Oscar Health, Inc. (OSCR) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary reflects strong financial performance with a 61% revenue growth forecast and improved profitability metrics. The Q&A section further supports this with favorable market morbidity reports and effective risk management strategies. Despite some uncertainties, the overall sentiment is optimistic, especially with a confirmed membership growth and strategic market positioning. The company's solid capital position and strategic plans for market share capture also contribute to a positive outlook, suggesting a likely stock price increase over the next two weeks.
Key Financial Performance
Revenue $4.6 billion, an increase of 53% year-over-year. This growth was driven by higher membership and rate increases, partially offset by higher risk adjustment payable accrual.
SG&A Ratio 15.2%, improved by 60 basis points year-over-year. This improvement was driven by disciplined expense management, top-line growth, and the growing impact of AI across operations and member services.
Medical Loss Ratio (MLR) 70.5%, improved by 490 basis points year-over-year. The improvement was primarily driven by disciplined pricing strategy, claims and risk adjustment seasonality, and favorable prior period reserve development.
Earnings from Operations $704 million, an increase of nearly 2.5x over the same period last year. This reflects a $407 million year-over-year improvement.
Net Income Approximately $679 million or $2.07 per diluted share, a $404 million increase year-over-year. This is the highest in the company's history.
Adjusted EBITDA $727 million, an increase of approximately $398 million year-over-year.
Membership 3.2 million members, an increase of 56% year-over-year. Growth was driven by above-market growth during open enrollment and solid retention.
Operating Margin 15.2%, a 540 basis point increase year-over-year.
Capital and Surplus $1.7 billion, including $809 million of excess capital, driven by strong operating performance.
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Operating Highlights
Transparency tools: Oscar launched real-time drug pricing features to predict when costs may cause a member to abandon a prescription. The tool cross-references deductible status, local supply, and pricing to guide members to lower-cost pharmacies or alternatives.
Bilingual voice agents: Oscar is scaling new bilingual voice agents to support care navigation and improve speed to care.
ICHRA X: Oscar launched ICHRA X, a plug-and-play data exchange connecting carriers, benefit brokers, and ICHRA platforms to create a consistent employee experience.
Lucie Health Marketplace: Oscar launched Lucie, a carrier-agnostic shopping platform for consumers, brokers, and employers, combining ACA plans with ancillary products and AI solutions.
Membership growth: Oscar ended Q1 2026 with 3.2 million members, a 56% year-over-year increase, driven by innovative and affordable plan designs and superior member experience.
Individual market positioning: Oscar is the largest carrier fully dedicated to the individual market, focusing on entrepreneurs, gig workers, part-time employees, and early retirees.
Revenue growth: Oscar reported $4.6 billion in revenue for Q1 2026, a 53% year-over-year increase.
SG&A ratio improvement: SG&A ratio improved by 60 basis points year-over-year to 15.2%, driven by disciplined expense management and AI integration.
MLR improvement: Medical Loss Ratio (MLR) improved by 490 basis points year-over-year to 70.5%, driven by disciplined pricing and favorable reserve development.
Earnings from operations: Oscar achieved $704 million in earnings from operations, nearly 2.5x increase year-over-year.
Consumer-driven health care: Oscar is focusing on creating a consumer-driven health care market by leveraging technology to provide transparency and choice.
ICHRA policy advocacy: Oscar is working with state legislatures to incentivize ICHRA adoption through tax credits and other policies.
Long-term strategy: Oscar aims to modernize health care by making it shoppable and consumer-driven, aligning with other modern markets.
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Risk or Challenges
Market Contraction: The individual market is experiencing contraction, with estimates of 20% to 30%. While current trends are in line with expectations, this poses a risk to membership growth and revenue stability.
Risk Adjustment Payable Accrual: Higher risk adjustment payable accruals were noted, which could impact financial performance if market morbidity assumptions do not align with actual outcomes.
Sunset of Enhanced Premium Tax Credits: The expiration of enhanced premium tax credits could lead to increased churn and reduced membership retention, impacting revenue and profitability.
Regulatory and Policy Risks: Oscar is working with federal and state policymakers to advance policies that strengthen transparency and innovation. However, changes in regulatory frameworks or delays in policy adoption could hinder strategic initiatives like ICHRA and Lucie Health Marketplace.
Economic Uncertainty: Economic conditions, including consumer purchasing power and market dynamics, could affect membership growth and retention, particularly in the individual market.
Technology and AI Implementation: While AI and technology initiatives are driving efficiencies, there is a risk of execution challenges or underperformance in achieving the anticipated cost savings and operational improvements.
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Guidance & Outlook
Full Year 2026 Guidance: Oscar Health reaffirmed its full-year 2026 guidance, expecting total revenues in the range of $18.7 billion to $19 billion. The Medical Loss Ratio (MLR) is projected to be between 82.4% and 83.4%, with the lowest MLR in Q1 and the highest in Q4. SG&A expense ratio guidance remains at 15.8% to 16.3%. Earnings from operations are expected to range from $250 million to $450 million, with adjusted EBITDA projected to be approximately $115 million higher than earnings from operations.
Membership Growth: Oscar Health anticipates gradual churn throughout the year, consistent with pre-ARPA levels, but remains optimistic about maintaining strong membership growth driven by innovative plan designs and superior member experience.
Risk Adjustment: The company expects risk adjustment as a percentage of direct premiums to be approximately 20% in 2026, with market morbidity tracking in line to favorable to pricing expectations.
Technology and AI Initiatives: Oscar plans to continue leveraging technology and AI to drive growth, lower costs, and enhance member experience. New tools, such as real-time drug pricing and bilingual voice agents, are expected to improve care navigation and cost efficiency.
ICHRA and Lucie Health Marketplace: Oscar is expanding its offerings with ICHRA X and the Lucie Health Marketplace to meet rising demand for flexible, consumer-driven health care solutions. These initiatives aim to modernize the individual market and provide personalized coverage options.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you describe the first quarter behavior of the 200,000 members who fell off between 1Q and April 1, and the accounting for any expenses incurred by that population?
A:The members who churned off showed no unusual utilization patterns. The biggest portion of the drop-off were people who never made a payment, and thus, there was no significant utilization. Once members go into delinquency, claims are no longer covered. The transition from 3.4 million to 3.2 million members, and starting the second quarter with 3 million members, proceeded as expected.
Q:Do you agree with the Wakely assessment that market morbidity is up 2.9% to 6.5% in 2026, and where do you think Oscar's membership morbidity is trending year-over-year in '26?
A:The Wakely report is seen as a positive development, providing early information on market morbidity. It aligns with expectations and could be a tailwind for the company. Risk adjustment accruals have not yet accounted for potential favorability seen in the report, but the data is encouraging.
Q:Why would SG&A go up if revenue is expected to lift with a lower risk adjustment hit to revenue?
A:SG&A grew at 46%, showing leverage as revenue grew at 53%. The first quarter SG&A ratio is likely the lowest for the year due to open positions and membership growth normalization. SG&A ratio may move sideways to slightly up, with the fourth quarter typically higher due to OE efforts. Taxes and fees are fixed at 9%-10%, and the variable portion is managed.
Q:Is the membership in 2Q still expected to start with 3 million in April?
A:Yes, the membership number for April 1 was confirmed to be 3 million.
Q:Why is the risk adjustment transfer as a percentage of premium tracking around 24%, and why is it expected to moderate to 20% for the full year?
A:The higher risk adjustment is due to seasonally low medical claims in Q1, which suppresses claims content and increases risk adjustment. A higher portion of new members in bronze plans also contributes to seasonality. Claims are expected to normalize over the year, leading to the projected 20% risk adjustment.
Q:What are you experiencing with the Bronze mix behavior at this point, and how does it compare to historical behavior?
A:The company ensures all metal levels have targeted profitability. Early data suggests the risk of membership is in line to favorable with expectations, with no unexpected patterns observed.
Q:What are the key swing factors that could materially shift your view on 2026 EBITDA in the second quarter and second half of '26?
A:The key factors are the Wakely numbers and risk adjustment. Year-over-year differences in risk adjustment have been accounted for, and claims development by the end of Q2 will provide more clarity.
Q:Is the 24% risk adjustment level driven by claims data, and is there any cleanup related to 2025 accruals?
A:The 24% risk adjustment level is driven by claims experience. No adjustments have been made for favorability in the Wakely report. There was adverse development in 2025 accruals totaling $85 million, balanced by favorable claims run-out of $150 million, resulting in a net favorable PPD of $68 million.
Q:Did flu or weather play any factor into the Q1 beat, and are there any emerging trends being monitored?
A:Flu and weather had no significant impact. Utilization patterns were stable, with no abnormal trends observed.
Q:Do you expect the outlook on risk adjustment in the June Wakely report to remain stable through the year, and could increased members in bronze plans cause volatility?
A:The June Wakely report will provide more data, but early metrics suggest favorable market morbidity. Each sequential report improves confidence, and Q2 will be the first to show claims-based market morbidity.
Q:What is the financial impact of the Lucie Health Marketplace model in 2026 and future years?
A:The Lucie Health Marketplace is expected to provide higher margins than insured ACA members without requiring risk capital. Costs and revenues for standing up the business are included in guidance, with modest effects in 2026 and potential for high-margin growth over time.
Q:Are there any market-level insights on effectuated enrollment or competitor dynamics?
A:Effectuation rates are as expected to modestly favorable, aligning with Wakely assumptions. Competitor exits have led to some auto-assigned members, and the company’s proactive product strategies have attracted members from competitors.
Q:How does the mix shift towards bronze members impact risk adjustment payable year-over-year?
A:Risk adjustment is designed to be neutral across metal levels. The company’s products attract healthier members, and risk adjustment is more influenced by overall utilization than metal mix. Utilization and costs remain at or below expectations.
Q:What trends are being observed in smaller states like Arizona, North Carolina, and New Jersey?
A:Membership growth in smaller and newer markets is strong, but it is too early in the year to assess claims or economic differentiation.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the financial impact of the Lucie Health Marketplace model in 2026 and future years, stating they would provide more information in September. Additionally, they did not provide detailed insights into trends in smaller states like Arizona, North Carolina, and New Jersey, citing insufficient claims data.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
Health Chief
ICHRA
Investor Relations
Lucie
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Relations website
SEC
Treasury Investor
Vice President
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choice transparency
consumer broker
consumer health
cost
coverage
economy health
employee
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OSCR Transcript
Oscar Health, Inc. (OSCR) Q1 2026 Earnings Call Transcript
Positive5-6
The earnings call summary reflects strong financial performance with a 61% revenue growth forecast and improved profitability metrics. The Q&A section further supports this with favorable market morbidity reports and effective risk management strategies. Despite some uncertainties, the overall sentiment is optimistic, especially with a confirmed membership growth and strategic market positioning. The company's solid capital position and strategic plans for market share capture also contribute to a positive outlook, suggesting a likely stock price increase over the next two weeks.
Oscar Health, Inc. (OSCR) Q4 2025 Earnings Call Transcript
Unknown2-10
The earnings call reveals a mixed outlook. Positive elements include market expansion, product diversification, and AI integration. However, the shrinking market size, higher churn rates, and lack of specific guidance on key metrics temper enthusiasm. The Q&A section further highlights uncertainties, especially around membership and utilization trends. While there are positive strategic initiatives, the overall sentiment is balanced by market contraction and cautious financial guidance, leading to a neutral stock price prediction over the next two weeks.
Oscar Health, Inc. (OSCR) Presents at UBS Global Healthcare Conference 2025 Transcript
Neutral11-10
CrossAmerica Partners LP Common Units (CAPL) Q3 2025 Earnings Call Transcript
Unknown11-7
The earnings call reveals several negative trends: declining fuel and rental income, reduced site count, and lower wholesale segment profit. Despite some positive aspects like increased net income and inside sales, the overall sentiment is negative due to asset divestitures and reduced operational capacity. The Q&A section lacked engagement, indicating possible concerns about transparency. Given the company's market cap, the stock price is likely to react negatively, falling between -2% to -8% over the next two weeks.
OSCR Report
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