10-K: Oscar Health Reports 2025 Loss Amidst Market Morbidity, Regulatory Shifts

Oscar Health, Inc. reported a net loss of $443.2 million for 2025, reversing its 2024 profitability, driven by increased medical expenses and risk adjustment transfers, despite significant membership growth.

Summary

• Oscar Health, Inc. reported a net loss attributable to Oscar Health, Inc. of $443.2 million for the fiscal year ended December 31, 2025, compared to a net income of $25.4 million in 2024.
• Total revenue increased by 27.5% to $11,701.4 million in 2025 from $9,177.6 million in 2024, primarily due to higher premium revenue.
• Premium revenue grew 28% to $11,469.9 million in 2025, driven by above-market membership growth, but partially offset by an increase in net risk adjustment transfer accrual.
• Medical expenses surged 37% to $10,019.0 million in 2025, attributed to increased membership and medical cost trends.
• The Medical Loss Ratio (MLR) increased to 87.4% in 2025 from 81.7% in 2024, primarily due to higher average market morbidity and increased utilization not fully offset by risk adjustment.
• Selling, general, and administrative (SG&A) expenses rose 17% to $2,049.9 million in 2025, mainly due to higher volume-driven costs like broker commissions and taxes, but the SG&A expense ratio decreased to 17.5% from 19.1% due to fixed cost leverage and disciplined management.
• Membership reached approximately 2.0 million effectuated members as of December 31, 2025, up from 1.67 million in 2024.
• The company acquired Lucie, Inc., IHC Specialty Benefits, Inc., and Healthinsurance.org, LLC in 2025 to support its Individual Coverage Health Reimbursement Arrangements (ICHRA) strategy.
• The Cigna+Oscar Small Group arrangement was not renewed after December 31, 2024, with transition services continuing through December 31, 2026.
• The company expanded its health plan offerings to 20 states for 2026, up from 18 states in 2025.
• A $475.0 million secured three-year revolving credit facility was entered into on February 6, 2026.
• The company's risk adjustment transfer payable significantly increased to $2,587.7 million as of December 31, 2025, from $1,558.3 million in 2024, due to higher estimated ACA average market risk scores and lower-than-anticipated relative risk scores.
• The securities class action lawsuit, Carpenter v. Oscar Health, Inc., et al., was dismissed with prejudice on April 22, 2025.
• A settlement agreement for the CSR program class action was granted final approval on November 6, 2025, with an estimated net recovery of $48 million for the company.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with a cautious sentiment. While strong membership growth and strategic acquisitions are positive, the return to significant net losses and a higher MLR, coupled with increased risk adjustment payables and regulatory uncertainties, present substantial financial challenges.

Positives

• Total revenue increased significantly by 27.5% to $11.7 billion in 2025, demonstrating strong top-line growth.
• Premium revenue grew 28% year-over-year, driven by above-market membership growth during the 2025 Open Enrollment period.
• Membership increased to approximately 2.0 million effectuated members as of December 31, 2025, indicating successful member acquisition and retention efforts.
• The SG&A Expense Ratio decreased by 160 basis points to 17.5% in 2025, reflecting greater fixed cost leverage, lower exchange fee rates, and disciplined cost management.
• Strategic acquisitions of Lucie, Inc., IHC Specialty Benefits, Inc., and Healthinsurance.org, LLC in 2025 are expected to diversify the company and support its ICHRA strategy.
• Expansion into 20 states for 2026 demonstrates continued market growth and strategic reach.
• The company successfully challenged the Georgia Regulator's Suppression Order against a competitor, Kaiser Foundation Health Plan of Georgia, Inc., preventing potential adverse impacts on its market share.
• A $48 million net recovery is expected from the settlement of the ACA Cost-Sharing Reduction (CSR) program class action lawsuit.
• The securities class action lawsuit (Carpenter v. Oscar Health, Inc., et al.) was dismissed with prejudice, resolving a significant legal overhang.

Negatives

• The company reported a net loss of $443.2 million in 2025, a significant reversal from the $25.4 million net income in 2024, indicating a return to unprofitability.
• Medical expenses increased by 37% in 2025, outpacing premium revenue growth, leading to a higher Medical Loss Ratio (MLR).
• The MLR increased by 5.7 percentage points to 87.4% in 2025, primarily due to increased average market morbidity and higher utilization not fully offset by risk adjustment.
• The risk adjustment transfer payable significantly increased to $2,587.7 million in 2025, up from $1,558.3 million in 2024, indicating a less favorable risk profile relative to the market.
• The expiration of enhanced Advanced Premium Tax Credits (eAPTCs) at the end of 2025 is expected to reduce overall participation in Health Insurance Marketplaces and potentially impact future membership.
• New CMS Program Integrity Rules and the One Big Beautiful Bill Act (OBBBA) are expected to create stricter eligibility verification processes for APTCs, potentially reducing the number of eligible individuals and impacting enrollment.
• Health Insurance Subsidiaries' aggregate statutory capital and surplus decreased to $1.0 billion in 2025 from $1.2 billion in 2024, and excess capital decreased to $315 million from $734 million, potentially limiting future growth or requiring additional capital contributions.
• The company has an accumulated deficit of $3,294.4 million as of December 31, 2025, highlighting ongoing historical losses.
• The company received a subpoena from the Congressional Committee on the Judiciary on February 9, 2026, regarding potential APTC fraud in the Health Insurance Marketplace, indicating ongoing regulatory scrutiny.

Risks

• Ability to execute strategy and manage growth effectively, including integrating acquisitions and expanding into new markets/lines of business.
• Failure to retain and expand the member base, or manage membership growth appropriately, especially if eAPTCs are not renewed or regulatory changes impact enrollment.
• Inability to accurately estimate incurred medical expenses or overall market morbidity, or effectively manage medical and administrative costs, which could negatively affect financial position.
• Unanticipated results of, or changes to, risk adjustment programs or estimates thereof, leading to material adjustments to premium revenue.
• Evolving federal or state laws or regulations, including changes to the ACA, expiration/renewal of eAPTCs, new program integrity rules, or potential funding of a cost-sharing reduction (CSR) program.
• Failure to achieve or maintain profitability in the future, given the history of losses and significant investments required for growth.
• Inability to arrange for quality care, maintain good relations with providers, or enter into cost-effective contracts, potentially leading to higher medical costs or network inadequacy.
• Failure to comply with ongoing, complex, and evolving regulatory requirements, including capital reserve and surplus requirements and performance standards, which could result in penalties or operational disruption.
• Changes or developments in the regulation of health insurance markets, including proposals for single-payer or government-run programs, could harm the business.
• Failure by the company or its vendors to comply with laws, regulations, and standards related to handling individual information or consumer protection laws, leading to liability, penalties, or reputational harm.
• Inability of Health Insurance Subsidiaries to make dividend or distribution payments to the parent company, limiting funds for business strategy.
• Inability to utilize quota share reinsurance to meet capital and surplus requirements or protect against downside risk on medical claims, potentially requiring additional capital.
• Adverse market conditions causing investment portfolio losses or reducing ability to meet financing needs.
• Unfavorable or costly outcomes of lawsuits, audits, investigations, and other third-party claims, including those related to fraud, waste, and abuse laws (e.g., FCA, Anti-Kickback Statute).
• Incurrence of data security breaches of company or partner information and technology systems, leading to increased costs, penalties, and reputational harm.
• Heightened competition in the markets, with competitors having greater resources or broader product offerings.
• Inability to attract and retain qualified personnel, especially highly-specialized technology and insurance experts.
• Uncertainties associated with the utilization of artificial intelligence (AI) and machine learning models, including potential for inaccurate/misleading content or regulatory changes.
• Failure to detect and prevent material weaknesses or significant control deficiencies in internal controls over financial reporting.
• Adverse publicity or other adverse consequences related to the dual-class stock structure or controlled company status.
• Risks associated with geographic concentration in states like Florida, Texas, and Georgia, making the company vulnerable to regional regulatory changes or increased competition.
• Risks associated with outsourcing services and functions to third parties, including vendor non-compliance or service disruptions.
• Inability to utilize net operating loss carryforwards (NOLs) to offset future taxable income due to insufficient earnings or ownership changes.
• Limited operating history in an evolving industry makes it difficult to evaluate current business performance and future prospects.
• Restrictions imposed by the 2026 Revolving Credit Facility, including financial covenants, may limit ability to operate and finance future operations.
• Inability to raise funds necessary to repurchase outstanding convertible notes or pay cash upon conversion, potentially leading to default.

Future Outlook

The company anticipates continued changes with respect to the ACA, including potential non-renewal or reduction of eAPTCs, which could reduce Health Insurance Marketplace participation and future membership. New CMS Program Integrity Rules and the OBBBA are expected to impact enrollment processes and APTC eligibility, potentially leading to a reduction in enrolled individuals. The proposed NBPP for policy year 2027 could significantly impact the Health Insurance Marketplace, potentially creating market instability or competitive disadvantages. The Trump administration's indicated tariffs on pharmaceutical products and medical devices could lead to higher medical costs. The company expects to continue investing in its technology platform, member engagement, and market expansion, including its ICHRA strategy, but acknowledges the significant capital expenditures and operational challenges involved.

Management Comments

• "We have been challenging the status quo in the healthcare system since our founding in 2012 and are dedicated to making a healthier life accessible and affordable for all."
• "Our technology drives superior experiences, deep engagement, and high-value clinical care, earning us the trust of approximately 2.0 million effectuated members, as of December 31, 2025."
• "We continue to believe ICHRA will disrupt employer group coverage and expand individual insurance beyond the traditional ACA market. Our goal is to position Oscar as the preferred carrier for employees enrolling in health insurance through an ICHRA program."
• "We are actively planning for various legislative and regulatory outcomes, including full or partial renewal [of eAPTCs], and have analyzed several operational pathways to mitigate these risks."
• "Management believes the amount of benefits payable is reasonable and adequate to cover our liability for unpaid claims as of December 31, 2025."

Industry Context

StockSavvy.ai notes that Oscar Health operates in a highly dynamic and competitive U.S. healthcare market, heavily influenced by federal and state regulations like the ACA. The expiration of enhanced Advanced Premium Tax Credits (eAPTCs) and the implementation of stricter Program Integrity Rules by CMS, along with the OBBBA, signal a tightening regulatory environment that could impact enrollment and market morbidity across the Health Insurance Marketplaces. The industry is also grappling with rising medical costs, which Oscar's increased MLR reflects, and the increasing adoption of AI technologies for efficiency and member engagement, where Oscar aims for a 'first mover advantage.' The shift towards Individual Coverage Health Reimbursement Arrangements (ICHRA) represents a significant trend in employer-sponsored health benefits, which Oscar is actively pursuing through recent acquisitions. The ongoing scrutiny of risk adjustment practices and potential tariffs on medical supplies are broader industry challenges that could affect all players.

Comparison to Industry Standards

• Oscar's MLR of 87.4% in 2025 is above the ACA's minimum MLR threshold of 80% for the individual market, and also above New York's 82% requirement, suggesting higher medical costs relative to premiums compared to industry benchmarks and its own 2024 performance (81.7%).
• The significant increase in risk adjustment transfer payable indicates that Oscar's member population had a lower-than-average risk score compared to the overall market, suggesting a less favorable risk pool compared to competitors in the ACA marketplace.
• The company's membership growth to 2.0 million effectuated members is substantial, indicating strong market penetration and competitive acquisition, especially in a market facing regulatory uncertainties.
• The decrease in SG&A expense ratio to 17.5% suggests improved administrative efficiency, which is a positive trend compared to industry peers who may struggle with scaling administrative costs amidst growth.
• The dismissal of the securities class action lawsuit and the favorable settlement in the CSR program class action provide a more stable legal and financial footing, potentially reducing legal overhangs that might affect other industry participants facing similar challenges.

Management Changes

Corporate Governance

Legal Proceedings

• The securities class action lawsuit, Carpenter v. Oscar Health, Inc., et al., alleging violations of Sections 11 and 15 of the Securities Act, was dismissed with prejudice by the Court on April 22, 2025.
• A class action lawsuit against the federal government (Common Ground Healthcare Cooperative v. United States) seeking compensation for halted ACA Cost-Sharing Reduction (CSR) subsidies, reached a settlement agreement on August 11, 2025, with final settlement approval granted on November 6, 2025. The company expects an estimated net recovery of approximately $48 million.
• On February 9, 2026, the company received a subpoena from the Congressional Committee on the Judiciary requesting documents in connection with their examination of potential Advanced Premium Tax Credit (APTC) fraud in the Health Insurance Marketplace.
• The company is subject to ongoing reviews and investigations by state insurance and healthcare regulatory authorities focusing on various business facets, which could result in fines or changes to practices.
• The company is involved in, and may become involved in, legal proceedings and other claims in the ordinary course of business, including class actions and suits by members, providers, and employees.

Related Party Transactions

• In February 2022, the company issued $305.0 million in 2031 Convertible Senior Notes to funds affiliated with or advised by Dragoneer Investment Group, LLC, Thrive Capital Management, LLC, LionTree Investment Management, LLC, and Tenere Capital LLC (Initial Purchasers).
• On November 3, 2025, the company and Oasis FD Holdings, LP (Dragoneer) entered into an Exchange Agreement, under which Dragoneer exchanged $250.0 million aggregate principal amount of 2031 Notes for approximately 30.1 million shares of Class A common stock and an inducement payment of $17.8 million (partially cash, partially stock).
• In connection with the Exchange Agreement, as of November 5, 2025, debt covenants in the Investment Agreement were extinguished, and the 2030 Notes ceased to be subordinated to the 2031 Notes.

Stakeholder Impact

• **Shareholders**: The net loss in 2025 and increased accumulated deficit could negatively impact shareholder value. The dual-class stock structure limits influence for Class A shareholders. The dismissal of the securities lawsuit and CSR settlement are positive for shareholder confidence. Future capital raises could dilute ownership.
• **Members**: Membership growth indicates continued trust and reach. However, increased MLR and risk adjustment payables suggest higher costs, which could translate to higher premiums or reduced benefits in the future. Regulatory changes like eAPTC expiration and Program Integrity Rules could impact affordability and access to coverage.
• **Employees**: The company continues to prioritize attracting and retaining qualified personnel with competitive compensation and benefits. The use of AI technologies may streamline administrative tasks, potentially impacting certain roles. Management changes, including the CEO's extended term and new CLO, provide leadership stability.
• **Providers**: The company's ability to arrange for quality care and maintain good relations with providers is crucial. Changes in contracting terms or disputes could affect provider networks and reimbursement rates. The focus on high-quality, technology-forward health systems aims to improve care delivery.
• **Regulators**: The company faces extensive and evolving federal and state regulations, including ongoing audits and investigations related to risk adjustment, fraud, waste, and abuse. Compliance with these complex requirements is a significant operational and financial burden.

Next Steps

• Evaluate markets for strategic fit and enter or exit markets accordingly, with expansion to 20 states planned for 2026.
• Continue to refine and improve marketing campaigns using data generated from member support interactions.
• Monitor and adapt to continued changes in ACA regulations, including the potential renewal of eAPTCs and the impact of Program Integrity Rules and the OBBBA on enrollment and APTC eligibility.
• Address the subpoena from the Congressional Committee on the Judiciary regarding potential APTC fraud.
• Manage compliance with financial covenants under the new $475.0 million revolving credit facility, commencing with the fiscal quarter ending March 31, 2026.
• Continue to invest in and leverage AI Technologies across the business for administrative efficiencies, member personalization, and digital self-service.
• Actively plan for various legislative and regulatory outcomes related to eAPTCs, including full or partial renewal, and analyze operational pathways to mitigate risks.

Key Dates

Recommendation

Oscar Health's 2025 results show a concerning return to unprofitability, marked by a significant net loss and a higher Medical Loss Ratio, primarily driven by increased market morbidity and medical costs. While the company achieved substantial membership growth and made strategic acquisitions to diversify its business, the financial performance indicates challenges in translating growth into sustainable profitability. Regulatory uncertainties surrounding ACA subsidies and enrollment processes, coupled with increased risk adjustment payables, pose ongoing headwinds. The new revolving credit facility provides liquidity, but the overall financial trajectory requires careful monitoring. Given the mixed signals—strong growth and strategic moves against a backdrop of significant losses and regulatory risks—a 'hold' recommendation is appropriate for seasoned investors. Further evidence of sustained profitability and effective navigation of regulatory changes would be needed to warrant a more bullish stance.

Keywords

Health Insurance, ACA, Health Tech, Risk Adjustment, Medical Loss Ratio, SEC Filing, 10-K, Healthcare Marketplaces, Individual Market, ICHRA, APTCs, Convertible Notes, Cybersecurity, AI in Healthcare, Regulatory Compliance, Financial Performance, Membership Growth, Operating Loss