Oscar CEO Schlosser to step down, focus on insurer’s tech

BY JACQUELINE NEBER

Mario Schlosser will transition out of his role as chief executive of insurance company Oscar Health effective April 3, the company reported last week. Mark Bertolini, previously the chief executive of Aetna and current co-chief executive of Bridgewater Associates, will assume Schlosser’s role at Oscar.

According to the company’s 8-K documents filed with the Securities and Exchange Commission, Schlosser and co-founder Joshua Kushner recommended to Oscar’s board that they give up their founders awards, which consisted of performance-based restricted stock units. Schlosser had almost 4,230,000, and Kushner, about 2,115,000. The founders awards were granted in 2021, and they were eligible to vest based on Oscar achieving predetermined stock price goals over a seven-year period, according to filings.

The filings show that the shares were an incentive to retain Schlosser and Kushner so they could lead the company to a positive performance. Oscar has struggled, however, since going public in 2021, although it seemed to be slowly improving in the fourth quarter of 2022. The company did not directly address why Schlosser is stepping down at this time.

Oscar expects to incur a stock compensation noncash charge of about $46 million in the first quarter of this year as a result of Schlosser and Kushner canceling their founders agreement. Jackie Kahn, a spokesperson for Oscar, said the co-founders did not receive any compensation or equity grants in exchange for the forfeiture of their founders grants.

According to the filing, canceling the founders agreement was an effort to reduce the dilutive effects of Bertolini’s sign-on equity awards and Oscar’s annual employee equity awards.

Transition plan

The filing shows that Oscar’s board of directors also adopted the first amendment to the company’s inducement plan, which increases the number of authorized shares of Class A common stock from 5 million to more than 18 million. The plan allows nonqualified stock options, stock appreciation rights, restricted stock, time-based restricted stock units, performance-based restricted stock units, dividend equivalents and other stock or cash awards to be granted to prospective employees.

Under the terms of Bertolini’s agreement with Oscar, he will receive a base salary of $600,000, a target annual bonus of 30% of his base, and 10,320,000 shares of Class A common stock. Nearly 3 million of those will be vested based on the passage of time, and more than 7 million will be based on his achieving certain performance goals.

Based on last week’s stock performance, Bertolini’s share grant would have a cost an estimated $37 million, a small noncash loss. Kahn said Oscar does not expect the founders’ cancellation to impact the company’s metrics or guidance for 2023.

If Bertolini is fired or leaves Oscar, he will receive an amount equal to the sum of his base and bonus for that year, as well as 12 months of health coverage.

On a conference call last week to discuss the transition, Oscar leaders said Bertolini has been acting as a strategic adviser to the company for the past year. Bertolini said he’s returning to the industry because he believes there’s still work to be done in making health insurance affordable.

Schlosser, who will become president of technology, will focus on the engineering that aims to help Oscar grow and scale its products.

Oscar is based in SoHo. It will release its first-quarter results on May 9. ■