Executive Summary / Key Takeaways

• Oscar Health achieved significant milestones in 2024, reporting full-year adjusted EBITDA and net income profitability for the first time, driven by robust membership growth and operational efficiency gains.
• The company's proprietary full-stack technology platform, '+Oscar', is a core differentiator, enabling superior member engagement, driving administrative cost efficiencies (contributing to record-low SG&A ratios), and powering innovative clinical and provider tools, including advanced AI applications.
• Oscar is executing a strategic plan targeting at least 20% revenue CAGR and a 5% operating margin by 2027, fueled by disciplined pricing, geographic expansion into new and existing markets (increasing addressable lives), and diversification into the promising ICRA market.
• First quarter 2025 results demonstrated continued strong performance, with significant year-over-year increases in revenue, net income, and operating margin, leading to the reaffirmation of full-year 2025 guidance which anticipates meaningful margin expansion.
• While regulatory changes, including potential shifts in premium tax credits and program integrity rules, pose potential risks to market dynamics and membership growth, Oscar believes its disciplined strategy, technological edge, and focus on consumer value position it to navigate these challenges and continue its growth trajectory.

The Ascent of a Tech-Driven Insurer

Founded in 2012 with a mission to make health a more accessible and affordable reality for all, Oscar Health emerged challenging the entrenched complexities of the U.S. healthcare system. From its inception, the company focused on the individual and small group markets, leveraging the newly established federal and state exchanges under the Affordable Care Act (ACA). This foundational focus on the consumer, empowered by a bespoke technology platform, set Oscar apart from traditional insurers.

Oscar's history is marked by periods of significant, often rapid, growth. The company has strategically expanded its geographic footprint, growing its presence in approximately 80% of its states year-over-year by mid-2024 and increasing its total addressable market to around 11 million lives by the third quarter of 2024 through entry into new geographies like North Carolina. This expansion, coupled with strong member retention and additions from the Special Enrollment Period (SEP) driven by Medicaid redeterminations, propelled membership to approximately 2 million effectuated members by the first quarter of 2025, a 41% increase year-over-year. This growth trajectory significantly outpaced the overall ACA market growth in 2025 open enrollment, where Oscar's 37% growth compared favorably to the market's 13%.

The company's strategic evolution is centered on achieving sustainable, profitable growth. At its Investor Day in June 2024, Oscar laid out a clear plan targeting at least a 20% compound annual revenue growth rate and a 5% operating margin by 2027. This plan hinges on doubling its footprint in Oscar Insurance, continuously innovating its product portfolio, diversifying its revenue streams, particularly through the burgeoning Individual Coverage Health Reimbursement Arrangement (ICRA) market, and doubling down on its core technological advantage.

The +Oscar Engine: Fueling Efficiency and Experience

At the heart of Oscar's differentiation lies its full-stack technology platform, branded as '+Oscar'. This proprietary technology is not merely an IT system; it is designed as the central nervous system of the business, driving operations, member engagement, and clinical outcomes. The platform enables Oscar to offer a superior member experience, characterized by ease of use, personalized interactions, and access to care navigation tools.

The tangible benefits of the +Oscar platform are quantifiable and directly contribute to Oscar's operational efficiency and competitive positioning. The technology underpins administrative processes, contributing significantly to the company's ability to reduce its Selling, General and Administrative (SGA) expense ratio. In the first quarter of 2025, Oscar reported its lowest quarterly SGA expense ratio in company history at 15.8%, a 260 basis point improvement year-over-year. This efficiency gain is driven by factors including fixed cost leverage from growing membership, variable cost efficiencies, and the increasing impact of technology and AI initiatives. Management notes that roughly half of the 2024 SG&A improvement stemmed from fixed cost leverage and half from variable cost efficiencies, with AI initiatives beginning to show effects on the cost structure.

Beyond administrative tasks, the platform powers innovative tools aimed at improving care delivery and managing costs. Examples include guiding members to Virtual Urgent Care, which management estimates drove approximately $18 million worth of value to Oscar Insurance in the first half of 2024 by averting more expensive care settings. AI is central to Oscar's technology roadmap, with the company actively integrating large language models into capabilities like tools for post-ER visit follow-up care, which reportedly lowered readmission rates by close to 10% for a major health system client. AI is also being deployed to reduce provider administrative burdens, with over 50% of onboarding and post-care instructions in Oscar Urgent Care being AI-powered, improving speed to care. Other AI programs include a clinical intake bot and tools for pre-populating preventative screening recommendations based on medical history. These technological advancements are viewed as critical for making operating processes more efficient and scalable, positioning Oscar to drive continued leverage and performance on the expense side.

Navigating a Competitive Arena

Oscar operates within a highly competitive U.S. health insurance market, facing off against established giants like UnitedHealth Group (UNH), Elevance Health (ELV), Cigna (CI), and Humana (HUM), among others. These larger competitors often possess greater financial resources, broader product portfolios, and more extensive provider networks, enabling them to potentially price more competitively or offer a wider array of options.

However, Oscar differentiates itself through its technology-first approach and consumer-centric model. While larger players may rely on scale for efficiency, Oscar's proprietary platform provides distinct operational advantages, such as faster claims processing and higher member retention rates, which contribute to better administrative efficiency and member loyalty. This technological edge allows Oscar to capture market share, as evidenced by its growth significantly outpacing the overall ACA market.

The competitive landscape is dynamic. Oscar views the exit of a competitor from the exchanges in 2026 as both regrettable for market choice and an opportunity, particularly given the significant overlap in service areas. Management attributes such exits primarily to competitors getting behind on pricing and margin, rather than systemic market issues for a disciplined player like Oscar. The company believes its disciplined pricing strategy, which for 2025 saw average rate increases around 6% compared to the market average of 7%, balances the need for growth with the imperative for profitability. Preliminary 2025 rates from competitors are characterized by management as stable and rational.

Oscar is also strategically positioning itself in the emerging ICRA market, aiming to become a preferred carrier for employers seeking to transition employees to individual plans. This initiative allows Oscar to tap into new growth segments and compete with traditional group plans offered by larger insurers, leveraging the ACA's attractive risk pool and lower cost trend.

Financial Performance: A Turning Point

2024 marked a pivotal year for Oscar Health's financial trajectory. The company achieved total company adjusted EBITDA profitability ($199 million) and, for the first time in its history, net income profitability ($25 million). This significant improvement was driven by strong performance across the business, including robust revenue growth and enhanced operational efficiency.

Revenue growth has been substantial, primarily fueled by increasing membership. Total revenue for the full year 2024 reached $9.2 billion, a 57% increase year-over-year. This momentum continued into the first quarter of 2025, with total revenue climbing to $3.05 billion, a 42% increase compared to the same period in 2024.

Profitability metrics also showed marked improvement. The Medical Loss Ratio (MLR), which measures medical expenses as a percentage of premiums, was 81.7% for the full year 2024, a slight increase of 10 basis points year-over-year. In the first quarter of 2025, the MLR was 75.4%, an increase of 120 basis points year-over-year. This increase was primarily attributed to unfavorable prior period development related to an increase in the 2024 Risk Adjustment payable, partially offset by favorable claims runout and a CSR recovery accrual. Management noted that overall utilization in Q1 2025 saw higher inpatient utilization partially offset by favorable pharmacy, with outpatient and professional largely in line with expectations.

The Selling, General and Administrative (SGA) expense ratio saw significant improvement, dropping to 19.1% for the full year 2024, a 520 basis point improvement year-over-year. This trend of efficiency continued into Q1 2025, with the ratio reaching a historic low of 15.8%. These improvements reflect the benefits of scale, fixed cost leverage, variable cost efficiencies, and the impact of technology investments.

Earnings from operations, a key metric for evaluating core business performance and progress towards long-term margin targets, reached $297.1 million in the first quarter of 2025, representing an operating margin of 9.8%. This marked a significant increase of $112 million year-over-year. Net income attributable to Oscar Health, Inc. was $275.3 million in Q1 2025, a substantial increase of $98 million over the prior year period. Adjusted EBITDA in Q1 2025 was $329 million, also a significant year-over-year improvement.

Capital Strength and Liquidity

Oscar maintains a strong capital position and healthy liquidity, managed at both the health insurance subsidiary and holding company levels. As of March 31, 2025, total cash and cash equivalents and investments stood at $4.9 billion. The combined statutory capital and surplus of the health insurance subsidiaries was estimated at approximately $1.52 billion as of March 31, 2025, comfortably exceeding minimum regulatory requirements. Historically, the parent company provided capital contributions to the subsidiaries, but as the insurance entities have become profitable and built excess capital, the potential exists for future dividends or distributions to the parent, subject to regulatory approval.

The company utilizes quota share reinsurance arrangements, expected to remain around 50% ceded premium in 2025, to manage risk and enhance capital efficiency. These arrangements significantly reduce the capital required to support growth.

Oscar's short-term cash requirements are expected to be met by available cash, operating cash flows, and current assets. Net cash provided by operating activities was robust in Q1 2025 at $878.5 million, a significant increase from the prior year, primarily due to higher premium receipts and reinsurance recoverables, partially offset by increased claim disbursements.

Long-term debt includes $305 million in aggregate principal amount of convertible senior notes due 2031. These notes became convertible at the option of the holder during the second quarter of 2025 due to the Class A common stock sale price condition being met in Q1 2025, although they had not been converted as of the May 8, 2025 filing date. The estimated fair value of these notes was significantly higher than their carrying amount as of March 31, 2025, classified as a Level 3 measurement. The company also has a $115 million revolving credit facility available until December 28, 2025, with no outstanding borrowings as of March 31, 2025.

Outlook and Key Considerations

Based on its strong first quarter 2025 results, Oscar reaffirmed its full-year 2025 guidance, signaling confidence in its ability to continue its trajectory of profitable growth and margin expansion. The company expects total revenue in the range of $11.2 billion to $11.3 billion. The MLR is projected to be in the range of 80.7% to 81.7%, representing a 50 basis point improvement at the midpoint compared to the prior year. The SGA expense ratio is guided to be between 17.6% and 18.1%, an approximate 125 basis point improvement year-over-year at the midpoint, reflecting continued efficiency gains.

Oscar anticipates earnings from operations in the range of $225 million to $275 million, a significant improvement year-over-year at the midpoint, and expects positive net income for the full year 2025. Adjusted EBITDA is expected to be roughly $140 million higher than earnings from operations, implying a range of approximately $365 million to $415 million.

Key assumptions underlying this outlook include expectations for membership to trend up in the first half of the year before potentially trending down in the second half, finishing the year around 1.8 million paid members. This forecast incorporates the anticipated impact of the proposed end of the continuous SEP for individuals below 150% of the federal poverty level. Management expects MLR seasonality to be flatter in the latter quarters of 2025 compared to historical patterns, with the fourth quarter typically being the highest. SG&A seasonality is expected to show modest increases each quarter. Risk adjustment as a percentage of premiums is anticipated to be largely consistent year-over-year based on the updated membership mix.

While the outlook is positive, investors should consider potential risks. The regulatory environment remains dynamic, with potential changes to the ACA, including the possible expiration of enhanced premium tax credits at the end of 2025 and the implementation of new program integrity rules. These factors could impact overall market size, membership eligibility, and market morbidity. Risk adjustment estimates, while modeled consistently, remain subject to inherent volatility. The ability to accurately estimate and manage medical costs in a changing utilization environment, particularly with new membership cohorts, is also critical. Competition remains intense, requiring continuous innovation and disciplined execution.

Conclusion

Oscar Health has reached a significant inflection point, demonstrating its ability to translate rapid membership growth into profitability. The company's differentiated technology platform is a core asset, driving operational efficiency and enhancing the member experience, providing a competitive edge in a crowded market. With a clear strategic plan focused on continued expansion, product innovation, and diversification into areas like ICRA, Oscar is positioned to pursue its ambitious long-term targets of substantial revenue growth and meaningful margin expansion. While regulatory uncertainties and competitive pressures persist, Oscar's disciplined approach, technological foundation, and focus on consumer value underpin its investment thesis. The strong financial performance in early 2025 and reaffirmed guidance suggest the company is on track to deliver another year of improved results, building on the foundation of profitability established in 2024. Investors should monitor the company's execution against its strategic plan, the impact of regulatory developments on market dynamics, and the continued leverage gained from its technology platform as key indicators of its future success.