Oscar raised $165 million in new funding but is still hemorraging cash. Photo: Oscar

In announcing a new $165 million cash injection, the co-founders of Oscar Health Insurance said the startup had made an "underwriting profit" in 2017.

Reality check: There's a lot of wiggle room in "underwriting profit," based on Oscar's own financial data. Oscar's core insurance functions are still in the red — which will have to turn around if the company also continues to spend more money on its health technology.

Behind the numbers: We looked at Oscar's 2017 financial documents in March; they showed a net loss of $127 million on $229 million of revenue in 2017. That includes overhead and administrative costs, like salaries, advertising, technology and keeping the office lights on.

Oscar calculating its underwriting profit by subtracting medical costs from premium revenues and adding in reinsurance money for high-cost claims, according to company spokesman Khan Shoieb. Using that measure, Oscar's gross margin was roughly break-even.

  • Before adding in reinsurance, though, the company lost more than $50 million last year.
  • Despite a few rocky years, many of Oscar's competitors in the Affordable Care Act's exchanges are turning a profit even without reinsurance — just from the balance between premium revenues and expenses. Other experts I contacted agreed that Oscar's situation is far from rosy.

The big picture: Many startups are unprofitable as they make investments in technology and elsewhere, but Oscar has to find a path to profitability somewhat soon.

  • State insurance departments require insurers to have enough money to cover their operations (so they don't go under and leave people uninsured). It's not feasible to rely on large funding rounds by outside investors who will eventually want their money back — and then some.

Go deeper

Felix Salmon, author of Capital
Updated 15 mins ago - Economy & Business

Trump risk rises for companies

Illustration: Aïda Amer/Axios

Donald Trump fancies himself a businessman — and has given himself a central role in determining the conduct and even the existence of major companies both domestic and foreign.

Why it matters: America has historically been a great place to operate a company under the rule of law, and not be beholden to political whim. Those days seem to be over — at least for companies in the communications industry.

Ben Geman, author of Generate
Updated 15 mins ago - Energy & Environment

China's split personality on climate

Illustration: Sarah Grillo/Axios

A new insta-analysis of China's vow to achieve "carbon neutrality" before 2060 helps to underscore why Tuesday's announcement sent shockwaves through the climate and energy world.

Why it matters: Per the Climate Action Tracker, a research group, following through would lower projected global warming 0.2 to 0.3°C. That's a lot!

Kayleigh McEnany: Trump will accept "free and fair" election, no answer on if he loses

White House press secretary Kayleigh McEnany said Thursday that President Trump will "accept the results of a free and fair election," but did not specify whether he will commit to a peaceful transfer of power if he loses to Joe Biden.

Why it matters: Trump refused to say on Wednesday whether he would commit to a peaceful transition of power, instead remarking: "we're going to have to see what happens."

Get Axios AM in your inbox

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Subscription failed
Thank you for subscribing!