Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Oscar Health Inc (OSCR, Financial) reported a 46% year-over-year increase in total revenue, reaching $2.2 billion for the second quarter.
- The company improved its medical loss ratio by 90 basis points year-over-year to 79%.
- Oscar Health Inc (OSCR) achieved total company adjusted EBITDA of $104.1 million, a nearly $69 million improvement versus the prior year.
- Membership grew by 63% year-over-year, reaching approximately 1.6 million members.
- The company raised its full-year 2024 revenue guidance by $700 million to a range of $9 billion to $9.1 billion and adjusted EBITDA guidance to a range of $160 million to $210 million.
Negative Points
- The increase in SEP (Special Enrollment Period) membership comes with an in-year medical loss ratio (MLR) headwind due to partial year risk adjustment dynamics.
- Higher risk adjustment as a percentage of premiums partially offset the revenue growth.
- The company expects a medical loss ratio in the range of 80.5% to 81.5% for the full year, driven primarily by SEP member risk adjustment dynamics.
- Oscar Health Inc (OSCR) noted that SEP members added in the second half of the year carry an in-year MLR headwind due to partial year risk adjustment dynamics.
- The company has seen some higher usage of the ER among SEP members, which could impact overall medical costs.
Q & A Highlights
Q: You raised the EBITDA guidance by $35 million. Can you explain the difference between the $40 million ahead of plan mentioned at Investor Day and the current guidance?
A: The biggest driver of the difference is SEP (Special Enrollment Period) growth. SEP growth comes with an in-year MLR (Medical Loss Ratio) headwind due to partial year risk adjustment dynamics. This growth is expected to be a tailwind for 2025 as we retain a significant portion of SEP members. β Scott Black (Trades, Portfolio), CFO
Q: Can you comment on the 2025 rate requests and the divergence in requested rate increases across different states?
A: Rate requests are driven by local geographies and market performance. For example, Georgia's higher rate request reflects the overall market there and is consistent with other insurers. Rate actions will always be responsive to local economics. β Scott Black (Trades, Portfolio), CFO
Q: How are you thinking about pricing relative to competitors for 2025, and what are your market growth expectations on the exchanges for next year?
A: We expect market growth of around 15% in 2025, driven by lingering effects of Medicaid redetermination and strong underlying market fundamentals. Our growth expectations are based on both overall market growth and our expansion into additional markets. β Scott Black (Trades, Portfolio), CFO and Mark Bertolini, CEO
Q: Can you provide an update on your CRA-related conversations and any membership opportunities for 2025?
A: We will provide guidance on 2025 membership later. We have built strong partnerships and go-to-market strategies, and we are seeing a lot of interest and opportunities. By 2025, we expect to have positive results. β Mark Bertolini, CEO
Q: Can you explain the impact of SEP membership on MLR and how it compares to prior periods?
A: SEP membership growth has higher MLR implications. SEP members are generally younger and healthier, and their economics are in line with expectations. We have seen some higher utilization among Medicaid redetermination members, but overall performance is satisfactory. β Scott Black (Trades, Portfolio), CFO
Q: Can you clarify the favorable prior period developments mentioned in the MLR decrease year-over-year?
A: We had favorable claims run out in the quarter, resulting in roughly $36 million of favorable prior period development. β Scott Black (Trades, Portfolio), CFO
Q: Are there any new states or geographies for 2025 based on preliminary rate filings?
A: We have doubled our markets overall, but specific state expansions will be discussed closer to the end of the year. β Scott Black (Trades, Portfolio), CFO and Mark Bertolini, CEO
Q: Can you provide more color on the long-term opportunity for ICRA and the expected cadence of growth over the next three years?
A: We remain bullish on ICRA and its long-term opportunity. We have no updates to the ICRA outlook but continue to see significant potential. β Scott Black (Trades, Portfolio), CFO
Q: How should we expect quota share to change over time, and what is the outlook for deployable capital?
A: We expect to generate significant excess capital through 2027. We will prioritize organic growth and may rely less on quota share over time, although it remains an efficient way to fund growth. β Scott Black (Trades, Portfolio), CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
