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Good morning, everyone. My name is Ellie, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Oscar Health First Quarter 2025 Earnings Conference Call. At this time, after the speaker's prepared remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I will now like to turn the call over to Chris Potochar, Vice President of Treasury and Investor Relations.

Good morning, everyone. Thank you for joining us for our first quarter 2025 earnings call. Mark Bertolini, Oscar Health's Chief Executive Officer; and Scott Blackley, Oscar'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 31, 2024, filed with the SEC and other filings with the SEC, including our quarterly report on Form 10-Q for the quarterly period ended March 31, 2025, to be filed with the SEC. Such forward-looking statements are based on 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 first 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 2025 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 would like to turn the call over to our CEO, Mark Bertolini.

Good morning. Thank you, Chris and thank you, all for joining us. Today, Oscar reported strong first quarter results. Our positive results were driven by continued top line growth, bottom line performance and year-over-year improvements across nearly all core metrics. Oscar reported total revenue of $3 billion in the quarter, a 42% increase year-over-year. We also generated net income of approximately $275 million, a significant improvement of $98 million over the prior year period. Earnings from operations grew by $112 million to $297 million, and we improved our operating margin by 110 basis points year-over-year to 9.8%. MLR increased 120 basis points year-over-year to 75.4%, primarily due to our risk adjustment true up for 2024. We also drove greater efficiency in the business, and reported the lowest SG&A ratio in the company's history, at 15.8%, a 260 basis point improvement year-over-year. Our first quarter performance demonstrates the strength of our strategic plan, and we expect meaningful margin expansion this year. Scott will review our first quarter results in a few moments. First, I will cover key business highlights. Oscar's first quarter results put us on a solid path for 2025. We closed the quarter with approximately 2 million effectuated members, a 41% increase year-over-year. Our solid retention and new membership growth reflect the value of Oscar's innovative plan designs, and superior member experience. Our condition focused plans are strong performers in the book. We are also seeing high levels of digital engagement across our IFP and ICRA membership, allowing us to more effectively manage member care. Oscar is deepening our market presence with new partnerships that give members more value added services. In the quarter, we launched Oscar Community Resources with Find Help, a social care network. The program connects members with local food, housing, transportation and other services beyond medical care that impact health. These resources will ultimately support our clinical intervention, and case management programs to lower spend, and improve clinical outcomes. Our technology is also further optimizing our operations and improving the member experience. The team recently launched a free live chat feature for Oscar, Virtual Urgent Care, which collects patient symptoms and severity, before provider engagement. Use of the new capability decreased member response times by 90%, and drove a 28% boost in provider efficiency. Similarly, our new AI tool for care guides, is more quickly addressing member needs. We continue to build a scalable and efficient technology infrastructure that, positions us to grow and differentiate the Oscar experience. Before I close, I want to talk about the current policy, environment and attention on the individual market. CMS's proposed program integrity initiatives targeting fraud, waste and abuse, are positive for the long term sustainability of the market. However, rules such as the shortened enrollment windows will constrain Americans ability to shop. Amid many enrollment changes for 2026. Many individuals are already facing meaningful premium increases. If the enhanced premium tax credits expire, they deserve adequate time to shop for plans that meet their needs. Oscar advocates for constructive solutions that strengthen the individual market. We are engaged with federal and state policymakers on both sides of the aisle. The individual market is a cornerstone of American healthcare, driving a record low uninsured rate, and a cost trend below CPI for the last several years. Policymakers recognize the market's role in our economy, and the gap it fills for their hard working constituents. Oscar has been in this business since the ACA's inception, and we look forward to building an even larger individual market for individuals, families and the business community. In summary, Oscar is off to a solid start in 2025. Our disciplined execution, strong top line growth and margin expansion, position us to achieve our 2025 targets. Oscar has the talent, technology and products to continue scaling a profitable business. Oscar is one of the fastest growing players in the individual insurance market. We are creating a marketplace that meets consumer and employer expectations for choice, quality and affordability. Our team's ability to stay responsive to stakeholder needs, and consistently execute in dynamic markets will continue to unlock new pathways for growth. Before I hand the call over to Scott, I want to thank the Oscar team for their dedication and commitment to our members and partners. We look forward to delivering strong results in 2025. Scott?

Thank you, Mark, and good morning everyone. We delivered strong financial results in the first quarter in line with our expectations. We continue to demonstrate consistent strong execution, and reported approximately $275 million of net income in the first quarter or $0.92 per diluted share. Total revenue increased 42% year-over-year to $3 billion in the first quarter driven by higher membership. We ended the quarter with more than 2 million effectuated members, an increase of 41% year-over-year and 22% sequentially. Membership growth was driven by strong retention, above market growth during open enrollment and SEP member additions. We had approximately 1.9 million paid members at the end of the first quarter. As expected, we experienced minimal churn from members who failed to file and reconcile. The first quarter medical loss ratio was 75.4%, and an increase of 120 basis points year-over-year. The first quarter MLR was impacted by $31 million of unfavorable prior period development, as an increase to our 2024 risk adjustment payable, was partially offset by favorable claims run out, from the prior year and a CSR recovery. On a year-over-year basis, the impact was approximately 60 basis points. Turning to utilization in the first quarter, we saw higher inpatient utilization that was partially offset by favorable pharmacy. Outpatient and professional were largely in line with our expectations. Switching to administrative costs, we continue to deliver meaningful improvement in the expense ratio. The first quarter SG&A expense ratio improved by 260 basis points year-over-year to 15.8%, the lowest quarterly SG&A expense ratio in the company's history. The year-over-year improvement, was driven by fixed cost leverage, lower exchange fee rates and variable cost efficiencies. Our strong first quarter results position us to deliver meaningful margin expansion this year. Earnings from operations was $297 million, a significant $112 million increase year-over-year. Operating margin was 9.8%, 110 basis point increase year-over-year. Net income was approximately $275 million, a significant $98 million increase year-over-year. Adjusted EBITDA was $329 million in the quarter, also substantially improved by approximately $110 million year-over-year. Shifting to the balance sheet, our capital position remains very strong. We ended the first quarter with approximately $4.9 billion of cash and investments, including $150 million of cash investments at the parent. As of March 31, 2025, our insurance subsidiaries had approximately $1.5 billion of capital and surplus, including $907 million of excess capital, which was driven by our strong operating performance. Turning now to 2025 full year guidance, based on first quarter results, we are reaffirming all of our full year guidance metrics. We continue to expect total revenue in the range of $11.2 billion to $11.3 billion in 2025. While membership at quarter end exceeded our expectations, our outlook now contemplates the end of the monthly SEP, for those at or below 150% of FPL. Collectively, these updates resulted in no change to our full year revenue outlook. Turning to medical loss ratio, we continue to expect the MLR in the range of 80.7% to 81.7%. On administrative expenses, we also continue to expect an SG&A expense ratio in the range of 17.6% to 18.1%. We continue to expect earnings from operations in the range of $225 million to $275 million. As a reminder, we would expect adjusted EBITDA, to be roughly $140 million higher than earnings from operations. In closing, we had a strong start to the year. We continue to execute against our strategic plan, and we're well positioned to achieve net income, profitability and margin expansion again this year. With that, I will turn the call over to the operator for the Q&A portion of our call.

Thank you. [Operator Instructions] Your first question comes from the line of John Ransom of Raymond James. Your line is open.

Hello?

John, do you have a question?

Oh, sorry, I didn't think I was in the queue. They told me I wasn't in the queue. Yes, just cleaning up a little bit, the numbers. What - the 2 million membership you ended the quarter with, how should we think about that number for the second quarter, and for the rest of the year?

Yes, good morning. Membership in the first quarter had a couple dynamics, so first of all we saw really strong payment rates, which was great, that exceeded our expectation. And then SEP in general was quite strong as well. We ended the quarter with more members than what we had anticipated. Looking forward, I would expect that - our. We'll see membership trend up in the first half of the year. We're now expecting that with the proposal to end the continuous SEP, for individuals that are at or below 150% of the federal poverty level, that we would see membership then trend down in the back half of the year. And so net-net, I end up kind of in the same place as what we were expecting, when we gave our guidance at the beginning of the year.

So in other words, 1.8 million by the end of the year, but trending up and then trending back down?

Yes, I think that's, about where we would expect to finish the year.

Okay. Thank you.

[Operator Instructions] Your next question comes from the line of Stephen Baxter of Wells Fargo. Your line is now open.

Hi, good morning, thanks for the question. Just wanted to ask first on the grace period membership. I think it would be really helpful, to potentially get some context around, as we try to think about what percentage of your membership that represented during the quarter, and what that might look like for maybe what we'd consider maybe a more recent period, kind of normalized number. Just we can think about how much larger that is, and then obviously, to the extent that, that's a more contribution positive part of your book. Maybe you could help us just think about how that kind of works its way into the MLR seasonality for the year. And then secondarily, just wanted to get an update on risk adjustment. I think you provided a net impact in the press release in terms of the 2024 true up. Maybe you could also provide us just the risk adjustment item in isolation, and then just remind us how that's informing, how you're thinking about 2025 risk adjustment? Thank you.

Okay. Why don't, I'll start with the membership and look, I think that what we've seen is, on grace, as you start the year, you have a portion of that membership, which is getting auto renewed, and we would expect to see those people end their grace period as of April 1, which is why we kind of shared the difference between effectuated and paid membership. We've seen paids really perform well and I would expect that in the second quarter, we would see the gap between paids and effectuated, or between effectuated and paids, to be a normalized level. And frankly it was closing in on that as we ended the first quarter. With respect to what happens on a go forward basis, I think we would expect to see normal patterns in terms of the percentage of our members that are in grace. Shifting towards the, what happened with prior period development. So PPD was 30 million net unfavorable in the quarter. The increase to the risk adjustment was $92 million, which was offset by favorable claims run out, with the other factors mostly offsetting. And that was about 60 basis points of the increase in the year over year MLR. The rest of the increase in the year-over-year MLR was mixed related. So those are the drivers. Steve.

Your next question comes from the line of Jon Yong of UBS. Your line is now open.

Thanks for the question here. Just on new versus retired members, is there anything of note between the utilization patterns between the two and on inpatient, assuming that may have been fluid driven in your comments there anything out, anything to parse out there and comment on. And then on the better than I expected pharmacy, that's a little different than kind of, I think just generally and broadly the comments we've heard across space. Anything of note there? Thanks.

Yes, I would say that on utilization, we're seeing a continuation of some of the trends that we saw at the end of last year, which is higher inpatient utilization with favorable pharmacy. Overall utilization was above our expectations, and we didn't see any specific driver of conditions that really was driving inpatient. We had some flu, but nothing that would be outsized. Overall at this point in the year, we're at about 15% of claims completion. So it's pretty early for us to draw any conclusions about utilization. Utilization I would say that we are expecting that, the elevated utilization is going to mostly be offset, by risk adjustment. The other thing I would say, is that we always start the year with a list of actionable initiatives that we would expect to be able to pull to decrease medical costs. And we don't include those levers in our guidance. And we're actioning on those initiatives at this point, to offset any potential headwinds from the increased utilization that we've seen.

Great. If I may ask, just one of your competitors is exiting the exchanges in '26. Kind of how you think about the opportunities and risk around this, and what it may mean for you? Thanks.

Hi, Mark here. We view this as both sad and as an opportunity. We hate when competition is lessened in the marketplace. We believe that's appropriate. The more people we have in, the more opportunities for people to find the product that works for them. However, in this circumstance, we have fairly significant overlap with this competitor. And we view that as an opportunity come 01/01/26, to help people maintain their coverage, at a level of pricing that we find disciplined and competitive in the market.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Joanna Gajuk of Bank of America. Your line is now open.

Hi, good morning. Thanks so much for taking the question. So a couple of, I guess those high level questions on the regulatory environment. So first you alluded to this proposal that came out in early March. It would include a couple of these different items in there. So any kind of thoughts, which of these provisions would be finalized? Sounds like you don't agree with most of them. And I guess, because all in and all these items together CMS had estimated would have reduced enrollment on exchanges by 3% to 9%. So it could be, somewhat material, right. And then related topic to that, any updated thoughts on people in Congress then on extending the enhanced subsidies on exchanges? And can you remind us the percentage of your exchange book that, is fully subsidized? Thank you.

Thanks, Joanna. I'll talk first to the enrollment changes that were made, I want to remind everybody that a number of these programs were on integrity, were put in midway through 2024. So we've seen some of the effect of that already. As we've reviewed and commented on the terms of the proposed regulation, we believe it's really important that we support CMS's effort to strengthen the integrity of the ACA, and foster stable risk pool. So we want a market we can trust, where enrollments are real and that we're taking care of real people. So we're fine with all of that. The one issue that I mentioned during my comments, is that the shortened enrollment period does not allow for enough shopping, for individuals and brokers will have to both comply, with these regulations and in the term of this last question around a competitor, find a new place to get coverage. And so, we think they should really seriously consider extending those enrollment periods. Scott, any comments on the risk?

I think that with respect to, which of these things we expect to go forward, we - as I mentioned in my prepared remarks in one of the questions, we do expect that they will limit the continuous SEP enrollment in 2025. That's what we're planning for in terms of impact this year. Looking at the remainder of the impacts, I think that there's a lot of overlap, between what may happen with the new rule, and what may happen with subsidies. So, those are all kind of blended together. So we're not going to, at this point, make any comments about how 2026 may run forward. And then your question with respect to what portion of our book is fully subsidized? I would say that Oscar has always had a significant portion of our membership that receives some, or full subsidized amounts of premiums.

Great, thank you.

Your next question comes from the line of Josh Raskin of Nephron Research. Your line is now open.

Hi. Thanks. Good morning. Why don't just follow-up on the competitor exits? I'm just curious, when you see this, historically, are those generally good members to attract, meaning, medical management versus risk adjustment? And then how do those large exits impact your estimates of risk adjustment? And then my bigger picture question is just, I'd be curious to get any progress on the ICRA market to sort of, in general, just sort of environmental progress and are you talking to large employers even about 2026 and maybe where are we in that cycle?

Great. Thanks, Josh. First and foremost, let me talk a little bit about ICRA. On the ICRA front, we believe that there is increased momentum. We're starting to see larger groups in the middle market space starting to get interested and talk to us about the opportunity. We have introduced through our House Ways and Means Committee testimony, the idea of this tax credit issue that needs to make the level playing field for employers. And we believe that that has some opportunity, to get pushed through on this next bill. So we believe once those kind of conditions are in place that, the momentum will continue to build. We have talked to large employers. I was in a room with large employers earlier this week, where there's a lot of interest expressed. I was invited to speak about my comments on CNBC about, the best way to solve healthcare problems is to eliminate the employer sponsored health insurance market. And I gave the reasoning behind all of that, which we've shared with you before, Josh. And we believe that that's an opportunity. It'll be slower, because there's always resistance in these staffs. But we think that continues to be a very important market. And then on your first question, I lost your point. If you could just sort of remind me quickly.

Our competitor exits or when you get members from other plans that have exited markets, is that good news and risk adjustment and yes…?

Yes, well, the good thing is, is that risk adjustment levels are playing field for everybody at the end of the year. So it's how you go into the market priced. And again, we don't underwrite these markets. So as long as we believe we have disciplined pricing in the marketplace, and the risk adjustment continues to work effectively the way it has, that we'll be fine in those markets and growing the membership. The reason that this competitor is exiting, more importantly is that they got behind on their margin, and behind on their pricing. And it's really hard to catch up unless you price way up, which other competitors have done in prior years. But in this instance, they tried to move up slowly, didn't get all the way there and as a result they need to exit the market. And we think that's their pricing problem, not ours. Again, with risk adjustment, we think we're fine and generally if people are, it'll be a mix that is consistent with the marketplace. All right, each market individually.

Your next question comes from the line of Jessica Tassan of Piper Sandler. Your line is now open.

Hi, thanks for taking the question. I just wanted to start with is your expectation for 2025, still that risk adjustment payable is a similar percent of premiums, as it was in 2024? And if not, can you give us a sense of any updated expectations on the risk adjustment as percent of premiums?

Yes, thanks, Jess. Why don't I make a couple comments about seasonality for a couple different components of the book. So with respect to risk adjustment, it's no significant adjustment at this point in time. Although, if we see elevated claims continue, that would tend to push down the risk adjustment as a percentage of revenue. So we'll have to see how that plays out on MLR seasonality. I would expect that MLR seasonality will be a little bit flatter in the second, third and fourth quarter than what we've seen historically. So, a step up in the second quarter with the fourth quarter being the highest. And then with respect to SG&A seasonality, we still expect to see gradual increases in the SG&A expense ratio each quarter.

Got it. That's helpful. And then just, I guess thinking about next year and the several alternative options. Can you give us a sense of the margin profile of bronze plans, both MLR and then just interested in the SG&A as a percent of premiums there, and whether you have an opportunity to kind of maintain flat margins, despite the potential for downward mix shift? Thanks.

Jess. I would say that we're not yet going to be giving any information about 2026. I would say is we're working on our pricing, where our intent is to continue to grow margin for this company. And so, we'll be looking at a pricing strategy that'll have disciplined pricing that'll allow us to, continue to take share and improve margins. So that's what we're focused on for '26.

And I would add that there's relatively high overlap between the enhanced premium tax credits, and fraudulent and the integrity regulations that they put in place. So depending on how those both settle out, what the details of each of them are is going to largely depend on what the mix is going to do, relative to pricing versus morbidity.

Got it. Thank you.

Your next question comes from the line of Michael Ha of Baird. Your line is now open.

All right, thank you. And congratulations on the quarter historic G&A print achieving 16% two years early before '27. With that said, I was wondering if you could elaborate more on the drivers of your G&A performance. How much of the beat would you attribute to fixed cost leverage versus the lower exchange fee rate, versus the variable cost efficiencies? I think Jess asked it. But in terms of cadence and seasonality of G&A throughout the remainder of this year, just given how strong the print is. I just trying to understand how durable this level of G&A is going forward. And again the source of the beat as well? Thank you.

Yes, I appreciate the question. And in terms of, you know the just kind of stepping back, SG&A improved, the ratio improved year-over-year by about 260 basis points. So a big step forward. And our cost trend honestly is just a great story. Our tech is playing a big part of driving the performance, and we've been, very focused and disciplined about expense management both on the fixed side, and the variable side. And those are the primary drivers of the year-over-year improvement. Just to give you some specifics, fixed cost leverage is about 40% of the improvement. Improvements in our variable cost structure is another, let's call that 15%. And then the remainder is, improvements in broker taxes and fees. We did see some lower fees this year, and then the remainder is RA geography. So the - a very significant portion of the year-over-year improvement is durable. And as I mentioned on the last question, we do expect to see from this point that, we would see some quarterly increases in SG&A going forward.

And Michael, as we said before, when we put together our operating plan, we have a number of different levers we pull, as we go through the year. So we're already reacting to '26, and setting the stage for '26 depending on how it all pans out. And we're making those moves ahead of time, so that we're prepared to be competitive, and to continue our move forward in enhancing margin for the business.

Great, thank you. And my follow-up question, so if I take a step back and think about Oscar's valuation over the past few months, I think it's clear investors are pricing in the worst case scenario, millions of fraudulent lies in the marketplace. But with all the evidence and proof just continuing to stack. Number one, being required attestations helping to address the ghost member issue. Number two, the non-payment of premiums now reflected in 1Q, effectuated enrollment. Number three, CMS even gave us the two-year FTR members at risk nationally. With all these new data points, could you refresh us on your latest thoughts here, and I guess your level of conviction that, what we're in is no longer a 4 million or 5 million fraudulent member problem. And also how do you view the catalyst path going forward, in terms of what will it take to fully dispel disprove, this debate once and for all? Thank you.

We're not going to size the government's estimate, we're doing our own homework. As we get ready for '26, we'll have a very clear view on it. But I can tell you that we are not backing off on our long-term targets. We continue to work as an organization to make those happen. We believe the market will continue to be competitive, and we believe the market will continue to be strong. We may have a pricing issue as we get into the 2026 market, versus where we've been, which is below CPI at or below CPI largely, because there's a high single-digit impact of both fraudulent, of both integrity regulations and enhanced premium credits. That will be the basis before we apply trend going forward. So that could be a major change. It would have an impact. We believe that now that we sit at 8% uninsured that we could get back into double-digits, if that should happen. But we're watching all of that happen in front of us, and until the regs are really clear and specific, we're not going to make any estimates against '26.

Our final question for today comes from the line of Dave Windley of Jefferies. Your line is now open.

Hi, thanks for taking my question. Mark, you may have obviated my question with your last point, but I was going to ask about the proposal to refund CSRs, and what your thoughts are around that. Is that positive relative to integrity, and how much disruption to kind of the pricing structure of second lowest silver, et cetera. If the government kind of steps in and refunds CSRs? Thanks.

David, look, I would say that with respect to CSR and silver loading. I think practically speaking that's a big undertaking for plans, to try to put into place the processes and infrastructure, and the same for the government in terms of their side. So we're obviously not a fan of that going into place for '26, because we think it's going to take, a fair amount of process to get that set up. And in theory that neutral, we should all be neutral to that switch, and we'll just have to see how that plays out. But again, we think it's a fairly big undertaking. So we will be recommending that the government not move forward with that in 2026.

Got it. And to your point, we're in May, so bids aren't that far away. A lot of undertaking for a couple of months, worth of time, I guess is the added point?

Yes.

Thanks for taking my question.