For the quarter ended September 30, 2023:
Direct and Assumed Policy Premiums of $1.6 billion, a 5% decrease YoY
Premiums earned of $1.4 billion, a 46% increase YoY
Medical Loss Ratio of 83.8%, a 608 bps improvement YoY
Net loss of $65.7 million, an improvement of $127.8 million YoY
Adjusted EBITDA loss of $20.3 million, an improvement of $139.5 million YoY
InsuranceCo Administrative Expense Ratio of 17.4%, a 326 bps improvement YoY
InsuranceCo Combined Ratio of 101.3%, a 934 bps improvement YoY
Adjusted Administrative Expense Ratio of 20.3%, a 443 bps improvement YoY
NEW YORK–(BUSINESS WIRE)–Oscar Health, Inc. (“Oscar” or the “Company”) (NYSE: OSCR), a leading healthcare technology company, today announced its financial results for the third quarter ended September 30, 2023.
“Oscar reported strong third quarter results with significant year-over-year improvement across all core ratios,” said Mark Bertolini, CEO of Oscar. “We are pleased with our year-to-date outperformance and are raising our full year outlook for 2023 InsuranceCo Adjusted EBITDA and consolidated Adjusted EBITDA. We are well-positioned to deliver $155 million to $165 million of profit in our insurance business in 2023 and to achieve Total Company Adjusted EBITDA profitability in 2024.”
Total Direct and Assumed Policy Premiums were $1.6 billion in the quarter, down 5% year-over-year (“YoY”), driven primarily by lower membership, partially offset by rate increases. Premiums earned in the quarter were up 46% YoY, driven primarily by the impact of deposit accounting for quota share reinsurance agreements, and lower risk transfer per member as a percent of premiums.
Oscar’s InsuranceCo Combined Ratio, which is the sum of its Medical Loss Ratio (“MLR”) and the InsuranceCo Administrative Expense Ratio, improved 934 bps YoY to 101.3%, driven by both an improved MLR and administrative cost efficiencies. Specifically, the MLR improved 608 bps YoY to 83.8%, due to targeted rate increases and a disciplined pricing strategy, and total cost of care initiatives. The InsuranceCo Administrative Expense Ratio improved 326 bps YoY to 17.4%, due to higher net premiums as a result of lower risk transfer per member as a percent of premiums, variable expense efficiencies, and lower distribution expenses.
The Adjusted Administrative Expense Ratio improved 443 bps YoY to 20.3%, driven primarily by higher net premiums as a result of lower risk transfer per member as a percent of premiums, higher net investment income, and variable expense efficiencies. Adjusted EBITDA loss of $20.3 million significantly improved by $139.5 million YoY, and Net loss of $65.7 million also significantly improved by $127.8 million YoY.
Oscar is raising its full year 2023 outlook for InsuranceCo Adjusted EBITDA and consolidated Adjusted EBITDA to reflect year-to-date outperformance. The Company projects InsuranceCo Adjusted EBITDA to be in the $155 million to $165 million range, above the high-end of the prior range of $20 million to $120 million. Additionally, the Company now projects consolidated Adjusted EBITDA loss to be in the ($60) million to ($50) million range, above the high-end of the prior range of ($175) million to ($75) million.
The Company is also announcing a new +Oscar agreement with Sanford Health Plan, a leading provider-sponsored health plan in the Midwest. The multi-year agreement leverages +Oscar’s Campaign Builder technology solution to drive member engagement and interconnectivity throughout the health plan’s operations.
Financial Results Summary
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
(in thousands)
Premiums before ceded reinsurance
$
1,394,985
$
1,318,048
$
4,305,785
$
4,001,589
Reinsurance premiums ceded
(2,903
)
(364,384
)
(10,111
)
(1,097,929
)
Premiums earned
$
1,392,082
$
953,664
$
4,295,674
$
2,903,660
Total revenue
$
1,439,991
$
978,427
$
4,431,211
$
2,968,511
Total operating expenses
$
1,498,235
$
1,170,799
$
4,521,349
$
3,335,899
Net loss
$
(65,703
)
$
(193,547
)
$
(120,756
)
$
(382,992
)
Key Metrics and Non-GAAP Financial Metrics
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
Direct and Assumed Policy Premiums (in thousands)
$
1,606,407
$
1,682,289
$
4,970,985
$
5,058,427
Medical Loss Ratio
83.8
%
89.9
%
80.0
%
83.2
%
InsuranceCo Administrative Expense Ratio
17.4
%
20.7
%
17.6
%
20.0
%
InsuranceCo Combined Ratio
101.3
%
110.6
%
97.6
%
103.2
%
Adjusted Administrative Expense Ratio
20.3
%
24.8
%
20.5
%
24.1
%
Adjusted EBITDA(1) (in thousands)
$
(20,285
)
$
(159,754
)
$
66,355
$
(272,599
)
(1)
Adjusted EBITDA is a non-GAAP measure. See “Key Operating and Non-GAAP Financial Metrics – Adjusted EBITDA” in this release for a reconciliation to net loss, the most directly comparable GAAP measure, and for information regarding Oscar’s use of Adjusted EBITDA.
As of September 30,
Membership by Offering
2023
2022
Individual and Small Group
912,761
1,017,544
Medicare Advantage
1,840
4,577
Cigna + Oscar (1)
68,559
53,324
Total Members
983,160
1,075,445
(1)
Represents total membership for Oscar’s co-branded partnership with Cigna.
Full Year 2023 Outlook
Direct and Assumed Policy premiums at the high-end of the $6.4 billion – $6.6 billion range
Medical Loss Ratio at the low-end of the 82% – 84% range
InsuranceCo Administrative Expense Ratio near the midpoint of the 17% – 18% range
InsuranceCo Adjusted EBITDA(1) of $155 million – $165 million, above the high-end of the prior range of $20 million – $120 million
Adjusted Administrative Expense Ratio near the midpoint of the 20.5% – 21.5% range
Adjusted EBITDA(1) loss of ($60) million – ($50) million, above the high-end of the prior range of ($175) million – ($75) million
(1)
Please see “Key Operating and Non-GAAP Financial Metrics – Adjusted EBITDA” below.
The foregoing statements represent management’s current estimates as of the date of this release. Actual results may differ materially depending on a number of factors. Investors are urged to read the Cautionary Note Regarding Forward-Looking Statements included in this release. Management does not assume any obligation to update these estimates.
Quarterly Conference Call Details
Oscar will host a conference call to discuss the financial results today, November 7, 2023, at 8:00 a.m. (ET). A live audio webcast will be available via the Investor Relations page of Oscar’s website at ir.hioscar.com. A replay of the webcast will be available for on-demand listening shortly after the completion of the call, at the same web link, and will remain available for approximately 90 days.
Non-GAAP Financial Information
This release presents Adjusted EBITDA and InsuranceCo Adjusted EBITDA, non-GAAP financial metrics, which are provided as a complement to the results provided in accordance with accounting principles generally accepted in the United States of America (“GAAP”). A reconciliation of historical non-GAAP financial information to the most directly comparable GAAP financial measure is provided in the accompanying tables found at the end of this release. For more information regarding Adjusted EBITDA, please see “Key Operating and Non-GAAP Financial Metrics” below.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained herein are forward-looking statements. These statements include, but are not limited to, statements about our financial outlook and estimates, including direct and assumed policy premiums, medical loss ratio, administrative expense ratio, InsuranceCo Adjusted EBITDA and Adjusted EBITDA and other financial performance metrics, and the related underlying assumptions, our business and financial prospects, and our management’s plans and objectives for future operations, expectations and business strategy, including planned +Oscar partnerships. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other similar expressions. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict and generally beyond our control.
Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, there are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: our ability to execute our strategy and manage our growth effectively; our ability to retain and expand our member base; heightened competition in the markets in which we participate; our ability to accurately estimate our incurred medical expenses or effectively manage our medical costs or related administrative costs; our ability to achieve or maintain profitability in the future; changes in federal or state laws or regulations, including changes with respect to the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended (collectively, the “ACA”) and any regulations enacted thereunder; our ability to comply with ongoing regulatory requirements, including capital reserve and surplus requirements and applicable performance standards; changes or developments in the health insurance markets in the United States, including passage and implementation of a law to create a single-payer or government-run health insurance program; our ability to comply with applicable privacy, security, and data laws, regulations, and standards, including as a result of our participation in government-sponsored programs, such as Medicare; our ability to arrange for the delivery of quality care and maintain good relations with the physicians, hospitals, and other providers within and outside our provider networks; unanticipated results of risk adjustment programs; our ability to utilize quota share reinsurance to reduce our capital and surplus requirements and protect against downside risk on medical claims; unfavorable or otherwise costly outcomes of lawsuits and claims that arise from the extensive laws and regulations to which we are subject; our ability to attract and retain qualified personnel; incurrence of cyber-security breaches of our and our partners’ information and technology systems; our ability to remediate a material weakness in our internal controls over financial reporting and the identification of additional material weaknesses in the future or other failure to maintain an effective system of internal controls; adverse publicity or other adverse consequences related to our dual class structure or “controlled company” status; and the other factors set forth under the caption “Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023, filed with the Securities and Exchange Commission (“SEC”), and our other filings with the SEC, including our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, to be filed with the SEC.
You are cautioned not to place undue reliance on any forward-looking statements made in this press release. Any forward-looking statement speaks only as of the date as of which it is made, and, except as otherwise required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise.
About Oscar Health
Oscar Health, Inc. (“Oscar”) is the first health insurance company built around a full stack technology platform and a relentless focus on serving its members. At Oscar, our mission is to make a healthier life accessible and affordable for all. Headquartered in New York City, Oscar has been challenging the health care system’s status quo since our founding in 2012. The company’s member-first philosophy and innovative approach to care has earned us the trust of nearly one million members, as of September 30, 2023. We offer Individual & Family, Small Group and Medicare Advantage plans, and +Oscar, our full stack technology platform, to others within the provider and payor space. Our vision is to refactor health care to make good care cost less. Refactor is a term used in software engineering that means to improve the design, structure, and implementation of the software, while preserving its functionality. At Oscar, we take this definition a step further. We improve our members’ experience by building trust through deep engagement, personalized guidance, and rapid iteration.
Oscar Health, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
Revenue
Premiums before ceded reinsurance
$
1,394,985
$
1,318,048
$
4,305,785
$
4,001,589
Reinsurance premiums ceded
(2,903
)
(364,384
)
(10,111
)
(1,097,929
)
Premiums earned
1,392,082
953,664
4,295,674
2,903,660
Administrative services revenue
3,871
19,421
11,612
58,366
Investment income and other revenue
44,038
5,342
123,925
6,485
Total revenue
1,439,991
978,427
4,431,211
2,968,511
Operating Expenses
Claims incurred, net
1,163,194
852,689
3,436,785
2,395,894
Other insurance costs
192,863
174,978
618,078
510,580
General and administrative expenses
75,503
78,557
254,106
233,975
Federal and state assessments
69,876
71,114
216,414
209,730
Premium deficiency reserve release
(3,201
)
(6,539
)
(4,034
)
(14,280
)
Total operating expenses
1,498,235
1,170,799
4,521,349
3,335,899
Loss from operations
(58,244
)
(192,372
)
(90,138
)
(367,388
)
Interest expense
6,130
6,126
18,386
16,488
Other expenses (income)
414
(3,336
)
8,132
(1,076
)
Loss before income taxes
(64,788
)
(195,162
)
(116,656
)
(382,800
)
Income tax expense (benefit)
915
(1,615
)
4,100
192
Net loss
(65,703
)
(193,547
)
(120,756
)
(382,992
)
Less: Net income (loss) attributable to noncontrolling interests
(305
)
(634
)
(58
)
(2,763
)
Net loss attributable to Oscar Health, Inc.
$
(65,398
)
$
(192,913
)
$
(120,698
)
$
(380,229
)
Earnings (Loss) per Share
Net loss per share attributable to Oscar Health, Inc., basic and diluted
$
(0.29
)
$
(0.91
)
$
(0.55
)
$
(1.80
)
Weighted average common shares outstanding, basic and diluted
223,098,974
212,822,733
219,826,759
211,560,332
Oscar Health, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
September 30, 2023
December 31, 2022
Assets
Current Assets:
Cash and cash equivalents
$
1,399,791
$
1,558,595
Short-term investments
1,044,445
1,397,287
Premiums and accounts receivable
207,098
216,475
Risk adjustment transfer receivable
54,127
49,861
Reinsurance recoverable
277,803
892,887
Other current assets
8,358
6,450
Total current assets
2,991,622
4,121,555
Property, equipment, and capitalized software, net
62,022
59,888
Long-term investments
179,633
222,919
Restricted deposits
27,335
27,483
Other assets
88,899
94,756
Total Assets
$
3,349,511
$
4,526,601
Liabilities and Stockholders’ Equity
Current Liabilities:
Benefits payable
$
910,449
$
937,727
Risk adjustment transfer payable
751,196
1,517,493
Premium deficiency reserve
179
4,214
Unearned premiums
71,601
78,998
Accounts payable and other liabilities
260,137
297,841
Reinsurance payable
67,314
427,649
Total current liabilities
2,060,876
3,263,922
Long-term debt
298,583
297,999
Other liabilities
68,618
72,280
Total liabilities
2,428,077
3,634,201
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $0.00001 par value; 82,500,000 shares authorized, none outstanding as of September 30, 2023 and December 31, 2022
—
—
Class A common stock, $0.00001 par value; 825,000,000 shares authorized, 190,796,321 and 181,176,239 shares outstanding as of September 30, 2023 and December 31, 2022, respectively
2
2
Class B common stock, $0.00001 par value; 82,500,000 shares authorized, 35,296,176 and 35,115,807 shares outstanding as of September 30, 2023 and December 31, 2022, respectively
—
—
Treasury stock (314,600 shares as of September 30, 2023 and December 31, 2022)
(2,923
)
(2,923
)
Additional paid-in capital
3,653,535
3,509,007
Accumulated deficit
(2,726,685
)
(2,605,987
)
Accumulated other comprehensive income (loss)
(4,453
)
(9,715
)
Total Oscar Health, Inc. stockholders’ equity
919,476
890,384
Noncontrolling interests
1,958
2,016
Total stockholders’ equity
921,434
892,400
Total Liabilities and Stockholders’ Equity
$
3,349,511
$
4,526,601
Oscar Health, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands) (unaudited)
Nine Months Ended September 30,
2023
2022
Cash flows from operating activities:
Net loss
$
(120,756
)
$
(382,992
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Deferred taxes
95
6
Net realized loss on sale of financial instruments
70
1,269
Depreciation and amortization expense
22,952
11,548
Amortization of debt issuance costs
583
519
Stock-based compensation expense
133,541
83,241
Net amortization (accretion) of investments
(22,856
)
4,138
Changes in assets and liabilities:
(Increase) / decrease in:
Premiums and accounts receivable
9,378
(77,057
)
Risk adjustment transfer receivable
(4,265
)
(3,597
)
Reinsurance recoverable
615,084
(392,488
)
Other assets
3,854
(12,159
)
Increase / (decrease) in:
Benefits payable
(27,278
)
482,178
Unearned premiums
(7,396
)
90
Premium deficiency reserve
(4,035
)
(14,280
)
Accounts payable and other liabilities
(41,366
)
13,842
Reinsurance payable
(360,335
)
230,401
Risk adjustment transfer payable
(766,297
)
284,296
Net cash (used in) provided by operating activities
(569,027
)
228,955
Cash flows from investing activities:
Purchase of investments
(622,183
)
(343,178
)
Sale of investments
26,656
360,449
Maturity of investments
1,019,612
483,224
Purchase of property, equipment and capitalized software
(19,475
)
(21,882
)
Change in restricted deposits
100
1,548
Net cash provided by investing activities
404,710
480,161
Cash flows from financing activities:
Proceeds from long-term debt
—
305,000
Payments of debt issuance costs
—
(7,035
)
Proceeds from joint venture contribution
2,491
1,324
Proceeds from exercise of stock options
2,886
1,294
Net cash provided by financing activities
5,377
300,583
Increase (decrease) in cash, cash equivalents and restricted cash equivalents
(158,940
)
1,009,699
Cash, cash equivalents, restricted cash and cash equivalents—beginning of period
1,580,497
1,125,557
Cash, cash equivalents, restricted cash and cash equivalents—end of period
1,421,557
2,135,256
Cash and cash equivalents
1,399,791
2,112,930
Restricted cash and cash equivalents included in restricted deposits
21,766
22,326
Total cash, cash equivalents and restricted cash and cash equivalents
$
1,421,557
$
2,135,256
Nine Months Ended September 30,
2023
2022
Supplemental Disclosures:
Interest payments
$
22,893
$
9,810
Income tax payments
$
1,000
$
1,660
Key Operating and Non-GAAP Financial Metrics
We regularly review a number of metrics, including the following key operating and non-GAAP financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, and make strategic decisions. We believe these operational and financial measures are useful in evaluating our performance, in addition to our financial results prepared in accordance with GAAP.
Members
Members are defined as any individual covered by a health plan that we offer directly or through a co-branded arrangement. We view the number of members enrolled in our health plans as an important metric to help evaluate and estimate revenue and market share. Additionally, the more members we enroll, the more data we have, which allows us to improve the functionality of our platform.
Direct and Assumed Policy Premiums
Direct Policy Premiums are defined as the premiums collected from our members or from the federal government during the period indicated, before risk adjustment and reinsurance. These premiums include APTC, or premium subsidies, which are available to individuals and families with certain annual incomes.
Assumed Policy Premiums are premiums we receive primarily as part of our reinsurance arrangement under our Cigna+Oscar Small Group plan offering, and are presented here net of Risk Adjustment.
We believe Direct and Assumed Policy Premiums is an important metric to assess the growth of our individual and small group plan offerings going forward. Management also views Direct and Assumed Policy Premiums as a key operating metric because each of our MLR, InsuranceCo Administrative Expense Ratio, InsuranceCo Combined Ratio and Adjusted Administrative Expense Ratio are calculated on the basis of Direct and Assumed Policy Premiums.
Medical Loss Ratio
Medical Loss Ratio is calculated as set forth in the table below. Medical claims are total medical expenses incurred by members in order to utilize health care services less any member cost sharing. These services include inpatient, outpatient, pharmacy, and physician costs. Medical claims also include risk sharing arrangements with certain of our providers. The impact of the federal risk adjustment program is included in the denominator of our MLR. We believe MLR is an important metric to demonstrate the ratio of our costs to pay for health care of our members to the premiums before ceded reinsurance. MLRs in our existing products are subject to various federal and state minimum requirements. Below is a calculation of our MLR for the periods indicated.
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
(in thousands)
Direct claims incurred before ceded reinsurance (1)
$
1,116,679
$
1,153,270
$
3,301,424
$
3,255,721
Assumed reinsurance claims
61,781
38,667
169,194
95,464
Excess of loss ceded claims (2)
(418
)
(4,392
)
(6,038
)
(14,316
)
State reinsurance (3)
(9,978
)
(10,368
)
(26,574
)
(28,643
)
Net claims before ceded quota share reinsurance (A)
$
1,168,064
$
1,177,177
$
3,438,006
$
3,308,226
Premiums before ceded reinsurance
$
1,394,985
$
1,318,048
$
4,305,785
$
4,001,589
Excess of loss reinsurance premiums (4)
(1,457
)
(8,621
)
(7,981
)
(23,387
)
Net premiums before ceded quota share reinsurance (B)
$
1,393,528
$
1,309,427
$
4,297,804
$
3,978,202
Medical Loss Ratio (A divided by B)
83.8
%
89.9
%
80.0
%
83.2
%
Contacts
Investor Contact:
Chris Potochar
VP of Investor Relations
[email protected]
917-397-0251
Media Contact:
Kristen Prestano
VP of Communications
[email protected]
516-317-1486