10-K: Oscar Health Achieves First Profitable Year, Reports $26.1 Million Net Income for 2024

Oscar Health reports its first profitable year with a net income of $26.1 million and Adjusted EBITDA of $199.2 million for the year ended December 31, 2024, driven by membership growth and strategic initiatives.

Summary

• Oscar Health, Inc. reports a net income of $26.1 million for the year ended December 31, 2024, marking its first profitable year.
• The company's Adjusted EBITDA for the same period was $199.2 million.
• Oscar Health's membership reached approximately 1.68 million effectuated members as of December 31, 2024.
• The company offers health plans through the Affordable Care Act (ACA) and technology solutions via +Oscar.
• Oscar Health's revenue is primarily derived from health insurance policy premiums, with $9,512.3 million from CMS and $799.3 million from members in 2024.
• The company exited the Medicare Advantage market before the 2024 plan year and stopped offering small group products as of December 15, 2024.
• Oscar Health also decided not to renew the Oscar+Cigna Small Group arrangement after its initial term ended on December 31, 2024.
• The company's strategy focuses on consumerization, digitization, and personalization in healthcare.
• Oscar Health's strategic priorities include sustainable operations, member experience, technology utilization, and innovative market offerings.
• As of December 31, 2024, the company had approximately 2,400 full-time employees.
• The company faces competition from national and regional carriers, Medicaid-focused insurers, and local Blue Cross plans.
• Oscar Health relies on copyright, trademark, and trade secret laws to protect its intellectual property.
• The company's business is subject to comprehensive federal, state, and local laws and regulations.
• The company is subject to fraud, waste, and abuse laws, including the Anti-Kickback Statute, Stark Law, and False Claims Act.
• The company is also subject to privacy, confidentiality and data standards regulation including HIPAA and the CCPA.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with the company achieving its first profitable year. However, it also acknowledges several risks and challenges, indicating a balanced perspective.

Positives

• Oscar Health achieved its first profitable year, reporting a net income of $26.1 million for 2024.
• Adjusted EBITDA for 2024 was $199.2 million.
• The company's membership reached approximately 1.68 million effectuated members as of December 31, 2024.
• During the fourth quarter of 2024, the company's net promoter score reached 66, which is meaningfully higher than the industry average.
• The company's strategic priorities include sustainable operations, member experience, technology utilization, and innovative market offerings.

Negatives

• The company exited the Medicare Advantage market before the 2024 plan year and stopped offering small group products as of December 15, 2024.
• Oscar Health also decided not to renew the Oscar+Cigna Small Group arrangement after its initial term ended on December 31, 2024.
• The company faces competition from national and regional carriers, Medicaid-focused insurers, and local Blue Cross plans.
• The company is subject to fraud, waste, and abuse laws, including the Anti-Kickback Statute, Stark Law, and False Claims Act.
• The company is also subject to privacy, confidentiality and data standards regulation including HIPAA and the CCPA.

Risks

• The company's ability to execute its strategy and manage its growth effectively may be harmed if it fails to acquire new members and retain existing members, introduce new products and plans, expand into new markets and lines of business, and monetize its technology through its +Oscar platform.
• The company's success and ability to grow its business depend in part on retaining and expanding its member base.
• Failure to accurately estimate incurred medical expenses or effectively manage medical costs or related administrative costs could negatively affect the company's financial position, results of operations, and cash flows.
• The company may not maintain profitability in the future.
• Any changes to the ACA and its regulations could materially and adversely affect the company's business, results of operations, and financial condition.
• The company's business activities are subject to ongoing, complex, and evolving regulatory obligations, and to continued regulatory review, which result in significant additional expense and the diversion of the company's management's time and efforts.
• 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, could materially and adversely harm the company's business and operating results.
• If the company or any of its vendors fail to comply with laws, regulations and standards relating to the handling of information about individuals or applicable consumer protection laws, the company may face significant liability, negative publicity, and/or erosion of trust, which could materially affect the company's business, reputation, results of operations, financial position, and cash flows; additionally, compliance with these laws, regulations, and standards involves significant expenditure and resources.
• The company is subject to extensive fraud, waste, and abuse laws that may require the company to take remedial measures or give rise to lawsuits, audits, investigations and claims against the company, the outcome of which may have a material adverse effect on the company's business, financial condition, cash flows, or results of operations.
• If the company is unable to arrange for the delivery of quality care, and maintain good relations with the physicians, hospitals, and other providers within and outside the company's provider networks, or if the company is unable to enter into cost-effective contracts with such providers, or if the company loses any of its limited number of in-network providers, the company's profitability could be adversely affected.
• The result of risk adjustment programs may impact the company's revenue, add operational complexity, and introduce additional uncertainties that have a material adverse effect on the company's results of operations, financial condition, and cash flows.
• If state regulators do not approve payments of dividends and distributions by the company's health insurance subsidiaries to the company, or do not approve other capital efficiency structures the company may pursue, the company may not have sufficient funds to implement its business strategy.
• The company utilizes quota share reinsurance to meet the regulatory capital and surplus requirements and protect against downside risk on medical claims. If regulators do not approve the company's reinsurance agreements for this purpose, or if the company cannot negotiate renewals of the company's quota share arrangements on acceptable terms, or at all, enter into new agreements with reinsurers, or otherwise obtain capital through debt or equity financings, the company's capital position would be negatively impacted, and the company could fall out of compliance with applicable regulatory requirements.
• Adverse market conditions may result in the company's investment portfolio suffering losses or reduce the company's ability to meet its financing needs, which could materially and adversely affect the company's results of operations or liquidity.
• The company is subject to risks associated with its geographic concentration.
• The company is subject to risks associated with outsourcing services and functions to third parties.
• From time to time, the company may become involved in costly and time-consuming litigation and regulatory audits and actions, which require significant attention from the company's management.
• If the company or its partners or other third parties with whom the company collaborates fail to protect confidential information and/or sustain a data security incident, the company could suffer increased costs, material financial penalties, exposure to significant liability, adverse regulatory consequences, and reputational harm, which would materially adversely affect the company's business, results of operations, and financial condition.
• The company relies on the experience and expertise of its Chief Executive Officer, Co-Founders, senior management team, highly-specialized technology and insurance experts, key technical employees, and other highly skilled personnel.
• If the company is unable to integrate and manage its information systems effectively, the company's operations could be disrupted.
• Real or perceived errors, failures, vulnerabilities, or bugs in the company's systems, website, or app could impair the company's operations, damage the company's reputation and brand, and harm the company's business and operating results.
• The company is subject to risks associated with public health crises arising from large-scale medical emergencies, pandemics, natural disasters and other extreme events, which have had, and could in the future have, an adverse effect on the company's business, results of operations, financial condition and financial performance.
• The company may not be able to utilize its net operating loss carryforwards (NOLs), to offset future taxable income for U.S. federal and state income tax purposes, which could adversely affect the company's cash flows.
• The company's limited operating history in an evolving industry makes it difficult to evaluate the company's current business performance, implementation of its business model, and its future prospects.
• If the company experiences material weaknesses or significant control deficiencies in the future, or otherwise fail to maintain effective internal control over financial reporting, the company's ability to comply with applicable laws and regulations and accurately and timely report the company's financial results, and the company's access to the capital markets, could be adversely affected.
• Significant delays in the company's receipt of direct policy premiums, including as a result of regulatory restrictions on policy cancellations and non-renewals, could have a material adverse effect on the company's business, operations, cash flows, or earnings.
• The company makes virtual healthcare services available to its members through Oscar Medical Group, in which the company does not own any equity or voting interest, and the company's virtual care availability may be disrupted if the company's arrangements with providers like the Oscar Medical Group become subject to legal challenges.
• Failure to secure, protect, or enforce the company's intellectual property rights could harm the company's business, results of operations, and financial condition.
• The company may be subject to claims by others that the company is infringing on their intellectual property rights.
• The company may face risks associated with its utilization of certain artificial intelligence and machine learning models.
• Increasing scrutiny and changing expectations with respect to sustainability and environmental, social and governance (ESG) matters may impose additional costs on the company, impact the company's access to capital, or expose the company to new or additional risks.
• The dual class structure of the company's common stock will have the effect of concentrating voting control with Thrive Capital and the company's Co-Founders for the foreseeable future, which will limit the ability of the company's other investors to influence corporate matters, including the election of directors and the approval of any change of control transaction.
• The company is a controlled company within the meaning of the rules of NYSE and, as a result, the company may rely on exemptions from certain corporate governance requirements and, if the company chose to do so, you will not have the same protections afforded to stockholders of companies that are not exempt from such requirements.
• The company does not intend to pay dividends on its Class A common stock for the foreseeable future.
• The company may issue shares of preferred stock in the future, which could make it difficult for another company to acquire the company or could otherwise adversely affect holders of the company's Class A common stock, which could depress the price of the company's Class A common stock.
• Future sales and issuances of the company's Class A common stock or rights to purchase the company's Class A common stock, including pursuant to the company's equity incentive plans, or other equity securities or securities convertible into the company's Class A common stock, could result in additional dilution of the percentage ownership of the company's stockholders and could cause the stock price of the company's Class A common stock to decline.
• Anti-takeover provisions in the company's governing documents and under Delaware law could make an acquisition of the Company more difficult, limit attempts by the company's stockholders to replace or remove the company's current management, and depress the market price of the company's Class A common stock.
• The company's Amended Charter provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for substantially all disputes between the company and its stockholders, and federal district courts are the sole and exclusive forum for Securities Act claims, which could limit the company's stockholders ability to obtain a favorable judicial forum for disputes with the company or its directors, officers, or employees.
• The obligations associated with being a public company require significant resources and management attention.
• If the company's operating and financial performance in any given period does not meet the guidance that the company provides to the public, the market price of the company's Class A common stock may decline.

Future Outlook

The company anticipates lower SEP membership growth during 2025. The enhanced APTCs are set to expire at the end of 2025 and if they are not renewed it could make coverage unaffordable to some individuals and thereby reduce overall participation in the Health Insurance Marketplaces and our membership.

Industry Context

The company operates in a highly competitive environment in an industry subject to significant and ongoing changes, including business and hospital system consolidations, new strategic alliances, market pressures, scientific and technological advances in medical care and therapeutics, as well as regulatory and legislative challenges and reform both at the federal and state level.

Comparison to Industry Standards

• The peer group is composed of Centene Corporation, Molina Healthcare, Inc., CVS Health Corporation, Cigna Group, Elevance Health, Inc., Agilon Health Inc., Alignment Healthcare, Inc., Evolent Health, Inc., Privia Health Group, Inc., Teladoc Health, Inc., and Accolade, Inc.
• The Peer Group was chosen based on (i) industry, including managed care and healthcare technology companies, with emphasis on direct competitors and close industry peers, (ii) revenue, and (iii) market capitalization.

Legal Proceedings

• On May 12, 2022, a securities class action lawsuit against the Company, certain of its directors and officers, and the underwriters that participated in the Company's IPO was commenced in the United States District Court for the Southern District of New York, captioned Carpenter v. Oscar Health, Inc., et al., Case No. 1:22-CV-03885 (S.D.N.Y.).
• The amended complaint, filed on December 6, 2022, primarily alleges that the Company failed to disclose in its IPO registration statement purportedly inadequate controls and systems in connection with the risk adjustment data validation audit for 2019, in violation of Sections 11 and 15 of the Securities Act, and that this alleged omission caused losses and damages for members of the putative class.

Related Party Transactions

• In February 2022, the Company issued the 2031 Notes to funds affiliated with or advised by Dragoneer Investment Group, LLC, Thrive Capital Management, LLC, LionTree Investment Management, LLC and Tenere Capital LLC (collectively, the Purchasers).

Stakeholder Impact

• The company's performance and strategic decisions can impact shareholders, employees, customers, suppliers, and creditors.
• The company's ability to provide affordable and accessible healthcare affects its members.
• The company's relationships with providers impact the delivery of care to its members.

Key Dates