20VC Raising Over $700m From The World's Best Investors, How To Innovate In Highly Regulated Markets & The 3 Superpowers of Insurance Companies with Mario Schlosser, Founder & CEO @ Oscar



In a revealing conversation on the 20 minutes VC podcast, host Harry Stebbings interviews Mario Schlosser, the co-founder and CEO of Oscar Health. Schlosser unpacks the inception of Oscar, driven by personal frustrations with the complexity, lack of coordination, and high costs of the U.S. healthcare system. He details the company's journey, from relying on external vendors to developing a fully integrated, tech-forward system that actively manages members' healthcare experiences. Despite regulatory hurdles and the necessity of significant capital—having raised over $700 million—Schlosser remains committed to transforming health insurance through data management, transparency, and patient empowerment. He envisions a future where Oscar proactively aids in health management, aligning business incentives with patient well-being over the long term.

Summary Notes

Introduction to the Episode

  • Harry Stebbings introduces the 20 minutes VC show and invites followers to Snapchat.
  • Guest Mario Schlosser, founder and CEO of Oscar, is introduced.
  • Oscar's achievements in venture funding and Mario's background are highlighted.
  • Thanks are given to Brian Singerman for the introduction to Mario.
  • First Republic and Segment are mentioned as critical support systems for startups.

Welcome back to the 20 minutes VC with me, Harry Stebbings, and you can find me on Snapchat at H. Stebbings with two b's to see all things behind the scenes here at the 20 minutes vc.

This quote introduces the host and the platform where listeners can engage with behind-the-scenes content.

So joining us in the hot seat, I'm thrilled to welcome Mario Schlosser, founder and CEO at Oscar, the startup that makes health insurance easy.

The quote introduces the episode's guest, Mario Schlosser, and his company, Oscar.

They've raised over $700 million in venture funding from some of the world's best investors...

The quote highlights Oscar's success in raising significant venture capital.

Previously, Mario cofounded the largest social gaming company in Latin America and held roles with the likes of Bridgewater Associates and McKinsey.

Mario Schlosser's diverse background is emphasized, showing his experience in different industries.

Fun fact, as a visiting scholar at Stanford University, Mario wrote ten computer science publications, including one of the most cited computer science papers published in the past decade.

The quote mentions Mario's academic contributions, underscoring his expertise.

I'd also like to say a huge thank you to Brian Singerman at Founders Fund for the intro to Mario today, without which this episode would not have been possible.

This quote acknowledges the role of Brian Singerman in facilitating the interview.

Founding Story of Oscar

  • The founding of Oscar was inspired by personal experiences with the healthcare system.
  • Mario and his co-founder, Josh Kushner, found the system confusing, uncoordinated, and expensive.
  • They believed that an insurance company could potentially address these issues.

The company is about five years old now, and in those five years, my wife and I had two kids as well. And I guess the third one is Oscar as a company.

Mario Schlosser compares the founding of Oscar to the experience of having children, indicating the personal investment in the company.

It's confusing as hell because it's at its core, a complex system, and there isn't anybody who will give you good, even data points on things like outcomes, costs, and who you ought to see next.

The quote describes the complexity and lack of clarity in the healthcare system, which Oscar aims to simplify.

It's uncoordinated because every provider you meet in the healthcare system tends to only be able to see his or her own little sliver of the system.

Mario points out the lack of coordination between different parts of the healthcare system, which Oscar seeks to improve.

The US spends about 18% of GDP on health care... and so somehow we've built ourselves a healthcare system that is too confusing, too uncoordinated, and too expensive.

This quote highlights the inefficiency and high costs of the U.S. healthcare system, which Oscar is trying to mitigate.

Challenges in Healthcare Technology and Data

  • The healthcare industry is complex and technology-backward, especially on the administrative side.
  • Oscar aims to improve member experience and system efficiency by building new infrastructure.
  • The healthcare industry's reliance on outdated technology and the regulatory environment pose significant challenges.

You're dealing with people's healthcare, which is inherently incredibly complex.

The quote emphasizes the inherent complexities of the healthcare sector that Oscar is navigating.

It is a system that's basically built around not outcomes, not payment for outcomes, but payments to providers for every little thing that they do...

Mario Schlosser critiques the current healthcare payment system, which is focused on services rendered rather than patient outcomes.

It's the last, I think, bastion pretty much anywhere in industry where the fax machine is still the primary means of communication.

The quote illustrates the outdated technology prevalent in the healthcare industry, which Oscar is trying to modernize.

We got to basically build a lot of infrastructure around transmitting information, around coordinating care, around enabling appointment scheduling and simple things like that.

This quote underlines the infrastructural developments Oscar is undertaking to improve healthcare coordination and information flow.

The first year of Oscar was really mostly spent getting a license, and we ended up being the first newly licensed commercial health insurance company in New York state in about 20 years...

The quote highlights the regulatory hurdles and the achievement of Oscar in obtaining a license as a new entrant in the health insurance market.

Complexity of Healthcare Regulation

  • The U.S. healthcare system is regulated by a complex mix of state financial departments, federal regulators, and health departments in various states.
  • This complexity creates a challenging environment for navigating healthcare regulations.

"ranging from the states financial departments to the federal regulators on the CMS side, to health departments in the various states that regulators in various ways."

This quote highlights the diverse range of regulatory bodies involved in the U.S. healthcare system, emphasizing the complexity of navigating through them.

Opportunity for Startups in Healthcare

  • The current system is inefficient, with healthcare costs making up 18% of U.S. GDP.
  • The U.S. spends twice as much on healthcare as other countries, yet has worse outcomes, such as higher infant mortality and lower life expectancy.
  • Private companies and startups are seen as more capable of innovating and improving the system compared to the government.
  • Private systems in other countries, like Germany and Switzerland, are run efficiently by private insurance companies and hospitals.

"The current system we have has horribly failed in containing costs and creating a better outcomes focus system."

Mario Schlosser criticizes the current healthcare system for its high costs and poor outcomes, suggesting that it has failed to prioritize efficiency and the health of the population.

The Role of Government and Private Sector

  • Medicare, a government-run program, is more cost-efficient than commercial insurance.
  • Commercial health insurance in the U.S. often costs 150% or more than Medicare for the same services.
  • The thesis of Oscar (Mario Schlosser's company) is that individuals are not asked for their opinion on how healthcare should work.
  • The lack of competition in the U.S. healthcare market is a problem, and the speaker believes private companies can bring back competitive pressure.

"Medicare tends to be on the cost side, at least more efficient than the commercial part of healthcare."

Mario Schlosser states that Medicare is more cost-efficient than private insurance, indicating a discrepancy between government and commercial healthcare costs.

Consumer Choice and Market Dynamics

  • Individuals in the U.S. cannot commit to a healthcare provider in exchange for better rates and long-term care investment.
  • In other markets, consumers can choose providers based on cost and quality, but this is not the case in U.S. healthcare.
  • The speaker believes that increasing competition and consumer choice is necessary to improve the healthcare system.

"You as an individual are effectively unable to vote with your feet as you could in any other market that is around you as to what kind of health care you want and at what kind of price you want it."

Mario Schlosser argues that the U.S. healthcare system lacks the consumer choice present in other markets, which restricts the ability to influence the quality and cost of healthcare.

Insurtech and Oscar's Role

  • Oscar was the first health insurance company startup and essentially created the category of insurtech.
  • The company had to raise significant capital due to the unique requirements of being an insurance provider, such as statutory capital reserves.
  • Insurance companies have the power to manage the flow of money, data, and decision-making in healthcare.
  • Oscar's fundraising was influenced by the recognition of the scale of their operation and the responsibility of managing large financial risks.

"We essentially defined the category of insurer tech, if you want to think about it that way, Insuretech as a search term."

Mario Schlosser explains that Oscar was a pioneer in the insurtech category, establishing a new sector within the technology and insurance industries.

Fundraising and Scale of Insurance Operations

  • Oscar's fundraising journey was unique due to being the first of its kind in the insurtech space.
  • The company anticipated high costs and a long timeline, which influenced their aggressive fundraising strategy.
  • Managing risk at a large scale is a significant responsibility for insurance companies, which can result in substantial financial consequences if estimates are incorrect.

"If we get it wrong by 10%, okay, we get our prices wrong by 10%, if we get our risk estimates wrong by 10%, it's $100 million."

Mario Schlosser emphasizes the immense financial risk involved in the insurance business, where a small percentage error can lead to a loss of hundreds of millions of dollars.

Investor Selection and Long-Term Vision

  • Oscar Health deliberately chose investors with a long-term perspective.
  • Investors like Founders Fund were sophisticated and focused on fundamentally changing systems rather than quick returns.
  • The company avoided investors primarily interested in short-term, viral successes like photo sharing apps.

"We only have investors who are taking very long term views, who are able to make very big bets, and who want to get at very fundamentally wrong systems and not just have another photo sharing app virally scale."

This quote emphasizes the strategic choice Oscar Health made in selecting investors who align with their long-term vision of fundamentally changing healthcare systems, as opposed to those looking for quick, viral successes.

Educating Investors Without Being Patronizing

  • The first pitch to General Catalyst was a pivotal moment.
  • Joel Cutler and Charlie Baker, who had health insurance experience, were present during the pitch.
  • The anecdote with Charlie Baker highlighted the inertia in big insurance companies and their lack of consumer orientation.

"Charlie Baker really probably was the only venture capitalist in that time who had also run a health insurance company."

This quote points out the unique position of Charlie Baker, who brought valuable health insurance industry insight to the pitch, helping Oscar Health to effectively communicate their vision to investors.

Consumer-Oriented Healthcare Innovation

  • Oscar Health aims to individualize and consumerize healthcare, empowering individuals with better quality and more responsive services.
  • The company's approach contrasts with traditional insurance companies that act as middlemen without a consumer focus.
  • By prioritizing member service and experience, Oscar Health develops new technologies and products that incumbents struggle to match due to outdated systems.

"If you come into this by having first and foremost in your dna that you want to serve members and create the best experience for them, get their cost down, you suddenly start developing new technology and products that the other guys will not get around to developing."

This quote illustrates Oscar Health's core philosophy of prioritizing member service, which drives their innovation and sets them apart from traditional insurance companies.

Challenges in Scaling the Team

  • Oscar Health faced typical startup growing pains, especially regarding the scaling of early team members into higher managerial roles.
  • The company needed to balance hiring for health insurance experience with bringing in talented individuals capable of scaling.
  • This balance was crucial as too much prior industry knowledge could hinder innovation, while a lack of experience could impede basic operational functions.

"We go through the same growing pins any other startup goes through."

This quote acknowledges the common challenges faced by startups in scaling their teams and the need for a mix of industry experience and fresh talent.

Strategic Approach to Building Company Infrastructure

  • Oscar Health had a five-year plan to transition from relying on outside vendors to owning and operating all their systems and networks.
  • This full-stack integration gives Oscar Health real-time visibility into individual healthcare, improving responsiveness and care.
  • The mix of experienced insurance professionals and innovative thinkers was crucial to the company's early operations and long-term reinvention of processes.

"We are at that point now where we own pretty much everything ourselves."

This quote signifies the successful execution of Oscar Health's strategic plan to gain full control over their systems and networks, enhancing their service capabilities.

Transparency and Public Accountability

  • Oscar Health's numbers have been public from the start, filing quarterly regulatory reports.
  • This level of transparency is unique for a startup and has shaped the company's internal culture.
  • Transparency extends to sharing critical financial and performance indicators with employees, fostering an open environment.

"We have been quasi public since the very beginning."

This quote highlights Oscar Health's unconventional approach to transparency, which has influenced both internal culture and external perceptions of the company.

  • Oscar operates in the Affordable Care Act (ACA) market, which is itself a startup market.
  • The ACA market has experienced growing pains, with insurance companies losing money and underestimating risks.
  • Oscar had to navigate these challenges while also managing the typical hurdles of a startup.

"We also happened to do it in a market that itself was a startup market. It's sort of like a very interesting thing where the affordable care act market, the market we started in, in and of itself is a startup, and in and of itself went through the growing pains and continues to do so."

The quote emphasizes the unique position of Oscar, operating in a new market (the ACA market) that was going through its own startup-like growth challenges. This added an extra layer of complexity to Oscar's journey as a startup.

Radical Transparency and Long-term Perspective

  • Oscar practices radical transparency internally to keep their team informed.
  • The company has adopted a long-term perspective when communicating with the external world.
  • This approach has led to the necessity of a thick skin due to the scrutiny and challenges faced.

"So radical transparency internally being taken a very long term view towards the external view towards worlds and being, I think, really radically results oriented."

This quote highlights Oscar's commitment to internal transparency and a focus on long-term goals and results, which are crucial for navigating the external pressures and expectations.

Results-Oriented Culture

  • Oscar has not had the luxury to overpromise; they had to prove their ability to manage their business effectively from early on.
  • The company's operational nature and the significant numbers involved mean that excellence is non-negotiable.
  • This has created a sense of urgency within the company and a culture where everyone is battle-hardened.

"We have not really have had the chance to go out there and over promise very much. We had to actually show very early on that we can manage our own affairs, manage our business in a tight kind of way, and it creates a sense of urgency internally in the company that I do think is very powerful."

The quote explains that Oscar's situation required them to deliver on their promises from the beginning, fostering a culture of urgency and accountability within the company.

Personal Preferences and Influences

  • Mario Schlosser's favorite book is "Helliman" by Sven Regener, appreciated for its language and humor.
  • Joel Klein, Oscar's Chief Policy and Strategy Officer, is Mario's biggest mentor, offering political and organizational guidance.
  • Mario suggests the startup and VC world should be more welcoming to founders from diverse backgrounds and life stages.

"Well, there's a great german book called Helliman written by a guy named Svenrigena... I think it's Joel Klein, who works for Oscar as chief policy and strategy officer... Perhaps obsession with young founders."

These quotes provide insight into Mario's personal tastes and influences, including his literary preferences, mentorship experiences, and views on diversity in the startup ecosystem.

Media Consumption

  • Mario enjoys reading Spiegel Online, a German news site known for its neutral and intellectual discourse.

"I like Spiegel Online, the german news sites online... it happens at a less partisan, much more neutral, much more intellectual level."

Mario appreciates the non-partisan and intellectual nature of German discourse as exemplified by Spiegel Online, which informs his world view and media consumption habits.

Future Aspirations for Oscar

  • Mario envisions Oscar evolving into a proactive healthcare partner, using real-time data to assist members in managing their health.
  • The goal is to intervene at the right moments to promote healthier living and reduce healthcare costs over the long term.
  • Oscar aims to align its business model with the interests of its members, focusing on long-term health outcomes.

"Fundamentally, I think I would love for us to be and grow more and more into is the tool and the entity that's able to predictively, reactively track what is happening in your healthcare life and come in with assistance at just the right points in time, in real time, even proactively, when we see something emerging."

The quote outlines Mario's vision for Oscar's future, which involves leveraging technology and data to provide timely and proactive healthcare support to its members.

Acknowledgements and Support Systems

  • Harry Stebbings expresses gratitude for the introduction to Mario by Brian Singerman at Founders Fund.
  • The 20 Minute VC podcast offers behind-the-scenes content and promotes supportive infrastructure for startups, such as First Republic and Segment.

"I'd like to say a huge thank you to Brian Singerman at Founders Fund for the intro to Mario... if you're an early stage startup, the right infrastructure and support systems are critical."

The quote thanks contributors to the podcast and underscores the importance of a supportive network and infrastructure for early-stage startups, highlighting services like First Republic and Segment.

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