Oscar Health, Inc. [OSCR] Filings

10-Q 1 oscr-20240630.htm 10-Q oscr-20240630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to__________

Commission File Number: 001-40154

____________________________________________________________

Oscar Health, Inc.

(Exact name of registrant as specified in its charter)

____________________________________________________________

Delaware

46-1315570

(State or other jurisdiction
of incorporation or organization)

(I.R.S. Employer

Identification No.)

75 Varick Street, 5th Floor

New York,

10013

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (646) 403-3677

Former name, former address and former fiscal year, if changed since last report: N/A

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.00001 par value per share	OSCR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒


Class of Stock						Shares Outstanding as of July 31, 2024
Class A Common Stock, par value $0.00001 per share						206,395,047
Class B Common Stock, par value $0.00001 per share						35,514,201

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Oscar Health, Inc.

TABLE OF CONTENTS


		Page
FORWARD LOOKING STATEMENTS		3
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income	6
	Condensed Consolidated Balance Sheets	7
	Condensed Consolidated Statements of Stockholders' Equity	8
	Condensed Consolidated Statements of Cash Flows	10

	Notes to Condensed Consolidated Financial Statements
	Note 1 - Organization	11
	Note 2 - Revenue Recognition	12
	Note 3 - Investments	13
	Note 4 - Fair Value Measurements	15
	Note 5 - Restricted Cash and Restricted Deposits	16
	Note 6 - Benefits Payable	16
	Note 7 - Debt	17
	Note 8 - Earnings (Loss) per Share	18
	Note 9 - Reinsurance	19
	Note 10 - Business Arrangements	20
	Note 11 - Related Party Transactions	20
	Note 12 - Commitments and Contingencies	21
	Note 13 - Cancellation of Founders Awards	22

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33
Item 4.	Controls and Procedures	34

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	35
Item 6.	Exhibits	35

SIGNATURES		36

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding our future results of operations and financial position, risk adjustment transfer payments, industry, regulatory and business trends, our commercial arrangements, business strategy, plans and plan mix, membership and market growth, and our objectives for future operations.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the following:

•Our ability to execute our strategy and manage our growth effectively;

•Our ability to retain and expand our member base;

•Heightened competition in the markets in which we participate;

•Our ability to accurately estimate our incurred medical expenses or effectively manage our medical costs or related administrative costs;

•Our ability to achieve or maintain profitability in the future;

•Changes in federal or state laws or regulations, including changes with respect to the Patient Protection and Affordable Care Act (“ACA”) and any regulations enacted thereunder;

•Our ability to comply with ongoing regulatory requirements, including capital reserve and surplus requirements and applicable performance standards;

•Changes or developments in the health insurance markets in the United States, including passage and implementation of a law to create a single-payer or government-run health insurance program;

•Our, or any of our vendors', ability to comply with laws, regulations, and standards related to the handling of information about individuals or applicable consumer protection laws;

•Our ability to arrange for the delivery of quality care and maintain good relations with the physicians, hospitals, and other providers within and outside our provider networks;

•Unanticipated results of or changes to risk adjustment programs;

•Our ability to utilize quota share reinsurance to meet our capital and surplus requirements and protect against downside risk on medical claims;

•Unfavorable or otherwise costly outcomes of lawsuits, audits, investigations, and claims that arise from the extensive laws and regulations to which we are subject;

•Incurrence of data security breaches of our and our partners’ information and technology systems;

•Our ability to attract and retain qualified personnel;

•Our ability to detect and prevent material weaknesses or significant control deficiencies in our internal controls over financial reporting or other failure to maintain an effective system of internal controls;

•Adverse publicity or other adverse consequences related to our dual class structure or “controlled company” status; and

•The other risks and uncertainties described under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on February 15, 2024.

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The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

This Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q should be read with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Oscar Health, Inc.

Condensed Consolidated Statements of Operations

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	2024		2023		2024		2023
Revenue
Premium	2,164,116		1,474,966		$	4,257,798	$	2,903,592
Investment income	49,994		41,484		92,983		77,540
Services and other	5,231		5,085		10,865		10,088

Total revenue	2,219,341		1,521,535		4,361,646		2,991,220
Operating Expenses
Medical	1,708,722		1,181,999		3,263,496		2,273,591
Selling, general, and administrative	435,206		337,244		829,368		735,763
Depreciation and amortization	7,601		8,821		15,412		13,760
Total operating expenses	2,151,529		1,528,064		4,108,276		3,023,114
Earnings (loss) from operations	67,812		(6,529)		253,370		(31,894)
Interest expense	5,991		6,120		11,893		12,256
Other expenses	872		1,612		2,050		7,718
Earnings (loss) before income taxes	60,949		(14,261)		239,427		(51,868)
Income tax expense	4,637		1,164		5,633		3,185
Net income (loss)	56,312		(15,425)		233,794		(55,053)
Less: Net income attributable to noncontrolling interests	105		103		219		247
Net income (loss) attributable to Oscar Health, Inc.	$	56,207	$	(15,528)	$	233,575	$	(55,300)

Earnings (Loss) per Share
Basic	$	0.24	$	(0.07)	$	0.99	$	(0.25)
Diluted	$	0.20	$	(0.07)	$	0.82	$	(0.25)
Weighted Average Common Shares Outstanding
Basic	238,672		219,400		235,056		218,164
Diluted	303,965		219,400		299,186		218,164

See the accompanying Notes to Condensed Consolidated Financial Statements

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Oscar Health, Inc.

Condensed Consolidated Statements of Comprehensive Income

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
Net income (loss)	$	56,312	$	(15,425)	$	233,794	$	(55,053)
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale	(31)		(2,377)		(3,934)		2,859
Comprehensive income (loss)	56,281		(17,802)		229,860		(52,194)

Comprehensive income attributable to noncontrolling interests	105		103		219		247
Comprehensive income (loss) attributable to Oscar Health, Inc.	$	56,176	$	(17,905)	$	229,641	$	(52,441)

See the accompanying Notes to Condensed Consolidated Financial Statements

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Oscar Health, Inc.

Condensed Consolidated Balance Sheets

(unaudited)


(in thousands, except share amounts)	June 30, 2024		December 31, 2023
Assets
Current Assets:
Cash and cash equivalents	$	2,268,154	$	1,870,315
Short-term investments	363,639		689,833
Premiums and accounts receivable (net of allowance for credit losses of $30,400 and $31,600)	398,366		201,269
Risk adjustment transfer receivable	72,136		51,925
Reinsurance recoverable	241,284		241,194
Other current assets	15,514		6,564
Total current assets	3,359,093		3,061,100
Property, equipment, and capitalized software, net	63,953		61,930
Long-term investments	1,465,974		365,309
Restricted deposits	29,856		29,870
Other assets	87,273		83,271
Total assets	$	5,006,149	$	3,601,480

Liabilities and Stockholders' Equity
Current Liabilities:
Benefits payable	$	1,252,228	$	965,986
Risk adjustment transfer payable	1,779,039		1,056,941
Premium deficiency reserve	2,887		5,776
Unearned premiums	59,970		65,918
Accounts payable and other liabilities	347,523		273,367
Reinsurance payable	60,094		61,024
Total current liabilities	3,501,741		2,429,012
Long-term debt	299,166		298,777
Other liabilities	64,674		67,574
Total liabilities	3,865,581		2,795,363
Commitments and contingencies (Note 12)
Stockholders' Equity

Class A common stock ($0.00001 par value; 825,000 thousand shares authorized, 206,153 thousand and 193,875 thousand shares outstanding as of June 30, 2024 and December 31, 2023, respectively)	2		2
Class B common stock ($0.00001 par value; 82,500 thousand shares authorized, 35,514 thousand and 35,514 thousand shares outstanding as of June 30, 2024 and December 31, 2023, respectively)	—		—
Treasury stock (315 thousand shares as of June 30, 2024 and December 31, 2023)	(2,923)		(2,923)
Additional paid-in capital	3,786,885		3,682,294
Accumulated deficit	(2,643,140)		(2,876,715)
Accumulated other comprehensive income (loss)	(2,625)		1,309
Total Oscar Health, Inc. stockholders' equity	1,138,199		803,967
Noncontrolling interests	2,369		2,150
Total stockholders' equity	1,140,568		806,117
Total liabilities and stockholders' equity	$	5,006,149	$	3,601,480

See the accompanying Notes to Condensed Consolidated Financial Statements

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Oscar Health, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(unaudited)


	Class A			Class B
(in thousands)	Shares	Amount		Shares	Amount		Treasury Stock		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total Stockholders' Equity
December 31, 2023	193,875	$	2	35,514	$	—	$	(2,923)	$	3,682,294	$	(2,876,715)	$	1,309	$	2,150	$	806,117
Issuance of common stock from equity incentive plans	6,622	—		—	—		—		27,309		—		—		—		27,309
Stock-based compensation expense	—	—		—	—		—		27,282		—		—		—		27,282
Unrealized losses on investments, net	—	—		—	—		—		—		—		(3,903)		—		(3,903)
Net income	—	—		—	—		—		—		177,368		—		114		177,482
March 31, 2024	200,497	$	2	35,514	$	—	$	(2,923)	$	3,736,885	$	(2,699,347)	$	(2,594)	$	2,264	$	1,034,287
Issuance of common stock from equity incentive plans	5,656	—		—	—		—		18,702		—		—		—		18,702
Stock-based compensation expense	—	—		—	—		—		31,298		—		—		—		31,298
Unrealized losses on investments, net	—	—		—	—		—		—		—		(31)		—		(31)
Net income	—	—		—	—		—		—		56,207		—		105		56,312
June 30, 2024	206,153	$	2	35,514	$	—	$	(2,923)	$	3,786,885	$	(2,643,140)	$	(2,625)	$	2,369	$	1,140,568

See the accompanying Notes to Condensed Consolidated Financial Statements

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Oscar Health, Inc.

Condensed Consolidated Statements of Stockholders' Equity Cont.

(unaudited)


	Class A				Class B
(in thousands)	Shares		Amount		Shares		Amount		Treasury Stock		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total Stockholders' Equity
December 31, 2022	181,176		$	2	35,116		$	—	$	(2,923)	$	3,509,007	$	(2,605,987)	$	(9,715)	$	2,016	$	892,400
Issuance of common stock from equity incentive plans	2,057		—		—		—		—		35		—		—		—		35
Stock-based compensation expense	—		—		—		—		—		73,248		—		—		—		73,248
Joint venture contributions	—		—		—		—		—		471		—		—		—		471
Unrealized gains on investments, net	—		—		—		—		—		—		—		5,236		—		5,236
Net loss	—		—		—		—		—		—		(39,772)		—		144		(39,628)
March 31, 2023	$	183,234	$	2	$	35,116	$	—	$	(2,923)	$	3,582,761	$	(2,645,759)	$	(4,479)	$	2,160	$	931,762
Issuance of common stock from equity incentive plans	3,556		—		—		—		—		2,551		—		—		—		2,551
Stock-based compensation expense	—		—		—		—		—		35,454		—		—		—		35,454
Unrealized losses on investments, net	—		—		—		—		—		—		—		(2,377)		—		(2,377)
Net loss	—		—		—		—		—		—		(15,528)		—		103		(15,425)
June 30, 2023	186,790		$	2	35,116		$	—	$	(2,923)	$	3,620,766	$	(2,661,287)	$	(6,856)	$	2,263	$	951,965

See the accompanying Notes to Condensed Consolidated Financial Statements

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Oscar Health, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Six Months Ended June 30,
(in thousands)	2024		2023
Cash Flows from Operating Activities:
Net income (loss)	$	233,794	$	(55,053)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Deferred taxes	51		26
Net realized loss on sale of financial instruments	—		9
Depreciation and amortization expense	15,412		13,761
Amortization of debt issuance costs	389		389
Stock-based compensation expense	54,658		104,773
Net accretion of investments	(12,219)		(15,275)
Change in provision for credit losses	(1,200)		9,779
Changes in assets and liabilities:
(Increase) / decrease in:
Premiums and accounts receivable	(195,898)		13,617
Risk adjustment transfer receivable	(20,211)		(10,474)

Reinsurance recoverable	(89)		539,004
Other assets	(13,001)		1,294
Increase / (decrease) in:
Benefits payable	286,242		(82,016)
Unearned premiums	(5,947)		(5,925)
Premium deficiency reserve	(2,888)		(832)
Accounts payable and other liabilities	71,254		(38,330)
Reinsurance payable	(930)		(360,015)
Risk adjustment transfer payable	722,097		465,507
Net cash provided by operating activities	1,131,514		580,239
Cash Flows from Investing Activities:
Purchase of investments	(1,362,993)		(537,688)
Sale of investments	—		19,160
Maturity of investments	596,838		711,453
Purchase of property, equipment and capitalized software	(13,512)		(12,996)
Change in restricted deposits	1,451		(522)
Net cash (used in) provided by investing activities	(778,216)		179,407
Cash Flows from Financing Activities:


Proceeds from joint venture contribution	—		471
Proceeds from exercise of stock options	46,011		2,586
Net cash provided by financing activities	46,011		3,057
Increase in cash, cash equivalents and restricted cash equivalents	399,309		762,703
Cash, cash equivalents, restricted cash and cash equivalents—beginning of period	1,891,971		1,580,497
Cash, cash equivalents, restricted cash and cash equivalents—end of period	2,291,280		2,343,200
Cash and cash equivalents	2,268,154		2,322,069
Restricted cash and cash equivalents included in restricted deposits	23,126		21,131
Total cash, cash equivalents and restricted cash and cash equivalents	$	2,291,280	$	2,343,200
Supplemental Disclosures:
Interest payments	$	11,269	$	22,636
Income tax payments	$	84	$	400

See the accompanying Notes to Condensed Consolidated Financial Statements

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Oscar Health, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

(in thousands, except per share amounts, or as otherwise stated herein)

1. ORGANIZATION

Oscar Health, Inc., together with its subsidiaries (either individually or collectively referred to as "Oscar" or the "Company"), is a leading healthcare technology company, whose mission is to make a healthier life accessible and affordable for all. The Company’s Class A common stock is traded on the New York Stock Exchange under the symbol “OSCR”.

Oscar operates as one segment to sell insurance to its members through the federal and state-run healthcare exchanges formed in conjunction with the Patient Protection and Affordable Care Act and leverages its technology platform to provide services via its +Oscar offering. Individual plans are offered to individuals and families through Health Insurance Marketplaces. Small Group plans are offered to employees of companies with 50 - 100 full-time workers. The Company also partners with Cigna through the Cigna+Oscar partnership to serve the small group employer market. Oscar previously offered Medicare Advantage insurance coverage, but exited the Medicare Advantage market for plan year 2024.

The Company’s member-first philosophy and innovative approach to care has earned the trust of approximately 1.6 million members, as of June 30, 2024.

Non-Renewal of Cigna+Oscar Partnership and Exit from the Small Group Market

On March 26, 2024, the Company notified Cigna Health and Life Insurance Company that it is not renewing the Cigna+Oscar Small Group arrangement after the expiration of the initial term on December 31, 2024. The parties will continue to offer their Cigna+Oscar Small Group product through December 15, 2024. Following termination of the arrangement on December 31, 2024, the Company will continue to provide transition and run-off services through December 31, 2026 and share proportionally in all premiums and claims for any Cigna+Oscar Small Group plan sold or issued on or before December 15, 2024, in accordance with the terms of the arrangement. Additionally, effective December 15, 2024, Oscar will no longer be offering small group products in any market.

Basis of Presentation

The accompanying interim Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), and the applicable rules and regulations of the Securities and Exchange Commission for interim financial information. As such, these financial statements do not include all information and footnotes required by U.S. GAAP for complete financial statements.

These Condensed Consolidated Financial Statements are unaudited; however, in the opinion of management, they reflect all adjustments, consisting only of normal recurring adjustments, necessary to state fairly the information presented in conformity with U.S. GAAP applicable for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of results for the full year or future periods. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and related notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2023.

Certain monetary amounts, percentages, and other figures included in this Quarterly Report on Form 10-Q have been subject to rounding adjustments. Percentage amounts included in this Quarterly Report on Form 10-Q have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Quarterly Report on Form 10-Q may vary from those obtained by performing the same calculations using the figures in the Company's Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. Certain other amounts that appear in this Quarterly Report on Form 10-Q may not sum due to rounding.

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Reclassification

With the commencement of the current fiscal year, the Company has made certain reclassifications to the income statement to provide more transparency into the Company’s streams of revenue and to increase comparability with peers. This reclassification has been applied retrospectively, and comparative figures for prior periods have been adjusted accordingly within the accompanying Condensed Consolidated Financial Statements and notes to the Condensed Consolidated Financial Statements. The reclassification does not affect the Company’s net income.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Significant estimates inherent in the preparation of the accompanying interim Condensed Consolidated Financial Statements include healthcare costs incurred but not yet reported (“IBNR”) and risk adjustment transfers. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual results may differ materially from these estimates.

Accounting Pronouncements - Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires, for each reportable segment, disclosure of significant segment expenses categories, other segment items, enhanced interim disclosures of certain segment-related disclosures that previously were only required annually, and other disclosure requirements. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this guidance on the Consolidated Financial Statements and related disclosures.

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to improve the transparency of income tax disclosures by requiring greater disaggregation of income tax disclosures related to the income tax rate reconciliation and income taxes paid and other amendments to improve the effectiveness of income tax disclosures. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this guidance on the Consolidated Financial Statements and related disclosures.

2. REVENUE RECOGNITION

Premium

Premium revenue includes direct policy premiums collected from members and from the federal government, assumed policy premiums received as part of the reinsurance arrangement under the Cigna+Oscar Small Group plan offering, and risk adjustment transfers, and is net of ceded premium from run-off quota share reinsurance contracts accounted for under reinsurance accounting (See Note 9 - Reinsurance for additional information on the Company’s reinsurance contracts).


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
Direct policy premiums	$	2,544,115	$	1,584,774	$	4,854,215	$	3,248,248
Assumed premiums	60,460		60,395		118,072		116,330
Risk adjustment transfers	(432,895)		(160,631)		(702,293)		(453,778)

Reinsurance premiums ceded	(7,564)		(9,572)		(12,196)		(7,208)
Premium	$	2,164,116	$	1,474,966	$	4,257,798	$	2,903,592

The direct policy premiums received from Centers for Medicare & Medicaid Services ("CMS") for the three and six months ended June 30, 2024 were $2.3 billion and $4.5 billion, respectively. For the three and six months ended June 30, 2023, direct policy premiums received from CMS were $1.4 billion and $2.8 billion respectively.

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Services and Other

The Company earns revenue as part of services performed via the +Oscar platform. Services revenue is recognized in the period the contractual performance obligations are satisfied and measured in an amount that reflects the consideration the Company expects to be entitled to in exchange for performing the services. The timing of the Company's revenue recognition may differ from the timing of payment by customers. A receivable is recorded to Premiums and accounts receivable when revenue is recognized prior to payment and there is an unconditional right to payment. Alternatively, deferred revenue is recorded to Accounts payable and other liabilities when payment is received before the performance obligations are satisfied. Other revenue includes primarily sublease income.

3. INVESTMENTS

Net investment income was attributable to the following:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
Fixed maturity securities	$	17,141	$	15,894	$	31,418	$	30,232

Cash equivalents	31,395		26,117		58,673		44,817
Other (1)	1,626		(274)		3,228		2,923
Investment income	50,162		41,737		93,319		77,972
Investment expense	(168)		(253)		(336)		(432)
Total	$	49,994	$	41,484	$	92,983	$	77,540

(1) Represents the net interest earned on funds withheld.

As of June 30, 2024 and December 31, 2023, the Company recorded accrued investment income of $15.5 million and $6.6 million, respectively.

The following tables provide summaries of the Company's investments by major security type as of June 30, 2024 and December 31, 2023:


	June 30, 2024
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. treasury and agency securities	$	1,399,239	$	2,115	$	(3,782)	$	1,397,572
Corporate notes	394,124		106		(1,054)		393,176
Certificates of deposit	38,865		—		—		38,865


Total	$	1,832,228	$	2,221	$	(4,836)	$	1,829,613


	December 31, 2023
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. treasury and agency securities	$	802,288	$	1,689	$	(1,062)	$	802,915
Corporate notes	234,908		854		(198)		235,564
Certificates of deposit	16,663		—		—		16,663


Total	$	1,053,859	$	2,543	$	(1,260)	$	1,055,142

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The following tables present the estimated fair value and gross unrealized losses of fixed maturity securities in a gross unrealized loss position, by the length of time in which the securities have continuously been in that position, as of June 30, 2024 and December 31, 2023:


	June 30, 2024
	Less than 12 Months					12 Months or Longer
(in thousands, except no. of securities)	Number of Securities	Fair Value		Gross Unrealized Losses		Number of Securities		Fair Value		Gross Unrealized Losses
U.S. treasury and agency securities	279	$	973,844	$	(3,389)	11		$	62,768	$	(393)
Corporate notes	211	287,408		(1,009)		5		19,158		(45)



Total	490	$	1,261,252	$	(4,398)	$	16	$	81,926	$	(438)


	December 31, 2023
	Less than 12 Months					12 Months or Longer
(in thousands, except no. of securities)	Number of Securities	Fair Value		Gross Unrealized Losses		Number of Securities	Fair Value		Gross Unrealized Losses
U.S. treasury and agency securities	69	$	480,312	$	(995)	4	$	24,551	$	(67)
Corporate notes	64	79,024		(166)		19	5,545		(32)

Total	133	$	559,336	$	(1,161)	23	$	30,096	$	(99)

The Company monitors available-for-sale debt securities for credit losses and recognizes an allowance for credit losses when factors indicate a decline in the fair value of a security is credit-related. Certain investments may experience a decline in fair value due to changes in market interest rates, changes in general economic conditions, or a deterioration in the credit worthiness of a security's issuer. For securities in an unrealized loss position that the Company does not intend to sell, the Company has assessed the gross unrealized losses during the period and determined an allowance for credit losses is not necessary because the declines in fair value are believed to be due to market fluctuations and not due to credit-related events.

The amortized cost and fair value of the Company's fixed maturity securities as of June 30, 2024 and December 31, 2023 by contractual maturity are shown below. Actual maturities of these securities could differ from their contractual maturities because issuers may have the right to call or prepay obligations, with or without penalties.


	June 30, 2024				December 31, 2023
(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	364,474	$	363,639	$	690,694	$	689,833
Due after one year through five years	1,467,754		1,465,974		363,165		365,309
Total	$	1,832,228	$	1,829,613	$	1,053,859	$	1,055,142

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4. FAIR VALUE MEASUREMENTS

Fair value represents the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. The Company's financial assets and liabilities measured at fair value on a recurring basis are categorized into a three-level fair value hierarchy based on the priority of the inputs used in the fair value valuation technique.

The levels of the fair value hierarchy are as follows:

•Level 1: Inputs utilize quoted (unadjusted) prices in active markets for identical assets or liabilities.

•Level 2: Inputs utilize quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; or model-derived valuations in which all significant inputs are observable in active markets.

•Level 3: Inputs utilized are unobservable but significant to the fair value measurement for the asset or liability. The unobservable inputs are used to measure fair value to the extent relevant observable inputs are not available. The unobservable inputs typically reflect management’s own estimates about the assumptions a market participant would use in pricing the asset or liability.

The following tables summarize fair value measurements by level for assets and liabilities measured at fair value on a recurring basis:


	June 30, 2024
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	167,474	$	—	$	—	$	167,474
Investments
U.S. treasury and agency securities	$	—	$	1,397,572	$	—	$	1,397,572
Corporate notes	—		393,176		—		393,176
Certificates of deposit	—		38,865		—		38,865


Restricted investments
U.S. treasury securities	—		4,251		—		4,251
Certificates of deposit	$	—	$	2,479	$	—	$	2,479
Total	$	167,474	$	1,836,343	$	—	$	2,003,817


	December 31, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	434,330	$	—	$	—	$	434,330
Investments
U.S. treasury and agency securities	$	—	$	802,915	$	—	$	802,915
Corporate notes	—		235,564		—		235,564
Certificates of deposit	—		16,663		—		16,663


Restricted investments
U.S. treasury securities	—		5,736		—		5,736
Certificates of deposit	$	—	$	2,478	$	—	$	2,478
Total	$	434,330	$	1,063,356	$	—	$	1,497,686

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5. RESTRICTED CASH AND RESTRICTED DEPOSITS

The Company maintains cash, cash equivalents and investments on deposit or pledged primarily to various state agencies in connection with its insurance licensure. The restricted cash and cash equivalents and restricted investments presented below are included in Restricted deposits in the accompanying Condensed Consolidated Balance Sheets.


(in thousands)	June 30, 2024		December 31, 2023
Restricted cash and cash equivalents	$	23,126	$	21,656
Restricted investments	6,730		8,214
Restricted deposits	$	29,856	$	29,870

6. BENEFITS PAYABLE

Reserves for medical claims expenses are estimated using actuarial assumptions and recorded as Benefits payable liabilities on the Condensed Consolidated Balance Sheets. The assumptions for the estimates and for establishing the resulting liability are reviewed and any adjustments to reserves are reflected in the Condensed Consolidated Statements of Operations in the period in which the estimates are updated.

The following table provides a rollforward of the Company’s beginning and ending benefits payable and claims adjustment expenses ("CAE") payable balances for the six months ended June 30, 2024 and 2023:


	As of June 30, 2024						As of June 30, 2023
(in thousands)	Benefits Payable		Unallocated Claims Adjustment Expense		Total		Benefits Payable		Unallocated Claims Adjustment Expense		Total
Benefits payable, beginning of the period	$	965,986	$	13,192	$	979,178	$	937,727	$	12,712	$	950,439
Less: Reinsurance recoverable	57,111		—		57,111		277,944		—		277,944
Benefits payable, beginning of the period, net	$	908,875	$	13,192	$	922,067	$	659,783	$	12,712	$	672,495
Claims incurred and CAE
Current year	$	3,366,660	$	50,814	$	3,417,474	$	2,258,751	$	55,228	$	2,313,979
Prior years	(103,164)		—		(103,164)		14,840		—		14,840
Total claims incurred and CAE, net	$	3,263,496	$	50,814	$	3,314,310	$	2,273,591	$	55,228	$	2,328,819
Claims paid and CAE
Current year	$	2,490,146	$	38,879	$	2,529,025	$	1,697,677	$	47,449	$	1,745,126
Prior years	485,022		8,173		493,195		467,891		8,759		476,650
Total claims and CAE paid, net	$	2,975,168	$	47,052	$	3,022,220	$	2,165,568	$	56,208	$	2,221,776

Benefits and CAE payable, end of period, net	$	1,197,203	$	16,954	$	1,214,157	$	767,806	$	11,732	$	779,538
Add: Reinsurance recoverable	55,025		—		55,025		87,905		—		87,905
Benefits and CAE payable, end of period	$	1,252,228	$	16,954	$	1,269,182	$	855,711	$	11,732	$	867,443

Amounts incurred related to prior periods vary from previously estimated liabilities as more claim information becomes available and claims are ultimately settled. The favorable development recognized in the six months ended June 30, 2024 resulted primarily from medical claims experience developing more favorably than originally expected.

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7. DEBT

Convertible Senior Notes

As previously disclosed in Note 15 - Long-Term Debt, in our Annual Report on Form 10-K for the year ended December 31, 2023, in February 2022, the Company issued $305.0 million in aggregate principal amount of convertible senior notes due 2031 (the “2031 Notes”) in a private placement to funds affiliated with or advised by Dragoneer Investment Group, LLC, Thrive Capital, LionTree Investment Management, LLC and Tenere Capital LLC. The 2031 Notes are the Company's senior, unsecured obligations which bear interest at a rate of 7.25% per annum, payable in cash, semi-annually in arrears on June 30 and December 31 of each year, commencing on June 30, 2022. The 2031 Notes will mature on December 31, 2031, subject to earlier repurchase, redemption, or conversion.

The 2031 Notes are convertible into the Company's Class A common stock at an initial conversion rate of 120.1721 per $1,000 principal amount (equivalent to an initial conversion price of approximately $8.32 per share of Class A common stock), subject to customary adjustments upon the occurrence of certain events. During the quarterly period ended June 30, 2024, a conditional conversion feature of the 2031 Notes was satisfied when the last reported sales price per share of the Company’s common stock was greater than 130% of the conversion price of $8.32 per share for each of at least twenty (20) trading days during the period of thirty (30) consecutive trading days ending on, and including, the last trading day of the quarter. As a result, the 2031 Notes are convertible during the third quarter of 2024 at the option of the holder. As of the date of this Quarterly Report on Form 10-Q, the 2031 Notes have not been converted. Upon conversion, the 2031 Notes will be settled, at the Company's election, in shares of Class A common stock, cash, or a combination of cash and shares of Class A common stock, subject to certain exceptions.

As of June 30, 2024, the net carrying amount of the 2031 Notes was $299.2 million, with unamortized debt discount and issuance costs of $5.8 million. The estimated fair value of the 2031 Notes as of June 30, 2024 was $612.5 million. The Company classified the fair value of the 2031 Notes as a level 3 measurement due to the lack of observable market data over fair value inputs such as stock price volatility over the term of the 2031 Notes and the Company's cost of debt.

The following table presents the interest expense indicating an effective interest rate of 7.61% over the term of the 2031 Notes:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
Coupon interest expense	$	5,528	$	5,528	$	11,056	$	11,056
Amortization of debt discount and issuance costs	195		195		389		389
Total interest expense	$	5,723	$	5,723	$	11,445	$	11,445

Revolving Credit Facility

As previously disclosed in Note 15 - Long-Term Debt, in our Annual Report on Form 10-K for the year ended December 31, 2023, on December 28, 2023, the Company entered into a third amendment to its senior secured credit agreement (the “Third Amendment”), with certain lenders (the “Lenders”) and Wells Fargo Bank, National Association, as administrative agent, which amended the senior secured credit agreement, dated as of February 21, 2021 (as amended by the Third Amendment, the “Amended Credit Agreement”). The Amended Credit Agreement provides for a revolving loan credit facility (the “Revolving Credit Facility”) in the aggregate principal amount of $115.0 million. The Revolving Credit Facility is guaranteed by Oscar Management Corporation, each wholly owned subsidiary of the Company, and all of the Company's future direct and indirect subsidiaries (in each case subject to certain permitted exceptions, including exceptions for certain guarantees (i) that would require material governmental consents or (ii) in respect of joint ventures). The Revolving Credit Facility is secured by substantially all of the Company’s and the guarantors’ assets (subject to certain exceptions). Proceeds are to be used solely for general corporate purposes of the Company.

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The Company is permitted to increase commitments under the Revolving Credit Facility by an aggregate amount not to exceed $50.0 million, subject to certain conditions.

The Revolving Credit Facility is available until December 2025, provided the Company is in compliance with all covenants, including financial covenants to maintain minimum thresholds related to direct policy premiums, consolidated Adjusted Earnings before Interest, Taxes, Depreciation, and Amortization (“Adjusted EBITDA”), and liquidity, and a maximum medical loss ratio.

As of June 30, 2024, there were no outstanding borrowings under the Revolving Credit Facility.

8. EARNINGS (LOSS) PER SHARE

Basic earnings per share is computed by dividing net income (loss) for the period by the weighted-average shares of common stock outstanding during the period. In periods when the Company is in a net loss position, potentially dilutive securities are excluded from the computation of diluted earnings per share because their inclusion would have an anti-dilutive effect. Thus, basic earnings per share is the same as diluted earnings per share.

During periods of net income, diluted earnings per share is calculated by adjusting net income for any interest charges and changes in the fair value of the bifurcated conversion option applicable to the convertible senior notes. This adjusted net income is then divided by the sum of the basic weighted-average shares of common stock and any dilutive potential common stock outstanding during the period, using the treasury stock method. Potential common stock includes the effect of outstanding dilutive stock options, restricted stock units, performance-based restricted stock units, as well as shares the Company could be obligated to issue from its convertible senior notes, as described in Note 7 - Debt, using the if-converted method. The calculation for basic and diluted earnings per share is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2024		2023		2024		2023
Numerator:
Net income (loss) attributable to Oscar Health, Inc.	$	56,207	$	(15,528)	$	233,575	$	(55,300)
Effect of convertible senior notes	5,840		—		11,621		—
Net income (loss) available to Oscar Health, Inc. common shareholders	$	62,047	$	(15,528)	$	245,196	$	(55,300)

Denominator:
Weighted average shares of common stock outstanding	238,672		219,400		235,056		218,164
Common stock equivalents	28,641		—		27,478		—
Effect of convertible senior notes	36,652		—		36,652		—
Weighted average shares of common stock outstanding and potential dilutive common shares outstanding	303,965		219,400		299,186		218,164

Net Earnings (Loss) per Share
Basic	$	0.24	$	(0.07)	$	0.99	$	(0.25)
Diluted	$	0.20	$	(0.07)	$	0.82	$	(0.25)

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The following potential common shares were excluded from the computation of diluted net income (loss) per share attributable to Oscar Health, Inc. because including them would have had an anti-dilutive effect:


	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands)	2024	2023	2024	2023
Stock options to purchase common stock	1,097	27,677	1,711	27,677
Restricted stock units	394	30,253	527	30,253
Performance-based restricted stock units	64	9,441	64	9,441
Shares underlying convertible notes (Note 7)	—	36,652	—	36,652
Total	1,555	104,023	2,302	104,023

9. REINSURANCE

The Company participates in quota share reinsurance to limit risk and capital requirements and excess of loss ("XOL") reinsurance to mitigate the exposure of high cost or catastrophic member risk. The quota share reinsurance arrangements are with more than one counterparty with multiple state-level treaties. The XOL reinsurance arrangements are with a private counterparty and federal and state-run programs. A summary of the Company's reinsurance agreements and related accounting treatment is included in Note 4 - Reinsurance, in our Annual Report on Form 10-K for the year ended December 31, 2023.

The Company also operates under an assumed reinsurance contract, under which the Company shares proportionally in all premiums and claims underwritten for the Cigna+Oscar Small Group offering.

Reinsurance Contracts Accounted for under Deposit Accounting

As of June 30, 2024 and December 31, 2023, a deposit liability balance of $12.9 million and $7.0 million, respectively, was recorded for the Company's quota share arrangements accounted for under deposit accounting and represents fees due to the reinsurer, which are recognized within Selling, general, and administrative expenses on the Consolidated Statements of Operations.

For the three and six months ended June 30, 2024, the Company ceded 55% of its premium under reinsurance contracts accounted for under deposit accounting. For the three and six months ended June 30, 2023, the Company ceded 45% and 46% respectively, of its premium under reinsurance contracts accounted for under deposit accounting.

Reinsurance Contracts Accounted for under Reinsurance Accounting

Reinsurance accounting applies to quota share reinsurance contracts that are in runoff as well as the XOL treaties. Under reinsurance accounting, the Company records premium paid to the reinsurer as a reduction to premium revenue with a corresponding reinsurance payable. In the case of federal and state-run reinsurance programs, no reinsurance premiums are paid. Expected reimbursement from the reinsurer for claims incurred are recorded as a reduction to claims incurred with a corresponding reinsurance recoverable asset. The tables below present information for the Company's reinsurance arrangements accounted for under reinsurance accounting. Please see Note 2 - Revenue Recognition for total reinsurance premiums ceded and reinsurance premiums assumed, which are included as components of total Premium revenue in the Condensed Consolidated Statements of Operations.

The following table reconciles total Medical expenses to the amount presented in the Condensed Consolidated Statements of Operations:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
Direct claims incurred	$	1,680,066	$	1,136,687	$	3,203,712	$	2,184,745
Ceded reinsurance claims	(29,954)		(14,943)		(49,652)		(18,567)
Assumed reinsurance claims	58,610		60,255		109,436		107,413
Medical expenses	$	1,708,722	$	1,181,999	$	3,263,496	$	2,273,591

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The Company records Selling, general and administrative ("SG&A") expenses net of reinsurance ceding commissions and assumed SG&A expenses. The following table reconciles total Selling, general and administrative expenses to the amount presented in the Condensed Consolidated Statements of Operations:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
Selling, general and administrative expenses, gross	$	435,144	$	337,833	$	829,840	$	734,817
Reinsurance ceding commissions	62		(589)		(472)		946
Selling, general and administrative expenses	$	435,206	$	337,244	$	829,368	$	735,763

The Company classifies Reinsurance recoverable within current assets on its Condensed Consolidated Balance Sheets. The composition of the Reinsurance recoverable balance is as follows:


(in thousands)	June 30, 2024		December 31, 2023
Reinsurance premium and claim recoverables	$	242,639	$	224,837
Reinsurance ceding commissions	7,017		7,054
Experience refunds on reinsurance agreements	(8,372)		9,303
Reinsurance recoverable	$	241,284	$	241,194

Credit Ratings

The financial condition of the Company's reinsurers is regularly evaluated to minimize exposure to significant losses. A key credit quality indicator for reinsurance is the financial strength ratings issued by the credit rating agencies, which provide an independent opinion of a reinsurer’s ability to meet ongoing obligations to policyholders. The Company’s reinsurers have most recently been issued financial strength ratings of A+ or higher.

The creditworthiness of each reinsurer is evaluated in order to assess counterparty credit risk and estimate an allowance for expected credit losses on the Company's reinsurance recoverable balances.

10. BUSINESS ARRANGEMENTS

Variable Interest Entities

In the normal course of business, the Company entered into business arrangements with integrated health systems, as well as medical professional corporations that employ health care providers to deliver telemedical healthcare services to its covered member population in various states. The financial results of these entities are consolidated into the Company's financial statements.

The following table presents the collective assets and liabilities of the Company's variable interest entities:


(in thousands)	June 30, 2024		December 31, 2023
Assets	$	121,814	$	125,709
Liabilities	$	64,011	$	74,568

11. RELATED PARTY TRANSACTIONS

In February 2022, the Company issued the 2031 Notes to funds affiliated with or advised by Dragoneer Investment Group, LLC, Thrive Capital Management, LLC, LionTree Investment Management, LLC and Tenere Capital LLC (collectively, the “Purchasers”). See Note 7 - Debt for additional information.

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12. COMMITMENTS AND CONTINGENCIES

The Company’s current and past business practices are subject to review or other investigations by various state insurance and healthcare regulatory authorities and other state and federal regulatory authorities. These reviews focus on numerous facets of the Company’s business, including claims payment practices, statutory capital requirements, provider contracting, risk adjustment, competitive practices, commission payments, privacy issues, network adequacy, utilization management practices, pharmacy benefits, access to care, and sales practices, among others. Some of these reviews have historically resulted in fines imposed on the Company and some have required changes to certain of the Company’s practices. The Company continues to be subject to these reviews, which could result in additional fines or other sanctions being imposed on the Company or additional changes to certain of its practices.

The Company is also currently involved in, and may in the future from time to time become involved in, legal proceedings and other claims in the ordinary course of its business, including class actions and suits brought by the Company’s members, providers, commercial counterparties, employees, and other parties relating to the Company’s business, including management and administration of health benefit plans and other services. Such matters can include various employment claims, disputes regarding reinsurance arrangements, disputes relating to intellectual property and the Telephone Consumer Protection Act and class action lawsuits, or other claims relating to the performance of contractual and non-contractual obligations to providers, members, employer groups, and others, including, but not limited to, the alleged failure to properly pay in-network and out-of-network claims and challenges to the manner in which the Company processes claims, and claims alleging that the Company has engaged in unfair business practices.

In addition, on May 12, 2022, a securities class action lawsuit against the Company, certain of its directors and officers, and the underwriters that participated in the Company’s initial public offering ("IPO") was commenced in the United States District Court for the Southern District of New York, captioned Carpenter v. Oscar Health, Inc., et al., Case No. 1:22-CV-03885 (S.D.N.Y.) (the “Securities Action”). The initial complaint in the Securities Action asserted violations of Sections 11 and 15 of the Securities Act based on the Company’s purported failure to disclose in its IPO registration statement growing COVID-19 testing and treatment costs, the impact of significant Special Enrollment Period membership, and risk adjustment data validation results for 2019 and 2020. By Court orders dated September 27, 2022 and December 13, 2022, the Court appointed a lead plaintiff and lead counsel on behalf of the putative class. An amended complaint filed on December 6, 2022 asserts the same violations of Sections 11 and 15 of the Securities Act, but this time based on the Company’s alleged failure to disclose in its IPO registration statement purportedly inadequate controls and systems in connection with the risk adjustment data validation audit for 2019, alleging that this purported omission caused losses and damages for members of the putative class. The amended complaint seeks unspecified compensatory damages as well as interest, fees, and costs. On April 4, 2023, the Company moved to dismiss the amended complaint. Briefing on the motion was completed on July 7, 2023. The Company believes it has meritorious defenses to these claims. At this time, the Company cannot predict the outcome, or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter.

The Company records liabilities for its reasonable estimates of probable losses resulting from these matters where appropriate. Estimates of losses resulting from legal and regulatory matters involving the Company are inherently difficult to predict, particularly where the matters: involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or represent a shift in regulatory policy; involve a large number of claimants or regulatory bodies; are in the early stages of the proceedings; or could result in a change in business practices. Accordingly, the Company is often unable to estimate the losses or ranges of losses for those matters where there is a reasonable possibility or it is probable that a loss may be incurred, the ultimate settlement of which could be material.

Given that such proceedings are subject to uncertainty, there can be no assurance that such legal proceedings, either individually or in the aggregate, will not have a material adverse effect on Oscar's business, results of operations, financial condition or cash flows.

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13. CANCELLATION OF FOUNDERS AWARDS

On March 28, 2023, the Company’s Co-Founders, Mario Schlosser (the Company’s President of Technology and Chief Technology Officer and former Chief Executive Officer) and Joshua Kushner (the Company’s Vice Chairman), recommended to the Company’s Board of Directors that they should cancel and terminate the applicable awards that were granted to them in connection with the Company’s Initial Public Offering (the “Founders Awards”). This recommendation was made in support of reducing the dilutive effects of equity awards granted on April 3, 2023, to Mark T. Bertolini in connection with his appointment as the Company’s Chief Executive Officer, effective April 3, 2023, and the Company’s annual employee equity awards granted in 2023. On March 28, 2023, Mr. Schlosser and Mr. Kushner each entered into an agreement to cancel and terminate his Founders Award, which consisted of performance-based restricted stock units covering 4,229,853 shares (for Mr. Schlosser) and 2,114,926 shares (for Mr. Kushner) of the Company’s Class A common stock. As a result of this cancellation, in March 2023 the Company recognized approximately $46.3 million of accelerated stock-based compensation expense that would have otherwise been recognized over the remaining vesting period of the awards. Stock-based compensation expense is included in the Selling, general and administrative line item on the Condensed Consolidated Statements of Operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited Consolidated Financial Statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") included the Company's Annual Report on Form 10-K for the year ended December 31, 2023 that was filed with the SEC on February 15, 2024. Unless the context otherwise requires, references in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" to "we," "us," "our," "Oscar," "Oscar Health, Inc," and the "Company" mean the business and operations of Oscar Health, Inc. and its consolidated subsidiaries.

Index to this MD&A

Management's Discussion and Analysis of Financial Condition and Results of Operations is comprised of the following sections:


			Page
Overview			23


Recent Developments, Trends and Other Factors Impacting Performance			24
Critical Accounting Policies and Estimates			26
Results of Operations			27
Liquidity and Capital Resources			31
Summary of Cash Flows			33

Overview

Oscar Health, Inc. is a leading healthcare technology company, whose mission is to make a healthier life accessible and affordable for all. Our full stack technology platform refers to our differentiated cloud-native end-to-end technology solution, which connects our member-facing features, including our mobile application, website, and virtual care solutions with our back-office tools that span all critical healthcare insurance and technology domains, including member and provider data, utilization management, claims management, billing, and benefits. Our member-first philosophy and innovative approach to care has earned the trust of approximately 1.6 million members, as of June 30, 2024. We currently offer individual and family as well as small group plans and we offer services through +Oscar that utilize our full stack technology platform to power others within the healthcare space.

We regularly review our Total Revenue, Medical Loss Ratio (“MLR”), Selling, General and Administrative Expense Ratio (“SG&A Expense Ratio”), and Adjusted Earnings before Interest, Taxes, Depreciation, and Amortization (“Adjusted EBITDA”, a non-GAAP financial metric) to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, and make strategic decisions. We believe these operational and financial measures are useful in evaluating our performance, in addition to our financial results prepared in accordance with GAAP.

Total Revenue

Total revenue includes Premium revenue, Investment income, and Services and other revenue. We believe Total revenue is an important metric to assess the growth of our business, as well as the earnings potential of our investment portfolio.

Premium revenue includes direct policy premiums collected from our members and from the federal government, risk adjustment transfers, and assumed policy premiums we receive as part of our reinsurance arrangement under our Cigna+Oscar Small Group plan offering, and is net of ceded premium from run-off quota share reinsurance contracts accounted for under reinsurance accounting. Investment income primarily includes investment income, interest earned, and gains (losses) on our investment portfolio. Services and other revenue includes primarily revenue earned from administrative services performed as part of the +Oscar platform, as well as sublease income.

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MLR

MLR is a metric used to calculate medical expenses as a percentage of net premiums before ceded quota share reinsurance. Medical expenses are the total expenses incurred by members in order to utilize health care services less any member cost sharing. These services include inpatient, outpatient, pharmacy, and physician costs. Medical claims also include fee-for-service claims, pharmacy benefits, capitation payments to providers, provider disputed claims, risk sharing arrangements with certain of our providers, and various other medical-related costs. The impact of the federal risk adjustment program is included in the denominator of our MLR. We believe MLR is an important metric to demonstrate the ratio of our costs to pay for healthcare of our members to the net premium before ceded reinsurance. MLR in our existing products are subject to various federal and state minimum requirements.

SG&A Expense Ratio

The SG&A Expense Ratio reflects the Company’s Selling, general and administrative expenses, as a percentage of Total revenue. Selling, general and administrative expenses primarily include wages, benefits, costs of software and hardware, and administrative costs for our corporate and technology functions, the impact of quota share reinsurance, and stock-based compensation. We believe the SG&A Expense Ratio is useful to evaluate our ability to manage our overall selling, general, and administrative cost base.

Adjusted EBITDA

Adjusted EBITDA is defined as Net income (loss) for the Company and its consolidated subsidiaries before interest expense, income tax expense (benefit), and depreciation and amortization, as further adjusted for stock-based compensation and other items that are considered unusual or not representative of underlying trends of our business, where applicable for the period presented. We present Adjusted EBITDA because we consider it to be an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Adjusted EBITDA is a non-GAAP measure. Management believes that investors’ understanding of our performance is enhanced by including this non-GAAP financial measure as a reasonable basis for comparing our ongoing results of operations.

We caution investors that amounts presented in accordance with our definition of Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate Adjusted EBITDA in the same manner.

By providing this non-GAAP financial measure, together with a reconciliation to the most comparable U.S. GAAP measure, Net income (loss), we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as an alternative to, or a substitute for Net income (loss) or other financial statement data presented in our Condensed Consolidated Financial Statements as indicators of financial performance. A reconciliation of Adjusted EBITDA from Net income (loss) is provided under “Results of Operations-Adjusted EBITDA”.

Recent Developments, Trends and Other Factors Impacting Performance

Non-Renewal of Cigna+Oscar Partnership and Exit from Small Group Market

On March 26, 2024, the Company notified Cigna Health and Life Insurance Company that it is not renewing the Cigna+Oscar Small Group arrangement after the expiration of the initial term on December 31, 2024. The parties will continue to offer their Cigna+Oscar Small Group product through December 15, 2024. Additionally, effective December 15, 2024, Oscar will no longer be offering small group products in any market. Refer to Note 1 - Organization - Non-Renewal of Cigna+Oscar Partnership and Exit from the Small Group Market included elsewhere in this Quarterly Report on Form 10-Q for additional information.

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Change Healthcare Incident

Change Healthcare (“CHC”), which provided claims clearinghouse and other services to the Company, experienced a cybersecurity incident on February 21, 2024. At this time, CHC has not notified the Company of any breach of our members’ data.

Members

Our membership is measured as of a particular point in time and is concentrated in the individual market. Membership may vary throughout the year due to disenrollments, the Special Enrollment Period (“SEP”), and other market dynamics that are in effect such as Medicaid redeterminations, other legislative or regulatory actions, or other factors that enable the overall market to grow or decline throughout the year.

Risk Adjustment

The risk adjustment programs in the markets we serve are administered federally by Centers for Medicare & Medicaid Services (“CMS”) and are designed to mitigate the potential impact of adverse selection and provide stability for health insurers. Under this program, each plan is assigned a risk score based upon demographic information and current year claims information related to its members. The risk score is used to adjust plan revenue to reflect the relative risk of the plan's enrolled population. We reevaluate our risk adjustment transfer estimates as new information and market data becomes available until we receive the final reporting from CMS in later periods, up to twelve months in arrears.

Our risk adjustment transfer estimates are subject to a high degree of estimation and variability and are affected by the relative risk of our members, and in the case of ACA, relative to that of other insurers. There is a higher degree of uncertainty associated with estimates of risk adjustment transfers at the beginning of the policy year resulting from composition of the risk score being based on concurrent claim data. There is additional uncertainty for both markets and blocks of business that experience outsized growth, compounded by the lack of credible experience data on the newly enrolling population. Furthermore, there is also uncertainty associated with changes in other carriers operations, which may impact the ultimate degree of market level risk. Actual risk adjustment calculations and transfers could materially differ from our assumptions.

Claims Incurred

Our medical expenses are impacted by seasonal effects of medical costs such as the utilization of deductibles and out-of-pocket maximums over the course of the policy year, which shifts more costs to us in the second half of the year as we pay a higher proportion of covered claims costs, and the number of days and holidays in a given period. Our medical and pharmacy costs can also exhibit seasonality depending on selection effects or changes in the risk profile of our membership and the proportion of our membership that is new in the calendar year. The emergence of medical and pharmacy claims is influenced by the aforementioned drivers, and further mix shifts may continue to alter claims incurred patterns in future periods.

Seasonality

Our business is generally affected by the seasonal patterns of our member enrollment, medical expenses, and health plan mix shift. SEP or other market dynamics that drive enrollment and/or mix changes throughout the year may impact the per member levels of premiums, claims, and/or risk adjustment transfers. Additionally, medical expenses have historically been highest towards the second half of the year due to a number of factors discussed above.

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Reinsurance

We believe our reinsurance agreements help us achieve important goals for our business, including risk management, capital efficiency, and greater predictability in our earnings in the event of unexpected significant fluctuations in our MLR. Specifically, reinsurance is a financial arrangement under which the reinsurer agrees to cover a portion of our medical claims in return for a portion of the premium. Our reinsurance agreements are contracted under two different types of arrangements: quota share reinsurance contracts and excess of loss ("XOL") reinsurance contracts. Reinsurance agreements do not relieve us of our primary medical claims incurred obligations. Refer to Note 9 - Reinsurance included elsewhere in this Quarterly Report on Form 10-Q for a description of the accounting methods used to record our quota share reinsurance arrangements.

Regulatory Update

In December 2022, Congress passed the omnibus spending bill which delinked the Medicaid continuous coverage from the end of the public health emergency (“PHE”) for COVID-19. Medicaid redeterminations were required to begin by April 1, 2023, and while most states initially anticipated completing unwinding-related renewals by mid-2024, many states have extended their unwinding timelines for several additional months, due to adoption of strategies to promote continuity of coverage for eligible individuals, pauses in procedural disenrollments, or other state-specific situations. The redeterminations are ongoing, and consumers’ transitions from Medicaid or Children’s Health Insurance Program (CHIP) coverage to ACA marketplace plans may contribute to additional growth in the ACA marketplace. CMS also previously announced a SEP that began March 31, 2023 and was expected to end July 31, 2024, but has been extended to November 30, 2024. The latest estimates from CMS indicate that Medicaid redeterminations will be complete in almost all states in which Oscar offers plans by July 2024, however, given uncertainties in CMS’s estimates and the extended SEP, we expect to continue to see consumers enrolling in ACA marketplace plans past this date.

On July 19, 2024, in response to increases in unauthorized changes in consumers’ enrollments by agents and brokers, CMS announced they will now block an agent or broker from making changes to a consumer’s federally facilitated marketplace enrollment unless the agent is already associated with the consumer’s enrollment. We continue to monitor regulatory developments to address bad actors, including possible changes to eligibility or income verification requirements or increased enforcement of existing requirements by CMS.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of the Company's significant accounting policies is included in Note 2 - Summary of Significant Accounting Policies, in our Annual Report on Form 10-K for the year ended December 31, 2023. Certain of our accounting policies are considered critical, as these policies require significant, difficult or complex judgments by management, often requiring the use of estimates about the effects of matters that are inherently uncertain. As of June 30, 2024, there were no significant changes to the critical accounting estimates from what was reported in our Annual Report on Form 10-K for the year ended December 31, 2023.

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Results of Operations

The following table sets forth our results of operations for the periods indicated:


	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands, except percentages)	2024	2023	2024	2023
Revenue

Oscar Health, Inc. [OSCR] Filings
10-Q	[2024-08-07]
10-Q	[2024-05-07]
10-K	[2024-02-15]
10-Q	[2023-11-07]
10-Q	[2023-08-09]
10-Q	[2023-05-10]
10-K	[2023-02-24]
10-Q	[2022-11-09]
10-Q	[2022-08-12]
10-Q	[2022-05-12]
10-K	[2022-02-25]
10-Q	[2021-11-12]
10-Q	[2021-08-13]
10-Q	[2021-05-14]
S-1	[2021-02-05]