Executive Summary / Key Takeaways

• Technology-First Foundation Driving Efficiency: Oscar Health's proprietary +Oscar technology platform and aggressive AI integration are central to its strategy, delivering quantifiable benefits in operational efficiency, member engagement, and cost management, positioning it uniquely against traditional insurers.
• Strategic Repricing and Market Share Opportunity: Despite a challenging 2025 marked by increased market morbidity, Oscar has implemented a disciplined 28% weighted average rate increase for 2026, aiming to profitably capture market share from competitors retreating or mispricing in a dynamic ACA landscape.
• Clear Path to 2026 Profitability: Management is committed to returning to profitability in 2026, supported by significant administrative cost reductions ($60 million targeted for 2026), fixed cost leverage, and maturing risk scores on its growing membership base, with long-term targets of 20% revenue CAGR and a 5% operating margin by 2027.
• Robust Capital Position Amidst Market Volatility: Oscar maintains a strong liquidity profile with substantial cash and investments, particularly within its insurance subsidiaries, providing a buffer against market uncertainties and supporting growth initiatives without significant reliance on external financing.
• Evolving Regulatory and Competitive Landscape: The individual market faces a "reset moment" due to the potential expiration of enhanced premium tax credits and new program integrity rules. Oscar is actively engaging with policymakers and leveraging its agile model to adapt, viewing these changes as opportunities to solidify its market leadership.

The Digital Core of Healthcare: Oscar's Foundational Strategy

Oscar Health, Inc. (OSCR), incorporated in 2012, emerged with a clear mission: to make a healthier life accessible and affordable for all by leveraging technology. From its inception as Mulberry Health Inc. to its current form, Oscar has consistently focused on selling health insurance through federal and state-run healthcare exchanges, a market segment that now serves 22 million Americans and underpins nearly half of the U.S. GDP through small businesses, service, and farming sectors. This technology-first approach, coupled with a member-centric philosophy, has been the bedrock of its strategy, aiming to disrupt traditional healthcare models by offering choice, transparency, and affordability.

The individual market, a cornerstone of American healthcare, has demonstrated remarkable durability, achieving a record-low uninsured rate and a cost trend below CPI in recent years. This market aligns with significant macroeconomic, workforce, and consumer trends, as more Americans seek flexible, affordable health options. Oscar's business model is inherently designed to capitalize on these shifts, positioning itself as a leader in a market powered by individual choice.

Technological Differentiation and Innovation: The Oscar Moat

Oscar's competitive edge is fundamentally rooted in its proprietary +Oscar technology platform, a cloud-native architecture that underpins its entire operation. This full-stack platform is designed to drive superior experiences, deep engagement, and high-value clinical care, differentiating Oscar from more traditional insurers.

The tangible benefits of this technology are evident across its business. For instance, Oscar has integrated AI models into its operations, with over two dozen models on the backend and new "agentic" AI tools emerging from its labs. A prime example is the AI-powered tool for follow-up care after ER visits, which has demonstrated a nearly 10% reduction in readmission rates for a major health system client. Similarly, in Oscar Urgent Care, over 50% of onboarding and post-care instructions are now AI-powered, significantly reducing provider administrative tasks and improving speed to care. The new live chat feature for Oscar Virtual Urgent Care has decreased member response times by 90% and boosted provider efficiency by 28%.

A significant recent innovation is Oswell, an industry-first health AI agent powered by OpenAI, infused into Oscar's entire product portfolio. Oswell is connected to Oscar's cloud-native platform, drawing from claims, medical records, care guide notes, and other member data to provide a personalized experience. It helps members understand symptoms, test results, medications, and pre-approvals, while also providing doctors with data to improve care paths. These technological advancements are not merely incremental; they are strategic investments that streamline operating costs, enhance member and provider experiences, and ultimately contribute to a stronger competitive moat. For investors, this technological leadership translates into potential for sustained operational efficiency, improved medical cost management, and a differentiated offering that can attract and retain members in a competitive market.

Financial Performance and Operational Momentum

Oscar Health's financial trajectory reflects a company in a dynamic "reset moment," balancing aggressive growth with a renewed focus on profitability. For the nine months ended September 30, 2025, Oscar reported total revenue of $8.90 billion, a substantial 31.1% increase from $6.79 billion in the same period of 2024. This growth was primarily fueled by a significant increase in membership, which reached 2.12 million effectuated members as of September 30, 2025, up 28.5% year-over-year from 1.65 million. Despite this top-line expansion, the company recorded a net loss of $90.54 million for the nine months ended September 30, 2025, compared to a net loss of $178.98 million in the prior year period. The third quarter of 2025 alone saw a net loss of $137.45 million.

A key factor impacting profitability was the Medical Loss Ratio (MLR), which increased to 84.8% for the nine months ended September 30, 2025, from 79.5% in the prior year. This increase was largely driven by a significant rise in average market morbidity, which resulted in a $130 million increase to the risk adjustment payable for 2025 in Q3 alone. Management attributes this higher morbidity to Medicaid redeterminations bringing higher utilizers into the ACA market and initial impacts of program integrity efforts. However, Oscar demonstrated strong operational efficiency in its Selling, General, and Administrative (SG&A) expenses. The SG&A expense ratio improved to 17.3% for the nine months ended September 30, 2025, down from 19.0% in the prior year. This improvement was primarily due to greater fixed cost leverage, lower exchange fee rates, and disciplined cost management, partially offset by the impact of higher risk adjustment as a percentage of premium. Favorable prior period development, particularly from lower-than-expected paid claims for 2024, partially offset the MLR pressure.

Liquidity and capital resources remain robust. As of September 30, 2025, Oscar held $5.75 billion in total assets, with $2.15 billion in cash and cash equivalents. The company's health insurance subsidiaries maintained approximately $1.3 billion in combined statutory capital and surplus, exceeding minimum regulatory requirements, with an estimated $564.1 million of excess capital. Oscar also strategically optimized its capital structure by issuing $410 million in convertible senior subordinated notes due 2030 and terminating its Revolving Credit Facility.

These actions, coupled with the use of quota share reinsurance to reduce capital requirements, underscore Oscar's proactive financial management.

Competitive Positioning and Strategic Responses

Oscar operates in a highly competitive environment, facing large, diversified health insurers such as UnitedHealth Group (UNH), Elevance Health (ELV), Cigna (CI), and Humana (HUM). These established players often possess greater financial resources, broader product scopes, and more extensive provider networks. However, Oscar differentiates itself through its agile, technology-first approach and member-centric strategy.

Oscar's competitive advantage lies in its ability to offer a user-friendly digital experience and curate narrow, high-value provider networks. While competitors may offer broader networks, Oscar's strategy focuses on providing plans with differential pricing based on its underlying network costs, which is particularly appealing in the individual purchasing decision where consumers prioritize specific network access and plan design over broad employer-offered options. This approach, combined with the risk adjustment mechanism in the ACA market, allows Oscar to effectively manage costs and compete on value rather than solely on network breadth.

The company is strategically positioned to gain market share, particularly as other carriers retreat or price themselves out of the market. For instance, CVS Health (CVS)’s Aetna is reportedly exiting the Obamacare market for next year, and other major players like UnitedHealth Group are scaling back in certain markets. Oscar views these exits as significant opportunities to absorb displaced members, offering disciplined and competitive pricing. For 2026, Oscar has resubmitted rate filings in states covering nearly 99% of its current membership, with a weighted average rate increase of approximately 28%. This disciplined pricing strategy accounts for elevated medical cost trends, higher market morbidity in 2025, and the anticipated expiration of enhanced premium tax credits, ensuring Oscar remains competitive while improving profitability.

Oscar's internal program integrity efforts also provide a competitive edge. The company actively validates membership and sidelines brokers suspected of fraud, resulting in a lower impact from issues like dual eligible enrollments compared to broader market estimates. This proactive stance contributes to a more stable risk pool for Oscar, distinguishing it from competitors who may be more susceptible to market-wide integrity challenges.

Outlook and Path to Profitability

Oscar Health is at a "reset moment" in the ACA marketplace, but management is confident in its ability to deliver meaningful margin expansion and return to profitability in 2026. The company's 2025 guidance projects total revenue towards the low end of $12 billion to $12.2 billion, a full-year MLR in the range of 86.0% to 87.0%, and an SG&A expense ratio between 17.1% and 17.6%. Oscar expects a loss from operations in the range of $200 million to $300 million for 2025, with an adjusted EBITDA loss approximately $120 million less than the operating loss.

Looking ahead to 2026, Oscar's planning assumptions are built on a foundation of disciplined action. The 28% weighted average rate increase for 2026 anticipates above-average trend and accounts for significantly higher market morbidity in 2025, the potential expiration of enhanced premium tax credits, and current ACA program integrity initiatives. Oscar has also committed to eliminating approximately $60 million in administrative costs for 2026, driven by fixed cost leverage and continued AI-driven efficiencies. The company believes its competitive positioning, even with these rate increases, will allow it to profitably grow market share.

While the potential expiration of enhanced premium tax credits at the end of 2025 poses a significant risk, potentially leading to market contraction, Oscar has priced its plans for 2026 as if these credits will not be renewed. This conservative approach, coupled with a diversified metal-level strategy (including $0 gold and bronze plans), aims to mitigate adverse selection and maintain a stable risk pool. Oscar's long-term targets remain ambitious: at least 20% revenue CAGR and a 5% operating margin by 2027. The company's ongoing investment in AI, with numerous new use cases in the pipeline, is expected to continue driving down SG&A and enhancing operational efficiency, further supporting these long-term goals.

Conclusion

Oscar Health stands at a pivotal juncture, transforming market challenges into strategic opportunities. Its foundational commitment to technology, exemplified by the +Oscar platform and aggressive AI integration, provides a distinct competitive advantage in an evolving healthcare landscape. Despite the market-wide morbidity shifts and regulatory uncertainties of 2025, Oscar's disciplined repricing strategy for 2026, coupled with significant administrative cost reductions, positions the company for a return to profitability.

The company's robust capital structure and proactive management of market dynamics, including leveraging competitor exits and internal program integrity efforts, underscore its resilience. While the potential expiration of enhanced premium tax credits and ongoing regulatory changes present notable risks, Oscar's strategic agility, technological leadership, and clear path to margin expansion in 2026 make a compelling case for its long-term investment thesis. Oscar Health is not merely adapting to the future of individual healthcare; it is actively shaping it, driven by innovation and a steadfast focus on consumer needs.