Oscar Health (OSCR) 9 May 232023 Q1 Earnings call transcript

Good afternoon. My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to Oscar Health 2023 First Quarter Earnings Conference Call.

[Operator Instructions]. I would now like to turn the conference over to Ms. of and President Relations. Vice Miller, Corporate Investor Development Cornelia Please go ahead.

discuss good and XXXX you we'll to in profitability. evening, our for execution you, year, earnings momentum and the joining where quarter Thank path first everyone. Thank around early our us call our for

Chief President and Mark by they're Chief Oscar's Mario and of host will Schlosser, Sid Officer, Oscar's Officer this Chief Technology. joined Bertolini, Sankaran, Oscar's Executive Financial evening's call,

at through available This details on ir.hioscar.com. release, call website be Investor additional Full are Relations accessed our commentary our which can in and results website. found our Investor of Relations also earnings can management be our

annual Private Oscar the forward Act various those of Securities looking makes that differ important future the XXXX. statements Actual remarks XX-K with results including including our to discussed meaning constitute in from those Harbor And ended the SEC, period filings the our on the the with within with Safe result XXXX by filed may those indicated our XXXX forward annual a ended Form of March quarterly factors the other Litigation Any of SEC. quarterly be report for XX, filed materially looking XX, the Reform about under December XX or SEC. for as Q statements provisions Form on report period

on based may today. of as statements Oscar subsequent expectations looking to estimates cause developments current change. events that forward and are Such anticipates

can found company's which available most quarter will the to reconciliation directly looking future, in A at specifically of to the to we XXXX do measures. The While these press obligation the elect comparable these also GAAP website. certain point some disclaim company may refer on the in the update measures call be statements non-GAAP release, to any IR is forward first so. measures

over the CEO, like With to turn call I that, would our to Mark Bertolini.

and why by to and and care have I virtualization I for evening, spent mission higher our I joined advocating would digitization my based restating Good of company's Cornelia. you, more like industry. career Oscar. healthcare levels everyone. start Thank consumerism, increased the within value

is this that believe our these is for Between come. the leverage I stack innovative but drive MPS, be platform can right the to our technology not positioned disruptor has Oscar to to change. a single industry company of high collection only uniquely that the years assets trends, and

deep modern my doing at deliver. understand We have the of energy the getting to the faster for infrastructure. see and our weeks than ability clear the morale to our a first is competitors team across and five size, The is spent excited know our to have I business move the Oscar high given dives win right to people the culture very to company and I and and company. culture.

total technology in continue our Three, business need company of improve business for to adjusted more goal to My company Two, insurance and the the our we achieve capabilities in profitability line bring of and will believe through our To profitability, remain company performance profitability enhance early to that one, to spend and co you value continue the the still targets. today. XXXX. against for high whole business manage we priorities the with in achieve profitability +Oscar our market. year, XXXX. target I profitability executing level well insurance is are hear EBITDA total in the will as It but

but only on within well of reach, Based priorities we shared way view, them. achieving the just three are all my to on not our current are I

already I'll moment. identified flight in in this we even a of As a it relates opportunities. have more detail in to lot profitability, on activities have touch greater and positive

to numbers. Turning the

executing are of from the this and results against our targets. our profitability saw fundamentals the quarter, are and you plan As we business sound

We leading industry NPS continue than to increased to members more XX. our million and X QX, in serve

points and XXX ratio loss than to year-over-year medical XX% more utilization was with improved Our basis our in plan. line

achieved combined of of points improvement an insurance a quarter ratio profitability the basis XXX with first XX% Our company year-over-year. in

company overall EBITDA total of adjusted $XX our profitability Importantly, the for reflects million quarter.

a seasonality, adjusted milestone an While we it our expect trend this will that EBITDA is us. course year, is downwards of still function over the of important results the for

for of calendar Next the provide year. targeting be year, are metric for review in full a few more moments. a Sid our to we will profitable results this detailed

scale on Oscar than sizable growth. is a could ensuring place year A we our a that a increased and our we were operations in in absorbing focused very ago. handle ago, were different year increase

we focused progress, to able results our at the and of the implementing to been members and of advancing initiatives to on capabilities shift our show but have aimed serve improving technology accelerate. The series Today, quarter to of are attention more efficiency still a opportunities operations. see the our best I

the see sculpting. out. core into buckets cost laid improving the levers that addressing total biggest previously management Regarding focusing our care, of two, efficiency One, insurance profitability, three, and falling I on company administrative

three technology to with goals. our achieve opportunities us value to position these our the combination well The objectives of enhance coupled of our

savings the with total payment from vendor network including strong Starting performance integrity, of several optimization cost across seeing contracts. We're care. areas and

performance for against areas However, our improved we I opportunities underperforming in where see potential. pockets of are financial

bottom payers Specifically, where many to for I opportunities processes the drive see there line. scale traditional are

As partner. and an scale example, has processes improvements driven in with PBM increased our pharmacy our material

had activities to-date, as help I merely care view While time. of to these total cost starting the reduce progress point over we've great

Moving to efficiency. administrative cost

the at this solidified efficiency in year. have We the majority our of efforts point

executed For year. our the example, expect throughout successfully continue and to distribution these enrollment savings open during optimization efforts we

scale also benefits in cost We're achieving our structure.

risk savings a adjustment negotiated multi-year agreement with us realize recently vendor, large we a example, new another forward. As significant allowing to going

efficiency. that X% common across satisfaction technology to of series features to instant has having Recently, Our automation ratings. customer technology impact reduced service inbound by retaining volume our we while questions. answers out also members XX% consistent rolled on is interactive an provide a for This channels

a portfolio sustainability the sculpting improve us tool exit of Finally, in over has our we profitability key margins markets. improving remains underperforming company help The and to managing time. portfolio been disciplined as its

We're the year decided the reenter to internal have as planned has intend our market XXXX individual and to met product the participation pause targets. announcing plan We today strategy in California in in to reshape our our we not market future. that the preparation offerings for

+Oscar. now to Turning

a can you the our having As impact see quarter on technology clearly first in our results, solid is business. positive

focused are for automation builder and on company, insurance tool. continuing to engagement we campaign the While and we is +Oscar's develop are build profitability which

that last year. we has shows with announced provider an Since power live that and with report officially builder our approximately Spanish engagement client our which the speakers launch, communication. to led happy XX% I'm are rate client speakers, engagement seen with a of rate first XX% campaign we English

commercial, We're thousands also serves across another of that patients group Medicaid hundreds builder Advantage signing segments. excited customer, about large campaign of care and primary a based Medicare value

and We several streamline expect tools close Campaign will caps next this the group just operations. builder partner example bring and to to one of is with affiliated over market drive years. we that PCPs, to utilization technology care to process owned primary the

technology natural but context, I models language explaining paid. stack AI. claim provider is language models good the got which are great only a on to large language produces also impact. Given file at proprietary a believe Large are data. if has the our thoughts our system member if is models But large output. language configuration if that coherent extracting We models pilots claim market good for, but Large are specialty language deploying configurable. been only benefit structured at good in your share provider a how into and system In with at for many system easily is translating contracts looking claim the some a only sizable tests, want system

large are We built language having enable data healthcare. and in offering. every us that tech competitive become our of for a aspect to a We proprietary a models believe stack, can across lake will +Oscar us unique this including advantage modern use

specifically, proposed As to through Medicaid coverage new the to due HRAs. future, employers recipients continue DACA in of marketplace to role shift the tailwinds individual the the coverage expand see we the we for many of continued to the redeterminations, and look resumption ACA, to growth market

marketplace industry consumer NPS from leading engagement. and should growth individual the with our Oscar benefit

products occurred with see this manages That While the market insurance, believe innovative I in our well. highly I groups space. space individualized opportunities are technology partnerships applicable in as to well. the and most experience, ACA the form Based is I interesting provider participate likeminded markets individualized my know other to on to

turn first results. quarter that, it on insight like to our to I'd over additional provide Sid With to

Thanks, evening, Mark, and everyone. good

our pricing with stable Our we're consistent We executing for first solid million large ended a members, that with was the across business show results against book. plan. our well which quarter fundamentals approximately one quarter the lease strategy and

strategy This year, mix mentioned, our of is population. portfolio on seen focused we a ever higher we've towards our As proportion members we than have historically. previously pricing shifting ACA the renewing and average membership

a have will more a morbidity mix from a% with higher Similar this result therefore very risk modest a expect lower to as we trends of premiums. a subsidized transfer year, saw last membership to silver also shift bronze. population updated We we in and

this few in shift with detail from We greater and the are progress, a discuss mix this I'll pleased in moments. impact

book. rate expected, modestly billion single across driven average by and to increase our grew $X.X our digit direct assumed premiums the high As on

by ceded projected the before lower factor X% year-over-year premiums grew transfer. driven same as to well a risk $X.X billion Our as reinsurance

care Turning XXX more cost actions points of our ratio XX.X% year-over-year disciplined and initiatives. basis medical to to than our medical pricing costs, by improved loss total driven

above favorable Overall accounting note population. year-on-year year. the claims is very seeing a claims offsetting early spike slightly decreases mix at utilization with while Partially this it's last trending and for the been line specific in year. pharmacy expectations XXXX outpatient of our of but professional categories, modestly we're is this trends in inpatient to in our the Within in have point year,

on expect our the population the risk will With MLR less less throughout will we to have the scores, our given denominator of transfer we this Given [indiscernible], the numerator but rise expect morbidity we not This impact expected as year. overall the transfer seasonality, stated, steeply year, an the risk albeit and regards dollars. the dynamics. underwriting of risk

and ratio vendor year-on-year to XX.X%, including efficiency distribution driven Moving company insurance savings. basis against, expense points XXX executed optimization successfully the administrative by administrative already we've initiatives to improved our admin costs,

our see for highest as quarter We QX admin this expense ratio the year.

of quarter XXX profitability insurance and combined basis XX.X% points the company quarter. in the improved by reflected year-over-year ratio for Our

are our on we believe track adjusted million million. EBITDA $XXX target $XX today, to results full-year to Based achieve our we on company of insurance

administrative year-over-year as well as same meaningfully more than points improved expense ratio adjusted Our that net due expense XX.X% higher basis to factors income. ratio company the our XXX of improved insurance investment

EBITDA adjusted an with we very pleased report profitability million above $XX expectations. and in achieved of the quarter of year-over-year to $XX our company profitability million I'm total first improvement

The the share key factors rates. reduced interest better that operating reinsurance insurance from income and drove include investment the fees, quota performance higher year-over-year increased co, of improvement

We for expect EBITDA QX represents this medical peak given year and our administrative expense seasonality. profitability adjusted

the $X.X at balance $XXX quarter. the at billion to cash and end sheet, parent. Shifting of investments of and cash investments the of the we had million Including

As throughout a recur not the in reminder, as includes will parent items one-time cash quarter first the such year. bonuses that

expect cash to XXXX. from back sharing expect payments parent also the that second to in half occur We tax of we the

and capital us That positions time. to and Our to million our capital of subsidiaries well position including had excess surplus capital. growth additional approximately optimize us million allows opportunities $XXX future of over fund capital excess $XXX

first our million. MLR range the guidance $XX we million to results, adjusted of and of including range our EBITDA metrics, $XXX of on our to reaffirming year XX% Based XX% quarter loss are full all

first sets our in are profitability year quarter expansion and our closing, plan and encouraged profitability insurance margin for remain achieve year. us In total in up to company further ability confident company execute by years believe for that this in well the the our we come. We to to against next performance

with ACA service our strong be in to customer additional value areas years to combination Oscar excited in for the satisfaction year. ahead. and pricing we disciplined TAM equates and expand player leading of creation brand next to our which has tailwinds the market, We're along The the with expect strong growth

With that, to call over for let final the comments. Mark me turn

progress continue for a our ours the mission future welcoming by of impact. group for advancing we've Thank do driving you, ESG Last Sid. our the communities. and within our employees A requires inaugural the real proud shared report we and published motivated and equitable I the important towards where health serving We're organization members. and build work want to making to we've to a strategies initiatives developed month, been iterate sustainable Oscar more in me equity. and of special we like our people world they thank

in company that have in horizon strength believe market. I'm we road that XXXX. from against and about summary, profitability execute start our goals ahead is map mix the excited win the with the a to confident good optimistic In and a the The of the of our operating right journey future. off in and and position are on experience we tools to place right to we for

turn it let's to operator over that, the for Q&A. With

[Operator sir. you, Baxter, Thank Instructions]. Fargo. Wells Stephen

Hi. Any XXXX, California, be Thanks. this Yeah. commentary company's Mark, membership importance efficiency bit achieving stage, financial sculpting talk portfolio targets, the be would a could growth you at have including XXXX? Thanks. I and would there the the in taking and targeting. to you little guess you're I California. about beyond actions you great. was on Appreciate hoping of expecting admin the the in membership further comments grow you're

Did you me that Or you need okay? that? repeat to hear

for a it Could you please, restate please. Yes, cut the there? little us, off question sorry was

Yeah.

Sorry about that.

connection's my at think I okay the moment.

I actions in yeah, you're commentary taking portfolio scoped the and on California. So, in appreciate the

So the of to growth about Thanks. in bit return importance expecting guess you guess, Mark, admin the financial you efficiency a would in be achieving I targets, including XXXX that you growth company's membership the XXXX. highlighted. California, and membership to little beyond I talk could further

or of with Yes, that's we see expect And growth to little the goal discipline. mirror higher. our that market pricing our a

for low XXs, that over is grow And say than believe But and so predicted or So year put the – XXs expect I'll next we with growth to grow The that make better high again. we teens market. XXs can and over we'll pricing. marketplace XXXX. high able we is I'll but important, that into the be in market over high to sure and that the growth disciplined

We will Nephron. go next to Josh Raskin,

MLR rough Could be just guys. above to and XXX% give or evening, or at Good us you was of membership Thanks. revenues California Hi. if either a the size book year. this expected

related year. XXX than a then And points rest in over of for basis little MLR, implies the guidance little a of to down a quarter more first XXX the the points just sort basis down the

timers help last in just -- the So understand, was me of that that. sorry, one or there year, create XQ rest the year some in I'm would

your year care capitated the XXXX? revenues the even are in just what last playing was in question, was or just percentage And then of And where how that based Maybe strategy? with that this arrangements. providers value into Thanks.

Hey, Josh. It's Sid. Thanks for the questions.

there. three got you've think I

So I'll sequentially. and tackle try

you than history, of California, The First portfolio. think some important portfolio. represents of of XX% just less on of all, days just about was probably X% the of but the Today, I Oscar the context notes. it referenced early

over and past couple it's commented. the somewhat been in certainly you've sculpting underperformed our it, still that of while portfolio an years, expectations with MLR And we've XXX% managing as a

required California XXXX California we while premium. it, the to sustainable at models, gross while work a expect XX,XXX way. members an reenter with With your pause to look ACA a approximately we review as take we is in will million to end more roughly respect in and in state, $XXX important So, the it

expect So its a exit the adjusted on performance. line would net-net, from have historical modest would modest top very California we'd impact given and accretion the EBITDA to MLR have

year-on-year comparisons your think your for around question really was Moving one, I MLR. to second think question, second the I second the

reflect denominator And alluded kind change seen I members is on historically. mix importantly, effect as the the MLR know, flap some seeing you've both shift more we of have. And think which of the You the what also the towards particular, to of calculation. that that will if it membership comments really, will you're seasonality and in we numerator you my renewing

on course, So, team that, of have that. to we're with detailed more the happy offline on questions deal you

specifically third I think don't question just was your that. We on capitation. disclose

it than opportunity think continue I say at is to that real think we'd his based believe roughly, provider before we've contract in I as on a arrangements. to Mark leave care they've value of other remarks. are we based commented And you type care our value that told XX%-ish been

you. Thank

Ha, question Stanley. next Michael Morgan the from take We'll

you. Thank Hi.

the in near Mario and when your past confirm, you're And and Curious on look on as +Oscar. pipeline membership that we or advisor, this expecting of Just acting part where contact +Oscar. year, focused understand CEO laser wanted to high next includes one's an growth ahead, Florida wealth at of your quickly But market then for second my focused Mark, and to least the I looking teens efforts the future XX exit. is, the developing how in term. with at you envision question low grow are Rolodex the you as +Oscar, now

And market campaign I know more you're decelerating, did prepared correctly. your five remarks, does today? in sorry. modularizing question, you part wasn't you. the builder also I beyond that applications if campaign announce mentioned to you capability I that And I heard bringing think but Thank more new builder? contract sure mean

Yeah.

hand I I'll So first its take one the Mark then +Oscar. Michael it I'll to about Sid here, talk to over -- think

First off, there. California you a exit market that referenced just that restating was

So I said, California, which than less X% overall as of was, the book.

we As execute Mark highlighted growth and that the of proven XXXX grow growth decision. there, inclusive in we it's objectives for very we markets we've to that against realistic the can continue target California these and that

this really to to that and I growth you But we've here show around should the financials. quarter, in showing in and and feel that we decisions positive we’re continue see process expect portfolio as up are you discipline results making, fruit XXXX Because in drive the profitability. bearing pricing think very going to the balance the been the

pleased So about we are that.

over to he it and that. to how Mark +Oscar turn sees thesis I'll with Maybe the that, cover

or capital to our to comments, investments we discipline. we want to marketing and business that we competitive important a meet of industry XX +Oscar and We We so now the X. that to averaging of around the growth. advantage with the in have internal market exercise pricing continue generation when it's support exceed Sid's the Sure, generate because the to rest do platform of NPS off is score the of segue of want believe an

members. our with actually, to high whether to so against last year, And not commission put maintain test a model could we or few MPS score in membership in the signing in up a markets this ACA distribution such that we race see

very platform The end, the strong end. front is on front on strong the

why did today. It's And is Medicare builder multi-specialty large it. has client And a we practice Advantage, announce so Medicare the taking that's NACA another Medicaid, off. in campaign group that Medicaid,

And will the put as we product. so test implement to that we that

As being available, need I and platform we Mario to that far to work work are as the the to in is now platform. starting do on that what full the evaluating harden

new the find We the in out it very that it won't we confident that coming have back know out back, some whole front technology on where roll until pieces clients. it But our available, we'll for but be valuable works end to platform we are in. we

next Kevin Bank America. Fischbeck, of is question Our

is Kevin for This [John Joe] Hey. (ph) Fischbeck. on

+Oscar how traction sort market? you are new Sort could a getting do to smaller bit. higher, the that What's have is like? exchanges, like, think on guys sorry, not small your you risk lower have But How quarter? of And the MLR, group look thinking what I about kind MLR groups, lines pool going? are MLR, in of what CI of in topics of mean, of the along maybe you that seeing So a shifting your redeterminations? the impact Medicaid membership. a they'll people

Sid. It's Thanks, Great. take John. that. I'll

these we we've our redetermination higher than And our before, do reminder, I think mentioned You deminimus acuity Medicaid from as current we impact said relatively expect will members in have we population. be think know, estimates. XXXX a

majority states live, still process. As of the early but our in are redetermination today, of the Medicaid now

be we growth, we've its a over Oscar meaningful next long has delivering very And larger ACA risk including monitoring an anything in our will differentiated market redetermination book mean, seen to trends many the But appropriate been term Medicaid have And the in and yet. to up, pool tailwinds and haven't members. the service with I we few years. pulling believe

So that'll be in think a long we the fit. run, good

question, with With respect venture. [C+I second respect group our C+O] to your joint (ph), think I and small to

theme approached the with us heard think XXXX and similar balance from we I the growth before, to of profitability. you pricing

profitable to see to balanced of growth our in We real good in investments to and and we're our particular. continue retention continue here we're growth member and broker Georgia, Arizona, across markets, going course, experience. target have targeting But

in [ACRA] One coverage. to of (ph) of And market and (ph) the moving into we're there's us lot potential XX% Medicare at and a look the the insured group that see of employer middle look grow off the opportunity insured beginnings opportunities, premium ACA, is Kevin, market sponsored the that the is premium marketplace, almost to when through you time. individual over at of more When [ACRA] small investigating you we're grow market Medicaid promise. analysis. We and individual and for

will taking a and next we hard so at look this And at looking year be potential year. that a launch

Alright. See you Thanks. tomorrow. Great. guys

See you tomorrow. Yep.

Rich, Nathan now we'll Sachs. hear from And Goldman

in line versus are good that going think additional other forward? of want as grow about I Hi, profitability taking actions you getting of high you when kind market business XXXX. you how as of thinking Thank that for the total do growth the the re-evaluations a that Thanks market for footprint you. markets between considering at And the think by the we guess guess algorithm be or you about the above exiting to on and in level I you leverage afternoon. any are California. like to growth to the about questions.

We will is footprint be where today. the it growing beyond

be, we looking that providers. as to change we And we recently, the any talk contracts we entry the all underlying to with on should at portfolio. do We market bear Where longer, what our to now best think about be return opportunities. get brought I is have platform really over PBM contract we that renegotiated new on the good mentioned, that our of when operating do we how of possible? look the are to opportunities scale the sculpting more that's I the the portfolio next for going But for line the we and that's grow we're year. as with be side talk shouldn't at operating side, where And about look the generating be because a internally That'll generated we with should So capital as effect. for contracting what for should on continue bottom opportunities time scale partner we something opportunities operating be us. lot our

the attention level, at And the gear our +Oscar can spending. We'll unless to for co we platform growth be and future. with use up we'll try paying in we whole keep big it opportunities line in real to that find the growth

that some The is the metric XX% that's of in largest only year really one year here, see outside And to to add what XXXX, markets important comments, a we its MLR I'd the XX% given roughly book An range. guys California. Sid within at for we we for is the look think of policy thing is is of you XX%. we've target terms to Mark's guidance that expect

we've And so, range. XX% It's portfolio to point, in have more on because target from what number probably that far think, XX% and terms same you would in I that the for in we of MLR I sculpting, gave book last very year. are like along that done been vantage

the progress about very feel execution Mark we good about we good feel as highlighted. the and and strategy So

That's helpful. Thank you.

would all today. to conclude It participation question-and-answer you conclude does does our There session. to We your for further thank questions. also conference. Instructions]. [Operator appear like no That today's be

You may now disconnect.