Oscar Health outlines 28% rate hikes for 2026 as pricing strategy adapts to higher morbidity

Earnings Call Insights: Oscar Health, Inc. (OSCR) Q3 2025

MANAGEMENT VIEW

* CEO Mark Bertolini announced third quarter results and reaffirmed the company's updated 2025 guidance, highlighting a reported total revenue of approximately $3 billion and a 23% year-over-year increase. Bertolini stated, "MLR increased approximately 380 basis points to 88.5% due to higher market morbidity, partially offset by favorable prior period development." He added that Oscar ended the first nine months of 2025 with more than 2 million members, a 28% increase over last year, and that the company is "well positioned to expand margins and return to profitability in 2026."
* Bertolini emphasized, "Our 2026 pricing strategy remained disciplined, balancing membership and profitability. For 2026, we resubmitted rate filings in states covering close to 99% of current membership. And our weighted average rate increase is approximately 28%." He noted Oscar's entry into Alabama and Mississippi, expansion of product mix, and the launch of HelloMeno for women's health. Oscar also launched an AI health agent, Oswell, powered by OpenAI.
* CFO Richard Blackley reported, "Total revenue increased 23% year-over-year to approximately $3 billion, driven by higher membership. We ended the quarter with 2.1 million members, an increase of 28% year-over-year." Blackley explained, "The third quarter medical loss ratio was 88.5%, an increase of approximately 380 basis points year-over-year...impacted by a $130 million increase to our risk adjustment payable for 2025, partially offset by $84 million of favorable prior period development." He also noted a $410 million convertible notes offering and a cash and investments balance of approximately $4.8 billion at quarter end.

OUTLOOK

* Oscar reaffirmed its 2025 full-year guidance, with total revenue expected toward the low end of the $12 billion to $12.2 billion range. Blackley stated, "Based on our results through the first nine months of the year, we are reaffirming all of our guidance metrics."
* The company continues to expect a full year medical loss ratio in the range of 86.0% to 87.0% and an SG&A expense ratio in the range of 17.1% to 17.6%. The outlook assumes a sequential decline in membership in the fourth quarter due to historical churn patterns.
* For 2026, Bertolini and Blackley both emphasized a disciplined pricing strategy, with a weighted average rate increase of approximately 28%. "We believe our disciplined pricing strategy captures the changing market conditions we've observed this year and the expected changes next year," Blackley added.

FINANCIAL RESULTS

* Oscar reported a $129 million loss from operations and an adjusted EBITDA loss of $101 million. Net loss for the third quarter was $137 million. The third quarter SG&A expense ratio improved by approximately 150 basis points year-over-year to 17.5%.
* The $130 million increase to risk adjustment payable, partially offset by $84 million of favorable prior period development, was a key impact on MLR. Year-to-date utilization was noted as modestly above expectations, with inpatient utilization elevated but moderating, and pharmacy remaining favorable.
* Blackley explained, "We have taken opportunistic steps to strengthen our capital position and optimize our capital structure," referencing the convertible notes offering and partial redemption of outstanding notes for shares.

Q&A

* Hua Ha, Baird: Asked about market morbidity and risk from FTR rechecks. Blackley responded that the Wakely report showed a 1.5 to 2 point morbidity increase and clarified, "about 45% of the people who were part of CMS' list to us on FTR or dual enrollments...have churned."
* Joshua Raskin, Nephron: Inquired about underlying cost trends and utilization. Blackley said, "Utilization continues to moderate year-over-year...inpatient remains elevated, continued to moderate into the third quarter."
* Jessica Tassan, Piper Sandler: Asked about enrollment in condition-specific plans. Blackley replied, "We create them to draw into the plans, people who are interested in managing their conditions...we continue to roll out new ones because we do see success with retention."
* Scott Fidel, Goldman Sachs: Sought details on early enrollment period trends and pricing strategy. Bertolini noted, "We have seen a lot of activity more than we thought we would see...but we're not banking on anything based on what we've seen in the first five days."
* Stephen Baxter, Wells Fargo: Asked about competitive positioning and risk adjustment percentage. Blackley noted, "Last year, we were only...in 15% of our markets, we were the lowest or second lowest silver price plan. This year, that's moving up to 30%."

SENTIMENT ANALYSIS

* Analysts exhibited a generally neutral tone, focusing on specific metrics, market morbidity, and pricing strategies, with persistent questions about cost trends, program integrity, and competitive positioning.
* Management maintained a confident stance during prepared remarks and Q&A, frequently emphasizing preparedness and discipline, as in Bertolini's comment: "We remain confident in our ability to expand margins and return to profitability in 2026."
* Compared to the previous quarter, the analyst tone remained probing but not overtly negative, while management's tone was more assertive about strategic pricing and cost actions.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter highlighted a more explicit 28% weighted average rate increase for 2026, compared to broad double-digit increases discussed previously.
* Management reiterated confidence in returning to profitability in 2026, now with more detailed discussion of pricing discipline, risk adjustment, and AI-driven cost controls.
* Analyst focus shifted from concerns about risk pool volatility and capital absorption to detailed questions on pricing, SG&A targets, and competitive positioning.
* Key metrics such as revenue growth and membership gains were similar, but the impact of higher market morbidity and risk adjustment became more prominent this quarter.
* There was greater emphasis on product innovation (HelloMeno, Oswell) and operational leverage from AI.
* The tone of management remained confident, with more specificity on actions taken to manage costs and risks.

RISKS AND CONCERNS

* Higher market morbidity was cited as a key challenge, attributed to Medicaid lives entering the market and ongoing program integrity efforts.
* Management acknowledged the risk of market contraction in 2026 due to the expiration of enhanced premium tax credits, but stated, "We remain optimistic Congress will reach a compromise on tax credits."
* Analysts questioned the potential for further market morbidity shifts and the operational impact of program integrity measures.
* Management described mitigation strategies, including disciplined pricing, targeted plan design, proactive broker engagement, and ongoing SG&A reductions through AI and operational efficiencies.

FINAL TAKEAWAY

Oscar Health's third quarter call underscored a proactive approach to managing higher market morbidity and an evolving individual market landscape. The company emphasized its disciplined pricing strategy, including a 28% average rate hike for 2026, alongside ongoing cost controls and product innovation. Management reiterated confidence in expanding margins and returning to profitability in 2026, supported by robust membership growth, strategic market expansion, and readiness to adapt to regulatory and market shifts.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/oscr/earnings/transcripts]

MORE ON OSCAR HEALTH

* Oscar Health, Inc. (OSCR) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4840110-oscar-health-inc-oscr-q3-2025-earnings-call-transcript]
* Oscar Health: Growing Fast, But Can It Handle The Heat? I'm Staying On The Sidelines [https://seekingalpha.com/article/4835146-oscar-health-stock-autious-bullishness-into-earnings]
* Oscar Health: What The U.S. Government Shutdown Means To The Company [https://seekingalpha.com/article/4828602-oscar-health-oscr-what-the-us-government-shutdown-means-to-the-company]
* Oscar Health GAAP EPS of -$0.53 misses by $0.03, revenue of $2.99B misses by $90M [https://seekingalpha.com/news/4517044-oscar-health-gaap-eps-of-0_53-misses-by-0_03-revenue-of-2_99b-misses-by-90m]
* Oscar Health Q3 2025 Earnings Preview [https://seekingalpha.com/news/4515860-oscar-health-q3-2025-earnings-preview]