Participants

Chris Potochar; Vice President of Treasury and Investor Relations; Oscar Health Inc

Mark Bertolini; Chief Executive Officer, Director; Oscar Health Inc

R. Scott Blackley; Chief Financial Officer; Oscar Health Inc

John W. Ransom; Analyst; Raymond James Financial Inc

Stephen Baxter; Analyst; Well Fargo Securities

John W. Young; Analyst; UBS Financial Service

Joanna Gajuk; Analyst; Bank of America

Joshua Raskin; Analyst; Nephron Research LLC

Michael Ha; Analyst; Baird

Dave Windley; Analyst; Jefferies LLC

Presentation

Operator

Good morning, everyone. My name is Ellie, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Oscar Health's first quarter 2025 earnings conference call. At this time, after the speaker's prepared remarks, there will be a question-and-answer session.
(Operator Instructions)
Thank you. I would now like to turn the call over to Chris Potochar, Vice President of Treasury and Investor relations.

Chris Potochar

Good morning, everyone.
Thank you for joining us for our first quarter 2025 earnings call. Mark Berlini, Oscar Health's Chief Executive Officer, and Scott Blackley, Oscar's Chief Financial Officer, will host this morning's call. This call can also be accessed through our investor relations website at ir.hioscar.com.
Full details of our results and additional management commentary are available in our earnings release, which can be found on our investor relations website at ir.hioskir.com.
Any remarks that Oscar makes about the future constitute forward-looking statements within the meaning of safe harbour provisions under the Private Securities Litigation Reform Act of 1,995.
Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in our annual report on Form 10k for the period ended December 31, 2024, filed with the SEC. And other filings with the SEC, including our quarterly report on Form 10Q for the quarterly period ended March 30, 2025; to be filed with the SEC.
Such forward-looking statements are based on current expectations as of today. Oscar anticipates that subsequent events and developments may cause estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so.
The call will also refer to certain non-GAAP measures. A reconciliation of these measures to the most directly comparable GAAP measures can be found in the first quarter earnings press release available on the company's investor relations website at ir.hioskr.com.
We have not provided a quantitative reconciliation of estimated full year 2025 adjusted IPETA as described on the call to GAAP net income because Oscar is unable without making unreasonable efforts to calculate certain reconciling items with confidence.
With that, I would like to turn the call over to our CEO Mark Bertolini.

Story Continues

Mark Bertolini

Good morning.
Thank you, Chris, and thank you all for joining us.
Today, Oscar reported strong first quarter results. Our positive results were driven by continued top line growth, bottom line performance, and year over year improvements across nearly all core metrics. Oscar reported total revenue of $3 billion in the quarter, a 42% increase year over year.
We also generated net income of approximately $275 million a significant improvement of $98 million over the prior year period.
Earnings from operations grew by $112 million to $297 million and we improved our operating margin by 110 basis points year over year to 9.8%. MLR increased 120 basis points year over year to 75.4%, primarily due to a risk adjustment true up for 2024.
We also drove greater efficiency in the business and reported the lowest SG&A ratio in the company's history at 15.8%. A 260-basis point improvement year over year. Our first quarter performance demonstrates the strength of our strategic plan, and we expect meaningful margin expansion this year.
Scott will review our first quarter results in a few moments. First, I will cover key business highlights. Oscar's first quarter results put us on a solid path for 2025. We closed the quarter with approximately $2 million effectuated members, a 41% increase year over year.
Our solid retention and new membership growth reflect the value of Oscar's innovative plan designs and superior member experience. Our condition focused plans are strong performance in the book.
We are also seeing high levels of digital engagement across our IFP and ICRA membership, allowing us to more effectively manage member care.
Oscar is deepening our market presence with new partnerships that give members more value-added services. In the quarter, we launched Oscar Community Resources with Find Help, a social care network. The program connects members with local food, housing, transportation, and other services beyond medical care that impact health.
These resources will ultimately support our clinical intervention and case management programs to lower spend and improve clinical outcomes. Our technology is also further optimizing our operations and improving the member experience.
The team recently launched a free live chat feature for Oscar Virtual Urgent Care, which collects patients symptoms and severity before provider engagement.
Use of the new capability decreased member response times by 90% and drove a 28% boost in provider efficiency.
Similarly, our new AI tool for care guides is more quickly addressing member needs. We continue to build a scalable and efficient technology infrastructure that positions us to grow and differentiate the Oscar experience. Before I close, I want to talk about the current policy environment and attention on the individual market.
CMS's proposed program integrity initiatives targeting fraud, waste, and abuse are positive for the long-term sustainability of the market.
However, rules such as the shortened enrolment window will constrain Americans' ability to shop amid many enrolment changes for 2026.
Many individuals are already facing meaningful premium increases if the enhanced premium tax credits expire. They deserve adequate time to shop for plans that meet their needs.
Oscar advocates for constructive solutions that strengthen the individual market. We are engaged with federal and state policymakers on both sides of the aisle.
The individual market is a cornerstone of American healthcare, driving a record low uninsured rate and a cost trend below CPI for the last several years.
Policymakers recognize the market's role in our economy and the gap it fills for their hardworking constituents. Oscar has been in this business since the ACA's inception, and we look forward to building an even larger individual market for individuals, families, and the business community.
In summary, Oscar is off to a solid start in 2025. Our disciplined execution, strong top line growth, and marginal expansion position us to achieve our 2025 targets. Oscar has the talent, technology, and products to continue scaling a profitable business.
Oscar is one of the fastest growing players in the individual insurance market. We are creating a marketplace that meets consumer and employer expectations for choice, quality, and affordability.
Our team's ability to stay responsive to stakeholder needs and consistently execute in dynamic markets will continue to unlock new pathways for growth.
Before I hand the call over to Scott, I want to thank the Oscar team for their dedication and commitment to our members and partners. We look forward to delivering strong results in 2025, Scott.

R. Scott Blackley

Thank you, Mark, and good morning, everyone. We delivered strong financial results in the first quarter in line with our expectations.
We continued to demonstrate consistent, strong execution and reported approximately $275 million of net income in the first quarter or $0.92 per diluted share. Total revenue increased 42% year over year to $3 billion in the first quarter, driven by higher membership.
We ended the quarter with more than $2 million effectuated members, an increase of 41% year over year, and 22% sequentially. Membership growth was driven by strong retention.
Above market growth during open enrolment and SEP member editions. We had approximately $1.9 million paid members at the end of the first quarter. As expected, we experienced minimal churn from members who failed to file and reconcile. The first quarter medical loss ratio was 75.4%, an increase of 120 basis points year over year.
The first quarter MLR was impacted by $31 million of unfavourable prior period development as an increase to our 2024 risk adjustment payable was partially offset by favorable claims run out from the prior year and the CSR recovery. On a year-to-year basis, the impact was approximately 60 basis points.
Turning to utilization in the first quarter, we saw a higher inpatient utilization that was partially offset by favorable pharmacy. Outpatient and professional were largely in line with our expectations.
Switching to administrative costs, we continue to deliver meaningful improvement in the expense ratio. The first quarter SG&A expense ratio improved by 260 basis points year over year to 15.8%, the lowest quarterly SG&A expense ratio in the company's history.
The year over year improvement was driven by fixed cost leverage, lower exchange fee rates, and variable cost efficiencies. Our strong first quarter results position us to deliver meaningful margin expansion this year.
Earnings from operations was $297 million a significant $112 million dollar increase year over year. Operating margin was 9.8%, 110 basis point increase year over year.
Net income was approximately $275 million a significant $98 million dollar increase year over year. Adjusted EBITDA was $329 million in the quarter, also substantially improved by approximately $110 million year over year.
Shifting to the balance sheet, our capital position remains very strong. We ended the first quarter with approximately $4.9 billion of cash and investments, including $150 million of cash investments at the parent.
As of March 30, 2025, our insurance subsidiaries had approximately $1.5 billion of capital and surplus, including $907 million of excess capital, which was driven by our strong operating performance.
Turning now to 2025 full year guidance. Based on first quarter results, we are reaffirming all of our full year guidance metrics. We continue to expect total revenue in the range of $11.2 billion to $11.3 billion in 2025.
While membership at quarter end exceeded our expectations, our outlook now contemplates the end of the monthly SEP for those at or below 150% of FPL.
Collectively these updates resulted in no change to our full year revenue outlook. Turn to medical loss ratio, we continue to expect the MLR in the range of 80.7% to 81.7%. On administrative expenses, we also continue to expect an SG&A expense ratio in the range of 17.6% to 18.1%. We continue to expect earnings from operations in the range of $225 million to $275 million.
As a reminder, we would expect adjusted EBITDA to be roughly $140 million higher than the ranges from operations.
In closing, we had a strong start to the year. We continue to execute against our strategic plan, and we're well positioned to achieve net income profitability and margin expansion again this year.
With that, I will turn the call over to the operator for the Q&A portion of our call.

Question and Answer Session

Operator

Thank you. We are now opening the floor for question-and-answer session.
(Operator Instructions)
Your first question comes from the line of John Ransom of Raymond James.

John W. Ransom

I played that course for, isn't that great?
Yeah, that's fantastic. See you later.
Got.

R. Scott Blackley

Hello John, do you, John, do you have a question?

John W. Ransom

I'm sorry, I didn't think I was in the queue. They told me I went in the queue, yeah, just, cleaning up a little bit the numbers what.
Yeah, the $2 million membership you ended the quarter with, how should we think about that number for the second quarter and for the rest of the year?

R. Scott Blackley

Yeah, good morning.
Membership in the first quarter had a couple dynamics. So, first of all, we saw really strong payment rates, which was great, that exceeded our expectation, and then SEP in general was quite strong as well. So, we ended the quarter with more members than what we had anticipated.
Looking forward, I would expect that you know ours. We'll see membership trend up in the first half of the year. We're now expecting that with the proposal to end the continuous SEP for individuals that are at or below 150% of the federal poverty level, that we would see membership then trend down in the back half of the year.
And so, net I end up kind of in the same place as what we were expecting when we gave our guidance at the beginning of the year.

John W. Ransom

So, in other words, a million eight by the end of the year, but trending up and then trending back down.

R. Scott Blackley

Yeah, I think that's, about, where we would expect to finish the year.
Okay, thank you.

Operator

(Operator Instructions)
Your next question comes from the line of Stephen Baxter of Wells Fargo. Your line is now open.

Stephen Baxter

Hey, good morning. It's a question. Just wanted to ask first on, the grace period membership.
I think it would be really helpful to potentially get some context around, as we try to think about what percentage of your membership that represented during the quarter and what that might look like for maybe.
What we consider maybe a more recent period kind of normalized number just so we can think about how much larger that is and then obviously to the extent that you know that's a more contribution positive part of your book maybe you could help us just think about how that kind of works its way into the MLR seasonality for the year and then.
Secondarily, just wanted to get an update on risk adjustment. I think you provided a net impact in the press release in terms of the 2024 through up. Maybe you could also provide us with the risk adjustment item in isolation and then just remind us how that's informing how you're thinking about 2025 risk adjustment.
Thank you.

R. Scott Blackley

Okay, Why don't, I'll start with the membership and look, I think that what we've seen is, on Grace.
As you start the year you have a portion of that membership which you know is getting auto renewed and we would expect to see those people, in their grace period as of April 1, which is why we kind of shared the difference between effectuated and paid membership we've seen pages really perform well and.
I would expect that in the second quarter we would see the gap between paid and effectuate between effectuated and paid, to be a normalized level and frankly, it was closing in on that as we ended the first quarter.
With respect to, what happens on a go forward basis I think we would expect to see normal patterns in terms of the percentage of our members that are in grace and shifting towards what happened with prior period development so.
PPD was $30 million net unfavourable in the quarter. The increase to the risk adjustment was $92 million which was offset by favorable claims run out with the other factors mostly offsetting, and that was about 60 basis points of the increase in the year over year MLR.
The rest of the increase in the year over year MLR was mix related. So those are the drivers, Steve.

Operator

Your next question comes from the line of John Young of UBS. Your line is now open.

John W. Young

Okay, thanks for the question here. Just on new versus retired members, is there anything of note between the utilization patterns between the two and on inpatient, I'm assuming that may have been flu driven in your comments there, but anything too far out there and comment on.
And then on the better than I expected pharmacy, that's a little different than kind of, I think just generally and broadly the comments we've heard across space, anything of note there. Thanks.

R. Scott Blackley

Yeah, I would say that on utilization we're seeing a continuation of some of the trends that we saw at the end of last year, which is higher inpatient utilization with favorable pharmacy, overall utilization was above our expectations, and we didn't see any specific driver of conditions that really was driving inpatient.
We had some flu but nothing that would be outsized, overall, at this point in the year we're at about 15% of claims, completion, so it's pretty early for us to draw any conclusions about utilizations, a utilization, I would say that we are expecting that, the elevated utilization is going to mostly be offset by risk adjustment.
The other thing I would say is that we always start the year with a list of actionable initiatives that you know we. Would expect to be able to pull to you know decrease medical costs and we don't include those levers in our guidance and we're actioning on those initiatives at this point, to offset any potential headwinds from the increased utilization that we've seen.

John W. Young

Great, if I may ask, just one of your comparison is exiting the exchanges in 26, kind of how you think about the opportunities and risk around that, around this and what it may mean to you. Thanks.

Mark Bertolini

I am Mark here. We view this as both sad and as an opportunity. We hate when competition's lessened in the marketplace. We believe that's appropriate. The more people we have in, the more opportunities for people to find the product that works for them.
However, in this circumstance, we have fairly significant overlap with this competitor, and we view that as an opportunity come 1,126 to help people maintain their coverage at a level of pricing that we find disciplined and competitive in the market.

Operator

Thank you.
(Operator Instructions)
Our next question comes from the line of Joanna Gajuk of Bank of America. Your line is now open.

Joanna Gajuk

Hey, good morning. Thanks so much for taking the question. So, a couple of, I guess those high-level questions on the regulatory environment. So first you alluded to this proposal that came out in early March, right, it would include a couple of these different items in there. So, any kind of thoughts. You know which of these provisions would be finalized?
Sounds like you don't agree with most of them, and I guess because all in all these items together, CMS had estimated would have reduced enrolment on exchanges by 3% to 9%, so it could be, somewhat material, right?
And then related topic to that. Any updated thoughts on, people in Congress than on extending the enhanced subsidies on exchanges, and can you remind us of the percentage of your exchange book that is fully subsidized?
Thank you.

Mark Bertolini

Thanks, Joanna. I'll talk first to the enrolment changes that were made.
I want to remind everybody that a number of these programs were on integrity were put. In midway through 2024, so we've seen some of the effect of that already, as we've reviewed and commented on the on the terms of the of the proposed regulation, we believe it's really important that we support CMS's effort to strengthen the integrity of the ACA and foster a stable risk pool.
So, we want a market we can trust where enrolments are. And that we're taking care of real people. So, we're fine with all of that. The one issue that I mentioned during my comments is that the shortened enrolment period does not allow for enough shopping for individuals and brokers.
We'll have to both comply with these regulations and then determine this last question or on a competitor find a new place to get coverage. And so we think they should really seriously consider extending those enrolment periods.
Scott, any comments on the risk.

R. Scott Blackley

I think that with respect to, Which of these things we expect to go forward we, as I mentioned in my prepared remarks, and one of the questions we do expect that they will limit the continuous SEP enrolment in 2025. That's what we're planning for in terms of impact this year, looking at the remainder of the impacts, I think that there's a lot of overlap between what may happen with the.
The new rule and what may happen with subsidies, so you know those are all kind of blended together, so we're not going to at this point make any comments about how 2026 may run forward.
And then your question with respect to what portion of our book is fully subsidized, I would say that Oscar has always had a significant portion of our membership that receives some oral subsidized amounts of premiums.

Operator

Great, thank you.
Your next question comes from the line of Joshua Raskin of Nephron Research. Your line is now open.

Joshua Raskin

Hi, thanks, good morning. Wanted to just follow up on the competitor exits. I'm just curious when you see this historically are those generally good members to attract, meaning, medical management versus risk adjustment, and then how do those large exits impact your estimates of risk adjustment?
And then my bigger picture question is just I'd be curious to get any progress on the ICRA market to sort of in general just sort of environmental progress and. Are you talking to large employers even about 2026 and maybe where are we in that cycle?

Mark Bertolini

Great, thanks, Josh. First, and foremost, let me talk a little bit about ICRA. On the ICRA front, we believe that there is increased momentum. We're starting to see larger groups in the middle market space starting to get interested and talk to us about the opportunity.
We have introduced through our House Ways and Means Committee testimony, the idea of this tax credit issue that needs to make the level plain. Field for employers and we believe that that has some opportunity to get pushed through on this next bill.
So, we believe once those kinds of conditions are in place, that the momentum will continue to build. We have talked to large employers. I was in a room with large employers earlier this week where there's a lot of interest expressed. I was invited to speak about my comments on CNBC.
About, the best way to solve health care problems is to eliminate the employer sponsored health insurance market, and I gave the reasoning behind all of that, which we've shared with you before, Josh, and we believe that that's an opportunity.
It'll be slower because there's always resistance in these staffs, but we think that that continues to be a very important market. And then on your first question, I lost your Point if you could sort of remind me quickly.

Joshua Raskin

Our competitor exits or, when you get members from other plans that have exited markets, is that that good news and adjustment and yeah.

Mark Bertolini

Well, the good thing is that risk adjustment levels the playing field for everybody at the end of the year. So, it's how you go into the market price.
And again, we don't underwrite these markets. So as long as we believe we have discipline pricing in the marketplace and the risk adjustment continues to work effectively the way it has, that we'll be fine in those markets and growing the membership. The reason that this competitor is.
Exiting more importantly is that they got behind on their margin and behind on their pricing. It's really hard to catch up unless you price way up, which other competitors have done in prior years.
But in this instance, they tried to move up slowly, didn't get all the way there, and as a result, they need to exit the market. And we think that's their pricing problem, not ours. Again, with risk adjustment, we think we're fine.
And generally if people are, it'll be a mix that is consistent with the marketplace. Each market individually.

Operator

Your next question comes from the line of Jessica Sexton of Piper Sandler. Your line is now open.

Hi. Thanks for taking the question. I just wanted to start with, is your expectation for 2025 still that risk adjustment payable is a similar percent of premiums, as it was in 2024? And if not, can you give us, a sense of any updated expectations on the risk adjustment as percent of premiums?

R. Scott Blackley

Yeah, thanks, Jess. Why don't I make a couple of comments about seasonality for a couple of different components of the book. So, with respect to risk adjustment, no, it's no significant adjustment at this point in time, although, if we see elevated claims, continue, that will tend to push down the risk adjustment as a percentage of revenue. So, we'll have to see how that plays out.
On MLR seasonality. I would expect that MLR seasonality will be a little bit flatter in the second, third, and fourth quarter than what we've seen historically. So, a step up in the second quarter with the fourth quarter being the highest, and then with respect to SG&A seasonality, we still expect to see gradual increases in the SG&A expense ratio, each quarter.

Got it. That helps. And then just, I guess thinking about next year, and the several alternative options, can you give us a sense of the margin profile of bronze plans, both MLR and then, just interested in the, SG&As the percent of premiums there, and whether you have an opportunity to kind of maintain flat margins despite the potential for downward mix shift. Thanks.

R. Scott Blackley

Yes, I would say that we're not yet going to be giving any information about 2026. I would say is we're working on our pricing, where our intent is to continue to grow margin for this company and so we'll be looking at a pricing strategy that'll have discipline pricing that'll allow us to. Continue to take share and improve margins. So that's what we're focused on for '26.

Mark Bertolini

And I would add that there's relatively high overlap between the enhanced premium tax credits and fraudulent and the integrity regulations that they put in place. So depending on how those both settle out and what the details of each of them are, is going to largely depend on what the mix is going to do relative to pricing versus morbidity.

Got it, thank you.

Operator

Your next question comes from the line of Michael Ha of Baird. Your line is now open.
Alright.

Michael Ha

Thank you and congratulations on the quarter historic GA print, achieving 15% two years early before 27. With that said, I was wondering if you could elaborate more on the drivers of the GNA performance, how much of the beat would you attribute to fixed cost leverage versus the lower exchange fee rate versus the variable.
Cost efficiencies, I think, Jess asked it but in terms of cadence and seasonality of GNA throughout the remainder of this year, just given how strong the print is, just trying to understand how durable this level of GNA is going forward and again the source of the beat as well.
Thank you.

R. Scott Blackley

Yeah, I appreciate the question and in terms of the Just kind of stepping back, SG&A improved, the ratio improved year over year by about 260 basis points. So, a big step forward and our cost trend honestly is just a great story.
Our tech is playing a big part of driving the performance, and we've been, very focused and disciplined about expense management both on the fixed side and the variable side. And those are the primary drivers of the year of your improvement just to give you some specifics. Fixed cost leverage is about 40% of the improvement.
Improvements in our variable cost structure is another, let's call that 15% and then the remainder is, improvements in broker taxes and fees. We did see some lower fees, this year, and then, the remainders are a geography so.
The, a very significant portion of the year your improvement is durable and as I mentioned on the last question, we do expect to see from this point, that we would see some, quarterly increases in SG&A going forward.

Mark Bertolini

And Michael, as we said before, when we put together our operating plan, we have a number of different levers we pull as we go through the year. So, we're already reacting to 26 and setting the stage for 26, depending on how it all pans out, and we're making those moves ahead of time so that we're prepared to be competitive and to continue our move forward in enhancing margin for the business.

Michael Ha

Great, thank you. And a follow up question. So, if I take a step back and think about Oscar's evaluation over the past few months, I think its clear investors are pricing in the worst-case scenario, millions of fraudulent lives in the marketplace, but with all the evidence and proof just continuing to stack.
Number one being required attestations helping to address the ghost member issue. Number two, the nonpayment of premiums now reflected in one queue effectuate the enrolment number three, CMS even gave us the two-year FTR members at risk nationally.
With all these new data points, could you refresh us on your latest thoughts here and I guess your level of conviction that what we're in is no longer a $4 or $5 million fraudulent member problem. And also, how do you view the catalyst path going forward in terms of what will it take to fully dispel, disprove this debate once and for all.
Thank you.

Mark Bertolini

We're not going to size the government's estimate. We're doing our own homework as we get ready for 26. We'll have a very clear view on it, but I can tell you that we are not backing off on our long-term targets. We continue to work as an organization to make those happen.
We believe the market will continue to be competitive and we believe the market will continue to be strong. We may have a pricing issue as we get.
Into the 2026 market versus where we've been, which is below CPI at or below CPI, largely because there's a high single digit impact of both fraudulent of both integrity regulations and enhanced premium credits that will be the basis before, we apply trend going.
Forward. So that could be a major change. It would have an impact. We believe that now that we sit at 8% uninsured that we could get back into double digits if that should happen. But we're watching all of that happen in front of us, and until the regs are really clear and specific, we're not going to make any estimates against 26.

Operator

Our final question for today comes from the line of Dave Windley of Jeffrey's. Your line is now open.

Dave Windley

Hi, thanks for taking my question, Mark. You may have obviated my question with your last point, but I was going to ask about the proposal to refund CSRs and what your thoughts are around that. Is that a is that positive relative to integrity and how much disruption to kind of the pricing structure of second lowest silver, etc.
If the government kind of steps in and refund CSRs, thanks.

R. Scott Blackley

Dave, look, I would say that you know with respect to CSR and silver loading.
I think practically speaking, that's a big undertaking for plans to try to put into place the processes and infrastructure and the same for the government in terms of their side so you know we're.
Obviously not a fan of that going into place for 26 because we think it's going to take, a fair amount of process to get that set up and, in theory, that neutral, we should all be neutral to that switch and we'll just have to see how that plays out.
But again, we think it's a fairly big undertaking, so you know we're, we will be recommending that the government not move forward with that in 2026.

Dave Windley

Got it to your point we're in May, so bids aren't that far away. A lot of undertaking for a couple of months' worth of time, I guess is the added point.

R. Scott Blackley

Yeah.

Dave Windley

Thanks for taking my question.

Operator

And that includes today's conference call.
Thank you for your participation. You may now disconnect. Goodbye.

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