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Oscar Health, Inc. (OSCR)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue of $2.99B grew 23% YoY but was below consensus; diluted EPS of -$0.53 beat Street by $0.05, while EBITDA modestly missed. Elevated morbidity drove a higher MLR (88.5%) and risk adjustment payable, partially offset by favorable prior period development and SG&A efficiencies .
  • Management reaffirmed full-year 2025 guidance (revenue $12.0–$12.2B; MLR 86–87%; SG&A 17.1–17.6%; loss from operations $(300)M–$(200)M) and indicated revenue will trend to the low end given Q3 risk adjustment true-up; profitability targeted for 2026 via disciplined pricing (~28% weighted average rate increase) and ~$60M SG&A run-rate cuts .
  • Strategic updates: AI agent “Oswell” infused across product portfolio; new menopause plan “HelloMeno” (with Elektra Health) and ICHRA momentum via Hy-Vee partnership expand product reach and support margin trajectory in 2026 .
  • Balance sheet actions reduce future interest burden: post-quarter exchange of $187.5M of 7.25% 2031 converts into ~23.3M shares; $410M 2030 converts completed in Q3 increased effective conversion price via capped call .
  • Narrative catalyst: Reaffirmed guidance despite morbidity shock, clarity on 2026 pricing and market share strategy, and capital structure simplification; near-term stock drivers include weekly morbidity/risk adjustment updates and open enrollment trends .

What Went Well and What Went Wrong

What Went Well

  • SG&A ratio improved to 17.5% (≈150 bps YoY) on fixed cost leverage, lower exchange fees, and disciplined cost control; management also executed ~$60M admin cost reductions for 2026 .
  • Favorable prior period development ($84M total; ~half related to risk adjustment rebates) and favorable in-year claims development supported margins amid higher morbidity .
  • Strategic product and AI initiatives: launch of Oswell health AI agent; rollout of “HelloMeno” menopause plan across multiple states for 2026; ICHRA employer solution with Hy-Vee in Des Moines .
    • CEO: “Oswell is powered by OpenAI… connected to Oscar's cloud-native tech platform… This is just the beginning of what we will do with leading AI models to redefine the healthcare experience.”

What Went Wrong

  • MLR rose to 88.5% (up ~380 bps YoY) as market morbidity increased; net risk adjustment transfer accrual increased by ~$130M in Q3 .
  • Loss from operations widened to $(129.3)M (vs $(48.4)M LY), and adjusted EBITDA was $(101.5)M (vs $(11.6)M LY), reflecting morbidity pressure and risk adjustment dynamics .
  • Revenue was pulled toward low end of FY guidance due to Q3 risk adjustment true-up; membership expected to decline sequentially in Q4 as the continuous SEP ended in early September .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Total Revenue ($USD Millions)2,423.5 3,046.3 2,863.9 2,986.0
Diluted EPS ($)-0.22 0.92 -0.89 -0.53
Medical Loss Ratio (%)84.6 75.4 91.1 88.5
SG&A Expense Ratio (%)19.0 15.8 18.7 17.5
Loss from Operations ($USD Millions)-48.4 297.1 -230.5 -129.3
Adjusted EBITDA ($USD Millions)-11.6 328.8 -199.4 -101.5

Estimates vs Actuals (Q3 2025) — Values retrieved from S&P Global

MetricConsensus EstimateActualSurprise
Revenue ($USD Millions)3,082.2*2,986.0*-96.2 (-3.1%)*
Primary EPS ($)-0.58*-0.53*+0.05*
EBITDA ($USD Millions)-119.5*-121.9*-2.4*

Segment and KPIs

MetricQ3 2024Q3 2025
Total Members1,654,284 2,116,904
Individual & Small Group Membership1,602,993 2,111,736
Cigna+Oscar Membership51,291 5,168

Drivers and context

  • “The increase [MLR] is primarily driven by an increase in average market morbidity that resulted in a $130 million increase in the net risk adjustment transfer accrual, partially offset by $84 million of favorable prior period development, and $22 million of favorable intra-year development.”
  • CFO: year-to-date utilization modestly above expectations; inpatient elevated but moderating; pharmacy favorable .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueFY 2025$12.0–$12.2B $12.0–$12.2B; now toward low end Maintained; low-end bias
Medical Loss RatioFY 202586.0%–87.0% 86.0%–87.0% Maintained
SG&A Expense RatioFY 202517.1%–17.6% 17.1%–17.6% Maintained
Loss from OperationsFY 2025$(300)M–$(200)M $(300)M–$(200)M Maintained
Adjusted EBITDAFY 2025≈$120M less than loss from operations ≈$120M less than loss from operations Maintained
Risk Adjustment AssumptionQ4 2025Mid-teens % of direct+assumed premiums High mid-teens % assumption Maintained/upward nuance

2026 Planning Assumptions

  • Weighted average rate increase ≈28%; pricing anticipates higher trend, significant 2025 morbidity, expiration of enhanced APTCs, and program integrity initiatives .
  • ~$60M administrative cost reductions targeted to 2026 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
AI/TechnologyNew AI tools improving Care Guides; virtual urgent care efficiencies Tech and AI efficiencies; cost management Oswell AI agent launched across portfolio Expanding AI deployment
Market Morbidity & Risk AdjustmentEarly-year risk adjustment true-up; MLR up modestly Significant morbidity shift; $316M RA increase; revised guidance Further morbidity increase; $130M RA Q3 true-up; reaffirmed guidance Elevated, stabilizing per CFO
Program Integrity & APTCsSupport integrity; concern on shortened enrollment; advocacy Stacked into 2026 pricing; expect market contraction Expect market contraction (20–30%); priced conservatively; bipartisan outreach on tax credits Policy risk integrated into pricing
Product Performance & MixCondition-focused plans performing strongly ICHRA strategy and acquisitions (brokerage/INSX Cloud) HelloMeno rollout; ICHRA with Hy-Vee; narrow-network positioning Broadening product portfolio
Membership/RetentionPaid vs effectuated dynamics; strong retention >2.0M members; SEP additions; retention 2.1M members; lower churn; sequential Q3 increase; Q4 decline expected Strong retention, near-term churn normalization
Capital StructureStrong capital position; excess capital $5.4B cash/investments; Q2 leverage low 2030 converts $410M; exchange of 2031 notes post-Q3 Deleveraging, interest savings

Management Commentary

  • CEO: “Our disciplined pricing and geographic expansion position us to profitably grow market share, and we are confident in our ability to expand margins and return to profitability in 2026.”
  • CFO: “We continue to expect a full-year MLR in the range of 86.0%-87.0%… SG&A expense ratio in the range of 17.1%-17.6%… loss from operations in the range of $200M-$300M.”
  • CEO on market strategy: “Taking market share really means taking advantage of people who priced way out of the market… we are pricing off of the underlying cost of the network because we get covered on the risk adjustment side.”
  • CFO on RA/morbidity: “Weekly report… had market morbidity increases by about a point and a half to two points… we do not see any reason to change our expectations that market morbidity will stay consistent through the end of the year.”
  • CFO on Q3 PPD: “PPD was $84 million… about half… related to risk adjustment… remainder was favorable development from claims.”

Q&A Highlights

  • Risk adjustment and morbidity: RA accrual increased ~$130M in Q3; morbidity up ~1.5–2 points; drivers include Medicaid redeterminations and program integrity; morbidity likely stable through year-end .
  • SG&A trajectory: Confidence in achieving 16% target by 2027; incremental savings from AI models and variable cost discipline; ~$60M admin cuts for 2026 .
  • Competitive positioning: Narrow-network strategy; percentage of lowest/second-lowest priced Silver markets rising from ~15% to ~30% YoY; industry pricing rational; average national rate increases ~26% (KFF cited) .
  • Membership trends: Q3 membership stronger than expected on lower churn; Q4 MLR to drift up per guidance; continuous SEP ended in early September .
  • Capital actions: $410M 2030 converts completed; exchange agreement executed for majority of 2031 notes post-quarter to reduce interest and simplify capital stack .

Estimates Context

  • Revenue missed consensus by ~$96M (−3.1%); EPS beat by $0.05; EBITDA slightly below consensus. Elevated RA payable drove revenue to low end of guidance, while PPD and SG&A efficiencies improved EPS relative to expectations .
  • Implications: Street models should reflect higher RA ratio in the high mid-teens of premiums for Q4, modestly higher Q4 utilization, and 2026 pricing/market contraction assumptions; SG&A trajectory remains favorable.
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Q3 2025 was a morbidity/RA-driven quarter: revenue below Street, EPS above Street; operational levers (PPD, SG&A) mitigated impact, supporting maintained FY guidance .
  • FY25 outlook intact; revenue biased to low end. Watch weekly morbidity/RA updates and Q4 utilization trends; management expects morbidity stability into year-end .
  • 2026 profitability plan: ~28% weighted average rate increases, ~$60M SG&A reductions, rational pricing environment, and targeted share gains from over-priced peers; risk of market contraction (20–30%) priced in .
  • Strategic expansion: HelloMeno and ICHRA partnership broaden addressable markets and support margin structure; AI agent “Oswell” enhances member engagement and operational efficiency .
  • Capital structure de-risking lowers interest expense, simplifies covenants, and increases flexibility; monitor dilution impact from note exchanges versus reduced interest burden .
  • Near-term trading setup: Guidance reaffirmation and clarity on 2026 pricing are supports; headline risks remain around program integrity, APTCs renewal, and RA reports; catalysts include open enrollment trajectories and policy developments .

Additional Relevant Q3 Materials

  • Oscar Health Q3 2025 press release and 8-K with detailed financials and guidance reaffirmation .
  • Press releases during Q3: Hy-Vee Health with Oscar ICHRA launch (Aug 14) and Oar Health milestone (Aug 26), advancing product breadth and partnerships .