Executive Summary

Q2 2025 deteriorated sharply versus last year: revenue grew 29% YoY to $2.864B, but Medical Loss Ratio surged to 91.1% and operating swung to a $(230.5)M loss as Oscar booked an incremental ~$316M risk adjustment payable tied to higher ACA market morbidity .
Against S&P Global consensus, Oscar modestly missed on revenue ($2.864B vs $2.918B*) and EPS (−$0.89 vs −$0.836*), reflecting the risk-adjustment true-up and elevated inpatient utilization despite sequential moderation in other categories .
Management reaffirmed its updated 2025 outlook: revenue raised to $12.0–$12.2B, but MLR increased to 86–87% and full-year operating result cut to a $(200)–$(300)M loss; SG&A ratio improved to 17.1–17.6% .
Strategic actions: 2026 rates refiled (expect double-digit increases), workforce rightsizing targeting ~$60M fixed admin cost savings in 2026, and new ICHRA initiatives (Hy-Vee partnership; assets including INSX Cloud, IHC Specialty Benefits, healthinsurance.org) to diversify and deepen distribution .
Liquidity strong with ~$5.4B cash and investments, insurance subs surplus capital ~$1.2B (incl. $579M excess); management expects to absorb 2025 losses largely at subs, and reiterated an expectation to return to profitability in 2026 .

What Went Well and What Went Wrong

What Went Well

SG&A efficiency and fixed-cost leverage: SG&A expense ratio improved 90 bps YoY to 18.7% in Q2; management guided 2025 SG&A to 17.1–17.6% and flagged ~$60M run-rate admin savings in 2026 from workforce actions .
Membership scale and top-line growth: Total members ~2.03M as of 6/30/25 (up from ~1.58M YoY), driving 29% YoY revenue growth to $2.864B; management cited strong retention and SEP additions in H1 .
Strategic positioning and tech/AI leverage: CEO emphasized “we expect to return to profitability in 2026” and highlighted AI-driven efficiencies and new ICHRA capabilities via INSX Cloud, IHC Specialty Benefits, and healthinsurance.org to power a consumer marketplace .

What Went Wrong

Risk adjustment and morbidity shock: Q2 MLR jumped to 91.1% (from 79.0% YoY), driven by a market-wide rise in morbidity; Oscar recorded an incremental ~$316M increase to 2025 risk adjustment payable, recognized year-to-date in Q2 .
Profitability reversal: Operating swung to $(230.5)M and Adjusted EBITDA to $(199.4)M (vs +$67.8M and +$104.1M YoY); full-year 2025 outlook now a $(200)–$(300)M operating loss .
Utilization mix: While utilization moderated sequentially through the quarter, inpatient remained elevated versus expectations (partially offset by pharmacy favorability), contributing to margin pressure .

Financial Results

Key financials by quarter (oldest → newest):

Metric	Q2 2024	Q1 2025	Q2 2025
Total Revenue ($USD Billions)	$2.219	$3.046	$2.864
Diluted EPS ($)	$0.20	$0.92	$(0.89)
Medical Loss Ratio (%)	79.0%	75.4%	91.1%
SG&A Expense Ratio (%)	19.6%	15.8%	18.7%
Operating Income (Loss) ($USD Millions)	$67.8	$297.1	$(230.5)
Adjusted EBITDA ($USD Millions)	$104.1	$328.8	$(199.4)

Q2 2025 vs S&P Global consensus:

Metric	Actual	Consensus	Delta
Revenue ($USD)	$2,863,945,000	$2,918,410,740*	$(54,465,740)
Diluted EPS ($)	$(0.89)	$(0.836)*	$(0.054)

Estimate count: EPS n=3*, Revenue n=7*.
Values retrieved from S&P Global.

Revenue breakdown:

Revenue Components	Q2 2024 ($USD Millions)	Q1 2025 ($USD Millions)	Q2 2025 ($USD Millions)
Premium	2,164.116	2,995.821	2,803.444
Investment Income	49.994	46.112	54.004
Other/Services	5.231	4.330	6.497
Total Revenue	2,219.341	3,046.263	2,863.945

KPIs and operating drivers:

KPI	Q2 2024	Q1 2025	Q2 2025
Total Members (Millions)	1.581 (as of 6/30/24)	2.039 (as of 3/31/25)	2.027 (as of 6/30/25)
Risk Adjustment Transfers (Revenue line) ($USD Millions)	$(432.895)	$(373.749)	$(692.245)
Risk Adjustment Transfer Payable (Balance Sheet) ($USD Millions)	–	1,954.451 (3/31/25)	2,647.187 (6/30/25)
Cash & Equivalents ($USD Millions)	–	2,236.555 (3/31/25)	2,598.942 (6/30/25)

Guidance Changes

Metric	Period	Previous Guidance (2/4/25)	Current Guidance (7/22/25; reaffirmed 8/6/25)	Change
Total Revenue	FY 2025	$11.2B–$11.3B	$12.0B–$12.2B	Raised
Medical Loss Ratio	FY 2025	80.7%–81.7%	86.0%–87.0%	Raised (worse)
SG&A Expense Ratio	FY 2025	17.6%–18.1%	17.1%–17.6%	Improved
Earnings from Operations	FY 2025	$225M–$275M	$(300)M–$(200)M	Lowered
Adjusted EBITDA	FY 2025	–	≈$120M less loss than operating loss	New context

Drivers: Updated guidance incorporates higher average market morbidity (per Wakely data), stable YoY risk adjustment as % of premiums, sequentially moderating utilization with potential Q4 increase if enhanced APTCs are not extended .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24 and Q1’25)	Current Period (Q2’25)	Trend
Profitability trajectory	2024 marked first full-year net income and Adjusted EBITDA profitability; introduced 2025 outlook with expected margin expansion .	2025 outlook cut to operating loss given morbidity and risk adjustment accrual; still targeting profitability in 2026 .	Negative near-term; medium-term intact.
Risk adjustment & morbidity	Q1’25 noted prior period development linked to 2024 risk adjustment payable .	Incremental ~$316M risk adjustment payable in Q2; Wakely data shows market-wide morbidity increase; 2024 CMS true-up ~$23M favorable .	Material headwind 2025; repricing underway.
Utilization	Noted strong operations in Q1; MLR 75.4% .	Sequential moderation through Q2; inpatient elevated; pharmacy favorable .	Mixed but improving sequentially ex-inpatient.
Pricing & 2026 setup	2025 outlook initially benign on MLR .	Refiled 2026 rates; expect double-digit increases; regulators receptive .	Repricing to restore margins.
SG&A/AI & cost actions	Cost leverage and variable efficiencies in Q1 .	AI-driven efficiencies; workforce reduction; ~$60M 2026 fixed-cost savings .	Accelerating cost takeout.
Regulatory/program integrity	–	FTR/duplicate enrollment impacts appear manageable; ~2.5% duals (≈<50k members) likely to revert to Medicaid, potentially beneficial to morbidity .	Risk moderated by process outcomes.
Growth vectors/ICRAs	–	ICHRA expansion (Hy-Vee partnership for 2026), plus assets: INSX Cloud, IHC Specialty Benefits, healthinsurance.org .	Strategic diversification progressing.

Management Commentary

“We believe the individual market has long-term upside… Oscar is well-positioned to manage through the market reset in 2025… and expect to return to profitability in 2026.” — Mark Bertolini, CEO .
“We acquired… an individual market brokerage, a direct enrollment technology platform and a consumer education website… and are launching a new ICHRA product with… Hy-Vee Inc.” .
“The second quarter MLR was impacted by an incremental $316 million increase to our risk adjustment payable for 2025… We recognized the year-to-date impact… in the second quarter.” — R. Scott Blackley, CFO .
“We continue to harvest technology and AI-driven efficiencies… reducing fixed cost headcount… actions will eliminate approximately $60 million in administrative costs for 2026.” — CEO/CFO .
“We expect… double-digit rate increases next year… regulators… are very interested in making sure that we’re priced properly.” — CEO/CFO .

Q&A Highlights

Cash, capital, and free cash flow: ~$5.4B cash/investments; ~$1.2B insurance subs capital and surplus with ~$579M excess; most 2025 losses expected to be absorbed at subs; parent cash to fund select capital contributions .
Risk adjustment mechanics: 2024 CMS result ~$23M favorable; Q2’25 included ~$316M incremental accrual; first-half accrual a good proxy for back half .
Program integrity and duplicate enrollment: ~~2.5% duals (~~<50k members) identified; likely trend back to Medicaid; Oscar views exposure as manageable and potentially morbidity-beneficial .
Pricing and regulator stance: Double-digit rate increases expected; regulators supportive to avoid market disruption; Oscar targeting rational positioning by market and metal level .
2027 targets and levers: No change to longer-term 5% margin target noted; management pointed to accelerated medical cost, anti-fraud, provider contracting, and AI as multi-year levers .

Estimates Context

Q2 2025 came in below S&P Global consensus on both revenue ($2,863.9M vs $2,918.4M*) and EPS (−$0.89 vs −$0.836*), reflecting risk adjustment accrual and inpatient utilization headwinds .
Given the reaffirmed 2025 outlook (MLR 86–87%, operating loss $(200)–$(300)M), Street models will need to reflect a full-year operating loss and higher MLR versus earlier-year expectations for profitability and lower MLR .
Values retrieved from S&P Global.

Key Takeaways for Investors

The quarter’s miss and guidance reset are primarily a function of market-wide morbidity and risk adjustment, not Oscar-specific share loss; the 2026 repricing (double-digit) is the key margin restoration lever .
SG&A discipline and ~$60M fixed-cost actions support improved 2026 operating leverage; AI-driven operational efficiencies are a differentiator to watch .
Liquidity and capital remain robust, providing flexibility to absorb 2025 losses and fund growth while executing rate and cost plans .
Monitor 2026 rate approvals and competitor filings; regulator receptivity and market-wide pricing rationality are critical catalysts for margin normalization .
Near-term estimate risk is to 2025 EPS/EBIT as models adjust to the operating loss and higher MLR; longer-term thesis hinges on rate adequacy, utilization normalization, and execution on ICHRA/adjacent growth .
Potential trading catalysts: visibility on 2026 rate approvals, evidence of continued utilization moderation, update on workforce/AI savings realization, and traction in ICHRA partnerships (e.g., Hy-Vee launch path) .

Oscar Health, Inc. (OSCR)·Q2 2025 Earnings Summary