Mark Bertolini has helped Oscar Health move toward profitability after taking over as CEO of the health insurer a year ago. Now, he says the company's next phase of growth and profitability will focus on tapping into the employer market.
That effort will include “going after the 71 million lives found at small and medium-sized group employers, where most employees are overinsured to care for the sick few in the group to earn a level premium,” Bertolini explained, ahead. of the company's investor day on Friday.
“We have a great opportunity to create a completely new market,” he added.
It is not a new concept. When the Affordable Care Act exchanges launched 10 years ago, analysts predicted that employers would abandon the complexities of purchasing group coverage and adopt individual coverage health reimbursement arrangements, or ICHRAs, giving workers cash to purchase your own ACA plans.
Bertolini says the market never took off because insurers weren't focused on keeping costs down for employers or their workers.
“What we're going to do now is include plan designs and support the group. That's how we get employees to choose the right plans, like an ultimate flexible benefits plan,” he said.
Entering the employer market is part of Oscar's strategy to expand its membership from 1.5 million to approximately 4 million by 2027.
Ahead of its analyst day presentation, the company set a goal of achieving annual revenue growth of about 20% over the next three years and earnings of $2.25 per share in 2027.
Focus on PBM contracts
After serving as CEO of Aetna for eight years, Bertolini has a deep understanding of how large insurers and pharmacy benefit managers operate. Earlier this year, he compared his role at the Oscars to being on a pirate ship ready to wreck large Spanish galleons loaded with gold.
Last year, he helped Oscar negotiate more favorable terms in its pharmacy benefit management, or PBM, contract with CVS Health Caremark Division, which he says has helped Oscar control medical costs in his plans.
Oscar Health's contract with CVS Caremark extends through 2026.
Mark Bertolini speaking at the CNBC Evolve New York event on June 19, 2019.
Astrid Stawiarz | CNBC
Next year, Bertolini will watch as California health insurer Blue Shield implements its potentially disruptive PBM model.
Blue Shield contracted with a smaller PBM company for most of its drug benefits in an attempt to control costs for its members. You will use Mark Cuban's Cost Plus medications and Amazon Pharmacy as your preferred pharmacy network from 2025.
“I think the PBM model no longer exists,” Bertolini said. “They have to start being legitimately direct with the customer base and saying: we are going to pass on all the [savings] that we have been able to create with the size of our organization directly for you. “If they make that leap, whether through insurance premiums or through the pharmacy itself, then I think they'll be able to stay.”
Top 3 US PBMs: CVS Caremark, Cigna Express scripts and UnitedHealth Group Optum Rx: They have seen their businesses come under increasing regulatory scrutiny. Over the past year, all three have launched more transparent pricing models for insurance customers and employers.
