Oscar Health, Inc. Q3 FY2024 earnings call

• Membership: Oscar closed the first 9 months of 2024 with approximately 1.65 million members, a 68% year-over-year increase, adding over 73,000 members in the quarter.
• Technology: Prototyped an AI tool to prevent fraud, waste, and abuse; launched AI programs for providers to enhance member speed to care, including a clinical intake bot and preventative screening recommendations.
• Expansion: Available in 18 states, total addressable lives increased to approximately 11 million, a 700,000 life increase year-over-year; average rate increase ~6% vs 7% overall market.
• New products: Launched a multi-condition plan for managing diabetes, pulmonary, and cardiovascular diseases; a tech-first HMO; a Spanish-first solution Buena Salud; and working with ICRA to make Oscar the carrier of choice for employers.

In the third quarter, Oscar reported revenue of $2.4 billion, a 68% year-over-year increase. Year-to-date revenue is in the range of $9.2 billion to $9.3 billion, a $900 million increase from initial guidance. The medical loss ratio (MLR) increased 80 basis points to 84.6%, driven by higher SEP membership and a late summer COVID uptick, partially offset by favorable prior period development. Total company adjusted EBITDA year-to-date is $312 million, a $246 million increase year-over-year, and year-to-date profit is $179 million, a $300 million improvement from the same period last year.

• Raised 2024 total revenue guidance to $9.2 billion to $9.3 billion due to higher membership and more favorable lapse rates.
• MLR expected towards the high end of the prior range of 80.5% to 81.5% due to SEP membership risk adjustment dynamics.
• SG&A expense ratio expected in the range of 19.4% to 19.6% due to greater fixed cost leverage.
• Total company adjusted EBITDA expected towards the high end of $160 million to $210 million.
• Expect net income profitability in 2024, and meaningful margin expansion in 2025 driven by disciplined pricing and total cost of care initiatives.

• Medicaid redetermination and SEP member impact on MLR.
• Potential changes in subsidies affecting the ACA market.
• Market competition and sustainability of pricing strategies for some players.

Q: Expand a bit on your competitive positioning for 2025.

A: Mark Bertolini notes average rate increase ~6% vs market 7%, believes market is rational and stable, with some players chasing share unsustainably.

Q: Just to expand a little bit on the SEP pressure.

A: Scott Blackley says SEP additions decelerated during the quarter, performance of SEP members on track, utilization slightly favorable, and growth slowing into Q4.

Q: Going back to your Analyst Day, path to $2.25 in EPS with assumption of extended subsidies sunset. Any change?

A: Mark Bertolini says no changes to 2025, believes both parties have incentive to ensure program continues, with possible changes but product here to stay.

Q: New product development, specifically guided care HMO product.

A: Mark Bertolini says HMO product uses digital tech for frictionless care, launching in markets, intention to use for California, and ICRA has 3,700 members with open enrollment ongoing.

Q: Peer expectations of industry market growth vs your 15% growth.

A: Mark Bertolini continues to expect double-digit ACA market growth in 2025 open enrollment, driven by Medicaid redeterminations and enhanced subsidies, with fundamentals like enhanced subsidies and growing gig economy as tailwinds.