Oscar Health, Inc. 2026 Third Quarter Earnings Conference Call - OSCAR HEALTH INC

Explicit Guidance:

• FY2026 Earnings from Operations: Raised to a range of $850 million to $950 million (midpoint $200 million above prior outlook).
• FY2026 Revenue: Expected range of $19.0 billion to $19.3 billion.
• FY2026 Membership: Expected to end the year with approximately 2.5 million members (reflecting disenrollments from a second CMS review).
• FY2026 Medical Loss Ratio (MLR): Expected range of 80.5% to 81.5%.
• FY2026 SG&A Expense Ratio: Expected range of 15.1% to 15.6%.
• FY2026 Risk Adjustment: Expected to be 17% to 18% of premiums (down from prior expectation of 20%).
• FY2026 Adjusted EBITDA: Expected to be roughly $110 million higher than earnings from operations.
• Long-Term Target: At least $4.00 earnings per share (EPS) by 2029.
• FY2027 Pricing: Weighted average rate increase of approximately 14%.

Business-Segment Outlook:

• 2027 Membership: Expect overall ACA marketplace membership to remain stable compared to year-end 2026, while targeting market share gains.
• Geographic Expansion: Expanding total addressable market (TAM) to 10 million consumers across 21 states; expanding footprint to 713 counties and entering South Carolina.
• Product Launches:
  • RetireEase: Live in select markets targeting 2.5 million early retirees in the ACA.
  • HelloMeno: Launching off-exchange to serve women across the workforce.
  • Allstate Health Solutions Partnership: Bundling low-cost supplemental coverage with bronze plans to manage out-of-pocket costs.
  • Hy-Vee Health with Oscar: Expanding concierge care model from Iowa to Nebraska, Missouri, and Kansas.
• Technology (Lucy Platform): On track to sell approximately 800,000 new policies in 2027 via the AI-driven broker and consumer matching platform.
• Employer Segment: "Choice" adoption growing fastest in healthcare, technology, construction, and manufacturing sectors; targeting small businesses and gig workers.

Market and Competitive Outlook:

• Competitive Landscape: Expect to gain share due to competitor exits (approx. 850,000 lives coming to market) and product differentiation.
• Pricing Strategy: Targeting markets where distribution and products address consumer needs; not necessarily the lowest price but "within a relatively reasonable range of the lowest" with superior retention.
• Member Retention: Higher retention rates expected compared to competitors due to product quality and customer service; 92% satisfaction rate for Hy-Vee Health with Oscar.
• Utilization Trends: Inpatient, professional, and pharmacy utilization expected to remain favorable; outpatient utilization elevated but viewed as a beneficial shift from inpatient care driven by affordability initiatives.

Macro / Industry Outlook:

• ACA Market Dynamics: ACA viewed as the foundation for a rapidly developing individual market; 28 million American workers remain uninsured with significant expansion opportunity.
• Program Integrity: Expect continued impact from CMS fraud and marketplace integrity initiatives (eligibility reviews) in 2027; believes these remove non-utilizers and stabilize the risk pool.
• Regulatory Environment:
  • 2028 Open Enrollment: CMS proposing pre-verification checks and restrictions on auto-enrollment; managing via "Lucy" platform tools for brokers.
  • Political Outlook: Midterms expected to have limited immediate effect on subsidies for 2027 due to veto pen dynamics; potential for policy deals (e.g., enhanced subsidies, tax treatment changes) to materialize before 2028.
• Cost Drivers: 2027 rate increase drivers (in ranked order) are medical cost trends (high single digits/high six digits), market morbidity (linked to program integrity), and margin expansion.

Strategic Initiatives:

• AI & Technology Deployment: Scaling AI capabilities across the business to drive fixed cost leverage and SG&A efficiency (14% SG&A ratio in Q3).
• Distribution Tools: Launching Lucy platform to increase broker productivity under new regulatory verification requirements; providing tools to offset potential commission pressure.
• Risk Management: Continuing a cautious approach to risk-adjustment reserves despite favorable trends; disciplined pricing balancing growth and profitability.

Risks and Headwinds to Outlook:

• CMS Eligibility Reviews: Ongoing disenrollments from industry-wide eligibility reviews could impact membership counts; small number of additional disenrollments expected in Q4.
• Procedural Friction: Enhanced verification (Social Security, broker consent) may slow enrollment start and impact broker productivity in the near term.
  2- Market Morbidity: Built into pricing assumptions; if morbidity trends higher than expected, it could impact MLR.
• Regulatory Uncertainty: Potential changes to subsidy structures (post-2027) or eligibility rules (2028) remain subject to legislative/bargaining outcomes.
• Seasonality: Q4 typically sees a step-up in MLR due to utilization trends (maximum out-of-pocket costs) and risk adjustment operations.

Management Tone on the Future:

• Confidence Level: High confidence in 2027 performance; management states they are "positioned to grow market share and expand margin."
• Pace of Progress: "2026 is the strongest year in Oscar Health's history"; on track to deliver long-term targets one year ahead of plan.
• Discipline: Emphasis on "disciplined execution," "disciplined pricing," and "cautious approach" to reserves despite favorable results.
• Growth Narrative: Viewed as a consumer health company meeting the demand for "simple, transparent, and personalized" care; optimistic about the opportunity to expand the ACA TAM.

Miscellaneous:

• Risk Adjustment Data: Updated data showed significant improvement in Oscar's risk relative to the market; $250 million revenue benefit in Q3.
• Financial Position: Ended Q3 with ~$9 billion in cash investments; ~$2.3 billion capital surplus in subsidiaries.
• Q4 Specifics: Anticipated SG&A step-up in Q4 due to seasonally expected spend (OE ramp, chart collection, early 2027 growth investments).