OSCR Post-Raymond James & Associates’ 46th Annual Institutional Investors Conference Investment Flash Update
Oscar Health: Scaling Profitably in the Post-Integrity ACA Era; Cloud-native insurer beats growth-to-earnings hurdle; adds tech-driven leverage while policy tailwinds and ICRA expand its runway.
Headline & Verdict
Raymond James fireside chat re-affirms Oscar’s glide-path to GAAP profitability and 20 % top-line CAGR; risk-reward still skewed up.
Key Drivers & Hard Data
Paid ACA membership sits at 1.80 m after February effectuations; guidance implies essentially flat enrollment through 2025, yet still supports ~23 % premium-revenue growth to ≈$11 bn (vs. $9.3 bn in 2024, +56 % y/y).
MLR 75.4 % in 1Q-25 (-120 bps y/y) and SG&A ratio 15.8 % (-260 bps)—both trend lines tracking toward long-term 80 % / 16 % targets even after CMS integrity rules tightened enrollment.
1Q-25 operating income $297 m and adjusted EBITDA $276 m put the company on pace to exceed FY-25 guide ($275-325 m) and to repeat GAAP net profit after 2024’s first-ever $25 m positive bottom line.
Balance-sheet surplus: $4.0 bn total cash & investments (-reg subsidiary locked capital) with $190 m at parent; capital ratio > 400 % RBC.
Tech-enabled cost take-out: mgmt cites AI scripting and automated EOB workflow cutting ~200 FTEs and $100 m run-rate SG&A.
Tech Edge Assessment
Oscar’s fully cloud-native claims stack, proprietary ML risk-scoring engine, and API-first “+Oscar” platform let us ingest, adjudicate, and surface data with sub-second latency—an order-of-magnitude faster than COBOL-bound incumbents. The architecture’s modularity (internally developed DSL for plan config) keeps change-cost low and supports rapid ICRA and embedded-payer pilots. That speed-to-iterate plus a 24 m-life ACA data lake create a feedback loop that legacy Blues and MA heavyweights struggle to match.
Valuation Snapshot
At $16.47 share OSCR’s equity value is ~$4.9 bn (268.9 m diluted shares); net cash is roughly flat, so EV ≈ equity. We model NTM premium revenue $11.4 bn and NTM EBITDA $300 m, implying EV/Rev 0.43× and EV/EBITDA 16×—a discount to Medicaid/ACA peer CNC (0.7×, 12×) and miles below UNH/HUM/ELV 1.0-1.3×, 10-12×. CLOV trades cheaper on revenue (0.25×) but remains EBITDA-negative.
Catalysts (Next 6-12 mos)
11/1/25 Open Enrollment—watch ICRA uptake and zero-premium CSR silver positioning.
Additional +Oscar platform client win (CFO hinted at “two late-stage RFPs”).
FY-25 reserving and prior-period development at 3Q print—evidence that AI-driven payment integrity sticks.
Congressional decision on enhanced ACA subsidies before December omnibus.
Potential share-buyback authorization once parent-level cash > $300 m.
Bear Counterpoints & Rebuttal
Underwriting volatility when enhanced subsidies lapse could spike churn and MLR. Our work shows 77 % of lives are in red states lobbying for continuation; Oscar’s guide already assumes sunset.
Capital adequacy—state regulators may view $190 m parent cash as thin. 4 × RBC plus positive EBITDA gives plenty of buffer; rating agencies affirmed NAIC-2 status post 1Q numbers.
Pricing wars vs. Centene & Elevance in Georgia/Texas could erode margin. Broker up-tiering and AI-assisted risk scoring let Oscar walk from mis-priced cohorts (seen in 200 k non-payer cull).
Q/A Assessment
Management drilled into three themes:
(i) CMS program-integrity rules (SSN/alien-ID checks, broker-switch curbs) tighten but ultimately stabilize risk pool;
(ii) broker quality screens now flag address clustering and pre-op enrollments, a material safeguard against opportunistic churn;
(iii) ICRA viewed as a decade-long TAM unlock—no legislative change required, but tax-credit permanence could accelerate SMB migration. CEO Bertolini’s weekly “operating model” cadence reinforces confidence in the $2.25 EPS-27 roadmap despite incremental AI spend.
Actionable Takeaway
Add 40 bps (total weight 160 bps) into any sub-$16 tape. Base case 12-month PT $24 (0.7× NTM Rev), bull $32 on 5 % EBIT margin; bear $12 on MLR blow-out. Upside > 2:1 vs. downside clears our IRR hurdle; maintain overweight.