York City and nearby counties. Under the rules of the Affordable Care Act, better known as Obamacare, Americans had until April 1st to choose insurance for 2014. Oscar's founders hope New Yorkers chose them. Their goal is simple--some say naive: to transform American health care.
It surely needs transforming. America spends 17% of its GDP on health, yet its people are not particularly healthy. A sick patient, trying to understand his insurance, is likely to need further care after banging his head against the wall. All this would suggest an industry ripe for disruption, in the argot of Harvard Business School, where Oscar's founders were trained.
Obamacare has pushed things along. The law created "exchanges" where insurers can sell directly to consumers. McKinsey, a firm of consultants, counts 80 companies that have entered this market. Many, however, are either hospitals that have begun selling insurance or firms that already managed coverage for Medicaid, the health programme for the poor. Oscar is a rare private, independent insurer.
Mr Kushner, a venture capitalist who backed Instagram, a photo-sharing app bought by Facebook in 2012, decided to start an insurer after he opened a confusing health bill. He and his co-founders chose New York, a notoriously complex market, because they live there. But they have a sweeping vision. "A lot of the problems that we think exist in the health-insurance world can be solved with technology," Mr Kushner believes.
This ambition abuts the unfortunate reality that being an insurer is a pain. Oscar hired lawyers to gather the thousands of pages needed to apply for an insurance licence. It set aside $29m to meet New York's requirements for capital reserves. To meet strict standards for the number and location of doctors where an insurer must pay for care, it is paying another company for access to its network of clinics and hospitals. Obamacare requires companies to cover certain benefits. It also sets tight rules for the share of health costs that an insurer must pay. On top of this, companies cannot charge a sick person more than a healthy one. And in New York, they cannot vary price by a person's age, either.
Despite all these rules, Oscar hopes to differentiate itself by making good care easier to find. A patient can log on to Oscar's website and see his recent doctor's visits and drug purchases, in the same way he can see his timeline on Facebook. Enter a symptom such as "my tummy hurts" into Oscar's search engine, and the engine presents possible conditions, as well as a list of clinics and doctors, with the average price beside each option.
To encourage patients to take care of themselves, Oscar offers free generic drugs and a few free visits to general practitioners each year. Virtual doctor's appointments, or televisits, are available all day. Over time, says Mr Schlosser, "we're going to recommend care in smart ways, in the way that Amazon recommends books." This might seem creepy to some; to others, it will be helpful. And Oscar plans to do more. Its staff includes former leaders at Foursquare and Tumblr, two celebrated startups. In January it raised $30m, on top of a previous $45m, to expand its team.
All this is new and exciting. Unfortunately, insurers' success rests on two old-fashioned factors: who buys your product and whether your price covers your costs. Oscar accounted for just 2% of New York's early sign-ups. Its premiums are low, about 50-60% below those of UnitedHealth, America's biggest carrier. Mr Schlosser says that Oscar's innovations, such as televisits, will reduce costs. Mr Kushner seems unworried by bigger, older companies. "Hopefully," he says, "the rest of our competitors can copy us, because we think that's what will raise the standard of care for America."