Oscar Health

Oscar’s edge rests on a modern tech stack, consumer app, data-driven care orchestration and a recognizable brand for ACA shoppers. However, ACA products are standardized, switching costs for individuals are low, and network breadth and unit costs are often inferior to scaled incumbents.

Risk adjustment is a zero-sum mechanism that can reverse advantages quickly when morbidity shifts. We do not see durable network effects or efficient-scale barriers outside select geographies. Consumer review patterns indicate service and network frictions that can erode intangible assets.

Overall we see a narrow, execution-dependent moat vulnerable to regulatory and competitive responses.

Premium rates are set through state filings and constrained by MLR minimums and competition. 2025 market morbidity and higher risk adjustment payable drove the Q2 MLR to 91.1 percent and forced a reset of 2026 filings that management expects to be double-digit. That underscores limited pricing power independent of the market.

Long term, earnings are governed more by risk selection, medical cost management, PBM terms and administrative efficiency than by discretionary pricing.

Membership and premiums are recurring in form but sensitive to policy and macro changes. 2025 brought a sharp morbidity shift and larger risk adjustment accruals, flipping quarterly results negative.

CMS’s 2025 final rule and the OBBBA will likely reduce enrollment and raise engagement and documentation hurdles, elevating volatility through at least 2026. Management reiterates profitability in 2026, but the range of outcomes has widened. TTM revenue of about 10.73 billion reflects scale, yet earnings cadence remains inconsistent.

Regulated subsidiaries held about 5.21 billion in cash and investments at June 30, 2025 and exceeded RBC minimums by roughly 579 million. That said, most of these assets are restricted to support insurance operations.

Parent-level flexibility improved with a 355 million 2.25 percent 2030 convertible issuance in September 2025. Total debt now includes the 7.25 percent 2031 convertible notes and the new 2030 notes.

We view near-term solvency risk as low, but capital intensity, regulatory constraints and working capital swing from risk adjustment reduce true financial flexibility.

Management exited unprofitable small-group lines with Cigna+Oscar, concentrated on core IFP, and is building an ICHRA vector via targeted deals: INSXCloud (enhanced direct enrollment), IHC Specialty Benefits (brokerage) and HealthInsurance.org (education).

These are strategically coherent and relatively small, but they add execution load during a volatile underwriting period. No dividends or buybacks; equity compensation is meaningful. The September 2025 convert adds optionality, though future dilution depends on stock performance and capped calls.

Overall, capital discipline is improving, but the record is short through a full cycle.

CEO Mark Bertolini brings deep payer pedigree from Aetna and a clear operating cadence; CFO R. Scott Blackley has strong public company finance experience. The team is acting quickly with repricing, cost takeout, and product focus, and communicates targets and levers with specificity.

Governance and alignment are adequate, though founder ownership influence is lower than at founder-led compounders. Execution under the 2025 shock will be the true test.