Q2 2021 Oscar Health Inc Earnings Call
Good afternoon. My name is Joanna and I will be your conference operator today at this time I would like to welcome everyone. So Oscar Health second quarter 2021 earnings call.
Participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone and if you require any further assistance. Please press star zero. Thank you I would now like to turn the call over to Cornelia Mueller, Vice President of corporate development and <unk>.
Dexter relations to begin the conference.
Thank you Joanna and good afternoon, everyone.
Thank you for joining us for our second quarter earnings call, where we will discuss our financial results the momentum in our business and updated guidance for 2021.
Mario Schlosser, Oscars co founder and Chief Executive Officer, and Scott Blackley, Oscars, Chief Financial Officer will host this afternoon's call, which can also be accessed through our investor relations website at IR Dot Hi, Oscar Dotcom.
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 Dot Hi, Oscar Dot com.
Any remarks that Oscar made 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 may differ materially from those indicated by those forward looking statements as a result of various important factors, including those discussed.
In our quarterly report on Form 10-Q for the quarterly period ended June 30th 2021 filed with the Securities and Exchange Commission and our other filings 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 supposed to get we specifically disclaim any obligation to do so.
The call will also refer to certain non-GAAP measures a reconciliation of these measures. The most directly comparable GAAP measures can be found in our second quarter 2021 press release, which is.
It is available on the company's Investor Relations site at IR Dot Hi, Oscar Dot com with that I would like to turn the call over to our CEO Mario Schlosser.
Good afternoon, everybody and thank you for joining us wherever you may be listening in from we're excited to have you.
Our results this quarter show that I remember centric take first approach to health care continues to generate value for our members and clients.
Today, we reported that direct and assumed policy premiums increased 45% year over year to $841 million for the second quarter of 2021 ahead of our expectations. We have positive momentum in the business and we are executing on our plan.
Before I jump into the details I would like to start by reminding of a core thesis, how we benefit from being a health insurance business and the tech platform business. We believe that the tech and services. We built four influenced business give us a battle tested assets and insights that we can bring to the broader health care markets at a time when those markets are under.
<unk> in a period of transformation.
Profitable insurance company would provide support to continue to expand our tech offerings and earnings.
Synergies of insurance and Tech company allow us to access a growing portion of the flood docked trailing donor health care marketplace and deliver an increasing profitable business over time.
Now let me expand on our approach we combine a human touch with technology and data to make complex decisions simple and intuitive for our members and for providers. We are the only ones in health care that run. This on a full stack platform that we control and builds into wins, we have purposely built this since day one always.
With the ambition of powering as much of the health care ecosystem as possible.
Now our core systems impact is compounding the systems with his help members find the right Doctor access virtual care empower care teams to assist them in navigating the health care system.
We can constantly test retest and optimize what we do and all of this makes US one a better managed care company.
A better technology partner to a plus Oscar clients.
Our strategy continues to be focused on reaching profitability as our insurance and plus Oscar businesses scale will.
We're driving towards this by one growing strategically across all of our business lines.
To constantly improving our technology and our tooling to drive operational efficiency reduce medical costs tends to increase our industry, leading member engagement rates.
And our members tell us that our investments in their experience matters to them as evidenced by our consistently high net promoter score, which reached 40 in the second quarter up from 30 in the last quarter of 2020, and this number is significantly higher than what is typically seen in health care that loan among health insurance companies.
Moreover, engagement matters when it comes to our business as well because we see that our digitally engaged members whereabouts 10 percentage points more likely to stay with us and those who are not engaged even when controlling for other factors like premium increases and demographics.
Now I want to spend a moment talking about COVID-19 and the trends we are seeing among Oscar members. Our system gives us a good look into COVID-19 utilization and friends.
First with respect to the Covid vaccine like the whole country, we saw a slowdown in vaccinations in May and June but Fortunately, we're clearly seeing a rise in daily vaccinations again since mid July and we are pushing in our own population health campaigns and channels to keep that going.
So give an idea of where we are targeting our future campaigns. It is where we still see gaps for example, our healthy members are still back to that 42% less than our chronic complex members.
Actually we see in our data that the overall probability of being hospitalized when you have a positive COVID-19 diagnosis has ended up only slightly with the rise of the Delta variance.
But what we are seeing is that in June July.
This probability you among 18 to 35 year olds Covid positive members has gone up by about two five times against its own long term COVID-19 baseline. So the probability of younger members getting hospitalized with Covid positive and has gone up against their own baseline that closely tracks the rise of Delta.
Turning to Covid testing and treatment in some markets. We are seeing that Covid case rates are approaching similar levels to what we saw in the second half of 2020.
And surprisingly in those markets. We are also seeing early indicators of a decrease in non COVID-19 utilization.
Florida, specifically, our trucking shows a 33% decrease in our authorization volume of elective surgeries and non surgical procedures from June into July and a continued decrease into the first two weeks of August.
Now like our peers, we have seen MLR pressure in the second quarter, driven by higher than expected COVID-19 costs and towards sort of non COVID-19 care, the braselton utilization slightly above baseline.
We're keeping a close eye on our data and about our progression throughout the rest of Europe youre intervening with our population health campaigns and Scott will discuss the progression of the MLR in greater detail later on the call.
Now, let me switch over to talking about our second quarter growth. We ended the second quarter with membership of approximately 563000 members, increasing 35% year over year within the individual markets starting Bayer Oscar is offering a differentiated products that delivers a unique member experience built on top of a network of <unk>.
High quality affordable providers, we are thrilled that we've continued to grow throughout the special enrollment periods, reaching around 120000, new members as of June 30th 'twenty 'twenty. One while also at the same time driving toward our goal of profitability for the business.
<unk> market fear in the last open enrollments and we've maintained this stronger market share throughout the second quarter with some markets performing exceptionally well for.
For example, nearly one in every five exchange members in Arizona markets is an Oscar member.
Looking ahead now to 'twenty 'twenty two individual open enrollments were excited to announce that's pending regulatory approval. We plan to enter three new States, Arkansas, Illinois, and Nebraska and expanded to a total of 146, new counties that would bring the overall Oscar footprint to a total of 22 states.
And 607 counties beginning in 2022.
Our technology platform lets us quickly spin up new programs and plan designs.
Those let us expand and drive growth, while also reducing MLR, let me give you two examples.
From what we're doing now one our surveys clearly showed that members want to join an insurance company that offers culturally competent kia.
And with their needs. So we are using our configurable systems to load new data and provide a race ethnicity and other factors to give our members more information when they are choosing a provider with wellcare routing tools leaning into this possibility of that.
Grabbing numbers attention without the sales process.
As another example, we are planning to launch an innovative new plan designed to better serve diabetic members. The plan, which includes zero dollar PCP visits eurodollar diabetic lapse and out of pocket costs, where insulin capped at $100 a month.
As another example of how we are using our tech infrastructure to implement more flexible benefit models for our members.
This kind of plan design is designed to save members money and it has the potential to attract members to Oscar based on more than just premium costs.
Turning to Signup as Oscar and a small employer business for thinking about the Oscar we are seeing steady growth and expansion since the last quarter, we have expanded into Connecticut, and Kansas into additional markets in Georgia, and we have plans for even more expansion before the end of the year.
And our pace of growth so far in markets like Tennessee, It put us among the fastest growing smuggled entrance ever and we have a lot of runway ahead of us and I'll remind you that the majority of small group growth happens at the end of a given year.
Now in our Medicare advantage product line, we delivered another quarter of steady growth and performance today.
Today, we have 3749 members and we have grown organically, 117% year over year. In fact, we were the fastest growing H M. O M. A plan in the Bronx, and we expect to see continued organic growth from our existing markets.
Looking ahead, we will also seek to scale, our Medicare advantage business with growth coming from plus Oscar.
Latam business through our arrangements through arrangements similar to health first.
Shifting now actually two plus Oscar.
The plant's ESCO platform is designed to help payer and provider clients shift people to value based care, while offering a best in class experience for their members and their patients.
This shift requires that providers and payers have access to fast moving data that is linked to decision, making technology. So that they can make the choices needed to improve costs and health outcomes.
Exactly what we build the differentiator plus Oscar product for what is positioned to deliver.
When I take you through how we are engaged in selling plus Oscar platform business deals. We have a dedicated enterprise sales team and that's an active conversations with potential clients about our suite of offerings that.
And that suite of offerings includes business processes as a service.
Standalone technology, as a service and Modularized components of our technology.
Receiving organic inbound interests and we're engaging in active prospecting.
Over the past few months the majority of our initial conversations have resulted in meaningful follow up and our pipeline is stronger than ever with a multitude of conversations with potential clients and within the total addressable market of more than 230 billion in annual premiums.
Since we officially launched the plus Oscar brand name, we feel more confident than ever about this business.
Now as I mentioned above one of the powerful elements of the plus Oscar platform is that we are using it actively today and we have confidence about the potential of this business in part because we are demonstrating real return on investment for our 563, thousands Oscar insurance members and for our existing class Oscar partners.
Let me give an example for the type of work, we do with a plus Oscar partner.
We partnered with a C. H N one of our Medicare advantage artisan plus Oscar to help drive more qualified PCP visits and we launched a digital engagement efforts and that was skewed entirely using our own internal campaign builder to build lots of two women, we can very very quickly.
String together, new types of campaigns incentives and so on.
After just one month, we saw a meaningful increase in the number of members who visited in Acs and primary care Doctor after receiving one of a very tailored messages.
Let me share some insights of the year, we saw actually the greatest lifts our members with disease risk factors, who received task based messaging.
Our members with chronic conditions, who received relationship based messaging and.
We can then find tier one those different types of messaging and target those very very carefully.
We looked at risk adjusted medical costs are 10% lower for members seeing a P. C. D E and so this gives us tremendous confidence in our ability to leverage our technology platform to scale, our campaigns with partners and therefore drive ongoing value for both our members.
And partners.
Our continued plus osco technology improvements are also making us a bedroom in this care company.
We're actually seeing in our own claims operations that we are now at or above 95% auto adjudication rates.
The amount of claims that get paid without human intervention, that's up from 92% in 2020, and we also see lower escalation and customer service complaint rates year over year.
So the example would be that our data driven approach for drug formulary design, which he managed in house has already saved us over one dollar P. M. P M through the second quarter of 2021.
Now these improvements also hold true for our virtual care platform for example, Oscar insurances, leveraging virtual primary care.
Fields on the plant Oscar platform to drive better results in risk adjustments in terms of value per charts and efficiency of the coding member.
Members, who use the virtual P. C. P service also if 25% lower out of network spend relative to other P. C. P was us.
And our virtual primary care providers are 24% less likely to prescribe a more expensive drug when theres a cheaper alternative available.
The power of highly integrated data flows between insurance company physician groups in our own internal systems.
These early year, one results give us the confidence to expand these virtual primary care plants into our signup as Oscar portfolio. We're thrilled here that plus Oscars virtual primary care offering will be made available to think about the ASO members in Georgia, and Tennessee in the small employer markets the Earth beginning in 2022.
So as Oscar's virtual primary care offering is staffed by the Oscar Medical group a team of about 125 providers.
That in turn are enabled by the plus Oscar EHR.
And that helps them deliver a higher quality lower cost care for members receive is expansion of virtual primary care is a clear sign that we are able to deepen relationships with existing plus Oscar clients.
Double clicking on the plus Oscar implementation work underway with health first we are on track to bring over health versus current 37000, Medicare advantage members and 20000 individual market members onto the plus Oscar platform.
We are particularly excited about the simplicity and ease plus Oscar will bring to stakeholders across the health first ecosystem.
For example, health force brokers will shift from using eight different portals to now needing just one.
Highlighting the value plus Oscar brings by significantly increasing the efficiency of health course brokers in the go to market efforts and that of course is our own broker portal built on the parcels kept platform.
As we stated before the work with health first will provide me, but you will need a sort of an even more meaningful Ami population Roscoe next year.
Now in closing I would like to reiterate that we see concrete examples every day that our strategy of having built a text first health care company is create a powerful flywheel that drives better care at lower costs.
Our fast growing insurance business is well positioned and we are targeting to put targeting for it to deliver profit in 2023.
Simultaneously, we are growing a services and software business, which leverages. The investments we have made over the past nine years.
Our solution to combine the power of being a great insurance company.
With the power of technology is positioned to improve the overall insurance experience to improve outcomes and to lower costs.
They all of our businesses are showing traction and we are seeing that coming through in the strong results for the first half of 2021.
So with that I would like to turn it over to Scott Blackley, our CFO to take us through the second quarter results.
Thank you Mario and Hello, everyone.
Today, I'm going to walk through how the momentum we see in our businesses is showing up in our results. How we are thinking about our MLR trends and then close with updates on guidance.
I'll start with a discussion on our membership we ended the second quarter with approximately 563000 members an increase of 35% year over year.
And by growth in our individual Medicare advantage, and Cigna, plus Oscar books of business.
Membership growth exceeded our expectations as consumers continue to select Oscars innovative plans during the special enrollment period.
As Mario mentioned from the startup S U P and January through June 30th we've enrolled around 120000 new members.
Second quarter direct and assumed policy premiums increased 45% year over year to $841 million driven by higher membership as well as business mix shifts towards higher premiums silver plans and modest rate increases.
Premiums before ceded reinsurance were 724 million in the quarter up 84% year over year, driven by both higher premiums and lower risk adjustments year over year, both of which exceeded our expectations.
We recognized 34 million of favorable risk adjustments relative to our expectations for the 2020 plan year driven by outperformance in our value capture activities.
Based on a favorable report from Wakely, we also recognized an incremental $34 million of risk adjustment benefit related to 2021, as we have been increasing our mix of silver plans and we're seeing that result in a lower transfer estimate for members with higher acuity.
We recognize the comparable offset in medical claims and idea in our adjustments. So net net that's had an immaterial impact on the quarter.
Premiums earned of $528 million increased 364% year over year in the second quarter as we further reduced our use of quota share reinsurance from 76% in the second quarter of 2020% to 33% in Q2 'twenty one.
As a reminder, given our recent IPO and the momentum in our businesses. We chose to decrease our utilization of quota share reinsurance. This year, we would expect quota share to stay at approximately the Q2 levels over the balance of the year.
Our medical loss ratio was 82, 4% in the quarter in terms of drivers Covid related medical medical costs declined slower than we expected and we're roughly $35 million in the quarter contributing 500 basis points to the MLR, we had approximately 34 million of favorable prior period.
<unk> related to the prior year, a benefit of 400 basis points in the quarter.
The prior year period development impacted our risk adjustment, which is included in the denominator of the MLR calculation.
So while the dollars of the Covid related medical costs N. P. P. D item basically offset the COVID-19 costs had a larger impact to MLR.
In the comparable period last year, we experienced a very significant decline in medical costs due to our COVID-19 related drop in utilization. So the year over year trends are understood understandably unfavorable.
Let me offer more color on Covid and the overall utilization environment Covid.
Covid costs declined from Q1, 'twenty, one levels, but not as quickly as anticipated direct COVID-19 testing and treatment costs were higher than expected, partially offset by lower vaccine administration costs.
<unk> costs peaked in April and decline through June as Mario mentioned in our current data we are seeing an increase in our members who are currently receiving care for Covid and at the same time in those geographies, we're seeing a decrease in non COVID-19 utilization.
In terms of non Covid no utilization during the quarter, we saw a resumption of routine care a portion of which we believe is a pull forward of demand from the second half of 2021 as opposed to a catch up from deferred care in 2020, specifically, we saw increases in professional visits largely in the routine and preventative visit categories where <unk>.
Managing this increase to our strong utilization management capabilities and are intervening based on real time data through our concierge teams.
Our second quarter insurance company administrative expense ratio of 19, 8% improved 330 basis points year over year the.
The meaningful year over year improvement in the insurance company in minutes administrative expense ratio was driven primarily by increased operating leverage from our significant net premium growth of eight 5% year over year and tech efficiencies as well as the removal of the health insurance fee.
Our tech enabled model has helped us scale and grow premiums at a faster rate and administrative costs.
Our overall combined ratio some of our medical loss ratio and insurance company in minutes administrative expense ratio was 102.2% in the quarter on a year to date basis. This metric was 98, 5% continuing to reflect the consolidated profit across our insurance companies.
Our adjusted EBITDA loss of $50 million increased by $22 million year over year on year to date basis. The loss was 77 million, a 38 million improvement year over year.
<unk> related care as a headwind to our year over year results, even with these headwinds we delivered year to date improvement in adjusted EBITDA year over year, demonstrating that we are leveraging our tech enabled model to fuel strong premium growth and capture administrative efficiency.
Turning to the balance sheet.
We ended the quarter with over $3 billion in total company cash, including $1.1 billion of cash and investments at the parent and another $2 billion of cash and investments at our insurance subsidiaries.
Now, let me turn to our updated 2021 guidance.
We now expect direct and assumed policy premiums for the full year 2021 will be approximately 3.2 to $3.3 billion compared to our prior guidance that is an increase of $125 million at the midpoint largely driven by membership increases from the special enrollment period.
We now expect our MLR will be in the range of 85% to 87% for the full year, an increase of 100 basis points at the midpoint from guidance.
For the first six months, our MLR was 78, 7% and our guidance guidance continues to assume a seasonal ramp in the second half of 2021.
We previously expected around three five points of direct COVID-19 costs for the full year and our updated guidance now assumes roughly twice that amount. We are all also assuming that non COVID-19 utilization will be around baseline and the second half of the year.
We project, our insurance company administrative expense ratio will be between 21% and 22% an improvement of 150 basis points from prior guidance at the midpoint is increased revenue and scale are driving higher leverage in this metric.
Based on the above changes, we're maintaining our insurance company combined ratio guidance of between 107% and 109%.
Finally, we are maintaining our 2021 full year adjusted EBIT loss range of 380 million to $350 million, which is a meaningful improvement from 2020.
And with that let me turn the call back over to Mario.
Thank you Scott I want to thank everybody for joining our call.
I just wanted to add two points before we close.
First I want to thank the incredible Oscar team, we talked a lot about our differentiation and why that technology certainly sets us apart we are truly powered by people.
Without this theme, we wouldn't be able to keep raising the bar for our members and for the industry.
And second I want to reinforce our priorities and the path forward.
One we remain dedicated to growing our insurance business, while at the same time and it's been costs. Two we are driving forward the expansion of the plant Oscar platform with active partner conversations while simultaneously demonstrating real ROI for our current partners and three we are fully committed to becoming profitable businesses.
Reaching scale.
Now that's we turned over to the operator for the Q&A portion of the call.
So much as a reminder to ask a question you will need to press star one on your telephone keypad.
Yeah first question is from the line of Ricky Goldwasser from Morgan Stanley. Your line is open.
Yeah, Hi, good afternoon, and thank you for all the details.
Sounds good questions here first just wanted to get a better sense on the MLR and the underlying assumptions as you think about second half of the year. I mean, clearly you gave us a lot of pay down.
Impacted MLR.
In Q Q, but it sounded like you were seeing towards the end of the quarter you saw a decrease in non COVID-19 utilization, but you are raising MLR in Europe kind of thing.
Modeling higher MLR for second half of two years, so just kind of like trying to understand what's embedded in that.
New guidance around <unk>.
Call utilization versus baseline.
Underlying COVID-19 assumptions and also what type of acuity are you seeing among the new members, especially the ones that kind of like on boarded during the extended open enrollment season.
Okay, Ricky so I'm going to try to tick through those things I'm sure I'm going to skip so if I missed any of your questions. Please go ahead and come back to me on any of those so let's start with overall, what we're seeing in utilization. So I mentioned in my talking points that.
We saw through the quarter, we saw COVID-19 utilization declining on the other hand for non Covid utilization, we did see that.
Above baseline and accelerating <unk>.
<unk> picture I wouldn't say that non COVID-19 utilization again, it was slightly above the baseline, which looks like to us that it's been by pent up demand. We saw specifically that there was elevated professional utilization.
PCP visits were up preventative care and diagnostics the.
The nature of those gives us increased confidence that that's really pent up demand.
Potentially pulled forward demand.
And as another data point, we saw that inpatient costs were also elevated in the quarter and that was driven more by increased medical admissions.
Versus surgical admissions that were roughly at baseline so overall, but it feels like in the second quarter, we were seeing a bit of pull forward demand on non COVID-19 utilization now with respect to guidance just wanted to go back and make a couple of points. The first is that in our full year guidance we are assuming.
<unk> that the cost that we will incur for Covid are basically the same as what we experienced in the first half of 2021.
With respect to non Covid utilization, we're assuming that non COVID-19 utilization is basically at baseline in the second half of 2021. So you know I would just comment that with respect to that guidance, we're not assuming that the increase in COVID-19 care that we model is going to result.
In a decrease in non COVID-19 utilization as Mario and I, both talked about we have seen evidence that thats occurring where we're in markets, where there are spikes that gives us confidence that the guidance that we're putting out there is balanced.
Yeah, Ricky maybe I'll add one more thing on the on the question of what the nature of the demand is one.
One question that I think a lot of people have had in their mind. This is there sort of a.
I'll, just pent up demands on things like preventative and so on which we are seeing but is there also a higher acuity from deferred care from last year kind of flowing into this year. For example are there more cancer diagnoses are they have higher severity and things like that are members, who will ask you, perhaps where unless well managed as a result of not leaving.
The house now coming to a higher acuity level is something that we're not seeing.
Examples so that would be if it would be that new cancer diagnoses have about the same likelihood to be metastatic as 2019.2020.
So that would be inconsistent with ESG. The members misdiagnosis last year are now showing up as most of you. This year. If we look at members with certain chronic conditions diabetes autoimmune disorders.
Dear rates of emergency room and in patient usage are about to see Mr. <unk> 19, 2020, yet and that was in 2021 and so that seems also indicative of the fact that some utilization isn't driven by that that utilization in second quarter wasn't driven by that.
Yeah and the other question I think was to ACP versus OE insights and Scott do you want to take that yeah, yeah with respect to.
Oh E versus SCP basically what we're seeing is that the C. P. Population. This year has about the same committee co morbidity as the OA population.
We've seen generally an increase in morbidity in our total book and that is being driven by an increase in our membership mix, we've been working to drive towards a more silver heavy population and not what we're seeing now is that we've got a slightly older part.
<unk>, we've got a higher mix of silver plans and that in turn is causing a bit of a higher.
Higher overall morbidity the consequence of that is kind of twofold.
One we're seeing a stronger risk adjustment, so theres lower transfer for us. It also gives us the opportunity to use our customer.
Customer engagement engine to really help manage those those more acute members and we think over time that delivers a higher amount of profit to the company.
Okay, and then one question on Plas Oscar Mario It sounds like Youre, having conversations with providers and payers.
And now also sort of.
The interaction and and and and member satisfaction is becoming increasingly more important for star ratings.
So maybe can you share with us sort of profile of payers that are engaging with you on plas Oscar.
So.
Yeah.
Let me point you to.
Mostly really our history, there because it's pretty indicative of what we're doing at the moment.
We have a help for US is a good example for a regional payer wounded decades actually buy by a provider.
Where we're taking 37000 members 20000 life he members bring them onto our platform and so we're at that is sort of like one archetype of client we're talking we're talking to them and there was another archetype, which it's true.
Providers, who are.
Are either already taking risk in some shape or form one of go deeper into risk when it potentially even some of their own insurance company, yet and that is the other essentially push we have been making both inbound and outbound.
So that's the example, there obviously its ACTH in South Florida. We're also month, if you were in the Bronx and that can actually go all the way towards as I mentioned before us slicing into our stack and taken just a piece of it and for example, helping a physician group has already taken risk to also start paying claims.
And that's obviously part of our core offering on the admin side.
We think we do this very efficiently nightclubs and orientation right and so on and.
And so we can sort of like sliced it into somebody's already will be activity, but wants to do it better. So those are the archetypes.
And then the inbound on upfront conversations.
Thank you.
Mhm.
Your next question is coming from the line of Stephen Baxter from Wells Fargo. Your line is open.
Hey, good afternoon, and thanks for the question.
So wanted to come back and ask you about the tech stack and your claims visibility I was hoping you could talk a little bit about your level of visibility into Q2 cost as you book the quarter. How many months of good data do you feel like you have on the acute side also on the non acute side just would be great to hear a little bit more about your process here I'm in a dynamic environment higher technology is helping there.
Yeah.
Good question, Steve So.
And it's a lot to unpack there for sure, but let me give you a couple of examples I mean that the benefit we have is that.
We've got one big data Lake, where everything flows together and so we can very easily say what is happening with our COVID-19 searches for example in our membership for them what is happening with our conversations and in customer service what is happening.
With.
With no utilization management volume and really all the way to the to the present day I mean, all of this stuff is really available to me at my fingertips.
If I, if I care to look at it and obviously I do quite a bit.
And so for example.
You pull this up here if I look at if I look at let's say.
Covid conversations in a virtual prime in a virtual primary urgent care.
Up from from the kind of like.
Trough or bottom where they were in about may.
But there are still only at about half of the peak we had in December January and our kind of all mentions of Covid and all customer service channels, whether it's.
That's where the consortium's conversations over the phone with the consumer schemes things like that are also.
Certainly up over the past months on the episode and but they are still.
Yeah.
30, 40% off from kind of the peak we had they are also earlier in the year and so these are all numbers that we can pull up even better by the minute basically and the generally track quite well within the eventual number of positive cases, we see it.
Which then eventually come into the claims system.
So one even on the claim side, we generally think we've got some pretty good visibility there because it's obviously also single source of truth, and which means a claim comes in and we can see it right away as opposed to having run through the system and it's taken a while to kind of get processed ore. So that gives us a good backup to these to these leading indicators.
So these two these coincident indicators that we can generate more quickly so.
So that's one example, how we didn't see it.
The point I made earlier that if we look at electric surgeries.
We have a nice real time indicator is for us the AUM decisions utilization with the decisions we make on those on those surgeries everyday.
Those decisions are down by about 33% in July versus June and they're down a bit more actually in the first where are we now in the first 10.11 days of saw in August and so these things look like then we can see them ripple through would eventually when the claims come in now one last thing I would tell you that I'm always excited about it.
We can tie these things together it wasn't kind of before and after the fact, when I look at our cost estimation to where now where contractual users can go in and generate cost of Smiths prospectively for a particular kind of pathway of care will cost you as a member members can go and do this.
We checked quite actually would be there as well.
When you get a cost estimates and then you know a couple of weeks later, we were whenever you actually go and get the service and we put all that together automatically on the back ends and we can then see how close we get we are generally within those within kind of like 10% or so that's also a really high number that's kind of like above.
<unk> 50, 60% or so.
Or actually even higher now recently of some estimates we get kind of way in advance of how much that would actually later on LIFO on cost to you and we can do this now for about 93% of all utilization.
Really happens in the ecosystem, we can create these kind of prospective cost estimates.
That of course baked into our claims system as well and prices in real time. So that's the kind of a I think good stuff we're doing there.
That's very interesting.
Thank you for all the detail there and just on philosophically as you guys are approaching the individual market in 2022.
It'd be great to get a little bit of insight into how you are thinking about I guess you already would have priced that market I guess any way you could characterize kind of what you're assuming around baseline levels. Like you know kind of extended COVID-19 costs into 2022 any thoughts around <unk>.
Pent up demand or potential for pent up demand just be great to get a sense of how you guys thought about approaching the pricing for next year. Thanks.
Yeah, Thanks for the questions.
And I'll just comment that if you were here with me you would see that Mario literally pulled up the dashboards and was giving that answer are we using real time data.
It is really one of the most amazing parts of this company that ive seen since ive joined coming.
Coming to your 'twenty two question I will just say that so first of all we did the majority of our filings as you'd mentioned in May and June when.
When we went about putting those filings and we really tried to be thoughtful about the environment. We balanced at that time, you know all of the information that we were seeing in a real time data.
We have we've always talked about that we try to balance.
Both risk and in our ability to grow and we think that we achieved that in the pricing that we put in so at this point, even given what we've seen thus far with COVID-19 and with utilization trends, we feel like we've we've put that into a good spot with pricing.
We have had a chance to re file in a couple of locations where it was appropriate to do so.
And we think we're well positioned to move forward.
Yes.
Yeah.
I think my questions. Thank.
Thank you. So much. Your next question is from the line of Kevin Fischbeck from Bank of America. Your line is open.
Alright, great. Thanks.
One of your peers.
Provided a pretty wide range for MLR in the back half of the year and what they attributed to was I guess less about utilization, but more about the uncertainty around the risk scoring for the back half of the year than in particular.
Enrollment has fewer.
They used to just get them.
Covid.
Get that risk score together are you at all worried or is that a is that a concern or issue for you around.
The risk capture in the back half of the year.
Look I think that.
Excuse me read risk capture is always one of the factors that you have to deal with when when you're in an S&P environment. I think we've got some experiences we talked about the members that we're seeing come in.
Look a lot like what we saw as part of the OE process. So we've tried to give reasonable accommodation for that in in the MLR guidance that we've provided.
Okay.
Even in prior years, we obviously have a decent chunk of that will come through special enrollment as well and so we have experience with risk of the members when they come in.
I told you they I think to.
The PPD, we had on risk adjustments for last year in the second quarter came in better than expected and I think as Scott said that that was due to our own improvements in systems build outs in doing that well and so I think the thing machinery will work just as well this year.
Okay and then.
Obviously G&A coming in.
Well I.
I guess oftentimes, we see this though I guess with managed care companies and MLR is a little bit high G&A, a little bit lower either because of lower bonus accruals or companies kind of act two and take out costs and G&A is higher it sounded to me like you.
That wasn't the driver, but I just want to make sure that.
How are you characterizing that the G&A leverage is it really more about just revenue coming a little bit better and getting efficiencies faster.
Or is this kind of anything kind of onetime in here that you know we shouldn't think about you being on a different trajectory into next year, we should be kind of back to work.
Original 2022 assumptions on G&A.
Now we are theres nothing unusual in the trends there there's no reversal of bonus accruals or anything like that what youre seeing is really the leverage that we're generating in our business and you know we are.
Basically you've seen our expenses grow at the same pace on the variable expenses with revenues and then we're getting some leverage on fixed costs and so we think that that demonstrates the traction in that business and one of the reasons why we feel optimistic about the trajectory of our ability to target getting that business to profitability in 2000.
23, and the insurance company.
Okay, Great and then last question.
I guess when we.
Think about the.
The MA business I guess, it hasn't been a lot of.
Talk there about that I mean, how are you thinking about Europe.
Your cost trend there and how.
Have you thought about pricing for that next year.
So.
I'd say it goes to the same cautious pricing process and plant design process, we have.
And so we are internally for the ISP business and for the small employer business.
Which I think we've now demonstrated that we can we can land that's in the way that we need to work.
I would also say that some.
We have not obviously people have not seen the bid publicly it's I don't want to talk too much about that but again. This year, we tried to really be thoughtful in the same way. We launched we're launching all these diabetic plans for example in AFP also about EMEA benefits and plan designs are proud of the work we've done the Earth.
On the Q4 and a growth.
Our focus next year is.
On really two different things, we first of all think that Theres a lot of runway in the existing footprint behalf right. These are for the most part plants. We built together with other health systems that are co branded oftentimes that we're excited about growing work and then the other part is really taken over the big book from health forests, and flipping that over for one one.
Twenty-two where they exited the pricing in that case.
But so.
We're kind of same pricing process, therefore, similar assumptions.
But obviously you sort of like tailored when you for the population we have there which is different.
Vaccination than an individual and so on then you'd see it in the individual markets.
It all kind of incorporated there.
Okay, great. Thanks.
Your next question is coming from the line of Jay <unk> from Credit Suisse. Your line is open.
Yeah. Thank you. Thanks for taking the question I was wondering if you could spend some time on the competitive landscape for the individual market next year, we have some large insurers trying to enter the market in it next year and some of the reinsurance expanding just wondering if how this impacts your thought process around growth and expansion opportunities.
And related to that.
Three states you're in 146 counties you are entering how did you go about picking those markets was it last quarter.
Other criteria demographics are landscape, just curious like I talked about with you.
Yeah. Good question.
So I'd say for a number of years, we know that the individual market is competitive.
That's.
And in my view, it's shifted away a bit from just kind of premium level more towards can you see members money on total cost of care and I think that shift has been generally a tailwind for us because that's what we do when diabetic plantar zions, but for primary care plan designs.
Always like to remind people of the fact that I think we were the first ones to put the new director of Bras and also silver plans out there and these kind of plan is on movements in moments have really helped us continue to gain fear with not always or not generally priced in the lowest.
Now grew premiums as compared to a year ago by 45%, even though we were only the lowest priced in 10% of all of the markets. We're in and so it's that same approach.
Disciplined approach on pricing that we've historically done now.
We balanced growth and profitability and we will follow that playbook again for for next year, but obviously pricing isn't public anyway, yet so I don't want to talk too much about you know we did watson and so on but that that same playbook, we really follow what they are.
And from that point of view I don't see too much of that difference in the markets right now the pricing we've seen nationwide. Some I would say it has not surprised us in either direction.
And then.
I think the balance sheet, we've been driving towards there is going to be the right. One and we picked these new counties also with an eye towards where do we have a right to win where can we get the right provider partners that we work with more closely that could by the way eventually turned the plus Oscar clients right. That's happened to US a couple of times, so we get a footprint in IOP.
Look I wanted and then we build outs overall were up some relationship over time.
The case in Orlando and in Broward County, as well.
So where do we pick comes with the right provider partnership with the counties, where we think the offering we have will resonates for the population is such that we can really make sure. We learn we can do well.
Two culturally competent tier for example, I think we will.
We brought some really good Spanish speaking concierge team solutions into Florida back in the days that would be helped us grow there early on and we pay counties, where we think you know that.
The pricing makes sense.
We can be again kind of deliberate margin there with high and so that's how we picked up and I think that's exactly what we see into next year as well.
Okay can't wait to get into open enrollment and start getting getting them getting going back you will see me at broker dinner starting in.
In September actually at the end of the beginning of September the end of August and hopefully in person with.
Okay.
That's that's helpful and just my follow up.
Back to this comment.
Comment around non COVID-19 utilization being pulled forward in Q2.
How much of that was like self imposed given you have this higher member engagement and care management model and as the people who are getting vaccinated.
You are pushing for them to see their doctor than just our.
If that was the one of the dry what all it wasn't even beyond just the which might have come across from Europe, Ohio care management model.
And yes, so that is really always in what we do in the outreach is always intended.
Two.
Get members to utilize and channels of care that are going to be better for them and more efficient overall more effective overall so yes.
Yes, we see higher drug utilization among members who are attribute to a virtual primary care physicians adherence goes from.
65% level, or so or to drugs, which is sort of like standards in the U S health care system to <unk> 85 per cent medication adherence. When you are a member was attributed to an Oscar virtual primary care physician.
Because I mean for two reasons. One is we can remind you that's member engagements in this nice automated follow up and all that kind of stuff in there, but the second reason is that we make those drug suite in our plan designs. So the Oscar can prescribe the drug and it becomes free and that itself drives the medication risk score and so that does mean that medication costs or medication utilization.
<unk> ended up being higher than that is an increase that ends up being an increased utilization, but even with that we see in those petrochemical plan designs that the benefit we're getting I'm lory or utilization better a specialist care routing and so on actually outweigh the absence of what that's how we generally think about our companions.
We don't always get that right, which means we just kind of constantly churn through ideas. They have how to tweak these campaigns ought to get them right and so that's I think.
How you can think about that and the above.
Based on utilization there in the second quarter, Therefore, I would not say, it's driven by bye bye.
By that but as Scott said is more of a pent up demand we saw right. It's country preventatives concentrating some of the things.
People do when they first gets when they first get coverage and she doesn't S&P when they come in there's a little bit of kind of increase the earth seem as annuity membrane.
But.
As we said we are just kind of prescribing.
If you just look at the entire first half the entire first of the year is below was below baseline.
And so it would be prescribed prescribing forward into the second half of the year at baseline, which we feel like it's again, the kind of prudent thing to do.
Developments, we could have in the second half of the year.
Great. Thanks, a lot.
Thank you once again, if you would like to ask a question you May press star one on your telephone keypad.
Our next question is coming from the line of Josh Raskin from Nephron. Your line is open.
Hi, Thanks, good evening.
First question, just and I should know this I think is that you know the MLR on the ceded premium seems to move in the opposite direction of the.
Retained premiums and I'm, just still trying to reconcile why that's happening why would the MLR.
Be better on the ceded premiums or am I, just completely reading that wrong.
Yeah, Josh will you can you can certainly pull up with coronary who can walk you through all that math, but.
When you look at the way that the MLR for ceded works there is puts and takes related to them.
Prior period development that come in and impact that so it can skew it and make it look different than the rest of the MLR for the non CD book.
Alright ill pop up accordingly, and then on the plus Oscar pipeline I'd just be curious you know you mentioned, it's as robust as you've ever seen it where are you seeing the most interest and how should we think about the cadence or the timing of potential announcements and I know these are long sales cycles.
That sort of thing, but I'm, just curious kind of where you feel like that pipeline is moving.
Definitely continues to be a shift of providers, saying I want to reinvigorate my insurance company, but already Avalon or I want to start an insurance company that is clearly one one area.
But we're actually also.
I'm now seeing demand for CBD co admin systems.
Slicing kind of into what into our services and that can actually either be it is a business process as a service what can even be as a software as a service.
Offering where we can actually do both layer.
And so you know that that's really it's a it's a pretty equal split at the moment between these three different ways of going about this.
Yes, when we have a deal to announce there will.
We'll be excited to do that.
Understood. Thanks.
Okay.
Thank you speakers I am not seeing any other questions at this time I'd like to thank everyone for joining the conference today, Ladies and gentlemen. This concludes today's conference call. Thank you all for joining you may now disconnect.
Okay.
Yeah.
[music].
Right.
Okay.
[music].
Yes.
[music].