Oscar Health, Inc. (NYSE: OSCR)

Q1 2025 Financial Analysis | May 7, 2025

Executive Summary

Oscar Health reported outstanding Q1 2025 financial results, with net income of $275.5 million compared to $177.5 million in Q1 2024, representing a 55% year-over-year increase. The company achieved substantial growth with total revenue increasing 42% to $3.05 billion, driven by membership growth to approximately 2.0 million effectuated members. Despite the headwinds from increased risk adjustment transfers, Oscar maintained a favorable Medical Loss Ratio (MLR) of 75.4%, while improving its SG&A Expense Ratio to 15.8% from 18.4% in the prior year period, demonstrating effective cost management and operational efficiency.

Q1 2025 Highlights

Total revenue increased 42% year-over-year to $3.05 billion
Net income of $275.5 million, up 55% year-over-year
Earnings per share of $1.10 (basic) and $0.92 (diluted)
Membership growth to 2.04 million members, up 41% year-over-year
Medical Loss Ratio of 75.4%, up slightly from 74.2% in Q1 2024
SG&A Expense Ratio improved to 15.8%, down from 18.4% in Q1 2024

Financial Performance

Total Revenue
$3.05B
↑42% YoY
Premium Revenue
$3.00B
↑43% YoY
Net Income
$275.5M
↑55% YoY
Diluted EPS
$0.92
↑48% YoY
Medical Loss Ratio
75.4%
↑120 bps YoY
SG&A Expense Ratio
15.8%
↓260 bps YoY

Oscar Health delivered exceptional financial performance in Q1 2025, with total revenue increasing 42% to $3.05 billion compared to $2.14 billion in Q1 2024. This growth was primarily driven by a significant increase in premium revenue, which rose 43% to $3.00 billion. The robust revenue growth reflects the substantial expansion in membership, with the company's customer base growing to approximately 2.04 million effectuated members.

The company reported net income of $275.5 million for Q1 2025, a 55% increase from $177.5 million in the same period last year. This strong bottom-line performance translated to diluted earnings per share of $0.92, up 48% compared to $0.62 in Q1 2024. The improved profitability was achieved despite an increase in the Medical Loss Ratio, highlighting the company's effective cost control in other operational areas.

Investment income increased to $46.1 million in Q1 2025, a 7% increase from $43.0 million in Q1 2024, primarily due to a larger asset base. This contributed to the company's overall revenue growth and profitability. Oscar continued to maintain a strong balance sheet, with total cash, cash equivalents, and investments of $4.9 billion as of March 31, 2025.

Operational efficiency showed marked improvement, with the SG&A Expense Ratio decreasing to 15.8% in Q1 2025 from 18.4% in Q1 2024. This 260 basis point improvement reflects the company's successful efforts to leverage fixed costs and achieve variable cost efficiencies while supporting significant membership growth. Medical expenses increased by 45% to $2.26 billion, generally in line with membership growth, resulting in a slight increase in the Medical Loss Ratio to 75.4% from 74.2% in the prior year period.

The company's operating income showed remarkable growth, reaching $297.1 million in Q1 2025, a 60% increase from $185.6 million in Q1 2024. This substantial improvement in operating performance highlights Oscar's ability to scale its business model efficiently while maintaining profitability.

Membership and Operational Metrics

Membership by Offering Q1 2025 Q1 2024 YoY Change
Individual and Small Group 2,021,484 1,386,980 +45.7%
Cigna+Oscar 17,983 61,428 -70.7%
Total Members 2,039,467 1,448,408 +40.8%

Oscar Health experienced significant membership growth in Q1 2025, with total effectuated members increasing 41% to 2.04 million compared to 1.45 million in Q1 2024. This growth was concentrated in the company's core Individual and Small Group segment, which grew by 46% year-over-year to 2.02 million members. The strong membership increase was driven by successful open enrollment periods and the company's ability to attract and retain members through its digital-first approach and member-focused value proposition.

The Cigna+Oscar offering showed a decline in membership, decreasing by 71% to approximately 18,000 members. This was expected as the company had previously announced that it did not renew the Cigna+Oscar Small Group arrangement after the expiration of the initial term on December 31, 2024. Oscar will continue to provide transition and run-off services through December 31, 2026, and share proportionally in all premiums and claims for Cigna+Oscar Small Group plans sold or issued on or before December 15, 2024.

The substantial increase in Individual and Small Group membership reflects the company's successful strategy to focus on its core business and leverage its technology platform to deliver a superior member experience. The growth also demonstrates Oscar's ability to benefit from market dynamics, including Medicaid redeterminations which continued to drive enrollment in the ACA marketplace.

Medical Loss Ratio (MLR) increased slightly to 75.4% in Q1 2025 from a 74.2% in Q1 2024, representing a 120 basis point increase. This increase was primarily driven by unfavorable prior period development related to the 2024 Risk Adjustment payable, partially offset by favorable claims runout and a cost sharing reduction (CSR) recovery accrual. Despite this modest increase, the MLR remains at a healthy level, indicating effective medical cost management.

The company's operational metrics reflect its continued focus on efficient growth and scale. The improved SG&A Expense Ratio of 15.8%, down from 18.4% in Q1 2024, demonstrates the benefits of operating leverage as the company grows its membership base. This efficiency gain was driven by fixed cost leverage, lower exchange fee rates, and variable cost efficiencies.

Financial Position and Cash Flow

Cash & Cash Equivalents
$2.24B
↑46% vs Q4 2024
Total Investments
$2.62B
↑7% vs Q4 2024
Total Assets
$5.84B
↑21% vs Q4 2024
Stockholders' Equity
$1.34B
↑31% vs Q4 2024
Operating Cash Flow
$878.5M
↑38% YoY
Statutory Capital & Surplus
$1.52B
↑22% vs Q4 2024

Oscar Health maintained a robust financial position as of March 31, 2025, with total cash, cash equivalents, and investments of $4.86 billion, representing a significant increase from $3.97 billion as of December 31, 2024. This strong liquidity position provides the company with substantial financial flexibility to support its growth initiatives and navigate any potential market uncertainties.

The company generated operating cash flow of $878.5 million during Q1 2025, a 38% increase from $634.4 million in Q1 2024. This improvement was primarily driven by higher premium receipts and reinsurance recoverables, partially offset by higher claim disbursements. The strong operating cash flow performance demonstrates the company's ability to efficiently convert its growing revenue into cash.

Total assets increased to $5.84 billion as of March 31, 2025, a 21% increase from $4.84 billion as of December 31, 2024. This growth was primarily driven by increases in cash and cash equivalents, investments, and premiums receivable. Total liabilities increased to $4.51 billion from $3.82 billion at the end of 2024, primarily due to higher benefits payable and risk adjustment transfer payable.

Stockholders' equity reached $1.34 billion as of March 31, 2025, a 31% increase from $1.02 billion as of December 31, 2024. This increase was primarily driven by the strong net income for the quarter. The combined statutory capital and surplus of the company's health insurance subsidiaries was estimated at approximately $1.52 billion, up from $1.24 billion at the end of 2024, well in excess of minimum regulatory requirements.

Oscar's investment portfolio remained conservatively positioned, with a focus on high-quality, liquid investments. As of March 31, 2025, the investment portfolio primarily consisted of U.S. Treasury and agency securities (79%), corporate notes (20%), and other investments (1%). The company's investment strategy continues to prioritize capital preservation while generating incremental investment income.

Regulatory Environment and Market Dynamics

Oscar Health operates in a highly regulated industry subject to continuous regulatory developments that can significantly impact its business. During Q1 2025, several key regulatory factors and market dynamics influenced the company's performance and outlook:

ACA and Premium Subsidies

The enhanced Advanced Premium Tax Credits (APTCs) under the American Rescue Plan Act, extended by the Inflation Reduction Act through the end of 2025, continued to support affordability and enrollment in the ACA marketplace. These enhanced subsidies have been critical in driving Oscar's membership growth by making insurance more accessible to a broader population. However, the company acknowledges that if these enhanced subsidies are not renewed beyond 2025, it could negatively impact enrollment and market dynamics.

Medicaid Redeterminations

The ongoing Medicaid redetermination process, which began in April 2023, has contributed to increased enrollment in the ACA marketplace as individuals who lost Medicaid coverage sought alternative health insurance options. While most states have substantially completed their unwinding processes in 2024, CMS has announced that all unwinding-related renewals must be completed by December 31, 2025. Oscar anticipates that any future impact on membership from this process will not be as significant as the growth experienced in plan year 2024.

Program Integrity Initiatives

CMS has been increasingly focused on improving integrity in the Health Insurance Marketplace eligibility and enrollment process. In March 2025, CMS issued proposed Program Integrity Rules that would create more stringent procedures to confirm member eligibility for APTCs and shorten enrollment periods. These regulatory changes could potentially impact enrollment patterns and market dynamics, particularly for the 2026 plan year if implemented.

Special Enrollment Period (SEP) Dynamics

The company noted that higher SEP growth in certain markets throughout 2024 contributed to an increase in risk transfer payables for both the year ended December 31, 2024, and the three months ended March 31, 2025. Oscar anticipates lower SEP membership growth throughout 2025, which could potentially impact the company's risk adjustment transfer patterns.

Proposed Tariffs

The company highlighted potential impacts from new tariffs that may be imposed on pharmaceutical products, ingredients, medical devices, and supplies imported into the United States. Such tariffs could lead to higher costs for medical providers and facilities, higher pharmaceutical prices, and potential shortages of medicines and medical supplies, which could affect Oscar's medical expenses and member health.

Strategic Initiatives and Outlook

While Oscar Health did not provide specific forward-looking guidance in its Q1 2025 earnings release, the company's strategic focus and recent performance provide insights into its future direction:

Key Strategic Priorities

  • Core Business Growth: Oscar continues to focus on growing its Individual and Small Group business, leveraging its technology platform and member-first approach to attract and retain members. The strong membership growth in Q1 2025 demonstrates the effectiveness of this strategy.
  • Technology Platform Expansion: The company remains committed to enhancing its full-stack technology platform, which drives superior experiences, deep engagement, and high-value clinical care. This technology advantage is a key differentiator for Oscar in the marketplace.
  • Operational Efficiency: Oscar's improved SG&A Expense Ratio reflects its ongoing focus on operational efficiency and cost management. The company aims to further leverage its scale to drive additional efficiencies while maintaining high-quality service to members.
  • Medical Cost Management: Despite a slight increase in MLR, Oscar continues to focus on effective medical cost management through its provider networks, utilization management, and data-driven approach to care delivery.
  • +Oscar Service Offering: While services revenue was modest in Q1 2025, the company continues to see opportunity to leverage its technology platform to provide services via its +Oscar offering to other healthcare industry participants.

Market Outlook

Oscar's performance will continue to be influenced by several key factors:

  • Uncertainty surrounding the potential renewal of enhanced APTCs beyond 2025, which could significantly impact marketplace enrollment and dynamics
  • Implementation of CMS's proposed Program Integrity Rules, which could affect enrollment patterns and risk adjustment transfers
  • Broader economic conditions affecting consumer healthcare spending and preferences
  • Competitive dynamics in the ACA marketplace
  • Potential impacts from proposed tariffs on healthcare costs and supply chains

Despite these uncertainties, Oscar's strong financial position, growing membership base, and technology-driven approach position the company well to navigate the evolving healthcare landscape and continue its growth trajectory.

Risks & Opportunities

Opportunities

+
Continued membership growth in the Individual and Small Group segment
+
Further operational efficiency gains as the business scales
+
Technology platform differentiation in an increasingly digital healthcare environment
+
Potential expansion of +Oscar service offerings to new customers
+
Strategic deployment of excess capital from profitable insurance subsidiaries

Risks

!
Potential non-renewal of enhanced APTCs after 2025
!
Regulatory changes affecting enrollment patterns and market dynamics
!
Medical cost inflation and potential impacts from proposed tariffs
!
Intensifying competition in the ACA marketplace
!
Risk adjustment transfer volatility affecting financial results

Conclusion

Strengths

  • Robust membership growth of 41% year-over-year
  • Strong profitability with $275.5 million in net income
  • Improved operational efficiency with SG&A Expense Ratio down 260 basis points
  • Solid financial position with $4.86 billion in cash and investments
  • Technology-driven approach to member engagement and experience

Areas to Monitor

  • Slight increase in Medical Loss Ratio to 75.4%
  • Risk adjustment transfer volatility and impact on financial results
  • Regulatory developments, particularly regarding APTCs and enrollment rules
  • Transition of the Cigna+Oscar partnership to run-off mode
  • Potential impacts from proposed tariffs on healthcare costs

Summary

Oscar Health delivered exceptional financial performance in Q1 2025, with substantial growth in revenue, earnings, and membership. The company's net income increased 55% year-over-year to $275.5 million, while total revenue grew 42% to $3.05 billion. Membership expanded significantly to 2.04 million members, demonstrating the effectiveness of Oscar's technology-driven, member-first approach.

The company's operational efficiency continued to improve, with the SG&A Expense Ratio decreasing to 15.8% from 18.4% in the prior year period. While the Medical Loss Ratio increased slightly to 75.4%, it remains at a healthy level. Oscar's strong financial position, with $4.86 billion in cash and investments, provides substantial flexibility to support future growth initiatives.

Looking ahead, Oscar faces both opportunities and challenges. The company is well-positioned to continue its growth trajectory in the Individual and Small Group segment, leveraging its technology platform and operational efficiencies. However, it must navigate regulatory uncertainties, particularly regarding the potential non-renewal of enhanced APTCs beyond 2025 and the implementation of new program integrity rules.

Overall, Oscar's Q1 2025 results demonstrate the company's ability to execute its growth strategy while maintaining profitability and operational discipline. With its strong financial foundation and technology-driven approach, Oscar appears well-equipped to navigate the evolving healthcare landscape and continue its positive momentum.

Disclaimer: This analysis is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence or consult a licensed financial advisor. The information presented is based on Oscar Health's Q1 2025 earnings release and supplementary materials and may not reflect subsequent developments.

Source: Oscar Health, Inc. Q1 2025 Form 10-Q