Oscar Health, Inc. ((OSCR)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Oscar Health’s recent earnings call conveyed a mixed sentiment, reflecting both optimism and challenges. The company reported significant revenue growth and strategic initiatives aimed at long-term stability, such as acquisitions and expense management. However, Oscar Health faces hurdles with increased medical loss ratios, operating losses, and market morbidity, impacting its short-term financial performance. Despite these challenges, the company remains hopeful about future profitability and market stabilization.
Revenue Growth
Oscar Health reported a robust total revenue of $2.9 billion for the second quarter, marking a 29% increase year-over-year. This growth was primarily driven by a higher membership base, showcasing the company’s ability to expand its market presence effectively.
Membership Increase
The company ended the quarter with over 2 million members, a 28% increase year-over-year. This surge in membership was supported by strong retention rates and above-market growth during the open enrollment period, highlighting Oscar Health’s competitive edge in attracting and retaining customers.
SG&A Ratio Improvement
Oscar Health’s SG&A ratio saw a year-over-year improvement of 90 basis points, bringing it down to 18.7%. This improvement was attributed to lower exchange fee rates and better fixed cost leverage, reflecting the company’s efficient operational management.
Strategic Acquisitions
Oscar Health announced strategic acquisitions of early-stage assets, including an individual market brokerage, a direct enrollment technology platform, and a consumer education website. These acquisitions are part of Oscar’s strategy to diversify its business and enhance its market offerings.
ICHRA Product Launch
In collaboration with Hy-Vee, Inc., Oscar Health is launching a new ICHRA product. This product aims to offer superior benefits, including concierge medicine, at an affordable price, demonstrating Oscar’s commitment to innovation and customer-centric solutions.
Expense Management Initiatives
Oscar Health is implementing expense management initiatives, including workforce reductions and administrative cost cuts. The company expects to eliminate approximately $60 million in administrative expenses by 2026, showcasing its focus on improving financial efficiency.
Increased Medical Loss Ratio (MLR)
The Medical Loss Ratio (MLR) increased by 12 points year-over-year to 91.1%, mainly due to an uptick in average market morbidity. This rise in MLR poses a challenge to Oscar’s short-term financial health.
Operating Losses
Oscar Health reported a significant loss from operations of $230 million and an adjusted EBITDA loss of $199 million for the second quarter. These figures underscore the financial challenges the company is currently facing.
Risk Adjustment Payable
The second quarter MLR was further impacted by a $316 million increase in the risk adjustment payable for 2025, driven by higher ACA marketplace morbidity. This adjustment reflects the broader market challenges affecting Oscar Health.
Challenges with Market Morbidity
Oscar Health is experiencing a meaningful increase in market-wide morbidity in 2025, which is impacting its financial performance across various markets. This challenge underscores the external pressures the company is navigating.
Projected Loss for 2025
The company anticipates a loss from operations between $200 million to $300 million for the full year 2025. This projection highlights the ongoing financial hurdles Oscar Health expects to face in the near term.
Forward-Looking Guidance
During the earnings call, Oscar Health provided updated guidance for the fiscal year 2025. The company anticipates total revenue between $12 billion and $12.2 billion, marking a 29% year-over-year increase. Despite the challenges, Oscar remains optimistic, reaffirming a full-year operational loss estimate between $200 million and $300 million. The company is targeting profitability in 2026, supported by strategic initiatives such as rate adjustments, cost-cutting measures, and growth strategies, including new product launches in collaboration with partners like Hy-Vee.
In summary, Oscar Health’s earnings call presented a mixed outlook, with significant revenue growth and strategic initiatives being overshadowed by challenges such as increased medical loss ratios and operating losses. The company remains optimistic about future profitability, driven by strategic acquisitions, product launches, and expense management initiatives. Investors and stakeholders will be keenly watching Oscar Health’s efforts to navigate these challenges and achieve its long-term goals.