OSCR 8-K
Oscar Health, Inc. (OSCR)
8-K
2021-05-13
For: 2021-05-13
View Original
Added on
April 07, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): May 13, 2021
Oscar Health, Inc.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 001-40154 | 46-1315570 | ||||||||||||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
75 Varick Street, 5th Floor
New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
(646) 403-3677
(Registrant’s telephone number, including area code)
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425). | ||||
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12). | ||||
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)). | ||||
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)). | ||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered | ||||||||||||
| Class A Common Stock, $0.00001 par value per share | OSCR | New York Stock Exchange | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On May 13, 2021, Oscar Health, Inc. (the “Company”), announced the Company’s financial results for the three months ended March 31, 2021. A copy of the press release issued in connection with the announcement is attached and furnished as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
Item 7.01. Regulation FD Disclosure.
On May 13, 2021, the Company posted an earnings presentation in the “Investor Relations” portion of its website at ir.hioscar.com. A copy of the earnings presentation is attached and furnished as Exhibit 99.2 to this Current Report on Form 8-K.
The information in Items 2.02 and 7.01 and Exhibits 99.1 and 99.2 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information and exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Oscar Health, Inc. | |||||||||||
| By: | /s/ R. Scott Blackley | ||||||||||
| Name: | R. Scott Blackley | ||||||||||
| Title: | Chief Financial Officer | ||||||||||
Date: May 13, 2021
 | |||||
Oscar Health, Inc. ir.hioscar.com News Release | |||||
Oscar Health Announces Results for First Quarter 2021
May 13, 2021
•Membership as of March 31, 2021 of 542,220, a 28.9% increase YoY
•For the quarter ended March 31, 2021:
◦Direct policy premiums of $820.8 million, a 43.5% increase YoY
◦Premiums earned of $368.5 million, a 332.5% increase YoY
◦Medical Loss Ratio of 74.4%, improved 670 bps YoY
◦InsuranceCo Administrative Expense Ratio of 19.8%, improved 380 bps YoY
◦InsuranceCo Combined Ratio of 94.2%, improved 1040 bps YoY
◦Net loss of $(87.4) million, improved $9.5 million YoY and Adjusted EBITDA of $(26.3) million, improved $59.9 million YoY
New York, NY, May 13, 2021 - Health insure-tech company Oscar Health, Inc. (NYSE: OSCR) today announced its financial results for the three months ended March 31, 2021.
“Our first quarter results show that our model is delivering value to the market, our provider partners and to our members,” said Mario Schlosser, CEO and Co-Founder of Oscar. “We achieved very attractive first quarter growth, while simultaneously lowering our medical loss ratio and administrative cost ratio year-over-year. This trend, coupled with the recent launch of +Oscar, positions our company well for continued sustainable growth and improving profitability.”
Total direct policy premiums were $820.8 million in the quarter, up 43.5% year-over-year (“YoY”), driven primarily by higher membership growth in existing and new states and business mix shifts. Premiums earned in the quarter were up 332.5% YoY, driven both by membership growth and lower quota share cession rates in 2021.
Oscar’s InsuranceCo Combined Ratio, which is the sum of its Medical Loss Ratio (“MLR”) and the InsuranceCo Administrative Expense Ratio, improved 1040 bps YoY to 94.2% reflecting a consolidated profit across the insurance companies. Oscar’s MLR improved 670 bps YoY, driven by the absence of reserve increases that occurred in the quarter ended March 31, 2020 and a modest benefit from favorable prior period development in the quarter ended March 31, 2021. The InsuranceCo Administrative Expense Ratio improved by 380 bps YoY, driven by operating leverage, scale efficiencies from our tech stack, and the repeal of the health insurer fee (“HIF”).
Net loss was $(87.4) million in the quarter, an improvement of $9.5 million YoY and Adjusted EBITDA loss was $(26.3) million, an improvement of $59.9 million YoY.
Key Metrics and Non-GAAP Financial Metrics | ||||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| 2021 | 2020 | |||||||||||||
| Members | 542,220 | 420,552 | ||||||||||||
| Direct Policy Premiums (in thousands) | $ | 820,814 | $ | 572,011 | ||||||||||
| Medical Loss Ratio | 74.4 | % | 81.1 | % | ||||||||||
| InsuranceCo Administrative Expense Ratio | 19.8 | % | 23.6 | % | ||||||||||
InsuranceCo Combined Ratio | 94.2 | % | 104.6 | % | ||||||||||
Adjusted EBITDA(1) (in thousands) | $ | (26,258) | $ | (86,168) | ||||||||||
1.Adjusted EBITDA is a non-GAAP measure. See “Key Operating and Non-GAAP Metrics - Adjusted EBITDA” in this release for a reconciliation to net loss, the most directly comparable GAAP measure, and for information regarding Oscar’s use of Adjusted EBITDA.
1
Oscar Health, Inc.
News Release
| Membership by Offering | ||||||||||||||
| As of | ||||||||||||||
| March 31, 2021 | March 31, 2020 | |||||||||||||
| Individual and Small Group | 535,001 | 418,924 | ||||||||||||
| Medicare Advantage | 3,628 | 1,628 | ||||||||||||
Cigna + Oscar(1) | 3,591 | — | ||||||||||||
| Total Members | 542,220 | 420,552 | ||||||||||||
1.Represents total membership for Oscar’s co-branded partnership with Cigna.
| Full Year 2021 Outlook | ||||||||||||||
| Low | High | |||||||||||||
| Direct and Assumed Policy Premiums (in thousands) | $ | 3,075,000 | $ | 3,175,000 | ||||||||||
| Medical Loss Ratio | 84.0 | % | 86.0 | % | ||||||||||
| InsuranceCo Administrative Expense Ratio | 22.5 | % | 23.5 | % | ||||||||||
| InsuranceCo Combined Ratio | 107.0 | % | 109.0 | % | ||||||||||
Adjusted EBITDA(1) (in thousands) | $ | (380,000) | $ | (350,000) | ||||||||||
1.Oscar has not provided a quantitative reconciliation of forecasted Adjusted EBITDA to forecasted GAAP net loss within this press release because Oscar is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. These items include, but are not limited to, stock-based compensation expense. These items, which could materially affect the computation of forecasted GAAP net loss, are inherently uncertain and depend on various factors, some of which are outside of Oscar’s control. As such, any associated estimate and its impact on GAAP net loss could vary materially. For more information regarding Adjusted EBITDA, please see “Key Operating and Non-GAAP Metrics” below.
The foregoing statements represent management's current estimates as of the date of this release. Actual results may differ materially depending on a number of factors. Investors are urged to read the Cautionary Note Regarding Forward-Looking Statements included in this release. Management does not assume any obligation to update these estimates.
2
Oscar Health, Inc.
News Release
Quarterly Conference Call Details
Oscar will host a conference call to discuss the financial results today, May 13, 2021 at 5:00 p.m. (ET). A live audio webcast and a supplemental presentation will be available via the Investor Relations page of Oscar’s website at ir.hioscar.com. A replay of the webcast will be available for on-demand listening shortly after the completion of the call, at the same web link, and will remain available for approximately 90 days.
Non-GAAP Financial Information
This release presents Adjusted EBITDA, a non-GAAP financial metrics, which is provided as a complement to the results provided in accordance with accounting principles generally accepted in the United States of America (“GAAP”). A reconciliation of the non-GAAP financial information to the most directly comparable GAAP financial measure is provided in the accompanying tables found at the end of this release.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained herein are forward-looking statements. These statements include, but are not limited to, statements about our financial outlook and estimates, including direct policy premiums, medical loss ratio, administrative expense ratio and other financial performance, and the related underlying assumptions, our business and financial prospects, general and healthcare industry market conditions and trends, and our management’s plans and objectives for future operations, expectations and business strategy. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other similar expressions. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict and generally beyond our control.
Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, there are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: the impact of COVID-19 on global markets, economic conditions, the healthcare industry and our results of operations, and the response by governments and other third parties; our ability to retain and expand our member base; our ability to execute our growth strategy; our ability to maintain or enter into new partnerships or collaborations with healthcare industry participants; negative publicity, unfavorable shifts in perception of our digital platform or other member service channels; our ability to achieve and/or maintain profitability in the future; changes in federal or state laws or regulations, including changes with respect to the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended (collectively, the “ACA”) and any regulations enacted thereunder; our ability to accurately estimate our incurred claims expenses or effectively manage our claims costs or related administrative costs, including as a result of fluctuations in medical utilization rates due to the impact of COVID-19; our ability to comply with ongoing regulatory requirements and applicable performance standards, including as a result of our participation in government-sponsored programs, such as Medicare; changes or developments in the health insurance markets in the United States, including the passage and implementation of a law to create a single-payer or government-run health insurance program; our ability to comply with applicable privacy, security, and data laws, regulations, and standards; our ability to maintain key in-network providers and good relations with the physicians, hospitals, and other providers within and outside our provider networks, or to arrange for the delivery of quality care; unfavorable or otherwise costly outcomes of lawsuits and claims that arise from the extensive laws and regulations to which we are subject; unanticipated results of risk adjustment programs; delays in our receipt of premiums; disruptions or challenges to our relationship with the Oscar Medical Group; cyber-security breaches of our and our partners’ information and technology systems; unanticipated changes in population morbidity and large-scale changes in health care utilization; and the other factors set forth under the caption “Risk Factors” in our prospectus dated March 2, 2021, filed with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b) and our other filings with the SEC.
You are cautioned not to place undue reliance on any forward-looking statements made in this press release. Any forward-looking statement speaks only as of the date as of which it is made, and, except as otherwise required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise.
About Oscar Health
3
Oscar Health, Inc.
News Release
Oscar Health, Inc. (“Oscar”) is the first health insurance company built around a full stack technology platform and a relentless focus on serving its members. At Oscar, our mission is to make a healthier life accessible and affordable for all. Headquartered in New York City, Oscar has been challenging the health care system's status quo since our founding in 2012. The company’s member-first philosophy and innovative approach to care has earned us the trust of approximately 540,000 members as of March 31, 2021. We offer Individual & Family, Small Group and Medicare Advantage plans, and +Oscar, our full stack technology platform to others within the provider and payor space. Our vision is to refactor health care to make good care cost less. Refactor is a term used in software engineering that means to improve the design, structure, and implementation of the software, while preserving its functionality. At Oscar, we take this definition a step further. We improve our members’ experience by building trust through deep engagement, personalized guidance, and rapid iteration.
Investor Contact:
Cornelia Miller
VP of Investor Relations
917-397-0251
Media Contact:
Jackie Kahn
VP of Communications
202-538-0128
Source: Oscar Health, Inc.
4
Oscar Health, Inc.
News Release
Oscar Health, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)
| Three Months Ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
Revenue | |||||||||||
Premiums before ceded reinsurance | $ | 610,099 | $ | 424,448 | |||||||
| Reinsurance premiums ceded | (241,562) | (339,229) | |||||||||
| Premiums earned | 368,537 | 85,219 | |||||||||
| Investment income and other revenue | 851 | 2,884 | |||||||||
Total revenue | 369,388 | 88,103 | |||||||||
Operating Expenses | |||||||||||
Claims incurred, net | 268,048 | 84,216 | |||||||||
Other insurance cost (including non-cash stock-based compensation expense of $9.7 million and $4.1 million as of March 31, 2021 and 2020, respectively) | 79,837 | 40,904 | |||||||||
General and administrative expenses (including non-cash stock-based compensation expense of $9.4 million and $4.0 million as of March 31, 2021 and 2020, respectively) | 63,062 | 31,839 | |||||||||
Federal and state assessments | 30,515 | 22,297 | |||||||||
| Health insurance industry fee | — | 4,813 | |||||||||
| Premium deficiency reserve release | (9,543) | (18) | |||||||||
Total operating expenses | 431,919 | 184,051 | |||||||||
Loss from operations | (62,531) | (95,948) | |||||||||
Interest expense | 3,697 | — | |||||||||
| Loss on extinguishment of debt | 20,178 | — | |||||||||
Loss before income tax expense | (86,406) | (95,948) | |||||||||
Income tax provision | 965 | 931 | |||||||||
Net loss | $ | (87,371) | $ | (96,879) | |||||||
| Earnings (Loss) per Share | |||||||||||
Net loss per share, basic and diluted | $ | (0.98) | $ | (3.36) | |||||||
Weighted average common shares outstanding, basic and diluted | 88,865,726 | 28,874,520 | |||||||||
5
Oscar Health, Inc.
News Release
Oscar Health, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
| March 31, 2021 | December 31, 2020 | ||||||||||
Assets: | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 2,321,287 | $ | 826,326 | |||||||
Short-term investments | 389,016 | 366,387 | |||||||||
Premium and other receivables | 75,851 | 65,322 | |||||||||
Risk adjustment transfer receivable | 37,765 | 31,157 | |||||||||
Accrued investment income | 1,445 | 1,862 | |||||||||
Balances due from reinsurance programs | 353,996 | 579,393 | |||||||||
Total Current Assets | 3,179,360 | 1,870,447 | |||||||||
Property, equipment, and capitalized software, net | 38,993 | 35,812 | |||||||||
Long-term investments | 329,597 | 325,740 | |||||||||
Restricted deposits | 26,449 | 26,478 | |||||||||
Other assets | 19,472 | 13,136 | |||||||||
Net deferred tax asset | 485 | 493 | |||||||||
Total Assets | $ | 3,594,356 | $ | 2,272,106 | |||||||
Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit) | |||||||||||
Current Liabilities: | |||||||||||
Benefits payable | $ | 358,066 | $ | 311,914 | |||||||
Risk adjustment transfer payable | 922,069 | 716,370 | |||||||||
Premium deficiency reserve | 75,029 | 84,571 | |||||||||
Unearned premiums | 71,946 | 71,904 | |||||||||
Accounts payable and accrued liabilities | 120,954 | 137,524 | |||||||||
Reinsurance payable | 260,055 | 343,313 | |||||||||
Total current liabilities | 1,808,119 | 1,665,596 | |||||||||
| Long-term debt | — | 142,487 | |||||||||
| Warrant liabilities | — | 15,005 | |||||||||
| Total liabilities | 1,808,119 | 1,823,088 | |||||||||
| Commitments and contingencies | |||||||||||
| Convertible Preferred Stock, $0.00001 par value; 407,156,831 shares authorized; 400,904,302 shares issued and outstanding as of December 31, 2020 | — | 1,744,911 | |||||||||
Stockholders' Equity (Deficit) | |||||||||||
| Preferred stock, $0.00001 par value; 82,500,000 shares authorized, none issued or outstanding as of March 31, 2021 | — | — | |||||||||
| Class A common stock, $0.00001 par value; 825,000,000 shares authorized, 172,060,630 shares issued and outstanding as of March 31, 2021 | 2 | — | |||||||||
| Class B common stock, $0.00001 par value; 82,500,000 shares authorized, 35,115,807 shares issued and outstanding as of March 31, 2021 | — | — | |||||||||
Series A common stock, $0.00001 par value, 680,000,000 shares authorized; 8,291,917 issued and outstanding; Series B common stock, $0.00001 par value, 69,487,963 shares authorized; 23,162,654 shares issued and outstanding as of December 31, 2020; Series C common stock, $0.00001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2020 | — | 2 | |||||||||
Treasury stock at (314,600 shares at March 31, 2021 and December 31, 2020) | (2,923) | (2,923) | |||||||||
| Additional paid-in capital | 3,303,031 | 133,255 | |||||||||
Accumulated deficit | (1,514,477) | (1,427,106) | |||||||||
Accumulated other comprehensive income (loss) | 604 | 879 | |||||||||
Total Stockholders’ Equity (Deficit) | 1,786,237 | (1,295,893) | |||||||||
Total Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit) | 3,594,356 | 2,272,106 | |||||||||
6
Oscar Health, Inc.
News Release
Oscar Health Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Three Months Ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (87,371) | $ | (96,879) | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Deferred tax | 8 | 120 | |||||||||
| Net realized gain on sale of financial instruments | (113) | (654) | |||||||||
| (Gain) loss on fair value of warrant expense | 12,856 | (860) | |||||||||
| Depreciation and amortization expense | 3,403 | 2,544 | |||||||||
| Amortization of debt issuance costs | 329 | — | |||||||||
| Stock-based compensation expense | 19,115 | 8,096 | |||||||||
| Investment amortization, net of accretion | 1,074 | 155 | |||||||||
| Debt extinguishment loss | 20,178 | — | |||||||||
| Changes in assets and liabilities: | |||||||||||
| (Increase) / decrease in: | |||||||||||
| Premium and other receivables | (10,529) | (75,271) | |||||||||
| Risk adjustment transfer receivable | (6,608) | (11,151) | |||||||||
| Accrued investment income | 417 | 322 | |||||||||
| Balances due from reinsurance programs | 225,397 | (92,900) | |||||||||
| Other assets | (6,336) | (14,823) | |||||||||
| Increase / (decrease) in: | |||||||||||
| Benefits payable | 46,152 | 96,423 | |||||||||
| Unearned premiums | 42 | (2,855) | |||||||||
| Premium deficiency reserve | (9,542) | (18) | |||||||||
| Accounts payable and accrued liabilities | (13,222) | 15,461 | |||||||||
| Reinsurance payable | (83,258) | 119,881 | |||||||||
| Risk adjustment transfer payable | 205,699 | 158,759 | |||||||||
| Net cash provided by operating activities | 317,691 | 106,350 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of fixed maturity securities | (245,694) | (150,752) | |||||||||
| Sale of investments | 83,798 | 163,887 | |||||||||
| Maturity of investments | 134,199 | 39,211 | |||||||||
| Purchase of property, equipment and capitalized software | (6,583) | (3,978) | |||||||||
| Change in restricted deposits | — | (356) | |||||||||
| Net cash (used in) provided by investing activities | (34,280) | 48,012 | |||||||||
| Cash flows from financing activities: | |||||||||||
| Debt prepayment | (153,173) | — | |||||||||
| Debt extinguishment costs | (12,994) | — | |||||||||
| Proceeds from IPO, net of underwriting discounts | 1,348,321 | — | |||||||||
| Offering costs from IPO | (9,447) | — | |||||||||
| Proceeds from exercise of warrants and call options | 9,191 | — | |||||||||
| Proceeds from exercise of stock options | 29,652 | 442 | |||||||||
| Net cash provided by financing activities | 1,211,550 | 442 | |||||||||
Oscar Health, Inc.
News Release
Increase in cash, cash equivalents and restricted cash equivalents | 1,494,961 | 154,804 | |||||||||
Cash, cash equivalents, restricted cash and cash equivalents—beginning of period | 843,105 | 353,380 | |||||||||
Cash, cash equivalents, restricted cash and cash equivalents—end of period | $ | 2,338,066 | $ | 508,184 | |||||||
Cash and cash equivalents | $ | 2,321,287 | $ | 491,711 | |||||||
Restricted cash and cash equivalents included in restricted deposits | 16,779 | 16,473 | |||||||||
Total cash, cash equivalents and restricted cash and cash equivalents | $ | 2,338,066 | $ | 508,184 | |||||||
| Supplemental Disclosures: | |||||||||||
| Interest payments | $ | 3,553 | $ | — | |||||||
| Non-cash investing and financing activities: | |||||||||||
| Conversion of redeemable convertible preferred stock to common stock upon initial public offering | $ | 1,744,911 | $ | — | |||||||
| Net exercise of preferred stock warrants to preferred stock upon initial public offering | $ | 28,248 | $ | — | |||||||
| Adjustment to fair value of preferred stock warrant liability upon initial public offering | $ | (13,243) | $ | — | |||||||
Key Operating and Non-GAAP Metrics
We regularly review a number of metrics, including the following key operating and non-GAAP financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, and make strategic decisions. We believe these operational and financial measures are useful in evaluating our performance, in addition to our financial results prepared in accordance with GAAP.
Members
Members are defined as any individual covered by one of our health plans. We view the number of members enrolled in our health plans as an important metric to help evaluate and estimate revenue and market share. Additionally, the more members we enroll, the more data we have, which allows us to improve the functionality of our platform.
Direct Policy Premiums
Direct policy premiums are defined as the premiums collected from our members or from the federal government during the period indicated, before risk adjustment and reinsurance. These premiums include APTC, or premium subsidies, which are available to individuals and families with certain annual incomes. Through March 31, 2021, APTC was available to those individuals and families with annual incomes between 100% and 600% of the federal poverty level in California and 100% and 400% of the federal poverty level in all other states under the ACA. Starting April 1, 2021, consumers enrolling in Individual health plans through a health insurance marketplace could take advantage of additional subsidies available under the American Rescue Plan, which caps premium payment at 8.5% of household income, and expands maximum coverage subsidies to anyone who received unemployment insurance benefits in 2021. We believe direct policy premiums are an important metric to assess our growth. We expect direct policy premiums will increase over time as we increase membership and continue to shift our member mix more towards higher value metal tiers like Silver and diversify across our product markets.
Medical Loss Ratio
Medical loss ratio is calculated as set forth in the table below. Medical claims are total medical expenses incurred by members in order to utilize health care services less any member cost sharing. These services include inpatient, outpatient, pharmacy, and physician costs. Medical claims also include risk sharing arrangements with certain of our providers. The impact of the federal risk adjustment program is included in the denominator of our MLR. We believe MLR is an important metric to demonstrate the loss ratio of our costs to pay for health care of our members to the premiums before ceded reinsurance. We believe our member engagement engine and full stack technology platform will allow us to more efficiently manage total claims incurred. MLRs in our existing products are subject to various federal and state minimum requirements. Below is a calculation of our MLR for the periods indicated.
Oscar Health, Inc.
News Release
| Three Months Ended | ||||||||||||||
| March 31, 2021 | March 31, 2020 | |||||||||||||
| (in thousands) | ||||||||||||||
Direct claims incurred before ceded quota share reinsurance (1) | $ | 457,219 | $ | 345,509 | ||||||||||
| Assumed reinsurance claims | 1,777 | (2) | ||||||||||||
Excess of loss ceded claims (2) | (4,736) | (4,935) | ||||||||||||
State reinsurance (3) | (2,343) | (904) | ||||||||||||
Net claims before ceded quota share reinsurance (A) | $ | 451,917 | $ | 339,668 | ||||||||||
| Premiums before ceded reinsurance | $ | 610,099 | $ | 424,448 | ||||||||||
Excess of loss reinsurance premiums (4) | (2,935) | (5,547) | ||||||||||||
Net premiums before ceded quota share reinsurance (B) | $ | 607,164 | $ | 418,901 | ||||||||||
Medical Loss Ratio (A divided by B) | 74.4 | % | 81.1 | % | ||||||||||
1.See the Appendix to this release for a reconciliation of direct claims incurred to claims incurred, net appearing on the face of our statement of operations.
2.Represents claims ceded to reinsurers pursuant to an excess of loss treaty, for which such reinsurers are financially liable. We use excess of loss reinsurance to limit the losses on individual claims of our members.
3.Represents payments made by certain state-run reinsurance programs established subject to CMS approval under Section 1332 of the ACA.
4.Represents excess of loss insurance premiums paid.
InsuranceCo Administrative Expense Ratio
InsuranceCo Administrative Expense Ratio is calculated as set forth in the table below. The ratio reflects the costs associated with running our combined insurance companies. We believe InsuranceCo Administrative Expense Ratio is useful to evaluate our ability to lower our expenses as a percentage of premiums before ceded quota share reinsurance. Expenses necessary to run the insurance company are included in other insurance costs and federal and state assessments. These expenses include variable expenses paid to vendors and distribution partners, premium taxes and exchange fees, employee-related compensation, benefits, marketing costs, and other administrative expenses. Below is a calculation of our InsuranceCo Administrative Expense Ratio for the periods indicated.
| Three Months Ended | ||||||||||||||
| March 31, 2021 | March 31, 2020 | |||||||||||||
| (in thousands) | ||||||||||||||
| Other insurance costs | $ | 79,837 | $ | 40,904 | ||||||||||
| Ceding commissions | 19,306 | 35,026 | ||||||||||||
| Stock-based compensation expense | (9,695) | (4,086) | ||||||||||||
| Health insurance industry fee | — | 4,813 | ||||||||||||
Federal and state assessment of health insurance subsidiaries | 30,598 | 22,024 | ||||||||||||
Health insurance subsidiary adjusted administrative expenses(A) | $ | 120,046 | $ | 98,681 | ||||||||||
| Premiums before ceded reinsurance | $ | 610,099 | $ | 424,448 | ||||||||||
| Excess of loss reinsurance premiums | (2,935) | (5,547) | ||||||||||||
Net premiums before ceded quota share reinsurance(B) | $ | 607,164 | $ | 418,901 | ||||||||||
Insurance Co Administrative Expense Ratio(A divided by B) | 19.8 | % | 23.6 | % | ||||||||||
InsuranceCo Combined Ratio
InsuranceCo Combined Ratio is defined as the sum of MLR and InsuranceCo Administrative Expense Ratio. We believe this ratio best represents the current overall performance of our insurance business for activities that can be compared to peers.
Adjusted EBITDA
Adjusted EBITDA is defined as net loss for the Company and its consolidated subsidiaries before interest expense, income tax expense, depreciation and amortization as further adjusted for stock-based compensation, warrant contract expense, changes in the fair value of warrant liabilities, and other non-recurring items as described below. We present Adjusted EBITDA because we consider it to be an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Adjusted EBITDA is a non-GAAP measure. Management believes
Oscar Health, Inc.
News Release
that investors’ understanding of our performance is enhanced by including this non-GAAP financial measure as a reasonable basis for comparing our ongoing results of operations.
We caution investors that amounts presented in accordance with our definition of Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate Adjusted EBITDA in the same manner.
Management uses Adjusted EBITDA:
•as a measurement of operating performance because it assists us in comparing the operating performance of our business on a consistent basis, as it removes the impact of items not directly resulting from our core operations;
•for planning purposes, including the preparation of our internal annual operating budget and financial projections;
•to evaluate the performance and effectiveness of our operational strategies; and
•to evaluate our capacity to expand our business.
By providing this non-GAAP financial measure, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as an alternative to, or a substitute for net loss or other financial statement data presented in our consolidated financial statements as indicators of financial performance.
| Three Months Ended | ||||||||||||||
| March 31, 2021 | March 31, 2020 | |||||||||||||
| (in thousands) | ||||||||||||||
| Net loss | $ | (87,371) | $ | (96,879) | ||||||||||
| Interest expense | 3,697 | — | ||||||||||||
| Income tax expense | 965 | 931 | ||||||||||||
| Depreciation and amortization | 3,403 | 2,544 | ||||||||||||
Stock-based compensation/warrant expense (1) | 31,972 | 7,236 | ||||||||||||
Other non-recurring items (2) | 21,076 | — | ||||||||||||
| Adjusted EBITDA | $ | (26,258) | $ | (86,168) | ||||||||||
1.Represents (i) non-cash expenses related to equity-based compensation programs, which vary from period to period depending on various factors including the timing, number, and the valuation of awards, (ii) warrant contract expense, and (iii) changes in the fair value of warrant liabilities.
2.Represents debt extinguishment costs of $20.2 million incurred on the prepayment of the Company's Term Loan and approximately $0.9 million of non-recurring expenses incurred in connection with our initial public offering.
Oscar Health, Inc.
News Release
Appendix
Oscar Health, Inc.
News Release
Reinsurance Impact
| Three Months Ended | ||||||||||||||
| March 31, 2021 | March 31, 2020 | |||||||||||||
| (in thousands) | ||||||||||||||
| Quota share ceded premiums | $ | (261,852) | $ | (352,163) | ||||||||||
| Quota share ceded claims | 183,869 | 255,451 | ||||||||||||
| Ceding commission | 19,306 | 35,026 | ||||||||||||
| Experience refund | 23,225 | 18,481 | ||||||||||||
| Net quota share impact | $ | (35,452) | $ | (43,205) | ||||||||||
The composition of total reinsurance premiums ceded and reinsurance premiums assumed, which are included as components of total earned premiums in the consolidated statement of operations, is as follows:
| Three Months Ended | ||||||||||||||
| March 31, 2021 | March 31, 2020 | |||||||||||||
| (in thousands) | ||||||||||||||
Reinsurance premiums ceded, gross | $ | (264,787) | $ | (357,710) | ||||||||||
Experience refunds | 23,225 | 18,481 | ||||||||||||
| Reinsurance premiums ceded | (241,562) | (339,229) | ||||||||||||
Reinsurance premiums assumed | 2,411 | — | ||||||||||||
Total reinsurance premiums ceded and assumed | $ | (239,151) | $ | (339,229) | ||||||||||
The Company records claims expense net of reinsurance recoveries. The following table reconciles the total claims expense to the net claims expense as presented in the consolidated statement of operations:
| Three Months Ended | ||||||||||||||
| March 31, 2021 | March 31, 2020 | |||||||||||||
| (in thousands) | ||||||||||||||
Direct claims incurred | $ | 457,219 | $ | 345,508 | ||||||||||
Ceded reinsurance claims | (190,948) | (261,290) | ||||||||||||
Assumed reinsurance claims | 1,777 | (2) | ||||||||||||
Total claims incurred, net | $ | 268,048 | $ | 84,216 | ||||||||||
The Company records selling, general and administrative expenses net of ceding commissions. The following table reconciles total other insurance costs to the amount presented in the consolidated statement of operations:
| Three Months Ended | ||||||||||||||
| March 31, 2021 | March 31, 2020 | |||||||||||||
| (in thousands) | ||||||||||||||
Other insurance costs, gross | $ | 99,143 | $ | 75,930 | ||||||||||
Ceding commissions | (19,306) | (35,026) | ||||||||||||
Other insurance costs, net | $ | 79,837 | $ | 40,904 | ||||||||||
The Company records reinsurance recoverables as “balances due from reinsurance programs” within current assets on its consolidated balance sheets. The composition of the reinsurance recoverables balance is as follows:
Oscar Health, Inc.
News Release
| March 31, 2021 | December 31, 2020 | |||||||||||||
| (in thousands) | ||||||||||||||
| Ceded reinsurance claim recoverables | $ | 307,943 | $ | 435,331 | ||||||||||
| Reinsurance ceding commissions | 27,469 | 41,586 | ||||||||||||
| Experience refunds on reinsurance agreements | 18,584 | 102,476 | ||||||||||||
| Balances due from reinsurance programs | $ | 353,996 | $ | 579,393 | ||||||||||
HIOSCAR.COM Oscar Health, Inc. First Quarter 2021 Earnings Presentation May 13, 2021 Cover with Illustrations
HIOSCAR.COM 2 Safe Harbor Statement and Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained herein are forward-looking statements. These statements include, but are not limited to, statements about our financial outlook and estimates, including direct policy premiums, medical loss ratio, administrative expense ratio and other financial performance, and the related underlying assumptions, our business and financial prospects, general and healthcare industry market conditions and trends, and our management’s plans and objectives for future operations, expectations and business strategy. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other similar expressions. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict and generally beyond our control. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, there are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: the impact of COVID-19 on global markets, economic conditions, the healthcare industry and our results of operations, and the response by governments and other third parties; our ability to retain and expand our member base; our ability to execute our growth strategy; our ability to maintain or enter into new partnerships or collaborations with healthcare industry participants; negative publicity, unfavorable shifts in perception of our digital platform or other member service channels; our ability to achieve and/or maintain profitability in the future; changes in federal or state laws or regulations, including changes with respect to the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended (collectively, the “ACA”) and any regulations enacted thereunder; our ability to accurately estimate our incurred claims expenses or effectively manage our claims costs or related administrative costs, including as a result of fluctuations in medical utilization rates due to the impact of COVID-19; our ability to comply with ongoing regulatory requirements and applicable performance standards, including as a result of our participation in government-sponsored programs, such as Medicare; changes or developments in the health insurance markets in the United States, including passage and implementation of a law to create a single-payer or government-run health insurance program; our ability to comply with applicable privacy, security, and data laws, regulations, and standards; our ability to maintain key in-network providers and good relations with the physicians, hospitals, and other providers within and outside our provider networks, or to arrange for the delivery of quality care; unfavorable or otherwise costly outcomes of lawsuits and claims that arise from the extensive laws and regulations to which we are subject; unanticipated results of risk adjustment programs; delays in our receipt of premiums; disruptions or challenges to our relationship with the Oscar Medical Group; cyber-security breaches of our and our partners’ information and technology systems; unanticipated changes in population morbidity and large-scale changes in health care utilization; and the other factors set forth under the caption “Risk Factors” in our prospectus dated March 2, 2021, filed with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b) and our other filings with the SEC. You are cautioned not to place undue reliance on any forward-looking statements made in this presentation. Any forward-looking statement speaks only as of the date as of which it is made, and, except as otherwise required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. This presentation presents Adjusted EBITDA, a non-GAAP financial metric, which is provided as a complement to the results provided in accordance with accounting principles generally accepted in the United States of America (“GAAP”). A reconciliation of such non-GAAP financial information to the most directly comparable GAAP financial measure is provided at the end of this presentation.
HIOSCAR.COM 3 Continued Strong YoY Membership Growth in 1Q21 ● Total quarter end membership increased 29% YoY to 542,200 in 1Q21 from 420,600 in 1Q20 ● Membership growth was primarily driven by growth in the Individual book of business during the Open Enrollment and Special Enrollment Periods, as well as Medicare Advantage growth and Cigna + Oscar growth Total Membership 29%
HIOSCAR.COM 4 44% Premium Growth Exceeded Membership Growth in 1Q21 ● Direct and Assumed Policy Premiums increased 44% YoY driven by membership growth and business mix shift to higher premium Silver and MA plans Direct and Assumed Policy Premiums (millions)
HIOSCAR.COM 5 1Q21 Premiums Earned Up ~4x Driven by Reduced Quota Share Premiums Earned (millions) 1Q21 Premiums Walk (millions) 332% ($242M) Quota Share as % of Premiums before Ceded: 83% 43%
HIOSCAR.COM 6 We’ve Restructured Our Quota Share Reinsurance Program ● We’ve restructured our quota share reinsurance program following the IPO ● Reduced quota share cession rate to 43% of premiums in 1Q21, compared with 77% in FY20 and 55% in FY19 Quota Share as % of Premiums before Ceded Reinsurance
HIOSCAR.COM 7 1Q21 InsuranceCo Combined Ratio Improved 1,040 bps YoY ● InsuranceCo Combined Ratio (the sum of MLR + InsuranceCo Administrative Expense Ratio) improved 1,040 bps YoY to 94.2% ● The lower Combined Ratio was driven by higher YoY underwriting margin, fixed operating leverage, scale efficiencies, and the repeal of the HIF 1Q20 - 1Q21 InsuranceCo Combined Ratio Walk
HIOSCAR.COM 8 1Q21 MLR Improved 670 bps YoY; ~Flat to Normalized Excluding 2020 Reserve Build ● 1Q20 MLR included reserve strengthening ○ The adjusted MLR would have been 75.2% in 1Q20 excluding the non-recurring items ● 1Q21 MLR of 74.4% benefitted from modest favorable prior period development ○ Excluding the impact from PPD, MLR would have been largely in-line YoY 1Q20 - 1Q21 Medical Loss Ratio Walk
HIOSCAR.COM 9 1Q21 InsuranceCo Admin Ratio Improved 380 bps YoY ● InsuranceCo Administrative Expense Ratio decreased 380 bps YoY to 19.8% ● The lower Admin Ratio was primarily driven by fixed operating leverage, scale efficiencies, and repeal of the HIF, partially offset by new business expenses 1Q20 - 1Q21 InsuranceCo Administrative Expense Ratio Walk
HIOSCAR.COM 10 Adjusted EBITDA Loss Meaningfully Narrows in 1Q21 ● Adjusted EBITDA(1) loss decreased $60M YoY in 1Q21 to ($26M) ● The decrease in Adjusted EBITDA loss was driven by increased underwriting, lower quota share cession rate, premium deficiency reserve amortization, and the repeal of the HIF ● These benefits were partially offset by higher expenses driven by membership and G&A expenses 1Q20 - 1Q21 Adjusted EBITDA Walk (millions) (1) Adjusted EBITDA is a non-GAAP financial measure. See “Appendix” for a reconciliation to net loss. Net loss for 1Q21 was ($87M) vs ($97M) for 1Q20
HIOSCAR.COM 11 Full-Year 2021 Outlook Low Direct & Assumed Policy Premiums $3,075B Medical Loss Ratio 84.0% InsuranceCo Admin Ratio 22.5% Combined Ratio 107% High $3,175B 86.0% 23.5% 109% Adjusted EBITDA(1) ($380M) ($350M) (1) Oscar has not provided a quantitative reconciliation of forecasted Adjusted EBITDA to forecasted GAAP net loss within this presentation because Oscar is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. These items include, but are not limited to, stock-based compensation expense. These items, which could materially affect the computation of forecasted GAAP net loss, are inherently uncertain and depend on various factors, some of which are outside of Oscar’s control. As such, any associated estimate and its impact on GAAP net loss could vary materially. For more information regarding Adjusted EBITDA, please see “Key Operating and Non-GAAP Metrics” in our press release announcing our results for the three months ended March 31, 2021.
HIOSCAR.COM 12 Appendix: Adjusted EBITDA GAAP Reconciliation March 31, 2021* March 31, 2020* Net loss $ (87,371) $ (96,879) Interest expense 3,697 - Income tax expense 965 931 Depreciation and amortization 3,403 2,544 Stock-based compensation/warrant expense 31,972 7,236 Other non-recurring items 21,076 - Adjusted EBITDA $ (26,258) $ (86,168) Three Months Ended *(in thousands)