Oscar Health and Full-Stack Primary Care

How a Google investment and vertical integration strategy at Oscar Health create and capture winner-take-all dynamics in Primary Care.

Source: Bloomberg

Last month Oscar Health Insurance raised a $375M strategic investment from Alphabet, uncovered in an incredibly thorough interview. This immediately raised questions about the round size, valuation, sustainability, and growth strategy.

Naturally, Oscar’s round size and corresponding valuation (and lack thereof) received the most attention.

Data: PitchBook

First, the round size. Oscar’s business model and strategy necessitated massive capitalization for two reasons:

1. Nature of the business: As an insurance company, Oscar has to follow state regulations that mandate that insurers maintain a minimum cash pool to cover their internal operations (to avoid leaving people uninsured if they shut down). Given the size of their latest round, continuing to maintain cash reserves from venture financing is likely unsustainable and will require that they turn an operating profit by next year.
2. Strategy: Oscar deployed significant capex building their in-house claims processing infrastructure, which likely…