Oscar Health, Inc

Oscar Health, Inc (NYSE: OSCR) is a healthcare technology company centered around a comprehensive technology platform. Its services include a health insurance business and the +Oscar Platform. The company provides health plans primarily in the individual market, which serves individuals and families purchasing insurance through health marketplaces created under the Affordable Care Act (ACA), either federally operated or run by individual states.

Rationale – Sell at USD 18.24

• Rising Medical Loss Ratio Indicates Higher Claim Costs: One of the notable concerns in Oscar Health's Q1 2025 results is the increase in its Medical Loss Ratio (MLR) from 74.2% in Q1 2024 to 75.4% in Q1 2025. The MLR represents the percentage of premium revenues spent on medical claims, and a higher ratio indicates more spending on care relative to revenue. While an MLR in the 70–80% range is generally acceptable for ACA plans, the year-over-year increase is a negative trend, especially given the $31 million in unfavorable prior period development. This was driven by a higher 2024 Risk Adjustment payable, meaning Oscar underestimated the risk profile of its insured population. Persistent growth in MLR could pressure profitability if not carefully managed.
• Significant Decline in Cigna+Oscar Membership: Another red flag is the sharp decline in membership within the Cigna+Oscar partnership, which dropped from 61,428 members in Q1 2024 to just 17,983 in Q1 2025—a reduction of over 70%. This signals a deterioration in the performance or strategic alignment of that segment. The Cigna+Oscar co-branded small group product was previously seen as a growth opportunity, especially in the employer space, and its steep membership loss raises concerns about competitiveness, customer retention, or partner synergy. While individual and small group membership growth offset this decline, such a large contraction in a strategic partnership product is a negative indicator for diversification and long-term distribution strategy.
• Prior Period Development Exposes Forecasting and Reserving Risks: Oscar Health reported a $31 million unfavorable earnings impact from prior period development, compared to a $9 million favorable impact in the same quarter last year. This volatility suggests issues with reserve adequacy and actuarial forecasting accuracy. Specifically, the upward revision to the 2024 Risk Adjustment payable reveals that earlier assessments underestimated liabilities related to member risk. Although some of the loss was offset by favorable claims runout and cost-sharing reduction accruals, such swings in prior period adjustments can reduce investor confidence in the reliability of Oscar’s internal controls and financial projections.
• Margin Pressure Despite Revenue Growth: While revenue increased significantly by 42% year-over-year, margin expansion may face constraints due to elevated MLR and reliance on scale-driven SG&A improvements. The company’s SG&A expense ratio did improve to 15.8% from 18.4%, largely because of higher member volumes. However, Oscar's ability to continue expanding margins could be tested if revenue growth slows, especially given its exposure to ACA risk adjustment dynamics and medical cost trends. The health insurance industry remains susceptible to regulatory and policy changes, which could further strain profitability despite the current positive momentum.
• Continued Dependence on ACA Market Dynamics: Oscar Health’s growth remains highly concentrated in the ACA individual market, as seen by the surge in membership to over 2 million individuals, most of which are in individual and small group plans. This heavy reliance exposes Oscar to regulatory uncertainties, premium subsidy changes, and potential political shifts affecting the ACA. Additionally, ACA enrollees can be more price-sensitive and higher-risk compared to group markets, which increases Oscar’s exposure to both churn and adverse selection. The narrow focus could become a liability if federal policies or competitive dynamics shift unfavorably
  

Valuation (Using P/E Methodology)

Share Price Chart 

Conclusion

Despite strong top-line growth and improved net income in Q1 2025, Oscar Health faces several underlying challenges. The rise in its medical loss ratio, driven by unfavorable prior period developments, points to potential weaknesses in actuarial forecasting and reserve adequacy. A sharp decline in Cigna+Oscar membership also raises concerns about strategic partnerships and diversification. Additionally, heavy reliance on the ACA market and increased exposure to risk adjustment liabilities introduce volatility and regulatory sensitivity that may hinder sustainable margin expansion going forward.

Based on the notional gains, valuation downside and price action stance, a "SELL" recommendation on Oscar Health, Inc (NYSE: OSCR) has been given at the current market price of USD 18.24 as on 08 May 2025 at 08:10 AM PDT.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 07 May 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.