Cigna and Oscar expand their small business partnership

0

Cigna Corp. and Oscar Health have expanded their small-group offering in California, and analysts called the low-stakes partnership a PR stunt intended to distract from the startup’s poor performance in the public markets.

The two companies’ small business insurance plan is now available across Tennessee, Connecticut, California and the Atlanta area. The insurers aim to sell their health plan to companies with 100 employees or less. Their plan includes integrated medical, behavioral and pharmacy services and broad access to high-performing doctor and hospital networks, the companies said. As in other Oscar plans, members will receive support from a concierge team to understand their benefits and find care. They will also have access to round-the-clock telemedicine at no cost and other digital tools to support their care. The insurers first partnered last year and entered Los Angeles and Orange County at the same time.

Their partnership is a natural fit, said Brad Ellis, a senior insurance analyst at Fitch Ratings. Cigna brings the network and ability to negotiate lower rates with providers, while Oscar brings the consumer-centric platform, he said.

“Cigna’s trying to move back into the small group market and what Oscar brings to this is really just the tech focus, helping people navigate this country’s fragmented healthcare system,” Ellis said.

Cigna and Oscar will face fierce competition in California. Kaiser Permanente dominates the California small-group insurance business. With more than 848,000 members, the insurer holds more than half the market in the state. Blue Shield of California, Anthem Blue Cross and UnitedHealthcare are also strong players in the space. Cigna holds no small-group contracts in California. Oscar, meanwhile, counted 3,800 small group customers in California at the end of 2020, according to the state’s Department of Managed Healthcare and Department of Insurance.

The startup’s consumer-centric focus could be seen as a positive for smaller employers that do not have the budget to employ full-time benefits administrators to help them—and their employees—navigate the insurance system, Ellis said. The decision to focus on the futuristic Bay Area may also prove strategic, added Adam Block, a New York-based health economist. Oscar’s tech-first image may appeal to young company founders looking to offer employees insurance that looks like them.

“Oscar has a young, fresh brand that appeals to a younger clientele and Cigna is more of a blue-chip health insurer that has the discounts and has the premiums,” Block said. “This may bring the best of both worlds to this small group market.”

Still, the insurer has not yet been successful in the small-group market, said Ari Gottlieb, a healthcare consultant. Out of the 1.6 million small group clients in California at the end of 2020, the startup had captured fewer than 1% of customers. The timing of this announcement—outside small business’ typical January purchasing cycle—could also be intended to draw attention away from Oscar’s disappointing public debut and subsequent drop in its stock price. As for Cigna, since the insurer has no customers in the market yet, there’s not a ton of risk in the partnership.

“They’ll say they’ve only been in the business for two or three years,” Gottlieb said. “But if you’re in small-group in LA and Orange County, the largest county in America, and you’re at 3,800 members? I think there’s probably something fundamentally challenged with your offering.”

He believes the startup’s local issue lies in distribution. The company lacks relationships with brokers who typically sell policies to small business customers, he said. This is also not Oscar’s first partnership, Gottlieb said.

In 2017, Oscar and Humana partnered to bring small business insurance to Nashville, although Gottlieb said that effort ended after failing to gain market traction. More recently, Oscar launched a 2020 Medicare Advantage plan with Montefiore Health System in New York. The company now counts 3,170 Medicare Advantage members, more than double the number it had in 2020 although still less than 1% of the total Advantage market, according to a report from The Chartis Group. Continuing to partner is in line with the growth thesis presented to public investors, Gottlieb said.

“They’re trying to demonstrate that they have this partnership model,” Gottlieb said. “My supposition is that they are going to overplay this narrative of significance in the market as to what it means as a way of distracting from the fact that their stock is 40% lower than their IPO price and has really not been received well by investors.”

FOLLOW US ON GOOGLE NEWS

Source

Leave a comment