Business Overview and History
Oscar Health, Inc. (OSCR) has emerged as a true trailblazer in the healthcare technology industry, revolutionizing the way individuals access and experience healthcare. Founded in 2012, the company has weathered the storms of a rapidly evolving landscape, and its unwavering commitment to innovation has propelled it towards a historic milestone - profitability.
Oscar Health was established with a mission to disrupt the traditional healthcare system, leveraging cutting-edge technology to enhance the patient experience and drive greater affordability. The company was co-founded by Mario Schlosser, Joshua Kushner, and Kevin Nazemi, who saw an opportunity to address the complexities and pain points in the traditional healthcare system through technological innovation.
Initially, Oscar focused on offering individual and family health insurance plans on the Affordable Care Act (ACA) marketplaces. The company's user-friendly digital platform and emphasis on member experience quickly gained traction, leading to rapid expansion. By 2016, Oscar had become one of the largest ACA carriers in its markets.
However, the company faced significant challenges in the following years, struggling with higher-than-expected medical costs and difficulties in scaling its technology platform across its growing membership. These setbacks led Oscar to exit several state markets and discontinue some product offerings, including its Medicare Advantage plans.
Despite these obstacles, Oscar remained committed to its mission. The company continued to invest in its platform, introducing new features and products such as virtual care offerings and condition-specific health plans. These efforts helped Oscar regain momentum, and by 2023, it had rebuilt its membership and once again emerged as one of the largest ACA carriers in its markets.
Oscar's journey demonstrates its resilience and ability to adapt to market changes. The company has successfully navigated a complex and rapidly evolving healthcare landscape, overcoming challenges and leveraging its technological capabilities to provide affordable and accessible healthcare solutions to its members.
Business Segments and Operations
Oscar Health operates in a single reportable segment as a leading healthcare technology company. The company's primary focus is offering health plans through the Patient Protection and Affordable Care Act (ACA) and leveraging its technology platform to provide services via its Oscar platform.
In the insurance business, Oscar offers health plans in the individual market, which primarily consists of policies purchased by individuals and families through Health Insurance Marketplaces established by the ACA, as well as policies purchased off-exchange. Oscar's health plans are offered in the five metal plan categories defined by the ACA: Catastrophic, Bronze, Silver, Gold, and Platinum. These plans differ based on the size of the monthly premium and the level of sharing of medical costs between Oscar and its members.
Oscar's premium revenue, which includes direct policy premiums collected from members and subsidies received from the Centers for Medicare & Medicaid Services (CMS) as part of the Advanced Premium Tax Credit (APTC) program, was $8.97 billion for the year ended December 31, 2024, up 58% from $5.69 billion in the prior year. This increase was primarily driven by higher membership during the 2024 Open Enrollment period, strong retention, and additions of members through Special Enrollment Periods (SEPs).
In addition to its insurance business, Oscar leverages its technology platform to provide services to providers and payors through its Oscar offering. Oscar's Campaign Builder is an engagement and recommendation platform that utilizes predictive analytics to identify high-value engagement opportunities and deliver personalized interactions with real-time reporting and analytics. As of December 31, 2024, Oscar served nearly 500,000 client lives on its Campaign Builder platform, in addition to the approximately 1.68 million members enrolled in Oscar health insurance.
Financial Performance and Ratios
Oscar Health's financial performance in 2024 was nothing short of impressive. The company reported total revenue of $9.2 billion, a 57% increase from the previous year. This robust revenue growth was driven by a 37% increase in membership, with the company now serving approximately 1.8 million members across its 18-state footprint.
The company's medical loss ratio (MLR) for the full year 2024 was 81.7%, a slight increase of 10 basis points compared to 2023. This metric, which measures the ratio of medical expenses to premium revenue, demonstrates Oscar Health's ability to effectively manage its healthcare costs and maintain a healthy balance between member coverage and profitability. The increase in MLR was primarily driven by membership growth during SEPs and an increase in Oscar's risk adjustment transfer payable, partially offset by favorable prior period development and affordability initiatives.
Notably, Oscar Health's selling, general, and administrative (SG&A) expense ratio improved significantly, declining by 520 basis points to 19.1% in 2024. This improvement was driven by the company's focus on operational efficiency, leveraging its technology platform to drive cost savings and enhance its overall financial performance. The increase in SG&A expenses to $1.76 billion, up 23% from $1.43 billion in the prior year, was primarily due to higher distribution, taxes, and fees associated with the higher membership. This was partially offset by the impact of the acceleration of stock compensation expense associated with the cancellation of the Founders Awards in the first quarter of 2023.
The company's net income for the full year 2024 was $26.1 million, a remarkable turnaround from the $270.7 million net loss reported in the prior year. This achievement marks a significant milestone in Oscar Health's journey, as the company transitions from a growth-focused startup to a mature, profitable enterprise.
For the most recent quarter (Q4 2024), Oscar Health reported revenue of $2.39 billion, representing a 67% year-over-year increase. However, the company experienced a net loss of $153.55 million for the quarter.
Liquidity and Solvency
As of December 31, 2024, Oscar Health reported a strong liquidity position, with $4 billion in cash and investments, including $190 million at the parent company level. The company's cash and cash equivalents stood at $1.53 billion. This robust cash balance, combined with the company's $115 million revolving credit facility, provides ample resources to fund its ongoing operations and future growth initiatives.
The company's insurance subsidiaries maintained a solid capital and surplus position, with approximately $1.2 billion in total, including $774 million in excess capital. This strong solvency profile supports Oscar Health's ability to withstand market fluctuations and regulatory changes, while also positioning the company to capitalize on opportunities for expansion and innovation.
Oscar Health's debt-to-equity ratio was 0.29 as of December 31, 2024, indicating a relatively low level of leverage. The company's current ratio and quick ratio both stood at 0.82, suggesting a stable short-term liquidity position.
Guidance and Outlook
For the full year 2025, Oscar Health has provided guidance that reflects its continued commitment to profitable growth. The company expects total revenue to be in the range of $11.2 billion to $11.3 billion, representing a year-over-year increase of approximately 23%. The company also anticipates a further improvement in its medical loss ratio, with a projected range of 80.7% to 81.7%, representing a 50 basis point year-over-year improvement at the mid-point.
Oscar Health expects its SG&A expense ratio to be in the range of 17.6% to 18.1%, representing an approximate 125 basis points year-over-year improvement at the mid-point. The company projects earnings from operations in the range of $225 million to $275 million, representing a significant $193 million improvement year-over-year at the mid-point.
Notably, Oscar Health has announced a shift in its reporting metrics, moving from a focus on adjusted EBITDA to earnings from operations. This change reflects the company's confidence in its ability to deliver meaningful margin expansion, with a targeted operating margin of 5% by 2027. The company expects adjusted EBITDA to be roughly $140 million higher than earnings from operations in 2025.
Oscar Health also anticipates achieving positive net income in 2025, further solidifying its transition to sustained profitability.
Industry Trends and Market Position
Oscar Health operates primarily in the United States, with a focus on the individual market through the federal and state-run healthcare exchanges formed in conjunction with the Affordable Care Act (ACA). The company serves individuals, families, and employees in 18 states.
The U.S. health insurance market was valued at $453 billion in 2024 and is expected to grow at a CAGR of 3.7% during 2025-2033 to reach $639 billion by 2033. This growth is driven by rising healthcare costs, evolving enrollment trends, and technological advancements. Oscar Health's innovative approach and technology-driven solutions position it well to capitalize on these industry trends.
Human Capital and Corporate Culture
As of December 31, 2024, Oscar Health had approximately 2,400 full-time employees. The company fosters a culture in which employees share a common connection to its mission and are passionate about making a frustrating healthcare system easier, more human, and better for everyone. This commitment to its workforce has been instrumental in driving the company's success and innovation in the healthcare technology sector.
Cybersecurity and Risk Management
Oscar Health has developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of its critical systems and information, including protected health information. The company uses the ISO 27001 standard as a guide to help identify, assess, and manage cybersecurity risks relevant to its business. This proactive approach to cybersecurity is crucial in maintaining trust with members and ensuring the security of sensitive healthcare data.
Risks and Challenges
While Oscar Health's transformation has been remarkable, the company continues to navigate a complex and highly regulated healthcare landscape. Regulatory changes, such as potential modifications to the Affordable Care Act or shifts in government healthcare policies, could impact the company's operations and financial performance.
Furthermore, the healthcare industry is characterized by intense competition, with established insurers and new market entrants vying for market share. Oscar Health's ability to maintain its competitive edge and continue to attract and retain members will be crucial to its long-term success.
Lastly, the company's reliance on technology and data-driven solutions exposes it to cybersecurity risks and the potential for data breaches, which could undermine consumer trust and have far-reaching consequences.
Conclusion
Oscar Health's journey from a disruptive startup to a profitable healthcare technology leader is a testament to the power of innovation and the company's unwavering commitment to transforming the industry. With its strong financial position, innovative offerings, and a clear roadmap for future growth, Oscar Health is poised to continue its ascent, cementing its place as a trailblazer in the ever-evolving healthcare landscape. The company's ability to achieve profitability while maintaining strong membership growth and improving operational efficiency demonstrates its potential for long-term success in the competitive health insurance market.