Why Google is taking a closer look at disrupting health care

In its first investment since the announcement that Google would become Alphabet, Google Capital has put a major vote of confidence into the future of health care in the tech sector.

A vote of confidence to the tune of $32.5 million.

Google Capital, a growth equity fund and part of Google/Alphabet’s investment arm, has previously backed ventures like Duolingo, Survey Monkey, and Glassdoor, as the Wall Street Journal points out in its report. Now, Oscar Health Insurance Corp. joins those ranks, but there’s reason to believe Google’s interests in health care go beyond the investment.

Oscar is a health insurance startup that hopes to change the way that people buy and interact with their health care coverage by using technology paired with simple and intuitive design. By clearly laying out coverage options, connecting customers directly to providers, and keeping track of care, Oscar already sets itself apart from the pack of large health insurance providers, which continue to lean on outdated technology that drives a wedge between customers and their coverage.

Health care is slow to change, and the tech is outdated,” says Forrester Research health care analyst Kate McCarthy. “New competitors help push large payers forward and are a good way to test the market to see what works.”

Oscar isn’t the only startup attempting to push the health insurance industry forward, though. Accordion Health‘s customer-facing insurance solution Pistachio helps customers explore their options by comparing Medicare Advantage plans side-by-side.

“I think Oscar is a starting point for a huge change in health care, and we are working just as hard (or harder) in bringing about consumerism within health care through our tools, such as Pistachio,” says Accordion Health CEO Sriram Visiwanath. “We have a fraction of the resources of Oscar, but the same shared goal of making health plan risk management way more operationally, financially efficient, consumer-driven and UX-centric.”

Startups have a habit of moving industries forward (usually), and the health insurance industry is no exception. As companies like Oscar enter the marketplace and provide customers with options and transparency, expectations within the open market shift.

Health coverage is already moving in two directions,” says McCarthy. “More plans are being offered with high deductibles. This shifts much of the upfront investment in health expenses to the patient… In turn, this is pushing patients/consumers to expect more options in health plans and greater transparency on cost and quality outcomes. Startups that can be good patient navigators and agents of price transparency have a big spaaaaaace to fill in the industry.”

Google Capital’s $32.5 million investment boosts Oscar’s valuation up to $1.75 billion, according to a source from the WSJ report.  Though certainly a new direction for Google in the health care space, the recent investment is far from the company’s only foray into the health industry. For instance, Google Life Sciences, which is focused on technologies that push health care technology forward (like glucose-monitoring contact lenses), very recently hired Dr. Thomas R. Insel, who was previously the director of the National Institute of Mental Health.

Google (Alphabet) is clearly making a play to expand their presence in the health care marketplace,” says McCarthy. “Oscar represents an opportunity to invest in a model consumers are responding positively to and is a smart choice for Google.”

For now, Oscar is only available in New York and New Jersey, but plans to extend service to California and Texas beginning in 2016.