Oscar Health was co-founded by Jared Kushner's brother.
Photograph by Oscar
By Sy Mukherjee
July 27, 2016

Oscar Health, the fledgling New York-based insurance startup that has promised to upend how patients navigate healthcare in the digital age, is severely cutting back on the number of doctors and hospitals its customers can access while simultaneously hiking premiums.

Oscar is nixing about half of its medical provider network in New York for 2017, bringing the number of doctors available for its plan holders down to around 20,000, CEO and co-founder Mario Schlosser announced in a blog post Tuesday. Mount Sinai, Montefiore, and the Long Island Health Network are the three hospital systems which will form the backbone of its newly curtailed network.

The company, which lost $92.4 million in its 61,000-strong New York individual insurance market last year, is also raising premiums by an average of 16%.

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That may sound like a pretty brutal one-two punch of higher prices and fewer medical options. But Schlosser insists that the move is integral to realizing Oscar’s vision of better-coordinated health system that provides a seamless, mobile app-enabled user experience.

“Our new network will not contain every hospital or doctor we have today, but this is a good and necessary change,” wrote Schlosser in his blog post. “Nevertheless, there will be some healthcare critics, entrenched in their views on an outdated system, who will say we are only changing our network to improve our bottom line.”

Schlosser went on to explain that the smaller network contains only the types of medical providers which share in the insurance company’s goals of care coordination and telemedicine services powered by Oscar’s mobile app. For instance, the app will allow customers to scope out their doctor’s schedule while booking appointments; another feature alerts a patient’s primary care provider if they have to make a trip to the emergency room.

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The concept of restricting medical networks in order to hold down overall costs and premiums is hardly new in the insurance industry. Obamacare’s statewide marketplaces are heavily reliant on this precise tactic.

But only time will tell if Oscar’s move will truly improve users’ experience and whether this improvement will be enough to counteract any possible frustrations over more limited healthcare choices and higher premiums.

Oscar also has a heavy-hitting roster of tech and financial giants backing it. It’s raised hundreds of millions in funding from partners like Google Capital and Fidelity, and hired Google’s (googl) Alan Warren (who oversaw Google Docs and Google Drive) to be its CTO and SVP of Engineering in March.

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