Oscar Health Q2 2025 Earnings Report

Oscar Health EPS Results

• Actual EPS: -$0.89
• Consensus EPS: -$0.90
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: $0.20

Oscar Health Revenue Results

• Actual Revenue: $2.86 billion
• Expected Revenue: $2.88 billion
• Beat/Miss: Missed by -$19.54 million
• YoY Revenue Growth: +29.00%

Oscar Health Announcement Details

• Quarter: Q2 2025
• Date: 8/6/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 6, 2025
• Conference Call Time: 8:00AM ET

Oscar Health (NYSE:OSCR) operates as a health insurance in the United States. The company offers health plans in individual and small group markets, as well as +Oscar, a technology driven platform that help providers and payors directly enable their shift to value-based care. It also provides reinsurance products. The company was formerly known as Mulberry Health Inc. and changed its name to Oscar Health, Inc. in January 2021. Oscar Health, Inc. was incorporated in 2012 and is headquartered in New York, New York.

Oscar Health Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Oscar reported $2.9 billion in Q2 revenue (up 29% year-over-year) and grew membership by 28% to over 2 million customers.
• Negative Sentiment: The medical loss ratio rose 12 points to 91.1%, contributing to a Q2 operating loss of $230 million and an adjusted EBITDA loss of $199 million.
• Positive Sentiment: Oscar resubmitted 2026 rate filings covering nearly all membership and expects double-digit rate increases to counter higher market morbidity and program integrity effects.
• Positive Sentiment: Management is deploying AI-driven efficiencies and rightsizing staff to eliminate about $60 million in annual administrative costs, improving SG&A margins.
• Neutral Sentiment: Strategic acquisitions—including a brokerage, a direct enrollment platform, and healthinsurance.org—and a new Hy-Vee ICRA partnership aim to diversify long-term growth.

Presentation

[Operator]

Good morning. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Oscar Health Second Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

[Operator]

Thank you. I will now turn the conference over to Chris Potashar, Vice President of Treasury and Investor Relations. Please go ahead.

[Chris Potochar, VP - IR at Oscar Health]

Good morning, everyone. Thank you for joining us for our second quarter twenty twenty five 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.hioskir.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.

[Chris Potochar, VP - IR at Oscar Health]

Any remarks that Oscar makes about the future constitute forward looking statements within the meaning of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. 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 10 ks for the period ended 12/31/2024, and the quarterly report on Form 10 Q for the period ended 03/31/2025, each as filed with the SEC, and other filings with the SEC, including our quarterly report on Form 10 Q for the quarterly period ended 06/30/2025, 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.

[Chris Potochar, VP - IR at Oscar Health]

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 second quarter earnings press release available on the company's Investor Relations website at ir.hioskir.com. We have not provided a quantitative reconciliation of estimated full year 2025 adjusted EBITDA as described on this 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.

[Mark Bertolini, CEO & Director at Oscar Health]

Good morning. Thank you, Chris, and thank you all for joining us. Today, Oscar announced second quarter results, which are consistent with the preliminary results we released on July 22. We reported total revenue of $2,900,000,000 a 29% increase year over year. MLR increased 12 points year over year to 91.1%, primarily driven by an overall increase in average market morbidity.

[Mark Bertolini, CEO & Director at Oscar Health]

Conversely, our SG and A ratio of 18.7% improved 90 basis points year over year. Overall, Oscar reported a loss from operations of $230,000,000 and the adjusted EBITDA loss was $199,000,000 In the first half of the year, earnings from operations were $66,000,000 and adjusted EBITDA was $129,000,000 We are also reaffirming our updated 2025 guidance, including revenue of $12,000,000,000 to $12,200,000,000 and a loss from operations of $200,000,000 to $300,000,000 Scott will walk through our financial updates in greater detail in a few moments. Now I want to share our view of what we are seeing in the individual market and why we believe the market will stabilize in 2026. We continue to believe in the long term importance of the individual market for millions of consumers and employers. Let's start with recent market dynamics.

[Mark Bertolini, CEO & Director at Oscar Health]

The latest risk adjustment data from Wakely, which includes claims data through April 30, indicates a meaningful market wide increase in morbidity in 2025. This morbidity shift is impacting all carriers, increasing by mid to high single digits across Oscar's markets. We attribute market morbidity increases to consumers entering the individual market for Medicaid redeterminations and healthier low utilizing consumers leaving the market in part due to program integrity efforts. Oscar is taking several actions to drive value and mitigate the impact of current industry wide headwinds. We resubmitted twenty twenty six rate filings in states covering nearly all current membership to reflect morbidity increases.

[Mark Bertolini, CEO & Director at Oscar Health]

Our engagement with state regulators continues to be productive. Our initial rate filings already reflected program integrity changes and the expiration of enhanced premium tax credits. We expect the market will have double digit rate increases next year. We believe these overall rate increases will address the current morbidity pressure and the effects of program integrity efforts for 2026. We also see potential upside with growing support to renew enhanced premium tax credits in the upcoming continuing resolution.

[Mark Bertolini, CEO & Director at Oscar Health]

Oscar is a leader in the individual market with a twelve year track record of navigating dynamic markets. We are focused on what we can control. In addition to repricing, we remain disciplined in our expense management. Our team is rightsizing the cost of the business in the back half of this year. We continue to harvest technology and AI driven efficiencies to optimize our operations and drive several medical cost affordability initiatives.

[Mark Bertolini, CEO & Director at Oscar Health]

The team is also reducing fixed cost headcount. We expect these actions will eliminate approximately $60,000,000 in administrative costs for 2026. We also improved our 2025 SG and A guidance by 50 basis points at the midpoint compared to initial guidance. The individual market is experiencing a reset moment, but the market is resilient and we see significant opportunity for long term growth. The individual market's fundamental characteristics combined with ICRA will drive a growing and stable risk pool over the long term.

[Mark Bertolini, CEO & Director at Oscar Health]

Oscar is at the center of building this future and is creating a competitive health care market for many more consumers and businesses. We are announcing several strategic steps to power ICRA and further diversify our business. We acquired important early stage assets with capabilities to help us build the consumer marketplace of the future. These assets include an individual market brokerage, a direct enrollment technology platform and a consumer education website, healthinsurance.org. We are also launching a new ICRA product with a well known consumer brand in the Midwest, Hy Vee Inc.

[Mark Bertolini, CEO & Director at Oscar Health]

Our new ICRA assets will give us capabilities to meet and exceed the expectations of consumers and employers. The technology platform, INSX Cloud, is a fundamental asset of the marketplace as it is one of only 11 CMS approved solutions creating a digital storefront for all health products. The brokerage, IHC Specialty Benefits, offers individual medical and supplemental health products across carriers in all 50 states. The brokerage will allow us to offer consumers the supplemental health products they typically buy with health insurance. While the acquisition will not have a meaningful impact on our near term results, we believe these capabilities are important building blocks of our long term strategy.

[Mark Bertolini, CEO & Director at Oscar Health]

Hy is one of the most trusted brands in the nation with five seventy grocery and convenience stores and two seventy retail pharmacies. Hy Vee and Oscar are introducing a new Hy Vee Health branded ICRA plan. We are initially launching this product for employers and employees in Des Moines, Iowa for plan year 2026, subject to state approval. The plan offers superior benefits, including concierge medicine at an affordable fixed price through Hy Vee Health exemplar care clinics. Our partnership is an example of the innovation we intend to drive with other employers, provider systems and consumer brands in The United States.

[Mark Bertolini, CEO & Director at Oscar Health]

In summary, Oscar is well positioned to manage through the market reset in 2025. We believe the market will stabilize next year and we expect to return to profitability in 2026. Oscar's track record of disciplined execution, strong management processes and a highly skilled team will continue moving us toward long term growth. The individual market has greater long term upside and is the future of health care. It is a market powered by individual choice.

[Mark Bertolini, CEO & Director at Oscar Health]

Choice drives a competitive market where consumers direct the innovation they want. Every American and American business deserves high quality, affordable health care that fits their needs. I want to thank the Oscar team for their leadership and hard work. We continue to execute against our strategy, stay responsive to the consumer and harness AI to move faster than the market. We are a company built on great technology with an exceptional member experience that will change health care.

[Mark Bertolini, CEO & Director at Oscar Health]

Now I will turn the call over to Scott to discuss our financials in more detail. Scott?

[R. Scott Blackley, CFO at Oscar Health]

Thank you, Mark, and good morning, everyone. This morning, we reported our second quarter financial results and reaffirmed the updated outlook we provided a couple of weeks ago. There is a market wide shift occurring in the ACA marketplace shifting towards higher average market morbidity. While we are now projecting a loss for 2025, we are taking corrective actions to ensure we are well positioned to return to profitability next year. In the second quarter, total revenues increased 29% year over year to $2,900,000,000 driven by higher membership.

[R. Scott Blackley, CFO at Oscar Health]

We ended the quarter with more than 2,000,000 members, an increase of 28% year over year. Membership growth was driven by solid retention, above market growth during open enrollment and continuing SEP member additions. The second quarter medical loss ratio was 91.1%, an increase of 12 points year over year. The second quarter MLR was impacted by an incremental $316,000,000 increase to our risk adjustment payable for 2025, driven by higher ACA marketplace morbidity that increased by more than our prior estimates. We recognized the year to date impact of the risk adjustment change in the second quarter.

[R. Scott Blackley, CFO at Oscar Health]

Applying the revised risk transfer accrual consistently across the first half would have resulted in an MLR of 80.7% in the first quarter and eighty five point one percent MLR in the second quarter. With regard to the final CMS risk report for 2024, it was approximately $23,000,000 favorable to the accruals as of the 2025. Turning now to utilization. Second quarter utilization moderated meaningfully as compared to the first quarter. We saw sequential softening in utilization each month in the second quarter.

[R. Scott Blackley, CFO at Oscar Health]

Inpatient utilization remained elevated compared to our expectations and was partially offset by continued favorability in pharmacy. Outpatient and professional were largely in line with our expectations. Switching to administrative costs, we continue to deliver improvement in the SG and A expense ratio. The second quarter SG and A expense ratio improved 90 basis points year over year to 18.7%. The year over year improvement was driven by lower exchange fee rates and fixed cost leverage, partially offset by the impact of a higher risk adjustment payable as a percentage of premium.

[R. Scott Blackley, CFO at Oscar Health]

In the second quarter, the loss from operations was $230,000,000 a decrease of $298,000,000 year over year and the net loss was $228,000,000 a $285,000,000 decrease year over year. The adjusted EBITDA loss was $199,000,000 in the quarter, a decrease of $3.00 $4,000,000 year over year. Shifting to the balance sheet. Our capital position remains very strong. We ended the second quarter with approximately $5,400,000,000 of cash and investments, including $2.00 $5,000,000 of cash and investments at the parent.

[R. Scott Blackley, CFO at Oscar Health]

As of 06/30/2025, our insurance subsidiaries had approximately $1,200,000,000 of capital in surplus, including $579,000,000 of excess capital. Let me spend a moment on uses of cash. We expect the majority of the expected losses this year to be absorbed by the significant excess capital position of our insurance subsidiaries. With respect to quota share reinsurance, we expect our ceding percentage to be just under 50% for 2025. Turning now to 2025 full year guidance.

[R. Scott Blackley, CFO at Oscar Health]

We are reaffirming the updated outlook we shared with the preliminary second quarter results. We expect total revenues in the range of $12,000,000,000 to $12,200,000,000 in 2025, an increase of $850,000,000 at the midpoint compared to the prior guidance range. Our improved outlook is driven by better than expected retention and higher SEP member additions. We expect SEP member additions to moderate in the back half of the year as continuous monthly SEP for those at or below 150% of the federal poverty level ends September 1. The revised guidance assumes risk adjustment as a percentage of direct and assumed policy premiums is in the mid teens range and largely consistent year over year.

[R. Scott Blackley, CFO at Oscar Health]

Shifting to the medical loss ratio. We expect a full year MLR in the range of eighty six percent to eighty seven percent with the increase driven by higher average market morbidity. The revised outlook contemplates higher market morbidity, the continuation of our first half utilization patterns with a modest increase in utilization in the fourth quarter as members may seek additional care if the enhanced premium tax credits are not extended. On administrative expenses, we expect a slightly better SG and A expense ratio in the range of 17.1% to 17.6% driven by greater operating leverage and variable cost efficiencies. We expect a loss from operations in the range of $200,000,000 to $300,000,000 and an adjusted EBITDA loss of approximately $120,000,000 less than the loss from operations.

[R. Scott Blackley, CFO at Oscar Health]

As Mark mentioned, we are reducing our workforce in the back half of 2025 with run rate savings starting in 2026. In closing, we are taking appropriate actions to return to profitability in 2026. Our 2026 rate filings reflect the higher market morbidity in addition to having contemplated trend, impacts from program integrity efforts and the expiration of the enhanced premium tax credits. We know how to successfully navigate dynamic markets. We will continue to execute against our strategic plan and we expect to deliver meaningful improved financial performance next year.

[R. Scott Blackley, CFO at Oscar Health]

With that, I will turn the call over to the operator for the Q and A portion of our call.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. As we enter the Q and A session, we ask that you please limit your input to one question and one follow-up. Your first question comes from the line of Josh Raskin of Nephron Research. Please go ahead.

[Joshua Raskin, Partner - Managed Care & Providers at Nephron Research LLC]

Hi, thanks. Appreciate the comments, Scott, on the uses of cash. But can you provide some guidance on 2025 free cash flow, understanding the strength in the first half and then the outflows, I assume, in the second half? And then on the risk adjustment payable, I know there's a lot of moving parts there, but I think the total on the balance sheet is about $2,650,000,000 I think 2024 balance was 1.65. It sounds like there was a small change there, so maybe there's something around a billion dollars for 2025.

[Joshua Raskin, Partner - Managed Care & Providers at Nephron Research LLC]

And then I guess my question would be why would the payable as a percentage of revenues be lower in '25 relative to '24?

[R. Scott Blackley, CFO at Oscar Health]

Yes. Well, Josh, let me start with your question about cash. So as we talked about in the prepared remarks, we feel like we've got a very strong capital position at this point, 5,400,000,000.0 of total cash and investments, $579,000,000 in excess capital and $2.00 $5,000,000 of cash at the parent. The vast majority of the cash and investments are in our insurance subsidiaries, which more than covers the risk adjustment payable as well as our required capital, and that's where you end up with the excess capital. We think that the bulk of the remaining losses that we're forecasting for this year are going to be absorbed by that excess capital position.

[R. Scott Blackley, CFO at Oscar Health]

And so you saw that our excess capital decreased by about 300,000,000 from last quarter and that was the subsidiaries absorbing the losses in the second quarter. And with respect to parent cash then, I do think the parent cash will decline in the back half of the year largely due to us making some additional capital contribution to the insurance subsidiaries where we don't have as much excess capital. But we feel confident that parent cash is going to be at levels that remain more than sufficient to cover the cost of the holding company the things that we need. So we feel really good about where our capital position was going into this change in market morbidity and are confident that we've got the access to funding that we need to continue to run this company.

[Joshua Raskin, Partner - Managed Care & Providers at Nephron Research LLC]

Okay. Okay. That's perfect. And then just if I could follow-up. How should we be thinking about your previous long term targets for 2027, specifically the 5% margin and the $2.25 of EPS?

[Mark Bertolini, CEO & Director at Oscar Health]

Well, we're not changing our longer term forecast at this moment, but 5% is still our target. We need to get through this pricing season, see how the membership is going to develop As we then look at '26, '20 or '26, '27, and '28, we'll we'll we'll revise as necessary. But at this point in time, we're not changing our point of view.

[Joshua Raskin, Partner - Managed Care & Providers at Nephron Research LLC]

Perfect.

[R. Scott Blackley, CFO at Oscar Health]

And, Josh, I'm just gonna add that, Josh, just to add that with respect to your questions about the risk adjustment payable, we're putting a table in the queue that shows you all the risk adjustment payables by year so that's easier for you guys to navigate that. And I would just say in terms of the risk adjustment payables, the adjustment that we recorded obviously from the market morbidity is hitting the current year risk adjustment payable, and there's really nothing about the prior year risk adjustment payable that changed other than the trope I spoke to.

[Joshua Raskin, Partner - Managed Care & Providers at Nephron Research LLC]

Perfect.

[Operator]

Your next question comes from the line of Michael Hall of Baird. Please go ahead.

[Michael Halloran, Senior Research Analyst & Associate Director - Research at Robert W. Baird & Co]

Hi. Thank you. So last year when you set your '27 EPS target to 25, I saw a number of multiyear upside levers, you know, from the hundreds of basis points of opportunity on fraud, waste and abuse, the EVM renegotiation and provider contract renegotiations, you know, upside from ICRA, you know, that could drive considerable earnings upside well above $2.25. So with everything happening this year, the risk pool volatility, I was wondering if you could elaborate on what you view as multiyear earnings levers that may have been more mongregated that you may have had in your back pocket, but you could also pull forward and accelerate if needed? Like, how large and tangible are these opportunities?

[Mark Bertolini, CEO & Director at Oscar Health]

Hi. Hi. Mark here. We are continuing to accelerate wherever we can across the board, particularly around medical costs. So I would say that, you know, we still have opportunity, plenty of opportunity to do better.

[Mark Bertolini, CEO & Director at Oscar Health]

You saw the effects of our administrative cost reductions through AI. We're now deploying AgenTeq AI in the clinical space as we look at ways of directing people and helping people find the right care, at the right time. And so all of those things are coming to play, and we still, Michael, believe we have a lot of opportunity, and we are pulling all levers as we can now to set up 26 and beyond as profitable years.

[Michael Halloran, Senior Research Analyst & Associate Director - Research at Robert W. Baird & Co]

Got it. Thank you.

[Michael Halloran, Senior Research Analyst & Associate Director - Research at Robert W. Baird & Co]

Just my follow-up question. Looking ahead to the back half of this year, your updated guide, I just wanted to hear your thoughts on, is there a chance that the risk pool could deteriorate further? Like, any additional potential shoes that could drop? I guess four things that come to my mind are, number one, FTR rechecks. I know you're fine, but I'd be concerned if the broader market needs attrition.

[Michael Halloran, Senior Research Analyst & Associate Director - Research at Robert W. Baird & Co]

Number two, at the end of the year, STP, if that drives more growth, how that could affect profitability. Number three, the duplicative membership CMS identified. And, number four, the preemptive utilization in the fourth quarter. Just wondering of these four items and if there are any others that might factor into your updated '25 guide? Thank you.

[R. Scott Blackley, CFO at Oscar Health]

Yes. Thank you. So let me start with FTR. So on FTR, we've been telling you that we see little risk to us from that particular initiative.

[R. Scott Blackley, CFO at Oscar Health]

And just to double click into that, we had an initial list of, members who had failed to file and reconcile, which was around 27,000 members. And a portion of those members, have already lost their subsidy. And, we, saw the remainder of those that had failed to reconcile lose their subsidies as of August 1. Importantly, though, 60% of that group actually did complete their filed and reconcile process, which I think is compared to some concerns that that might be a very significant portion of people that are unable to file and reconcile. So for us, and if that's indicative of what others may see in the market, we feel like that's pretty positive news.

[R. Scott Blackley, CFO at Oscar Health]

On dual eligibles in terms of Medicaid and ACA, what we've heard from CMS is that for us, that's approximately two and a half percent of our membership or just under 50,000 members. We don't know exactly yet which way those members are going to go, whether they're going to land in the ACA or Medicaid. But our understanding from the FAQs is that the member will have to take affirmative action in order to retain their ACA premium tax credit. So on balance, I think that would suggest that we would see more of those members tending to go back into Medicaid and away from the ACA. We've also heard from CMS that the 2.5% that we've seen in our book is consistent for the market.

[R. Scott Blackley, CFO at Oscar Health]

And so I think that, you know, they gave a press release previously that I think was based on 24 information. Looks like the 25 information is less significant in terms of those dual enrollments. And so we think this is a smaller exposure than maybe some have feared in terms of its exposure losing that membership. And frankly, when we look at the utilization patterns of those individuals, they are higher on average than our book. And so there could be a little bit of benefit to morbidity if everyone in the market has has seen similar patterns and those folks move from our books back into Medicaid.

[R. Scott Blackley, CFO at Oscar Health]

And with respect to the other things that you listed out, look, I think that SEP is moderating into the back half. We do have a fourth quarter increase in utilization. We think that that's possible, but we're we've pulled some levers that we think will offset the effects of that in our guidance. And so overall, we feel very good about that we've factored all those risks into our pricing for 2026 and feel like we're on the path to return to profitability next year.

[Michael Halloran, Senior Research Analyst & Associate Director - Research at Robert W. Baird & Co]

Great. Thank you so much.

[Operator]

Your next question comes from the line of Jessica Tsaan of Piper Sandler. Please go ahead.

[Jessica Tassan, VP & Senior Research Analyst at Piper Sandler Companies]

Hi, guys. Thanks for the questions. So I guess maybe, first, can you just help us understand kind of the assumptions around returning to prop? First of all, assumptions around market stabilization in '26, around returning to profitability in '26? And then just how do you kind of think about fortifying the balance sheet in the event that next year rate that next year's expectation for profitability kind of surprises to the downside or is subject to adversity? Thanks.

[R. Scott Blackley, CFO at Oscar Health]

Yeah. Look, would say that for 2026, we, as Mark talked about in his prepared remarks, we have built in, I think, fairly conservative assumptions about the impacts of program integrity, the impacts of this market morbidity shift, trend, all those things have been baked in. When we access information that we're able to get in terms what does the competitive pricing landscape look like, we see higher, very conservative rate actions from the larger carriers. And those we've all been more competitive historically, but we are certainly seeing very significant increases in prices next year to capture the impacts of the things that I just spoke about. So we feel like the pricing is contemplating the risks that are out there.

[R. Scott Blackley, CFO at Oscar Health]

So that gives us a strong expectation that we'll be able to both improve our margin from this year obviously and return to profitability. And then your question with respect to what happens in a down scenario from a cash and capital perspective, I would just say this. We feel like the company right now has a strong capital position. We feel like if we are at need to access capital that we'll have access for additional, we have virtually no leverage in the company. We feel like we could add additional leverage And we believe that we would have access to capital as needed.

[Jessica Tassan, VP & Senior Research Analyst at Piper Sandler Companies]

Got it. And then I just have a follow-up. So we understand there was a large issuer that submitted data late, risk adjustment data late for 2024. I don't think that other issuers will be penalized for that late submission, but just curious if the data in that submission had been contemplated in 2024, would your risk adjustment payable as a percent of premiums have been larger and make 25% look smaller as a percent of premiums on a relative basis? Thanks.

[R. Scott Blackley, CFO at Oscar Health]

Yeah. We did see that true up. It was single small single digit millions that really didn't have any impact.

[Jessica Tassan, VP & Senior Research Analyst at Piper Sandler Companies]

Awesome. Thank you.

[Operator]

Your next question comes from the line of John Ransom of Raymond James. Please go ahead.

[John Ransom, MD & Director - Healthcare Research at Raymond James Financial]

Hey, good morning. I know things have changed, but when you were forecasting the market without enhanced subsidies, your number was about 21,000,000 people. I mean, we've seen some other numbers that say the marketplace might shrink by 40% or so. Kind of where do stand in that debate as we sit now?

[Mark Bertolini, CEO & Director at Oscar Health]

As we look today, John, we believe that our 18% that we projected in our long term guidance is the bottom and that it'll probably be higher. Again, we need to see how the rates play out in the marketplace. We believe we have a good handle on program integrity efforts and that impact, but it will be higher than the 18% we'd originally project projected.

[John Ransom, MD & Director - Healthcare Research at Raymond James Financial]

So, what do you mean by the 18%? I'm sorry. Just to clear clarify that.

[Mark Bertolini, CEO & Director at Oscar Health]

We had a we had an 18 reduction in in the book as a result of what was going to happen

[John Ransom, MD & Director - Healthcare Research at Raymond James Financial]

Yeah.

[Mark Bertolini, CEO & Director at Oscar Health]

With with right? And so we're still projecting in our in our numbers no enhanced subsidies, and we were projecting 18%. We believe our number will be larger than 18%, but we haven't pegged it until we see rates and market competitors by market.

[John Ransom, MD & Director - Healthcare Research at Raymond James Financial]

I got you. And then just secondly, if we assume the MLR comes in line and you're going to accrue at about 15.5% for risk adjustment, so that implies that your medical margin is down about, call it, 600 basis points this year over last year. As you think about next year, how much of that margin do you think you can recover with pricing actions? And when you talk about profitability, is that EPS profitability, EBIT, EBITDA? Just some clarity on that would be great. Thanks.

[R. Scott Blackley, CFO at Oscar Health]

Yeah. Thank you. When we're of working backwards, when we talk about profitability, we're always talking about earnings from operations. Earnings from operations means that adjusted EBITDA will also be positive. With respect to the MLR, comparisons are impacted by looking at year over year, there was a six thirty basis point year over year increase on the first half.

[R. Scott Blackley, CFO at Oscar Health]

And as you think about the second half and what that means, last year we had a significant amount of SEP growth in the second half. And this year we're expecting membership to basically trend down to the back half of the year. And so we think that as we look at kind of adjusting for the relative growth in the book last year to this year, we would expect MLR trends in the back half of the year to the MLR is going to increase sequentially from the adjusted MLR that I mentioned in the call. But we think that that trend is going to look a lot more like 'twenty three, maybe 'twenty two than what it was last year because last year we had so much growth that really drove that.

[John Ransom, MD & Director - Healthcare Research at Raymond James Financial]

Thank you.

[Operator]

Your next question comes from the line of Stephen Baxter of Wells Fargo. Please go ahead.

[Stephen Baxter, Senior Equity Research Analyst at Wells Fargo]

Hi, thanks. Just a couple of quick follow ups. First, I guess, on the second half MLR commentary. I guess, first, you know, there's an announcement from CMS about, you know, potential scrubbing of duplicative enrollment. I guess, we'd be curious to get, your guys' perspective on what you feel like the impacts from that might be and if you're assuming anything for that in this guidance?

[Stephen Baxter, Senior Equity Research Analyst at Wells Fargo]

And then on the second question, the fourth quarter provision you mentioned for some additional utilization. Can you help us think about the magnitude of that? And then I have a couple of quick follow ups.

[R. Scott Blackley, CFO at Oscar Health]

Yeah. So on the dual eligible enrollees, as we talked about, we know the membership. You know, we know the number. For us, that's less than, 50,000 members that potentially could end up moving back to Medicaid and losing their or losing their subsidy.

[R. Scott Blackley, CFO at Oscar Health]

I guess they could pay out of pocket if the but they would lose their subsidy if they can't validate that they're no longer eligible for Medicaid or other Medicaid programs. I think it's important to note that we understand from CMS that the 2.5% that we see in our book is also the similar number in the marketplace, so probably a smaller exposure than what many had feared. So we factor we think that regardless of the outcome of which direction those members end up moving, we're well within the range of our guidance. And so that's what I would expect on that component. With respect to the fourth quarter increase in utilization, I won't dimension it specifically other than to say that we are we did build that into our guidance.

[R. Scott Blackley, CFO at Oscar Health]

We think that a lot of the levers that I talked about last quarter around what do we do when we see increases in utilization. We've been working those levers, things like leaning into some fraud, waste, and abuse investments that we can make ensuring that, you know, we are fully and correctly applying our provider contracts. You know, there are issues that we know where, you know, in our systems that we may not be we may be overpaying in spots. And so we are working to always address those. I think that's common for all insurers, but we see opportunities there.

[R. Scott Blackley, CFO at Oscar Health]

So we've leaned into all those things, which we think will help to moderate some of the back half pressure that we've otherwise, built into the outlook.

[Stephen Baxter, Senior Equity Research Analyst at Wells Fargo]

Got it. Okay. And then just to hopefully add a little bit of clarity to some of the the repricing and and refiling discussions. So appreciating that, I think, in use of the vast, vast majority of membership is now, you know, refiled, rates for have you gotten assurances or any kind of clarity from the states about, you know, what they're willing to accept? Like, if most states said, like, we will accept what you will submit, or are you still expecting there's gonna be a significant amount of scrutiny around the assumption changes that you're making?

[Stephen Baxter, Senior Equity Research Analyst at Wells Fargo]

I wanna just get a sense of, you know, how how confident you are that the request changes you've made will actually end up going through. Thank you.

[Mark Bertolini, CEO & Director at Oscar Health]

Yeah. Thanks, Steve. We we have filed and we have had good conversations with the regulators. They've been accepting of our point of view and actually have been pushing in a few places to say, you know, are we all priced properly? They don't want their markets to fail.

[Mark Bertolini, CEO & Director at Oscar Health]

That causes them to have to move membership, which they don't like to do. So they're very interested in making sure that we're priced properly. As you know, subsidies change with those kind of rates as well. And so we believe for individuals, it won't be as dramatic a change for them. But we believe we have pretty much received all the right messages from regulators that we're fine with our pricing models.

[Mark Bertolini, CEO & Director at Oscar Health]

And we believe everybody else is pricing rationally as well. I know there's some data out there from yesterday. It's not complete. There are a couple of markets where we've already filed where they have not updated the files online. So we are confident in our pricing includes everything we need to include.

[Operator]

Your next question comes from the line of Jonathan Young of UBS. Please go ahead.

[Jonathan Yong, Analyst - Equity at UBS]

Hi, thanks for taking the question. I just wanted to go to your commentary on getting back to profitability in 2026. I guess as you kind of think about where your peers are kind of shaking out at your pricing, their pricing, is there a level of enrollment where perhaps they're leaving a lot more enrollments to be left to the rest of the marketplace and where perhaps you absorb perhaps too much enrollment? Is there kind of a break point where you just say, okay. This is just way too much. Can can you frame that for us? Thanks.

[Mark Bertolini, CEO & Director at Oscar Health]

Yeah. We have been very careful not to create adverse, risk coming into our pool from others. And so our pricing has been very careful on metal levels, types of products. We have a new strategy, a couple of new strategies we've exercised in markets that are not traditional stat Saturday the strategies you've seen in the markets to avoid the things like adverse selection or adverse retention, on the other side. So we believe we have picked the right spots by market, at this point, and we were very aware of that issue.

[Mark Bertolini, CEO & Director at Oscar Health]

It was constant part of our conversation. We've had multiple pricing meetings, probably more than anybody would wanna actually attend, but we have to make sure we're in the right place.

[Jonathan Yong, Analyst - Equity at UBS]

Okay. And then as we kind of think about the g and a reductions that you're, doing to set yourself up to 26, I don't can you talk to, like, where exactly these are kind of, taking shape in terms of those cost reductions? And then, I guess, similarly, is that 60,000,000 the needed level to get to the level of profitability? Or is that if you didn't do this, would you actually hit that? Thanks.

[R. Scott Blackley, CFO at Oscar Health]

Yeah. Appreciate the question, Jonathan. And I would just say the action we take is just as we've losses that we're now projecting for 2025, we wanted to make sure that we just solidified our profitability position next year. So we just view this as one of the levers that we're pulling to ensure we hit profitability and have meaningful margin expansion next year. So with regards to the nature of the savings, we are having a reduction in force, which is roughly half of the savings we're projected for next year.

[R. Scott Blackley, CFO at Oscar Health]

The other half is driven by a mixture of closing some open roles that we had planned as well as reducing some vendor costs. So the majority of those savings will roll into '26, but we will see some of that in the back half of this year, which is part of the improvement in our SG and A guidance for the full year '25.

[Mark Bertolini, CEO & Director at Oscar Health]

And the focus has been on fixed costs. We assume there may be variable cost changes depending on where membership ends up, but we have not taken those actions yet.

[Jonathan Yong, Analyst - Equity at UBS]

Thank you.

[Operator]

Your next question comes from the line of Andrew Mock of Barclays. Please go ahead.

[Andrew Mok, Director at Barclays]

Hi, good morning. Can you help us bridge the $9.00 $7,000,000 of excess capital at Q1 to the $577,000,000 of excess capital you quoted today? I think the earnings revision was $500,000,000 the risk adjustment payable accrual increased and minimum capital is presumably increasing with the higher premium. So just want to understand what's getting better in the capital bridge and what the capital commitments look like for the back half of the year? Thanks.

[R. Scott Blackley, CFO at Oscar Health]

Yeah. So in terms of the decreases in capital, I would just point you to the loss that we recognized in the second quarter as being the biggest driver of the decrease in excess capital. We always have cash that's going back and forth between the subs and the parent. So for example, parent cash increase in the second quarter, that was due to some tax sharing payments that moved from the subsidiaries up into the parent. That also affects kind of the amount of excess capital at the subs.

[R. Scott Blackley, CFO at Oscar Health]

So that's the picture of where we are. As I've already spoken to with respect to cash and capital, we are very comfortable with our current position. We have a revolver that's expiring at the end of the year. So we're actively working towards extending and improving that facility. And overall, we feel very confident that we will have we have the right capital and should we need, whether it's for growth reasons or otherwise, to increase our capital position.

[R. Scott Blackley, CFO at Oscar Health]

We have a fairly unlevered balance sheet, and we think that we would have ready access to be able to improve our capital position as necessary.

[Andrew Mok, Director at Barclays]

Great. Can I just ask a few follow ups on that? One, can you give us the level of minimum cash you like to retain at the parent? And two, just a follow-up on the risk adjustment. It looks like the year to date accrual is running around 15.5%.

[Andrew Mok, Director at Barclays]

Is that a good number to think about for the back half accrual as well? And can you help us understand why that number wouldn't increase more year over year if market acuity is increasing? Thanks.

[R. Scott Blackley, CFO at Oscar Health]

Yes. So on the parent cash levels, we have internal targets that we maintain. I would say that currently we are well above our internal targets and are comfortable with the cash position at the parent even through the second half of this year. With respect to the risk adjustment, I think that that the first half is reflective of the change in market morbidity. So it is now consistent.

[R. Scott Blackley, CFO at Oscar Health]

It's a good proxy for the back half as well. We had seen elevated claims and expected that we would see some risk adjustment offset for those. Obviously, now we know that we're not going to see that full offset. But at this point, we are we've adjusted for the market morbidity change and that's fully reflected in the amount of risk adjustment that we're projecting in our guidance.

[Andrew Mok, Director at Barclays]

Great. Thank you.

[Operator]

Your next question comes from the line of Craig Jones of Bank of America. Please go ahead.

[Craig Jones, Vice President at Bank of America]

Great. Thanks for the question. So when you're thinking about where you end up among your peers in each state in terms of the rate increase requested for 2026, As you refile in each state, there's a pretty wide range of rate increases requested. So are you targeting getting towards the higher end of rate increases in each state to be more conservative in 2026 with the risk pool potentially changing so significantly? Are you sort of more are you plenty comfortable in the mid to low end of rate increases and are just confident in the rate that you've requested?

[R. Scott Blackley, CFO at Oscar Health]

Thanks. Yes. So as you might expect, we start with what do we believe we need to do to put ourselves in the right position to ensure that we are confident that we are covering the changes in market morbidity, the impacts of subsidies expiring, enhanced subsidies. And so we build up our price first just based on our detailed modeling. That gets us into double digit increases and significant double digit increases in some of our biggest markets.

[R. Scott Blackley, CFO at Oscar Health]

When we look at how our price position looks compared to what we're seeing with competitors, we think that we're very competitive in some markets. We're less competitive in others. On average, we feel very comfortable that our price change is going to be comparable to some of our larger peers and that we have covered off the risks that we see.

[Craig Jones, Vice President at Bank of America]

Okay. Great. That makes sense. Thanks. And then just to clarify, when you say double digit, is that between 1099%?

[Craig Jones, Vice President at Bank of America]

Or what's the can you narrow that down for us a little bit?

[R. Scott Blackley, CFO at Oscar Health]

I would I would say that you are correct in terms of that number. Could be any of those. But, you know, I would just say that we would expect that in 2026. We'll see rate increases that will be multiple times what we saw last year.

[Craig Jones, Vice President at Bank of America]

Okay, great. Thank you.

[Operator]

Your next question comes from the line of Dave Windley of Jefferies. Please go ahead.

[Dave Windley, Managing Director at Jefferies LLC]

Hi, thanks for taking the question. I wondered if you could talk to the membership shifts that you are seeing. Think from the beginning of the year, your membership has obviously held up better than the original expectation. In that gain, are those SEP, like, signees, or are they switchers from other plans? And what do the what is the profile of those members that are switching to or or are shifting to your book one way or the other?

[R. Scott Blackley, CFO at Oscar Health]

Yeah. So I would say part of the improvement in membership is actually stronger retention and lower lapse. So, you know, it's not all from new membership. We, we do have, growth in SEP. You know, we see a good portion of that growth is in $0 plans.

[R. Scott Blackley, CFO at Oscar Health]

I think that many of the dynamics that have fueled growth last year continue to persist. This year, we are comfortable that the members that we've added have MLR profiles that are consistent with our historical expectations that they'll be modestly higher than what we see for the full book and that's kind of what we've seen thus far in 'twenty five. And as we talked about with utilization, we have seen that settling down to levels that are approaching our expectations for what we should see for the risk in the book. So I don't think that we see any kind of signals that these members that we're adding this year you know, are driving some types of adverse selection or or, you know, increased risk for market morbidity.

[Dave Windley, Managing Director at Jefferies LLC]

Okay. Got it. My my follow-up question was gonna be on the very last part of what you said. So it seems like better retention or or switching of perhaps price sensitive members to you helps to to perhaps maintain the risk profile of your book, but perhaps to the detriment of your peers' books that are losing members, aren't in benchmark position, etcetera. Bottom line, seems like the issue for assessing the market here, particularly for price leaders in the market, is not so much your own book, but everybody else's book.

[Dave Windley, Managing Director at Jefferies LLC]

I wonder how you get comfortable with that pattern not persisting through the balance of this year and further into next year in terms of just market morbidity continuing to deteriorate away from you as people get swept out of the market with the enhanced integrity? You've addressed a lot of this, but I just wondered if we could put a finer point on it. Thank you.

[R. Scott Blackley, CFO at Oscar Health]

Sure. And I would just say this, the increased program integrity rules have already been put into place for '25. We think that's been the effects of that have already manifested in terms of what we see the first quarter change in market morbidity. With respect to the population of low to no utilizers, we just really haven't seen much of a shift in our book. We've seen actually quite consistent percentages of those members in our book consistent with last year.

[R. Scott Blackley, CFO at Oscar Health]

In fact, it's been consistent with a number of years. So we're not really seeing anything in that that gives us great pause and concerns about kind of what's going on with market morbidity. I read, I see what others are saying in terms of the potential shifts there. We acknowledge that that could be a source of pressure and part of the driver of market morbidity. But we don't see anything in our statistics through the second quarter that caused us to think that there's another leg that's going to drop in terms of market morbidity.

[Dave Windley, Managing Director at Jefferies LLC]

Great. Thank you.

[Operator]

There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. We thank you for participating and ask that you please disconnect your lines.

Participants

Executives

• Chris Potochar, VP - IR
• Mark Bertolini, CEO & Director
• R. Scott Blackley, CFO

Analysts

• Joshua Raskin, Partner - Managed Care & Providers at Nephron Research LLC
• Michael Halloran, Senior Research Analyst & Associate Director - Research at Robert W. Baird & Co
• Jessica Tassan, VP & Senior Research Analyst at Piper Sandler Companies
• John Ransom, MD & Director - Healthcare Research at Raymond James Financial
• Stephen Baxter, Senior Equity Research Analyst at Wells Fargo
• Jonathan Yong, Analyst - Equity at UBS
• Andrew Mok, Director at Barclays
• Craig Jones, Vice President at Bank of America
• Dave Windley, Managing Director at Jefferies LLC