Oscar, which made its name as a startup focused on providing Obamacare coverage, Thursday reported a second-quarter “underwriting profit of $128 million.” That was somewhat less than the $141 million underwriting profit Oscar reported in the second quarter of last year though the insurer said it was “in line” with company projections.
But a new agreement Oscar signed with Berkshire Hathaway’s National Indemnity reinsurance subsidiary may be even more important and a signal Oscar may be on the verge of a big expansion in the individual and small group markets. A company spokeswoman Thursday wouldn’t confirm where Oscar plans to expand for 2020.
Such reinsurance partnerships typically mean a health plan like Oscar will have more capital to expand and invest in new technology. Providing health insurance in the individual market can be capital intensive given regulations in each state and the marketing is targeted to individuals and small groups as opposed to a few large national employers.
“This quarter, we are excited to announce a new multi-year quota-share reinsurance agreement on the portfolio with Berkshire Hathaway’s NICO subsidiary, the largest U.S. reinsurer,” Oscar chief financial officer Sid Sankaran said in a statement accompanying the health insurer’s financial results.
“Under the partnership, which is being reviewed by regulators, Oscar cedes 50 percent of its risk on the portfolio to NICO,” Sankaran added. “This will allow Oscar additional capital flexibility to fuel our growth and further refine our already best-in-class technology stack. This marks the second material reinsurance agreement for Oscar after we brought on AXA in January 2018 and is a continued vote of confidence in our ambition to deliver profitable growth supported by our industry leading technology and customer experience.”
Oscar is part of the parade of health insurance companies looking to expand into new markets for both individual Obamacare coverage as well as small group health insurance products. Earlier this week, for example, health insurer Centene said it planned to expand in 10 of 20 states it now sells subsidized individual coverage under the ACA.
Oscar currently sells individual Obamacare coverage in 14 markets in 9 states: New York, New Jersey, California, Tennessee, Ohio, Texas, Florida, Michigan and Arizona.