Well, thank you for joining us for the next panel. We're really pleased to have Oscar Health with us for the next panel. I'm Scott Fidel. I'm the healthcare services analyst here with Goldman Sachs. Joining us today from Oscar, we've got Scott Blackley, he's the chief financial officer, and then also we have Bianca Rodriguez from investor relations, who's also in the audience with us today. First of all, Scott, great to see you.
Nice to see you too.
Welcome to the conference.
Thank you.
It's great to have Oscar, and it's great to have you here as well. We've got a nice list of questions and conversation that we're going to have. Scott, I thought maybe first, you did have an 8-K out this morning, had sort of an allusion to a business update. I'm sure we'll get into that. Maybe I'll sort of kick it over to you if there's any initial comments you wanted to make and sort of set things up for the conversation.
Great. Thank you. Good morning, everyone. Why don't we start off with just a quick update on where we are with the business as we've closed out the month of May. I would say that 2026 is off to a very strong start. We spent several years planning for how 2026 was going to play out with the expiration of enhanced subsidies. I think a lot of that planning work that we did is showing up in the results that we're seeing. As you talked about, Scott, we did file an 8-K this morning, just reaffirmed our full year guidance. Behind that affirmation of our current guidance, we do see some pretty healthy tailwinds in the performance of the company. First off, I would just say that when it comes to membership, we continue to see trends as expected.
We finished open enrollment with 3.4 million members. That migrated down to about 3 million members at the beginning of Q2. Things are proceeding more or less as we would expect from there. On utilization through May has been, continued to be modestly favorable to our expectations, continue to see strong performance there. Another important update, we did receive the final 2025 Wakely report. This report is based on the actual data that the carriers submit to CMS, it tends to be the most accurate Wakely report of the year.
That report was $130 million favorable to the accruals that we had booked in the first quarter, a pretty significant tailwind to where we were at the end of the first quarter. I take all that together, I think there's some pretty strong tailwinds, given that we still are waiting for the first 2026 Wakely report, which gives us a bit more information about the market morbidity this year, we are holding off on making any updates to our guidance at this point in time. I think we go into the quarter close this month with a pretty strong tailwind.
All right. Well, great. Thanks for those updates, Scott. That's encouraging and also helps to provide some nice visibility into trends year to date. Certainly those are three topics that we were going to want to discuss. To the extent that we can drill further, looking forward to doing that. Just first, on the first formal Wakely report, the June report, can you just to the extent of, I know it's coming in June, what's the report? Where would you sort of guide investors to in terms of when to expect that report would come out?
Yeah. We tend to get the Wakely reports, the first one we'll get here, we should receive it at the end of this month. We'll have claims through April, then each report has claims for an additional 90 days. We tend to get a report from them every month, and obviously the first report has got a light amount of claims data, we typically look at it as just indicative of how does it compare to our expectations. Last year, we saw that market morbidity was certainly accelerating in a way that the market hadn't expected. It can give you information even though it's early.
We should have that report again by the end of this month, and we're looking forward to seeing it because a lot of what the research that's come out from third parties, our own claims data is suggesting that market morbidity in 2026, which we all went into this year with assumptions that it was going to increase pretty dramatically. A lot of the early signs are suggesting that it is probably going to come in a bit lighter than what we all expected.
Yeah
Which would be good news for us. In fact, Wakely had published an early report on market morbidity, market sizing in April, and that report had a range of market morbidity, which actually was lower than what we had built into pricing. If indeed we see that market morbidity come in favorable, as the Wakely early report had suggested, that gives us an opportunity for some upside for the year.
Yeah. Maybe we'll even step back, and why don't we just stay on Wakely.
Sure
Since we're already there, just sort of make sure that we cover each of the steps and sort of getting to where we are now. First, going back to that final 2025 report, like you said, it is. While it's a 2025, it has earnings implications, as we just talked about. Maybe can you provide us some more information, visibility around, excuse me, the particular inputs that ultimately informed those revisions to your accruals when thinking about data, what you saw around the overall market and around morbidity, and around the risk profile of the market. Then relative to how you were assuming that for Oscar versus the market. We'll move to the interim report.
Yeah. The 2025 report that we got, typically there's not that much variability between the final Wakely report and the final CMS report, which will come out later. From here, don't expect, at least historically, there hasn't been much volatility. We feel like that's a good estimate of how 2025 is closing out. I think that what the really good news about the Wakely report, I'll take the $130 million as a tailwind to the year, but seeing that market morbidity was not accelerating at the end of 2025 as much as we and the rest of the market had expected, all of those assumptions ultimately got built into our guidance, got built into our pricing.
While it's a positive for our prior period development, it is also a persistent tailwind to 2026 because of the way we thought about market morbidity and our pricing. I'll just comment on overall risk adjustment, as you know, is the most challenging part of our business to predict. We have to predict our own risk scores, and we have to predict the market risk scores. Seeing 2025 and how 2025 is coming out also gives us an additional lens for predicting 2026. It helps us to refine our models to understand better what's going on in a state-by-state basis, and to be able to be ready to receive that first Wakely report.
How much do you discount, or are you able to bridge some of the unique dynamics around 2025 versus 2026, just given the more extreme or material change to the marketplace just because of the sunset of the enhanced subsidies and the resulting particularly changes into metal-level products that we've seen play out so far this year?
Yeah. I think for 2026, as an industry, I think we have more information about market morbidity earlier in the year than we've ever had. The Wakely report that I think we and others sourced information, we gave that to Wakely early in the year, which they took and then gave back an early read on what is market morbidity looking like for 2026. It's the first time we've all had that report. We also got additional third-party data about our incoming membership, which gave us much more information about the risk scores and the potential utilization of our new members.
We walked into this year, I think, with more information than we've ever had about the membership. Since then, just the read-through from first quarter, it looks like we didn't see any of the competitors that had called out significant pressure on utilization. Our utilization was favorable to our expectations as well. When I take that information in the aggregate and look at how is 2026 playing out, I keep looking for some piece of bad news about 2026 market morbidity, and at this point, just haven't seen any.
Yeah. Well, certainly, relative to the fear levels or just uncertainty around how much the market could see a deterioration in the risk profile because of the loss of the subsidies and then the sharper premium increases, it's certainly encouraging to see that. Scott, to what extent can you line us up with that in terms of that favorable underlying variance around morbidity relative to maybe some of the assumptions that you had before that were in the accruals.
Again, I think also consistent with how the industry was thinking about things, in terms of what are some of the underlying inputs into what you're seeing that's coming in more favorable? Is it in terms of demographics of the membership, in terms of the product, again, shifting more into products that ultimately may actually affect some of the utilization dynamics, which we'll get to. Are there any particular characteristics that jump out particularly?
Yeah. I would say that given the amount of change that was happening in the marketplace with the expiration of enhanced subsidies, I think we and others, including the consulting firms, were probably as conservative as we could be in terms of trying to estimate what the effects of the loss of those subsidies would be on the marketplace. I think Oscar has been working backwards from an assumption that the subsidies would expire in 2026. That was when we did our last investor day, a couple of years ago now. That's the guide that we came up with is in the event these expire, here's what's going to happen. We were hopeful that they wouldn't, we were planning for the worst case scenario that they would.
I think that that has allowed us to really approach the market from the lens of what are the right products that need to be in this market if those subsidies are gone. That really informed how we built our Bronze plans, our Gold plans, and to a lesser extent, Silver, because what we were trying to do is to make sure that we had plans that could give those individuals that were able to maintain benefits or some type of subsidy, a landing spot where they could go to Gold and get rich benefits using the subsidy dollars that they had. They could go to Bronze and get potentially a cheaper plan, not have an out-of-pocket increase, still maintain coverage.
That strategy was really successful in both allowing us to retain our own members, also collecting a lot of members from other plans or new to the marketplace. Really, I think that when we look at what happened this year, you did see a fairly significant change in metal demographics, at least in our case, that was very intentional, something that we had worked for quite a long time. We think that was a huge reason for the success this year.
Certainly what we're talking about right now is going to have, I think, pretty meaningful implications for how you're thinking about 2027 strategies. Let's put an asterisk on that. I first want to sort of fill in the updates that you provided and sort of continue to sort of build out that mosaic of the inputs to 2027. I think this is a good transition towards utilization, and very much appreciate you giving the updates so that we can actually talk a little bit about some of the backdrop around utilization, and certainly not a significant surprise to hear that the bias may be more towards favorability just in terms of what we're hearing out in the market and with all the checks that we do, and then obviously the rest of the street does as well.
I guess to start with, Scott, any more additional layering that you can give us around just when sort of as that sort of bias towards favorability in terms of the cost components or the key provider settings, are you generally seeing it sort of broad-based, or are we seeing clearly it feels like on the hospital front, we've definitely felt like things have maybe sort of come in a little bit more than the hospitals expected, but I don't want to put words in your mouth. What you're seeing out there?
I think I'll save the details of the categories of utilization for our full quarter update. I would say that there's always puts and takes that you see along the way. We are seeing exactly that. There's some areas that are running really quite favorable. There's other areas that are running a little bit unfavorable in the aggregate, which is what I really focus on. We're seeing utilization that is kind of persistently grinding favorable each month, that's a real positive. I think that there's a question about how much is AI in the background starting to affect whether it's hospital systems or the way that Oscar utilization.
We've been sure that we remove friction from our member experiences, that's always been kind of, as you know, the entire history of Oscar has been built around that concept, I think we've been pretty methodically doing that over a number of years, but we're really starting to see some of that kind of working its way through towards more predictable utilization patterns because we know what type of things go straight through and get approved by us, what things need to actually go in for a clinical review. It is something that I think you're starting to certainly see the hospital systems using more AI to help them with coding charts, I think that potentially a lot of this utilization favorability can be kind of attributed back towards just more efficiency in how we all manage patient interactions.
Okay. All right. Getting back to just the membership dynamics and how that's tracking. Sounds like things are right on track with your book of business. How would you characterize the overall market at this point? It feels like from our perspective that we're probably right in that mid-20s type range, if you sort of aggregate everything that we've seen in terms of down mid-20s, and I know that's part of the range that you've provided as well. Does that still sort of make sense to you, or are you seeing a bias in either direction?
I think that our estimate was that the market would contract by 20%-30% in 2026. We priced morbidity assuming a 30% contraction, and currently our risk adjustment accruals are based on that pricing view of a 30% market contraction. Like you, I read everything I can get my hands on. I just see nothing in any of the competitor data, our own data, third-party kind of reviews that would suggest that it's going to be at the higher end of the range that we provided, that 20%-30% range. We'll see how it all plays out.
I'm super excited to see this weekly report just because while we think we've got good data that's going to help us understand how the year is going to play out, seeing that first confirmatory report will certainly give us even another layer of support behind starting to lean in and feel like, okay, market morbidity is going to come in below where we had all expected.
Let's talk about sort of where we sit right now and to the extent that we can sort of tease out some of your thinking around the outlook for 2027 and some of the key variables that may be a consideration around game theory and around how you're going to position pricing and how competitors are. There are some interesting crosscurrents here, right? Certainly it feels like the market is performing better than feared so far this year. Obviously, we're coming off of a pretty dynamic, pretty brutal last year for the sector in the exchange market, but also more broadly in all the key markets on the government side. Margins have certainly been beaten down, and our view is that the industry is sort of in that inflection towards cyclical recovery across some of these markets.
We're seeing some of the key things that we track are certainly around capacity, as part of our sort of different sort of key critical inputs on the underwriting cycle. It's definitely sort of as would be expected in terms of this late sort of cycle period. We've been seeing more announcements of market exits from carriers, more from regional and provider-sponsored carriers, the types that we would generally expect. It's a steady tempo there. I'm going to want to sort of get your opinion on sort of to what extent that capacity dynamic sort of may influence your thinking.
Ultimately, I think the big sort of choice or pick, right, is going to be like, are competitors going to pivot back to already sort of looking back to get on the growth side more on the exchange side after seeing some of this favorability? Is it the broader sort of pressure that the industry has faced across multiple lines? Again, still a market that is shrinking 25% and has a lot of underlying sort of variation going on in it. Do you think that that ultimately keeps a disciplined sort of balance around that price versus margin?
Yeah.
Obviously, a lot in there.
There is some-
a game theory.
Yeah
you may be thinking about at this point.
There's a lot to unpack. I would say 2027 has some new set of regulatory requirements for the marketplace. As we think about pricing for 2027, trying to figure out how are each of the different new regulatory standards going to affect the size of the market. We did see another piece of litigation come out, that last year, many of the program integrity efforts that CMS was trying to put into place ultimately got stayed by the courts.
A similar lawsuit was filed recently, same court systems challenging some of the new rulemaking that CMS has just released. There's a little bit of a lack of, while we know what the final rule proposal is, and we're working to build that into our pricing, we're also going to have to be thoughtful about having an alternative pricing scheme that says, "What if some of the current proposed or some of the current regulations ultimately get stayed again?
They're meaningful enough that you would have to give serious due diligence.
I think that there's some important things that would cause us to need to adjust some of the key inputs that go into pricing. We'll be carefully monitoring that.
When would you expect to have visibility into that? Is it more sort of staggered?
Boy, that's a court matter, and we would be hopeful that it gets resolved quickly. At least they've got some precedent about from how it was handled last year. There's some optimism that we could see this get rapidly resolved. Like all things in the government, surprises are probably more likely than not. We'll keep a close eye on that. I think that the thing that I learned most specifically about 2025, my biggest takeaway from that is when you know what is coming.
Even when the changes are pretty significant and we are able to price those into the assumptions that we use, and actually within a relative range, we're able to predict what's going to happen in the marketplace. When things change mid-year is when it gets pretty bumpy, and when you have a lot of mid-year regulatory changes or mid-year membership changes in who's allowed to access the marketplace. Those are the things that I think create the most volatility.
Yeah.
I'm pleased that we're going to try to get some of these things for 2027. Looks like we'll have clarity on how 2027 is.
At least this year, too, there's not all that.
Exactly
Talk that SEPs are coming, like we've seen last year.
Exactly. While it may seem like it's more dynamic, I actually view it as being a bit more structurally consistent each year, where we know what is happening in the year, we're able to price for it. That gives me some optimism about the predictability of the market. Exited. This is a very hard business. Incredibly important. I think that for what you see is those who have been in this business and are staying in this business tend to have networks that are built, narrow networks.
Some have Medicaid chassis. We've gone to the market with more of an approach of let's build narrow networks. I think that you've seen others who've tried to use a commercial network, just struggle to be able to be competitive with that type of backdrop. There are some carrier exits this year. We have a pretty good overlap with the markets where those carriers are, that gives us an opportunity for 2027. Overall, I think that the 2025 was a tough year for everyone.
Yeah.
I'm not sure that 2026 is going to be quite, that we're all going to conclude that we've completely recovered.
Yeah
to where we need to be. I know that when I look at the marketplace, and I think about how we're approaching pricing, I would characterize it as competitive, also, this isn't a marketplace where you win by being significantly the lowest price, because that just doesn't get you anywhere. I would expect it to be a rational market in terms of pricing.
Got it. I have one more question on the exchanges, and then I want to open it up to see if there's any questions with the audience, and then we'll see how much loosey and ick we could get in.
Yeah
With the time. The final question on the exchanges is just around, again, that sort of where we stand with market and program integrity and the numbers that we continue to still see around how much improper enrollment may or may not be in the market. Paragon Healthcare just put out their update, and they're still calling that a very substantial relative, especially against the size of the exchange market this year versus last year. Obviously, Oscar has a tremendous amount of technology monitoring things for your. What's your observation on maybe just sort of the Paragon view or just the general, let's say much more cautious view on some of those, on the accuracy of all the enrollments that are in the market?
Sure. Well, look, I think that the Paragon report clearly has a lens that they're trying to paint on the marketplace. They start with the 23 million open enrollment and use that as their proxy for how many people were inappropriately enrolled. We think that's more likely, your starting point should be kind of the.
The post.
the post.
Yeah.
There's already inflation.
Yeah.
It's also based on some census data that is known to be lagged. The census themselves will say that they are very ineffective at capturing data for low-income populations and immigrant populations. I think those are important pieces of data in terms of what's going on with the marketplace. I think that we know the folks at Paragon, they're obviously smart people, but I do think there's a little bit of a purpose for their report.
When we look at things, our view is we think that a stable marketplace is best for all the ACA participants. It's the best thing for Oscar, we support thoughtful program integrity initiatives. We think they're good. In our own book of business, we do bring AI to look for anomalous patterns amongst members, amongst brokers. When we see those things, we suspend brokers. If we see patterns that we deem suspicious, we have a constant dialogue with CMS about anything that we're seeing.
We try to be very front-footed in protecting ourselves and the marketplace from fraud. If we think that there's suspicious behavior amongst members, we don't recognize the revenue on those members. We're trying to make sure that we set the company up to be successful in a world where we want to be a market leader in making sure that this is a clean and healthy marketplace.
Great. We probably have time for a question or two from the audience, if anybody has anything they're curious about.
With as much power as the current administration has shown in their ability to rapidly change policy, how are you preparing for a potential flip-flop after the next election?
Yeah, the question being with as much power as the current administration has to create rules, what happens if you see a change in administration, and how likely is it that we might see a flip-flop? I'm sure there's a handful of initiatives that if we did see a different administration in power at some point in the future, certainly they would have their own set of agendas.
What I think that will likely be sticky is some of the program integrity initiatives that have been put into place. I would expect to see those continue. I think some of the expanded open enrollment or SEP type of characteristics that were put into place during COVID, I don't think we'll see those return. I don't want to get too far ahead of ourselves, but I think that the parameters of what would be different are narrower than maybe they've been in the past because I think the market's going to be more stable going forward.
Well, great. Well, I think we're right at time, so we're going to pause the session there. Scott, I want to thank you so much for joining us and hope the rest of the conference goes well for you
Really appreciate it, Scott. Thanks for your time.
You're welcome.
All right. Take care.