10-Q: Oscar Health Reports Wider Q3 Loss Amid Membership Growth

Oscar Health, Inc. reported a significantly wider net loss in the third quarter of 2025 despite substantial revenue and membership growth, driven by increased medical expenses and risk adjustment transfers.

Summary

• Oscar Health, Inc. reported a net loss attributable to Oscar Health, Inc. of $(137.45) million for the three months ended September 30, 2025, compared to a net loss of $(54.60) million for the same period in 2024.
• For the nine months ended September 30, 2025, the net loss was $(90.54) million, a significant decline from a net income of $178.98 million in the prior year period.
• Total revenue increased by 23% to $2.99 billion for the three months ended September 30, 2025, and by 31% to $8.90 billion for the nine months ended September 30, 2025, primarily due to higher membership.
• Membership grew by 28% year-over-year, reaching approximately 2.1 million effectuated members as of September 30, 2025.
• Medical expenses increased by 29% to $2.59 billion for the three months and by 40% to $7.40 billion for the nine months ended September 30, 2025, driven by increased membership and medical cost trends.
• The Medical Loss Ratio (MLR) worsened to 88.5% for the three months and 84.8% for the nine months ended September 30, 2025, up from 84.6% and 79.5% respectively, primarily due to an increase in the net risk adjustment transfer accrual.
• Selling, General, and Administrative (SG&A) expenses increased by 13% to $521.6 million for the three months and by 19% to $1.54 billion for the nine months ended September 30, 2025, due to higher volume-driven costs.
• The SG&A expense ratio improved, decreasing to 17.5% for the three months and 17.3% for the nine months ended September 30, 2025, from 19.0% in both prior year periods, reflecting greater fixed cost leverage and disciplined cost management.
• The company issued $410.0 million in 2.25% Convertible Senior Subordinated Notes due 2030 and terminated its $115.0 million Revolving Credit Facility.
• A securities class action lawsuit against the company was dismissed with prejudice on April 22, 2025.
• Oscar expects to recover an estimated $49 million from a proposed settlement related to halted ACA Cost-Sharing Reduction (CSR) subsidy payments.

Sentiment

Score: 4

Explanation: While Oscar Health demonstrated strong membership growth and improved SG&A efficiency, the significant widening of net losses and deterioration of the Medical Loss Ratio (MLR) indicate persistent challenges in achieving profitability. Regulatory uncertainties surrounding ACA subsidies and market morbidity further contribute to a cautious outlook, despite recent capital raises improving liquidity.

Positives

• Total revenue increased significantly by 23% to $2.99 billion for the three months and 31% to $8.90 billion for the nine months ended September 30, 2025, driven by higher membership.
• Membership grew substantially by 28% year-over-year, reaching approximately 2.1 million effectuated members as of September 30, 2025, primarily due to above-market growth during the 2025 Open Enrollment period.
• The SG&A expense ratio improved, decreasing to 17.5% for the three months and 17.3% for the nine months ended September 30, 2025, from 19.0% in both prior year periods, indicating greater fixed cost leverage, lower exchange fee rates, and disciplined cost management.
• Investment income increased by 6% to $53.2 million for the three months and 7% to $153.3 million for the nine months ended September 30, 2025, due to a larger asset base.
• The company acquired three businesses in the individual market (INSXCloud, Inc., IHC Specialty Benefits, Inc., and Healthinsurance.org, LLC) in May 2025, expanding its market presence and capabilities.
• A securities class action lawsuit (Carpenter v. Oscar Health, Inc., et al.) was dismissed with prejudice on April 22, 2025, resolving a significant legal overhang.
• Oscar expects an estimated net recovery of $49 million from a proposed settlement related to the ACA Cost-Sharing Reduction (CSR) program.
• The company successfully issued $410.0 million in 2.25% Convertible Senior Subordinated Notes due 2030, enhancing its liquidity and capital structure.
• The $115.0 million Revolving Credit Facility was terminated with no outstanding borrowings, simplifying the debt structure.
• Debt covenants in the Investment Agreement were extinguished as of November 5, 2025, and the 2030 Notes ceased to be subordinated to the 2031 Notes following Dragoneer's exchange of 2031 Notes.

Negatives

• Net loss attributable to Oscar Health, Inc. significantly widened to $(137.45) million for the three months ended September 30, 2025, from $(54.60) million in the prior year.
• For the nine months ended September 30, 2025, the company reported a net loss of $(90.54) million, a substantial reversal from a net income of $178.98 million in the same period of 2024.
• Earnings (loss) from operations worsened to $(129.25) million for the three months and $(62.61) million for the nine months ended September 30, 2025, compared to $(48.37) million and $204.99 million respectively in the prior year.
• The Medical Loss Ratio (MLR) increased to 88.5% for the three months and 84.8% for the nine months ended September 30, 2025, from 84.6% and 79.5% respectively, indicating higher medical costs relative to premiums.
• Medical expenses increased at a faster rate (29% for three months, 40% for nine months) than premium revenue (23% for three months, 32% for nine months), contributing to the worsening MLR.
• A significant increase in the net risk adjustment transfer accrual negatively impacted premium revenue and MLR.
• The Cigna+Oscar Small Group arrangement was not renewed after December 31, 2024, leading to a substantial decrease in membership from this segment (from 51,291 to 5,168 members).
• The company recorded a $14.9 million out-of-period adjustment in Q2 2025 within SG&A expenses related to prior periods (2023-2024), indicating an understatement of expenses in those periods.

Risks

• Ability to execute strategy and manage growth effectively, including integrating strategic acquisitions.
• Ability to retain and expand the member base, which is critical as substantially all revenue is derived from direct policy premiums.
• Inability to accurately estimate incurred medical expenses or effectively manage medical costs or related administrative costs.
• Unanticipated results of, or changes to, risk adjustment programs or estimates thereof, which have a high degree of estimation and variability.
• Evolving federal or state laws or regulations, including changes to the ACA, potential non-renewal of enhanced Advanced Premium Tax Credits (APTCs) after 2025, and implementation of new program integrity rules (e.g., CMS Program Integrity Rules, OBBBA).
• Ability to comply with ongoing regulatory requirements, including capital reserve and surplus requirements and applicable performance standards.
• Changes or developments in the health insurance markets in the United States, including increased morbidity due to Medicaid redeterminations.
• Heightened competition in the markets, with some competitors having greater financial resources, broader products, and larger networks.
• Inability to utilize quota share reinsurance to meet capital and surplus requirements and protect against downside risk on medical claims.
• Unfavorable or costly outcomes of lawsuits, audits, investigations, and other third-party claims.
• Incurrence of data security breaches of the company's and partners' information and technology systems.
• Ability to attract and retain qualified personnel.
• Ability 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 structure or controlled company status.
• Impact of proposed tariffs on pharmaceutical products, medical devices, and supplies, potentially leading to higher costs and shortages.
• Operational and regulatory complexities associated with the potential extension of enhanced APTCs, including rapid system modifications, pricing adjustments, and customer support strain.
• Uncertainty regarding the outcome of litigation (e.g., City of Columbus vs. Kennedy) impacting Program Integrity Rules and APTC eligibility.
• Impact of CMS periodic data matching operations on dual enrollees (Medicaid/CHIP and subsidized ACA) potentially reducing Health Insurance Marketplace enrollment.
• Inability to overcome competitive challenges from insurers with greater resources, broader products, and larger provider networks.
• Risk of pricing inaccuracies, margin compression, or insufficient premiums if enhanced APTCs are renewed on unfavorable terms or with compressed timelines.
• Inability to attract additional partners to the +Oscar platform or maintain existing partnerships if membership growth is not sustained.
• Inherent difficulty in predicting losses from legal and regulatory matters, especially those involving indeterminate claims, novel legal theories, or early stages of proceedings.

Future Outlook

The company anticipates continued impact from evolving regulatory landscapes, including the potential expiration or renewal of enhanced Advanced Premium Tax Credits (APTCs) and the implementation of new program integrity rules (CMS Program Integrity Rules, OBBBA), which are expected to reduce overall participation in Health Insurance Marketplaces and potentially impact market morbidity. While Medicaid redeterminations previously contributed to membership increases, future impact is expected to be less significant, and these members are believed to be higher utilizers of care, increasing overall market morbidity. The company is actively planning for various legislative and regulatory outcomes to mitigate risks, but acknowledges potential operational and financial impacts if APTCs are renewed late or on unfavorable terms. Management believes current cash, cash equivalents, and investments will be sufficient to fund operating requirements for at least the next twelve months.

Management Comments

• "Our technology drives superior experiences, deep engagement, and high-value clinical care, earning us the trust of approximately 2.1 million effectuated members."
• "We believe these operational and financial measures [Total revenue, MLR, SG&A expense ratio, Earnings from operations, and Net income (loss) attributable to Oscar Health, Inc.] are useful in evaluating our performance, in addition to our financial results prepared in accordance with GAAP."
• "The decrease [in SG&A expense ratio] was primarily due to greater fixed cost leverage, lower exchange fee rates, and disciplined cost management, partially offset by the impact of higher risk adjustment as a percentage of premium."
• "Based on our current forecast, we believe the Company's cash, cash equivalents, and investments, not including restricted cash, will be sufficient to fund our operating requirements for at least the next twelve months."

Industry Context

The health insurance industry, particularly the individual market under the ACA, is highly dynamic and subject to significant regulatory changes. Oscar Health's performance is heavily influenced by government subsidies (APTCs), risk adjustment programs, and enrollment policies. The potential expiration of enhanced APTCs at the end of 2025, coupled with stricter eligibility verification processes introduced by CMS Program Integrity Rules and the OBBBA, could lead to market contraction and increased morbidity. Medicaid redeterminations have historically boosted ACA enrollment but are now expected to contribute to higher utilization rates among new members. The competitive landscape remains intense, with larger, more established insurers posing a challenge. Oscar's focus on technology and member experience aims to differentiate it in this evolving market, but profitability remains a hurdle amidst rising medical costs and regulatory uncertainties.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• A 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 United States District Court for the Southern District of New York on April 22, 2025.
• The company expects an estimated net recovery of $49 million from a proposed settlement in a class action lawsuit filed by impacted issuers seeking compensation for halted ACA Cost-Sharing Reduction (CSR) subsidy payments.

Related Party Transactions

• In February 2022, the company issued 2031 Notes to funds affiliated with, among others, Thrive Capital (Initial Purchasers).
• The Investment Agreement with Initial Purchasers provides registration rights for 2031 Notes and Class A common stock held by Thrive Capital-affiliated entities.
• On September 11, 2025, the company amended the Investment Agreement with Oasis FD Holdings, LP (Dragoneer), an Initial Purchaser, to permit the private offering of the 2030 Notes.
• On November 3, 2025, the company and Oasis FD Holdings, LP (Dragoneer) entered into an Exchange Agreement, allowing Dragoneer to exchange up to $250.0 million of 2031 Notes for Class A common stock and/or cash.
• On November 5, 2025, Dragoneer exchanged $187.5 million of 2031 Notes for 23,273,179 shares of Class A common stock.

Stakeholder Impact

• **Shareholders**: Experience dilution from the issuance of Class A common stock to settle 2031 Notes conversions and exchanges. The widening net losses and negative EPS could negatively impact share price, while strong membership growth and improved SG&A efficiency offer long-term potential. Regulatory uncertainties pose a risk to future revenue and profitability.
• **Customers (Members)**: Benefit from continued membership growth and the company's focus on member experience. However, regulatory changes like the potential expiration of enhanced APTCs and stricter enrollment rules could impact affordability and access to plans.
• **Employees**: The company's growth and strategic acquisitions may offer opportunities, but ongoing financial losses could create uncertainty. Stock-based compensation is a significant expense.
• **Creditors/Noteholders**: The issuance of $410.0 million in 2030 Notes and the restructuring of 2031 Notes impact the company's debt profile. The termination of the Revolving Credit Facility and extinguishment of certain debt covenants could alter risk perception. The company's ability to meet future obligations relies on improving profitability and managing medical costs.
• **Regulators**: The company is subject to ongoing reviews and compliance requirements, with new rules (CMS Program Integrity Rules, OBBBA) and potential changes to ACA subsidies requiring close monitoring and adaptation.

Next Steps

• Monitor the potential renewal or non-renewal of enhanced Advanced Premium Tax Credits (APTCs) by the end of 2025 and its operational and financial impacts.
• Observe the implementation and impact of CMS Program Integrity Rules and the One Big Beautiful Bill Act (OBBBA) on Health Insurance Marketplace enrollment and APTC eligibility.
• Continue to provide transition and run-off services for the former Cigna+Oscar Small Group arrangement through December 31, 2026.
• Manage the conversion of 2031 Notes, including potential further exchanges by Dragoneer up to December 14, 2025.
• Begin semi-annual interest payments on the 2030 Notes starting March 1, 2026.
• Monitor the outcome of the City of Columbus vs. Kennedy litigation regarding the stayed provisions of the Program Integrity Rules.

Key Dates

Recommendation

Oscar Health demonstrates strong top-line growth through significant membership expansion and improved operational efficiency in its SG&A ratio. However, these positives are overshadowed by a substantial widening of net losses and a deteriorating Medical Loss Ratio, indicating persistent challenges in managing medical costs and achieving profitability. The regulatory environment, particularly concerning ACA subsidies and enrollment rules, introduces considerable uncertainty. While recent capital raises improve liquidity, the fundamental profitability issues and external market risks suggest a 'hold' recommendation until there is clearer evidence of sustainable path to profitability and effective navigation of regulatory headwinds.

Keywords

Oscar Health, OSCR, 10-Q, Quarterly Report, Health Insurance, ACA, Affordable Care Act, Medical Loss Ratio, MLR, Risk Adjustment, Convertible Notes, Healthcare Technology, Membership Growth, Net Loss, SEC Filing, Financial Results, Insurance Market, Regulatory Risk, Capital Raise, Debt Financing, SG&A Ratio, Medicaid Redeterminations, APTCs, Program Integrity Rules