Oscar Health Inc

Previous wording

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 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.

Current wording

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.

Previous wording

Oscar Health, Inc. is the first health insurance company built around a full stack technology platform and a relentless focus on member experience. Our full stack technology platform refers to our differentiated cloud-based 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. Powered by our full stack technology platform, we have built a scaled insurance business that enables us to earn our members’ trust, leverage the power of personalized data, and help our members find quality care they can afford. In addition to supporting our insurance business, externalizing our technology under the +Oscar technology platform enables us to power both providers and payors.

Current wording

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.

Previous wording

Premium revenue includes direct policy premiums collected from our members and from the federal government, risk adjustment, 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 and 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.

Current wording

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.

Previous wording

Non-Renewal of Cigna + Oscar Partnership

Current wording

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

Previous wording

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. Refer to Note 1 - Organization - Non-Renewal of Cigna + Oscar Partnership for additional information.

Current wording

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.

Previous wording

Change Healthcare (“CHC”) experienced a cybersecurity incident on February 21, 2024 that resulted in a disruption to the services CHC provides to the Company, including claims clearinghouse services. The Company promptly disconnected its systems from CHC and activated its incident management response policy. We were able to quickly implement work-around solutions that enabled us to promptly resume impacted operations, and to date the event has not had a material impact on the Company’s financial condition or results. At this time, CHC has not notified the Company of any breach of our members’ data.

Current wording

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.

Previous wording

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 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.

Current wording

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.

Previous wording

Our risk 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 transfers at the beginning of the policy year resulting from composition of the risk score being based on concurrent claim data. Furthermore, 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. Actual risk adjustment calculations and transfers could materially differ from our assumptions.

Current wording

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.

Previous wording

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 transfers. Additionally, medical expenses have historically been highest towards the second half of the year due to a number of factors discussed above.

Current wording

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.

Previous wording

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 Medical Loss Ratio ("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 for a description of the accounting methods used to record our quota share reinsurance arrangements.

Current wording

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.

Previous wording

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 are expected to extend 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. 2023 data from CMS on Medicaid redeterminations has shown marginal but consistent increases in ACA plan enrollments among consumers who lost Medicaid or Children's Health Insurance Program (CHIP) coverage. However, the redeterminations are ongoing, and consumers’ transitions to ACA marketplace plans may contribute to more substantial growth in the ACA marketplace in the future. For instance, data from CMS indicates that the ACA marketplace grew 30% during open enrollment for plan year 2024. CMS had also previously announced a sixteen month SEP for individuals that lose Medicaid or CHIP coverage as a result of the Medicaid redetermination process. This SEP began March 31, 2023 and was expected to end July 31, 2024, but has been extended to November 30, 2024.

Current wording

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.