Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Oscar Health Inc reported a significant year-over-year revenue increase of 46%, reaching $2.1 billion in the first quarter.
- The company achieved positive net income for the first time, reporting $178 million, marking a $217 million improvement from the previous year.
- Membership growth was robust, with a 42% increase year over year, driven by strong retention and growth in both existing and new markets.
- Oscar Health Inc reported an improved medical loss ratio of 74.2%, a 210 basis point improvement compared to the previous year.
- The company successfully launched new products and initiatives, such as the Spanish first program 'HolaOscar', which showed significant growth and high retention among Spanish-speaking members.
Negative Points
- Despite the positive developments, there are uncertainties regarding the continuation of strong Special Enrollment Period (SEP) growth and its potential impact on medical loss ratio (MLR).
- Oscar Health Inc announced the non-renewal of the Cigna + Oscar small-group offering in 2025, indicating a strategic shift but also posing challenges in transitioning and finding alternative profitable models.
- The company is exiting the Medicare Advantage market due to unsustainable provider relationships, which could impact its product diversity and revenue streams.
- There are ongoing challenges with risk adjustment factors, which could affect future revenue and profitability as the year progresses.
- Administrative costs, while improved, still represent a significant portion of expenses, and further efficiency gains are necessary to sustain profitability.
Q & A Highlights
Q: Can you provide an update on the expectations around the performance of your membership growth in 2024? How does the mix of those numbers compare to your expectations? And can you update us on where you sit in terms of metal mix and how that's changed year over year?
A: (Mark Bertolini - CEO, Oscar Health Inc) We reported 1.4 million members and that spend stronger SEP growth than we expected this early in the year. We're not sure if that's a pull forward or what's going to happen later in the year or it will continue to grow over time. And as we look at that growth rate, if it is longer over time, Medicaid Redetermination is through November. We would expect that we're going to have less and less insight on risk adjusters later in the year, which will work against us in the quarters, but we'll recover in the first quarter of next year when we get that data all of submitted through CMS.
Q: You've mentioned that you don't want Oscar to be a single product line company, but this quarter you're exiting Medicare Advantage, and it sounds like exiting the Cigna and after small-group relationship. What exactly is the rationale behind the exit?
A: (Mark Bertolini - CEO, Oscar Health Inc) We did pull out Medicare in large part because the provider relationships we had in place were unsustainable. And there wasn't anything we could do to fix them from the standpoint of getting to a profitable product. We do anticipate entering the market a different way, which we'll talk about in June when we have our Investor Day. But the near term opportunity for us is [Ecra]. And with it grow, we believe we have access to over 70 million lives in the under 50 and middle market segments, and we'll talk a lot about the significant progress we've made on that onset of products and the pilots we'll be doing this year and launching in the '25.
Q: Looking at your SG&A line and new look out few years, what do you think is the sustainable level of SG&A to revenue to kind of get you to your ultimate targeted margin?
A: (R. Scott Black (Trades, Portfolio)ley - CFO, Oscar Health Inc) We certainly were excited about the performance of SG&A year over year, significant improvement in that line item. The improvement there, obviously, we called out the one-timer related to the founder's award, but the rest of the improvement is sticky, and we'll continue going forward, seeing a lot of impacts of our technology, making our operations more efficient.
Q: What's the revenue expectation this year embedded in the $8.3 billion to $8.4 billion for Cigna + Oscar?
A: (R. Scott Black (Trades, Portfolio)ley - CFO, Oscar Health Inc) On C + O, I think that for 2024, that's probably in the range of $250 million to $260 million of revenue, has minimal impact to the bottom line, and going forward, when that book goes into runoff in 2025, it will be a much smaller revenue impact. But in both years, we would expect the bottom line to be insignificant.
Q: Following up on the MLR, it seemed like the underlying cost trend performance was in line with your expectations. How does that MLR compare to your plan in the first quarter and any change in how you're thinking about cadence over the balance of the year?
A: (R. Scott Black (Trades, Portfolio)ley - CFO, Oscar Health Inc) On MLR, I think that the MLR we saw in the first quarter was more or less consistent with our expectations where we saw utilization that was on plan. There's always puts and takes in utilization. But in summary, pretty much what we were anticipating. At this point in the year, you don't have that huge amount of visibility into the full year performance of your book. And so it's still early days in terms of what we would takeaway from the performance thus far in the year.
Q: If we look at the year-over-year improvement in MLR, what would you say are the key attributes there?
A: (R. Scott Black (Trades, Portfolio)ley - CFO, Oscar Health Inc) The first thing I would just call out is pricing and margin expansion and being thoughtful about pricing for the risks that we were going to take, really seeing that be a significant driver and it's the most important driver in the year-over-year performance. We had a small amount of prior period development this year. It was in the first quarter was about $17 million favorable, which was really run out on 2023 claims. So that was good.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
