Oscar Health, Inc. 2026 Q2 Earnings Call

Good morning, everyone. Thank you for joining us for our second quarter 2026 earnings call. Mark Bertolini, Oscar Health's Chief Executive Officer, Scott Blackley, Oscar Health's Chief Financial Officer, will host this morning's call. This call can also be accessed through our investor relations website at ir.hioscar.com. Full details of our results and additional management commentary are available in our earnings release, which can be found on our investor relations website at ir.hioscar.com. Any remarks that Oscar makes about the future constitute forward-looking statements within the meaning of safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in our annual report on Form 10-K for the period ended December 31st, 2025, the quarterly report on Form 10-Q for the period ended March 31st, 2026. Each is filed with the Securities and Exchange Commission and other filings with the SEC, including our quarterly report on Form 10-Q for the period ended June 30th, 2026, to be filed with the SEC. Such forward-looking statements are based on our current expectations as of today. Oscar anticipates that subsequent events and developments may cause estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. The call will also refer to certain non-GAAP measures.

A reconciliation of these measures to the most directly comparable GAAP measures can be found in the second quarter earnings press release, available on the company's investor relations website at ir.hioscar.com. We have not provided a quantitative reconciliation of estimated full-year 2026 adjusted EBITDA as described on this call to GAAP net income, because Oscar is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. With that, I will turn the call over to our CEO, Mark Bertolini.

Good morning. Thank you, Chris, and thank you all for joining us. Today, Oscar Health announced strong second quarter 2026 results with significant year-over-year improvement across all core metrics. Oscar delivered record profitability for the first half of 2026, generating $1.1 billion in earnings from operations, $1 billion in net income. In the second quarter, revenue grew 70% year-over-year to $4.9 billion. MLR improved 12 points to 79.2% year-over-year, with utilization moderately favorable to our expectations. Our SG&A expense ratio improved 450 basis points to a record low of 14.2%, reflecting disciplined expense management, technology-driven efficiencies, and continuing operating leverage. Earnings from operations increased by $619 million year-over-year to $389 million. Our performance demonstrates superior execution against the fundamentals of our strategy. Disciplined pricing, differentiated consumer products, and a scalable technology platform work together to fuel individual market growth.

We are raising our full year 2026 outlook based on the strength of our operating performance and our model built for long-term profitable growth. Now I will share our view on trends in the individual market, I'll dive into our business highlights. The individual market is vital to our nation's economy and was built for the labor market now taking shape. The market is expanding coverage for people outside of traditional employer plans, including a growing number of entrepreneurs, gig workers, part-time employees, and early retirees. Over the past decade, the market drove down the uninsured rate and prevented billions in uncompensated care. Over the next decade, its role will only grow as people move between full-time jobs, contract work, and retirement at twice the rate of prior generations. AI will accelerate that shift.

Our nation's leaders should promote policies that put the next generation of American workers in charge of choosing their healthcare. Oscar is leading the charge with portable coverage and experiences that meet the expectations of the people powering our economy. The future of American healthcare depends on a durable individual market, 2026 trends reinforce our conviction in its long-term strength. Total ACA membership stands at 19.2 million, down 12% year-over-year, tracking favorable to our pricing assumptions and reflecting continued consumer demand. Wakely's first claim-based report of 2026 market morbidity is also favorable to our expectations, suggesting potential upside to our outlook. We expect further market contraction, remain cautious with only four months of morbidity data, we expect both trends to remain favorable to our pricing assumptions. Looking ahead to 2027, we anticipate a rational pricing environment with rates that reflect the effects of CMS's program integrity efforts.

Now I will review our business highlights. Oscar ended the second quarter with 2.96 million members, up 46% year-over-year. Membership reflects above-market open enrollment growth and solid retention. Our consumer products designed around clinical, lifestyle, and cultural needs are driving higher member satisfaction, we continue to launch features that help members find high-value care and manage costs. We are also building momentum in ICRA with steady growth and demand from small businesses in the healthcare and professional services industries. Our technology continues to differentiate the member experience. This quarter, we piloted a radiology program with our Oswald agent. Oswald uses our members' claims history and clinical interactions to initiate their next step for care. It confirms coverage, guides members to high-quality providers based on cost, location, and availability, shows estimated savings from switching facilities.

One in four members choose Oswald's recommended site of care and saves $75 on average per appointment. We will expand this capability to additional procedures using care standards from leading centers of excellence. AI is powering operations across benefits, billing, claims, clinical care, and member support. Our claims platform delivers 98.7% first pass accuracy and processes most claims in under 48 hours. We are also deploying AI and medical economics programs to identify cost signals early and act before they become trends. Pharmacy is a clear example. Our models analyze pharmacy activity alongside utilization, provider, broker, and member data to flag outliers. Root cause analysis identifies the drivers, so our teams respond with precision. We expect these capabilities to generate tens of millions of dollars in annual savings. Oscar's technology is transforming the economics of the business.

The team is embedding intelligence into all core workflows across our platform, making it smarter and more efficient with every deployment. As membership grows, we can serve more members without adding headcount at the same rate. That scale fuels operating leverage, expands margins, and bends the medical cost trend for us and for our members. In summary, Oscar delivered a strong second quarter and record profitability in the first half of 2026. The fundamentals of the business are strong. Our performance was favorable to plan, and our improved 2026 outlook reflects that momentum. We are entering the second half of the year from a position of strength with the technology, scale, and operating discipline to deliver profitable growth. The ACA is the only healthcare market where private insurers compete directly for the consumer. Our job is to give consumers real choices, real price transparency, and reward what they value.

When that happens, the competitive market does what it does best. It drives out inefficiency, accelerates innovation, and lowers costs. Oscar is defining that future. We are replacing one-size-fits-all coverage with solutions that make healthcare as easy to use as any other consumer product. Our results reflect the team's focused execution across our products, platform, and strategy. We will outline how we translate that performance into durable growth and long-term value at our Investor Day on September 16. I will now turn the call over to Scott.

Scott? Thank you, Mark, and good morning, everyone.

This morning, we reported strong second quarter results, and we are raising our full year 2026 outlook to reflect our operating performance. Through the first half of the year, we delivered record profitability of approximately $1 billion of net income, or $3.16 per diluted share. The fundamentals of the business are strong, and our results are favorable to our plan. Let me now turn to details on second quarter performance. We ended the second quarter with 2.96 million effectuated members, an increase of 46% year-over-year, driven by above-market growth during open enrollment and solid retention. Total revenue was $4.9 billion, an increase of 70% year-over-year, driven by higher membership and rate increases, partially offset by higher risk adjustment payable accrual. The second quarter medical loss ratio was 79.2%, an improvement of nearly 12 points year-over-year.

Recall that in the prior year period, we recorded the entire first half impact of the 2025 risk adjustment true-up in the second quarter. The year-over-year MLR improvement was driven by our disciplined pricing strategy and a strong current year performance compared to the market reset experienced a year ago. We also benefited from favorable prior period reserve development in the quarter. I'll spend a moment on risk adjustment. In the second quarter, we received the final 2025 CMS risk adjustment report, which was approximately $160 million favorable to our first quarter accruals and fully recognized in the quarter. We also received the first risk adjustment report for 2026, covering claims through April, which showed market morbidity tracking quite favorable to both our pricing and first quarter accruals.