Earnings Call Transcript - OSCR 2026-11-05

Operator

Thank you, everyone. Good morning. My name is Erica, and I will be your conference operator. At this time, I would like to welcome everyone to Oscar Health's third quarter 2026 earnings conference call. I will now turn the call over to Chris Potacher, Vice President of Treasury and Investor Relations. Please go ahead.

Chris Potochar, Head of Investor Relations

Good morning, everyone. Thank you for joining us for our third quarter 2026 earnings call. Mark Bertolini, Oscar Health's Chief Executive Officer, and Scott Blackley, Oscar Health's Chief Financial Officer, will host this morning's call. This call can also be accessed through our Investor Relations website at ir.oscarhealth.com. Full details of our results and additional management commentary are available in our earnings release, which can be found on our Investor Relations website at ir.oscarhealth.com. Any remarks that Oscar makes about the future constitute forward-looking statements within the meaning of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in our annual report on Form 10-K for the period ended December 31, 2025, and the quarterly report on Form 10-Q for the period ended June 30, 2026. Each is filed with the Securities and Exchange Commission and other filings with the SEC, including our quarterly report on Form 10-Q for the period ended September 30, 2026, to be filed with the SEC. Such forward-looking statements are based on current expectations as of today. OSCAR anticipates that subsequent events and developments may cause estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. The call will also refer to certain non-GAAP measures. A reconciliation of these measures to the most directly comparable GAAP measures can be found in the third quarter earnings press release available on the company's investor relations website at ir.oscarhealth.com. We have not provided a quantitative reconciliation of estimated full year 2026 adjusted EBITDA as described in this call to GAAP net income because OSCAR is unable without making unreasonable efforts to calculate certain reconciling items with confidence. With that, I will turn the call over to our CEO, Mark Bertolini.

Mark T. Bertolini, CEO

Good morning. Thank you, Chris, and thank you all for joining us. 2026 is the strongest year in Oscar Health's history. We delivered record profitability for the first nine months of the year, reporting earnings from operations of $1.3 billion and net income of $1.2 billion. We also expect to achieve several of our 2024 Investor Day commitments one year ahead of plan. Based on our performance year-to-date, we are raising 2,026 earnings from operations guidance for a third time to a range of $850 million to $950 million. Our strong third quarter performance exceeded our expectations with improvement across all core metrics. Revenue grew roughly 70% year-over-year to $5.1 million. Our SG&A expense ratio improved 350 basis points year-over-year to 14%. Another record law reflecting the discipline execution, greater fixed cost leverage, and AI-driven efficiencies. MLR improved 450 basis points over the prior year period to 84%. Earnings from operations increased $307 million year-over-year to $178 million, and adjusted EBITDA increased $308 million to $207 million. Before I turn to our business highlights, I will share our perspective on current market trends. The ACA is the foundation of a rapidly developing individual market. Americans are building careers on their own terms. They are starting businesses, combining part-time work, participating in the gig economy, and retiring early. More than 19 million people rely on the ACA, yet 28 million American workers remain uninsured. Affordable coverage gives people greater financial security to pursue new opportunities and helps employers build a more stable workforce. Both parties understand health care is a priority for the American people. We have a significant opportunity to expand the ACA into a competitive marketplace that improves affordability and supports a resilient economy. Our 2026 performance demonstrates the strength of our operating model. We remain focused on growing market share and expanding margin in 2027. Our weighted average rate increase of approximately 14% for 2027 open enrollment period reflects elevated trend and higher market morbidity. Pricing is one lever of our growth model. We also target markets where our products and distribution network address consumer needs, including opportunities created by competitor exits. These strengths, combined with our medical cost management, operating efficiency, and superior technology, will drive sustainable financial performance in 2027 and beyond. Now I will review our business highlights. Oscar Insurance ended in the third quarter with 2.7 million members, up 27% year-over-year. We are entering open enrollment with a 24% larger footprint, spanning 713 counties. We are also expanding into South Carolina. Our expansion increases our total addressable market to approximately 10 million consumers across 21 states. OSCAR is launching a new wave of consumer lifestyle products. Our newest product, RetireEase, is live in select markets and serves a growing segment of 2.5 million early retirees in the ACA. Members keep their trusted doctors and receive set prices for preventative services, physical therapy, and heart, bone, and joint care. We are also addressing affordability through bundled benefits. Hundreds of OSCAR plans now include dental and vision coverage. In addition, our new all-state health solutions partnership bears OSCAR plans with low-cost supplemental coverage to help bronze members manage out-of-pocket costs. Each product meets a distinct consumer need and extends our reach into high-value, underserved segments. Our OSCAR team is also scaling choice. Our Hy-Vee Health with Oscar product is expanding from Iowa into Nebraska, Missouri, and Kansas. This product's concierge care model earns a 92% satisfaction rate and can now serve more small businesses, part-time employees, and gig workers. We are also launching Hello Menno off-exchange to better serve women across the workforce. Employer demand is building. Choice adoption is growing fastest in healthcare, technology, construction, and manufacturing sectors across OSCAR states. OSCAR's health technology puts consumers in control of their healthcare decisions across two platforms. The OSCAR platform now includes new AI capabilities that make our product suite easy to understand. The Lucy platform serves the broader market, personalizing the healthcare shopping experience at scale. LUCI instantly matches consumers with plans from major ACA carriers and select supplemental carriers and guides broker through CMS eligibility. No other platform brings these capabilities together in one place. LUCI is on track to sell approximately 800,000 new policies in 2027, driven by growing broker and consumer demand.

Mark T. Bertolini, CEO

Oscar Health's third-quarter performance puts us on track

Mark T. Bertolini, CEO

to deliver strong results one year ahead of plan. Our disciplined pricing, product innovation, and technology-powered support are delivering superior member experiences and efficiency across the company. The individual market opportunity is growing. People expect healthcare to work like the best consumer products, simple, transparent, and personalized. We are building a consumer health care company that meets those expectations and serves a much larger market. The team is positioned to grow market share and expand margin in 2027. We are also on track to deliver our long-term targets, including at least $4 earnings per share by 2029. Thank you to the Oscar Health team for giving people power over their health care. With that, I will turn the call over to Scott. Scott?

Scott Blackley, CFO

Thank you, Mark, and good morning, everyone. Sorry for the voice. I'm recovering from a goal today. Through the first nine months of 2026, we delivered net income of approximately $1.2 billion, or $3.59 per diluted share. Earns from operations were approximately $1.3 billion. Based on the strong results and underlying trends, we are raising our full-year 2026 outlook. Turning now to third quarter results. We ended the quarter with approximately 2.7 million members, an increase of 27% year-over-year. Sequential decline in membership primarily reflects disenrollments from CMS' industry-wide eligibility review, which was in line with expectations. From a second, smaller CMS review, we expect a small number of additional disenrollments in the fourth quarter. Total revenue increased approximately 70% year-over-year to $5.1 billion, driven by rate increases and higher membership. During the quarter, we received updated risk adjustment data. We saw significant improvement in Oscar's risk relative to the market, and market morbidity was modestly favorable to our expectations. These factors drove a $250 million revenue benefit in the quarter. Risk adjustment as a percentage of premiums was 11.8% in the third quarter, and 17.2% through the first nine months. While the additional data gives us greater visibility and more confidence in our risk adjustment rules, we continue to take a cautious approach to our risk adjustment reserves. The third quarter medical loss ratio was 84%, an improvement of 450 basis points year over year. Improvement was primarily driven by our discipline pricing strategy. Overall, year-to-date utilization was moderately favorable to our expectations. By category, inpatient, professional, and pharmacy utilization were favorable, while outpatient was elevated. We believe some of the elevated outpatient utilization reflects a rotation from inpatient to outpatient care, driven in part by our affordability initiatives.

Scott Blackley, CFO

Switching to administrative costs, the third quarter

Scott Blackley, CFO

SG&A expense ratio was 14%, the lowest in the company's history. The approximately 350 basis point year of year improvement was driven by lower risk adjustment as a percentage of premium, higher fixed cost leverage, and disciplined expense management, including an increasing impact from technology and AI initiatives. We reported earnings from operations of $178 million in the third quarter, a $307 million year-over-year improvement. Operating margin was 3.5%, an improvement of approximately 780 basis points year-over-year. Net income was $167 million, a $305 million increase year-over-year. Adjusted EBITDA was $207 million in the quarter, an increase of $308 million year-over-year. Shifting to the balance sheet, we ended the third quarter with approximately $9 billion of cash investments, including $360 million of cash investments at the parent. Sequential decline in cash investments primarily reflect the payment of our 2025 risk adjustment payable during the third quarter. As of September 30th, our insurance subsidiaries had approximately $2.3 billion of capital in surplus, including $1.4 billion of excess capital,

Scott Blackley, CFO

which was driven by our strong operating performance. Turning now to our 2026 full year guidance.

Scott Blackley, CFO

Based on the results through the first nine months, we are raising our full year earnings from operations guidance to a range of 850 million to 950 million. At the midpoint, this is 200 million above our prior outlook and 550 million above our original guidance. Our improved outlook reflects favorable risk adjustment and utilization that was moderately favorable to our expectations. We now expect total revenue in the range of $19 billion to $19.3 billion, an increase of $300 million from our prior outlook. We expect to end the year with approximately 2.5 million members, which reflect the additional disenrollments from the second CMS review. We expect risk adjustment as a percentage of premiums to be between 17% and 18%, compared with our prior expectation of

Scott Blackley, CFO

20%, which is based on year-to-date risk adjustment experience.

Scott Blackley, CFO

Turning to the medical loss ratio, we now expect a full-year MLR in the range of 80.5% to 81.5%. On administrative expenses, we expect our SG&A expense ratio to be in the range of 15.1% to 15.6%. We expect adjusted EBITDA to be roughly $110 million higher in earnings from operations.

Scott Blackley, CFO

Our performance this year positions us well for 2027.

Scott Blackley, CFO

We'll provide formal guidance on the fourth quarter earnings call, but let me spend a moment on our planning assumptions. We expect overall ACA Marketplace membership to be stable compared with year-end 2026, and we're positioned to gain market share. We continue to take a disciplined approach into pricing, bouncing growth, and profitability. As Mark mentioned, our weighted average rate increase for 2027 is approximately 14%. Our pricing reflects an incremental increase in medical cost trends and higher market morbidity from ongoing program integrity initiatives. Our competitive positioning, differentiated products, and strong member experience gives us confidence as we head into 2027. We expect improved medical cost performance and administrative efficiency to drive further their margin expansion next year. In closing, we are on track to deliver a strong financial performance in 2026, and we remain focused on driving sustainable earnings growth and achieving our long-term target of at least $4 of earnings per share by 2029.

Scott Blackley, CFO

With that, I'll turn the call over to the operator for the Q&A portion of our call.

Operator

Thank you. If you would like to ask a question, please press the star and one on your keypad. To leave the queue at any time, please press star two. We do ask that you limit yourself to one question and one follow-up. Once again, that is star one to ask a question. We'll pause momentarily for questions to queue, and we'll take our first question from Andrew with Barclays. Please go ahead. Your line is open.

Andrew, Analyst — Barclays

Hi, good morning. GNA came in meaningfully better in the quarter, but updated guidance appears to imply a 400 basis point sequential increase. Can you elaborate on the drivers of the strong 3Q outperformance and what's driving the higher than normal step up for 4Q? Thanks.

Scott Blackley, CFO

Good morning, Andrew.

Scott Blackley, CFO

So, on SG&A, I think that in Q3, you know, you're seeing the benefit of our continuous disciplined expense management, growing impact of AI that we're developing. Those are the themes that I would try. A pretty healthy amount of fixed cost leverage. So those are the drivers of Q3 performance. As you think about Q4, there is a step up in the Q4 SG&A ratio. A portion of that is, you know, being driven by Things like, I would say these are Q4 specific, things like OE ramp, some of our risk adjustment operations where we do a lot of our charter collection activity in the fourth quarter, and then we've got some, you know, typical investments that we make for 27 growth in the fourth quarter.

Andrew, Analyst — Barclays

See you so late. Great. And I think I heard you say membership is expected to be stable with year-end 2026 results while you take market share. Can you flesh out a little bit more how you're thinking about your share gains in the context of how market growth might play out for 2027? Thanks.

Mark T. Bertolini, CEO

Um, sure. Thanks, Andrew. This is Mark. Um, so we'll start with the market growth that both Scott and I highlighted, um, where we've ended, we're now going to be 713 markets. We've ended South Carolina. Um, secondly, I would offer new program extensions and products into the marketplace like retirees. We tend to have very high retention and opportunity, opportunistic growth in those marketplaces. And then finally, there's about 850,000 lives coming to market as a result of competitor exits. So all of that, as we add that into our mix and our ability to price appropriately, disciplined, and competitively in the marketplace, we believe that we'll pick up share.

Operator

Thank you. And our next question comes from Jessica Tassen with Piper Sandler. Piper Sandler, please go ahead. Your line is open.

Jessica Tassen, Analyst — Piper Sandler

Hi, thanks very much for the question, and congratulations on the phenomenal results. So, our estimates imply, I think, that year-over-year medics PMPM increased 19.9% in 3Q from down 1.5% in 2Q. So, can you maybe just give us some color on the utilization behavior you're observing by metal level? I'm curious to know how MLR seasonality is evolving both for bronze members and then also, you know, whether you're observing any changes in silver member behavior year over year or relative to your historical, relative to historical or relative to expectations and why that might be. Thanks.

Scott Blackley, CFO

Yeah, Jess, let me start with the claims PMPM.

Scott Blackley, CFO

So, you know, one of the challenges that you guys have this year in looking at claims PMPM is that we do have our member months, because of some of these CMS-driven disenrollments, the member months are reported are a little bit different than those that are actually generating claims. So there is a little bit of a skew in that. So when I unpack that and kind of put Humpty Dumpty back in. In Q1 to Q2, there's a meaningful... Q3 from there. And in Q4, we're anticipating, and this is historically been the case, that there's less movement. When I look at utilization, you know, we're seeing utilization across the metals, which is consistent with the risk that we see there. We're not seeing any, you know, specific things that I would call. I think that, you know, the risks that we have in the book is being supported by the claims that we're seeing. And, you know, we're, as you think about the MLR that we've got embedded for our fourth quarter, you know, we are expecting a normal seasonal uptick in MLR into the

Scott Blackley, CFO

fourth quarter from where we.

Jessica Tassen, Analyst — Piper Sandler

Got it. That's really helpful. Thank you. And then I appreciate that the midterms changed the EAPTC outlook considerably for 28, but maybe hoping you can help us better understand that just the membership outlook for 2027, where are we in terms of CMS's fraud and marketplace integrity efforts, and how do you expect those efforts to, you know, evolve in 27? And then can you just clarify that despite the expectation for flat enrollment year-over-year in 2027, you all are priced for an increase in market morbidity within that 14 percent? Thanks again.

Mark T. Bertolini, CEO

Yes, Jess, I'll start, and then I'll turn it over to Scott on market morbidity. So we do expect stable membership year over year. We do still see more program integrity programs coming through. We believe that will have an impact on the marketplace. Obviously, as I said before, you know, it's going to be offset by some of the other things, new market center, new products, and other competitors leaving. So overall, we see the whole market being relatively stable. I don't think the midterms are going to have much of an effect, if anything, in the near term, because there's a lot of bargaining that would need to go on, given that the administration still will hold the veto pen. And so getting the kind of things we would need to get done to, for example, reintroduce enhanced subsidies, and others would have to be part of a grander deal, and we're not quite sure how the dynamics of that will move forward. We always plan for these things in our operating plans and risks and opportunities, and we always see what we would need to do should these things begin to happen. But right now, I don't know that much of anything is going to happen over the next year at least. Scott?

Scott Blackley, CFO

You know, market morbidity, I have a couple thoughts there. You know, one is we are seeing and expecting to see a stable ACA in 27. A lot of the big change events, you know, happened in 26, and we expect fewer going into 27. We are expecting that program integrity will have, you know, an impact, and we have built that into our pricing. So I would comment that on our... You know, average 14% rate increase. The three things that are really driving that 14% kind of in ranked order of impact. Number one is trend, you know, which is in the, you know, call it high single digits. And then, you know, market morbidity coverage is second. And then we also, you know, have built in a little bit of margin expansion into pricing. So we feel like we've got a very competitive price and some, you know, really terrific products and markets. Thank you.

Scott Blackley, CFO

Thank you.

Operator

Thank you. And we'll take our next question from Parker Snur with Raymond James. Please go ahead.

Parker Snure, Analyst — Raymond James

Yeah, thanks, and good morning. So, just kind of piggybacking on the previous few questions, just curious on your view for this. Annual enrollment period, there's some additional friction that's being added to the enrollment process, some enhanced Social Security verification, broker consent, tax verification, things like that. I understand that you think the market will be flat, but just curious if you view these procedural measures as being a material driver in this year's annual enrollment process, and could this lead to some people being thrown off? And I guess just kind of general expectations in terms of market morbidity. I know you touched on that, but just related to that specific dynamic.

Mark T. Bertolini, CEO

Parker, I'll start by describing... Obviously, we've had a lot of preparation to try and get in front of the things for brokers and the enrollment program this year. So it will slow down the start. These systems are new to them. We did a lot of training over the summer. We even built our own capabilities on our own platform to help them as they navigate through this. But there will be a learning curve. It will be something new for them, and it will have an impact on their productivity. But I think that is something that they will pick up quickly enough. We're watching it every day and watching how it evolves. And obviously, we only have four or five days under our belt anyway from the standpoint of enrollment. Scott, you want to talk about market morbidity?

Scott Blackley, CFO

Yeah, I would maybe call out two things. So first of all, just to reiterate, we're expecting that 27 will be flat to year-end 26. You know, we do expect that some of these enhanced eligibility checks will result in some of the membership from 26 not being able to continue into 27. But we also anticipate that we're going to see a continuation of new people coming in too. The marketplace, we saw that in 26.

Parker Snure, Analyst — Raymond James

Okay, that's super helpful. And if I can just get one more, just curious on the fourth quarter guidance as it pertains to medical costs and MLR, it appears that it implies actually a decline in actual medical costs sequentially. I understand you'll have fewer members in the fourth quarter, but if I look back over the last five years or so, I don't know if 4Q medical costs have actually declined sequentially ever. So just... I'm curious if you can give more color on that dynamic, if there were some one-time items in the third quarter or fourth quarter, or is it just simply lower enrollment that's driving that?

Scott Blackley, CFO

I think you and I probably don't have the same math, because when I look at implied fourth-quarter MLR, you know, it's in the range of, let's call it, low 90s, and, you know, we finish the third quarter with an MLR of 84. If you add back PPD, that gets you. You know, I think it's important when you think about the $250 million benefit. It comes with claims. You shouldn't be taking the risk adjustment out of the numbers. I think that's fundamental to the business. Volumes that we're getting. So, you know, I think of, if you want to think of a comparison.

Operator

MLR in the- Thank you, and we'll take our next question from Stephen Baxter with Wells Fargo. Please go ahead.

Stephen Baxter, Analyst — Wells Fargo

Yeah, hi, thanks. Kind of a similar theme question. So, you're lowering the risk adjustment payable expectation by... 200 or 300 basis points, you're improving the MLR by 50 basis points, and then you're pointing to medical costs that I think you're saying are modestly favorable to your expectations. So it seems like there's a pretty big difference there, and I know that you're a conservative company, but just thinking about the difference between those two items, if you could maybe help us bridge that, that would be super helpful.

Scott Blackley, CFO

Yeah. So, Steve, I would say a few things.

Scott Blackley, CFO

So, you know, we have $250 million of favorable risk adjustment, and then we've got $45 million of PPD. As I talked about, not all of that favorable risk adjustment drops to the bottom line. There's a portion that's being on. It's appropriate, given the risk of the book, but, you know, are creating higher claims costs for us. When I think about, you know, full year guidance that we just put out, I would say, you know, we're being, we've only got Wakely through July. We're being prudent in making sure that we are thoughtful about the continued morbidity risk that's inherent in this marketplace. I feel like we've got a very balanced target for Got it.

Stephen Baxter, Analyst — Wells Fargo

Okay, thanks. And then, yeah, just be curious on your latest thinking on the latest CMS regulation governing 2028 open enrollment. I mean, I think this was mostly codifying changes that were already made by, you know, OB3, but we'd love to have, you know, your feedback on that. And I guess, how are you thinking about this potential dynamic around maybe having less of an ability to utilize auto enrollments in 2028? Thank you.

Mark T. Bertolini, CEO

Yeah, Steve, we're working on that for our 2027 plan, and we'll prepare ourselves to handle those new provisions and believe it's in the guidance that it will be in the guidance that we provide going forward, but it's just. From our perspective, program integrity is really important because it stabilizes the risk pool, and we want to keep those programs moving forward. Our biggest fear is that we make sure that the people who should be excluded are excluded and that the people who need coverage get coverage. And so that worked with CMS because the sort of eligibility and enrollment responsibilities are split between CMS and the plans. We have to make sure that our data synchronizes. And so, you know, in our latest review of this information, we have information going back and forth between CMS and us, and I'm sure our competitors as well, to say, well, wait a minute, let's look at this population and talk about what you see versus what we see and what we need to do to make sure these people, if they are eligible, get access to coverage. So that's an ongoing, I would call it a flaw in the system, is that we have dispersed eligibility too far between plans and CMS. You don't see that much anywhere else. And so we're working through those changes as we go through program integrity. But we support program integrity. We believe it's important.

Operator

Thank you. And our next question will come from Scott Fidel with Goldman Sachs. Please go ahead. Your line is open.

Scott Fidel, Analyst — Goldman Sachs

Hi, thanks, and good morning. Mark, thought might be helpful just given the midterm elections results yesterday. You know, if you want to, you know, one, you know, talk us through, like, in terms of as, you know, now as you go to the Hill and, you know, sort of speak with members and, you know, the expanded Blue Caucus, you know, from a policy perspective, what, you know, in particular, you'll maybe be advocating, you know, Advocating for, you know, the ACA. I know that in the prepared comments, you talked about, you know, opportunity to expand the ACA. But just curious in terms of, is it, I don't think it's probably as simple as you'll just advocate for, you know, sort of renewing the enhanced subsidies. You know, I would assume that there's probably suggestions that you'd want to make as well around, you know, strengthening the foundation of the program longer term. And then from a timing perspective, do you think that 28 would be, you know, possible in terms of potentially getting the subsidies restored or curious on your thoughts on timing, you know, as the Congress, you know, sort of starts at 27? Thanks.

Mark T. Bertolini, CEO

So I think the first thing, Scott, that you should know is that we have been working both at the state level and at the federal level. And we've actually made a lot of progress at the state level around things like choice. And I mean, at the state level versus federal. And at the federal level, we've been pushing through CMS and through the administration ideas about how do we best support the changes that we need to make to make the ACATAM bigger. And part of that is this whole eligibility issue. How do we get that right? And one of our suggestions has been that we create wallets, enhanced HSAs, if you will, that will allow people, by having KYC criteria, will allow them to be more sure of eligibility as people come into the program. We can stabilize that piece of the business that does great things for the risk pool and for growth and for our distribution channel that has to work through all these issues. Piecemeal every so often, as has happened over the last couple of years, is difficult. I mean, enhanced subsidies, you know, we shall see. That's a financial discussion. We shall see how much of that comes back in. Will it change in form? It's going to have to be a deal before 28 between the administration and the new caucus, and we don't know how that's yet going to work. The president has made comments that he can work with the caucus. We have the caucuses been talking about the things that they want to have happen. We need to see how that relationship is actually going to work and evolve into legislation and then regulation. So I'm not holding out a whole lot in 27 toward 28 at this moment, other than we will keep going forward. We continue to work with the administration on working on the eligibility piece and on regulations like tax treatment for HSA purchases and defined contribution for employers, where we see huge opportunity if we can clear some of that road blockage out of the way for them in the future. That makes the town bigger. That makes the ACA framework work. And we've also been talking to the Democrats as well while we've been talking to the administration about what we could do to make choice a reality. In a lot of ways, my point of view is that what we are talking about in making a bigger individual market is very much what some of the aims of the ACA were in its initial construction. So I think we have a lot of common ground there. It could be a great place for both parties to get together and actually do something that could advantage the American public, and more importantly, our economy.

Scott Fidel, Analyst — Goldman Sachs

That's helpful. Thanks. And for my follow-up question, I wanted to toggle just over to pricing. And it sounds like the average rate increases that you talked about are right in line with the market. I'm curious just if from the average perspective, obviously every pricing MSA is going to be different. But, you know, sort of a general just sort of breakdown as you think about those, you know, sort of 15, 14 percent or so sort of pricing. How would you say that sort of breaks down between underlying cost trend versus morbidity, you know, versus any other sort of key actuarial underwriting factors? And that's it for me. Thanks.

Mark T. Bertolini, CEO

I'll start off and I'll toss it to Scott on the morbidity stuff. So the very basis of our network, of our pricing structure, and our plan design in every market starts with the network. And so where we have a great network relationship. And where we can, again, all the most successful players in the ACA use narrow networks. And so you get a discount. And that passes through to the customer, number one. Number two, what are your distribution relationships like and what can you rely on in getting distribution done? Those are the two first most important requirements we assess when we go into the market. And then we look at the competitive framework, the pricing tolerance in the marketplace, and then we build our models. But think of it as us underwriting that network and distribution model first as a way of deciding where our price points need to be in the market. Relative to morbidity and the intricacies of pricing, Scott, I'll just toss it over to you to add anything that you would.

Scott Blackley, CFO

Yeah. I've got a few other thoughts. So, you know, first off, where starting from? The relative price increase this year was probably a bit lower than some of our competitors. So, you know, we've already got a very advantaged price position. Then you go to a 14% price increase from there. So we think that from a competitive position. As you said, it's an MSA by MSA game. When you think about the buildup of that 14%, again, it's, you know, in-rank order starts with trend, which, you know, we've built in something that's in the high six digits for trend. Then you've got that impact for market morbidity related to some of the. On top of that, you know, we're good.

Operator

Thank you. And as a reminder, it is the star and one to ask a question. And we'll go next to the line of Jonathan Young with UBS. Please go ahead. Your line is open.

Jonathan Young, Analyst — UBS

Hey, thanks for taking the question. I guess just based on the landscape files, it does look like one of your competitors has gotten a little bit more aggressive in terms of how they're pricing and, you know, coming in. As the cheapest option in the market, I guess from your perspective, you know, how do you consider, you know, your pricing relative to that? And is it most important to be at the cheapest end of the market? Or how are you viewing that alongside, you know, metal tier mix for 2027? Thanks.

Mark T. Bertolini, CEO

I was just going to say that, obviously, metal mix matters very much, number one. Number two, you know, we believe that it's not just price. It's the quality of the product, quality of customer service. We tend to have higher retention than our competitors do as a result. We have higher MPS scores. So as we look at all of that, it's a mix of... It's not just our capability and our relationship with our customers and our distribution channel that matter. It's not just the price point. Scott?

Scott Blackley, CFO

Yeah, I think you hit on it. The point I was going to make, Mark, is that it's really a question of you have to be within a relatively reasonable range of the lowest. We feel like we've got really strong price positions in our markets. We talked about the distribution and the right products, and we feel like we've got great relationships with our distribution. You know, we're a member-centric company. We've got a very good brand when it comes to supporting members, and that's a big part of our

Scott Blackley, CFO

selling package, and that, you know, we think that matters.

Jonathan Young, Analyst — UBS

Okay, great. And then just going back to the proposed rules for payment year or for 2028, I guess in relation to the pre-verification open enrollment period that is being proposed, do you see this as kind of a benefit in terms of making sure members, you know, Get enrolled given the pressure on auto enrollment. And then similarly, does this create pressure on GNA from your perspective where brokers may ask for more in terms of commissions, et cetera? Just curious how you're thinking about that. Thanks.

Mark T. Bertolini, CEO

We solved that problem first, Jonathan, by going after, I always like to say, brokers like to maximize revenue per joule of energy expended. And so if we can provide tools to them, which we have through Lucy and our EDE, the opportunity is for them to be able to keep their productivity while being able to go through each of these steps. And so that's part of what we've been doing along. That's what we did when the enhanced subsidies went away. We made it easy for them to move people to new products, and they moved some of our competitors' people to our new products as a result. So I think you have to look at it, again, from the perspective of what do they need to do? How can we help them with tools? And it doesn't necessarily mean that we have to have the highest commissions. As a matter of fact, and Scott, I checked with you on this, I believe we are not the highest commission program in the country.

Scott Blackley, CFO

That's right. I mean, our commission strategy generally is to be competitive, but we don't feel like we need to be the highest.

Operator

Thank you. And we'll take our next question from Michael Hall with Baird. Please go ahead. Your line is open.

Michael Hall, Analyst — Baird

Thank you. As you look at 27, I know you're expecting stabilizing metal mix next year. But I wanted to ask your thoughts on a potential scenario where bronze members could trade up into gold, meaning could there be an environment where bronze members, maybe they deferred care this past year because of the higher deductibles? Could that have worsened their health or acuity? And so next year, then they shift to gold, lower deductibles, unlock care for, you know. Members that previously deferred, how are you thinking about the possibility of that happening? How much of that migration have you assumed? What allowance did you build in your 27 pricing that has some sort of catch-up utilization beyond your normal gold plan assumption?

Scott Blackley, CFO

We do expect the similar metrics. We're not seeing any kind of thematic things that would suggest that there's some delay in use. 2026, where we were worried that we built in an expectation. Because people knew they were losing their subsidy. I don't think that's quite what we're seeing. And on the MOOP side, you know, at maximum out of pockets, we are seeing a progression there, which looks to us like behavior that, you know, we have seen over a longer period. So, again, it doesn't look like people are not using care because, you know, they've got a deductible that they have to cover a portion of those. When I kind of pull back and I look at the pricing bill that we did for 27, we think we've done, you know, the appropriate amount of risk analysis of where in the metals did we see people. We're excited about the products we've got out of the market and about our opportunity for the year.

Mark T. Bertolini, CEO

Michael, I would add just one thing about Lucy. So Lucy helps people find the right plan in the ACA, not necessarily an Oscar plan, but also connects them to a thing called Allstate Health Solutions that offer coverage for higher deductibles on a premium basis. So people can actually buy protection based on that underlying cover. So they have more than an option of just going up to gold. They could consider a plan like Allstate Health Solutions that helps cover some of those expenses when they occur.

Michael Hall, Analyst — Baird

Interesting. Helpful. Thank you. And my next question, just one key remaining question to me after your idea was really the latest Wakely data that confirmed the stabilizing risk pool even after all these CMS lives were removed, identified lives. I just wanted to ask if you could provide a bit more detail on what that weekly file showed about market morbidity, morbidity relative to your assumptions, and also of all the new integrity measures, all the verification checks, everything new happening next year. I'm curious, which one do you think has the biggest range of uncertainty and how it could impact membership in the next year? Thank you.

Scott Blackley, CFO

Yeah. I would say that,

Scott Blackley, CFO

you know, with respect to Wakely, latest Wakely white paper shows market morbidity moving as we would have anticipated. And, you know, I think that it just reaffirms that the estimates that we've been making are our Slightly favorable to our pricing expectations. I do think it's important to note that, you know, the first weekly risk report we got in the first quarter was quite favorable. We got that in the second quarter, and then the

Scott Blackley, CFO

report that we received in the third quarter.

Scott Blackley, CFO

We think that is the effect of the CMS program integrity efforts. You know, we still believe, though, that...

Operator

Thank you, and we'd like to take our next question from Kevin Fischbeck with Bank of America. Please go ahead.

Joaquin Aragada Martinez, Analyst — Bank of America

Hey, this is Joaquin Aragada Martinez on for Kevin. I just wanted to ask about on the 17% to 18% risk adjustment range that you guys gave, is this something that would continue in 2027, or does that reset back to the 20% range? Thanks.

Scott Blackley, CFO

The 17% to 18% for this year is specific to the risk of the book, and so, you know, we'll give you guidance on where we need to.

Joaquin Aragada Martinez, Analyst — Bank of America

All right. Thank you. And could you give us some more color on the trend commentary? What specifically an outpatient is hired and how are you translating that to your initiatives? Thank you.

Scott Blackley, CFO

We do see a bit of a tradeoff between inpatient

Scott Blackley, CFO

and outpatient, you know, which is honestly...

Scott Blackley, CFO

This is really doing things that are the, some of it is, is.

Scott Blackley, CFO

It's really kind of just a... You know, it's things like making sure that we're doing clinical reviews that, you know, are looking at distinguishing observation from it.

Operator

At this time, we have reached our lot of time for questions. We'd like to thank everybody for joining today's conference call. Please feel free to disconnect at any time.