Q1 2022 Oscar Health Inc Earnings Call
'twenty three.
Second we expect to improve our margins by harnessing the power of our technology to drive down the total cost of care in a membership.
Finally, we aim to drive long term above market growth and retention.
Let me give you a few examples for each of these.
Starting with as you know we are emphasizing profitability over growth. This year, one lever is pricing in our planned year 'twenty three pricing strategy contemplates market dynamics exogenous trends and our drive for market expansion.
In addition, the team is focused on driving towards greater variable cost efficiency, using our technology to reduce manual processes as.
As well as leveraging our scale to obtain better unit costs <unk>.
For example, today, we automates about 5% of our responses to inbound messages from our members and.
And we think we have meaningful opportunities to increase this automation of inbound messaging to at least 20% without impacts member experience.
Additionally, we're looking at ways to expand our self service to its members as we know that about 70% of the we'll call. It <unk> also will have a digital accounts.
And heading into 2023, we expect to achieve additional operating leverage through continued top line growth and the fixed cost growth.
In terms of driving down total cost of care.
We are executing on several key areas for medical cost savings for utilization management, we are extending our automated utilization management Decisioning and program communications for providers, thereby reducing the need for manual intervention and allowing our conditions to focus on more complex care management issues.
We also will continue to focus on payment integrity on our ex formulary management and population health campaigns and in closing kick ups.
For example members using our virtual primary care platform, where 40% more likely to get their diabetic ice screenings compared to a control group and.
<unk> one of the Oscar care virtual primary care providers are seeing primary medications hearings at roughly 85%.
Also by our zero dollar generic drug offering in these virtual plants.
And finally looking at growth and retention we are focused on balancing this with profitability. For example, we are expanding our virtual primary Catherine offering to new states and markets given the influence on total cost of care, our ability to achieve above market growth mutation, even when we were not the lowest price plan in the loss of enrollment.
Periods is the result of multiple factors coming together and the leveraging of the most differentiated parts of the Oscar product offering.
Now we've had tremendous growth and we've had some good MLR performance trend into this year and those give us confidence and afford us the opportunity to focus on markets, where we can win.
As such we are focused on modifying our portfolio mix by market and by product.
But this quarter.
We made the decision to withdraw from the Arkansas, Colorado market places for the plan year 2023.
Relatively small market for us and we intend to make these excess as seamless as possible while continuing to provide service to the existing membership in these states throughout the year.
Turning now to plus Oscar despite being in the market less than a year, we have approximately 100000 client lives.
We expect these clients will generate $65 million to $70 million in capital efficient fee based revenue within this year.
We have three strategic priorities for plus Oscar the first is to serve our existing clients as well leveraging the ongoing learnings we are gaining from the first full book migration, we implemented with health first health plan. These full book migrations are complex and challenging and we continue to optimize our implementation strategy and partnership with <unk>.
<unk>.
We look forward to supporting health first health plans and the expansion efforts for 2023.
Second we are adding modularized offerings in the news here is that we are already in the market selling our first externalized software the service solution our campaign builder to work as.
As we have talked about one of our secrets to success is a highly engaging insurer is our ability to spin up new campaigns and new workflows very quickly.
Our membership base, we run hundreds of campaigns concurrently with right now will open the dashboards, a 48% member engagement rates.
With the launch of our campaign Blitz will to the external world. We are now offering our tool kits and content to other regional health plans and risk bearing providers.
This solution enables scalable personalized interventions and that automates workflows to drive growth and.
Managed risk.
The tool is a self service solution designed for nontechnical seems to be a one stop shop for engagements driving clinical outcomes and improve improving efficiency clients can build programs where campaigns that can be a detested.
They can deliver interventions with multiple touch points over time to drive behavior change and these campaigns deliver Moreover, meaningful business results.
We by now have amassed a large large base of powerful and rotate the campaigns. Because we are this differentiated mix of both our risk bearing insurer and a technology company.
For example, one companion.
To increase annual wellness visits appointment bookings resulted in a roughly 15% increase in visits schedules and a 20% reduction in <unk>.
And finally, an impasse Oscar will continuing to take steps towards offering our full platform as a software the service solution.
Right.
Business process as a service solution in order to increase our Tam and to expand the margins. Our prospective clients are seeing that they like our tooling and a SaaS solution will allow for an easier integration onto our platform. Moreover, SaaS deals are largely software solutions. So we would expect them to have 40% plus margins.
We've had some exciting tech launches this quarter as well and I always want to also mention those to share just a few examples.
Outbound interactions from <unk> key Agi and are driven by an aggregate score of all underlying tasks were particular member.
Let's just make sure that we drive outreach to the highest priority individuals and tasks and because were built on a tightened on tech stack. It seems like this in one place flows everywhere, helping us prioritize campaigns better.
Deep in our core admin system, we launched a product update that mergers in portal provider russerts continuously.
Rather than the batch process and as a result of this updates data stay units for provider data went down from our two minutes.
Thats to elimination of the need for manual engineering interventions for updates of provider Russell's and provider.
That's in Suriname, another change made it easier for us to improve how we rank facilities in our key router by efficiency not just physicians with facilities.
These are just a few examples for ongoing improvements in our infrastructure and we have a lot more coming this quarter as well.
We remain steadfast in our commitment to our strategic priorities. So positioning the insurance company for near term profitability year of continuing to increase our penetration across the U S insurance market and the accelerating growth for our plus Oscar we view the first quarter results as a positive step on the path towards this objective.
And with that I'd like to bring in Scott.
Thank you Mario and good evening, everyone Tonight, I'm going to walk through our first quarter 2022 results, but before I jump into the numbers I'll call out a few key takeaways.
We continue to see meaningful top line momentum and increased scale.
Our first quarter results were largely in line with our expectations and we're focused on execution in 2022 as a stepping stone to insurance company profitability in 2023.
And finally with over 1 million members our scale enables us to optimize our 2023 pricing for margin first and growth second.
Turning to the results. We ended the first quarter with approximately $1 1 million members, an increase of 98% year over year driven by growth predominantly in our individual and T plus sell books of business in.
In the quarter membership growth modestly exceed our expectations driven by a higher effectuate in rate and a retention rate of 80%.
First quarter direct and assumed policy premiums increased 104% year over year to $1 7 billion driven by higher membership and business mix shifts towards higher premiums silver plans, specifically silver members now represent 65% of our overall mix up from 50% last year.
<unk> earned increased 159% year over year to $955 million.
Note that we entered into an additional reinsurance agreements as of the beginning of 2022.
This is increasing our total quota share coverage rate from 34% in 2021.
The 46% in the first quarter of 2022.
For our existing reinsurance contracts that we had as of last year and our accounting, we reduce premiums and medical claims for the reinsurers proportional interest.
For our new.
Quota share reinsurance treaties the terms required different accounting, where the net economic impact of the arrangement is included in our other insurance cost line item.
Our 10-Q, we will have more details about the accounting for these arrangements.
Our first quarter 'twenty to insurance company administrative expense ratio was 19, 8%, which was roughly flat year over year as operating leverage and variable efficiencies were offset by higher distribution costs.
<unk> benefits drove 220 basis points of improvement in our first quarter adjusted administrative expense ratio, which was 23, 8% in the quarter.
We expect the admin ratios will be flatter throughout the year with a modest uptick in the fourth quarter.
Turning to medical costs, our medical loss ratio was 77, 4% in the quarter, an increase of 300 basis points year over year, which was largely in line with our expectations the mix shift towards more silver members drove around 75% of the increase these.
These members have richer benefit designs with lower deductibles, resulting in flatter MLR seasonality.
Therefore, we expect our overall seasonality to be less dramatic throughout the year and it has been historically.
In addition, silver members generally have higher morbidity versus bronze members and the increase in silver members results in a lower risk adjustment transfer.
Offset by higher claims.
While this is neutral to the bottom line it increases the MLR due to the impact on the numerator and the denominator.
The remaining MLR variance was attributable to adverse prior period development relative to favorable prior period development.
Last year.
Which was more than offset by year over year.
Excuse me, which was more than offset by favorable year over year net impacts of Covid.
Let me spend a moment on COVID-19 and utilization trends.
Net COVID-19 costs on a per member basis are lower year over year, driven by lower severity of the omicron variance, resulting in fewer claims for COVID-19 related treatments.
In periods with high Covid infection rates, we have seen some level of offset from lower non COVID-19 utilization and we saw that trend continue in the first quarter.
Our overall combined ratio, which is the sum of our medical loss ratio in the insurance company and administrative expense ratio was 99.
97, 2% in the quarter, an increase of 300 basis points year over year, primarily driven by the MLR.
Our first quarter 'twenty to adjusted EBITDA loss of $37 million was $9 million higher year over year, but as a percent of premiums it improved to just two 8% down from four 6% last year.
Turning to the balance sheet, we ended the quarter with over $3 4 billion in total company cash and investments, including roughly $735 million of cash and investments at the parent and another $2 7 billion of cash and investments at our insurance subsidiaries.
In the first quarter the primary use to parent cash was to fund the insurance subsidiaries required capital related to the open enrollment premium growth.
Holding up our first quarter results were in line with our expectations and we're making no changes to our 2022 outlook.
After a quarter with our larger membership book, we're seeing a membership profile that is as we expected.
Slightly higher morbidity population associated with higher silver members.
Compared with prior years. This should result in less seasonality in our quarterly results and finally as a reminder, our guidance excludes any effects from regulatory changes, including the resumption of Medicaid Redetermination.
With that let me turn it back to Mario.
Thank you Scott also with great. These.
These are complex science and it is a complex market out there certainly yet.
For us on the back of our record breaking growth.
We're trying to keep things very simple serve members well serve clients well and continue to move towards insurance profitability in 2023 years.
We are doing that against the backdrop of a healthcare system that is moving further into the direction that we've long described more individualized more digital more about value.
And Moreover, we believe that the move away from point solutions in healthcare is solidifying our strategy and positioning.
We chose <unk> to become an insurance company and to build our own technology stack and that sets us apart in the markets, we're quite far along in that journey now and we're leveraging our fixed to serve members and clients and.
And to do so profitably is a milestone we cannot wait to it.
I want to thank all of the Oscar team members were a company that is powered by people and their tireless work serving members with mixed Oscar a special place for me and for them now.
Now with that we'll turn it over to the operator for the Q&A portion of the call.
Ladies and gentlemen, if you have a question at this time. Please press star and then the number one key on your Touchtone telephone again that is star one on your Touchtone telephone.
Your first question is from Ricky Goldwasser from Morgan Stanley . Your line is open.
Yeah, Hi, Scott Good evening and thank you for all the details.
Couple of questions here on <unk> Lar.
You broke it by silver and prior period development can you give us some more context on what is the MLR that youre seeing.
For the new members that you on boarded given that there's so many of them this year versus MSR off existing members.
Yes so.
With regards to the MLR. The first comment I would make is with our SCP membership that came over.
Two observations one we saw.
Very high levels of retention of that group.
Members that we added last year coming over.
And the and joining us in 2022, then on the side of MLR again, those members performed as we expected which was really very closely aligned to the.
The same as what we would have been seen with the rest of the membership that came on.
And again this is kind of what we were expecting and it gives us confidence about the rest of the year trajectory with those members.
And then as we think about sort of those those new members that you on boarded this year to kind of like you have a sense of the MLR is associated just given that the mix now seems to be skewed more towards the new members.
Yes, again, I think that what I would say is that the the the SCP members that we added.
Are they.
I would anticipate that their MLR is going to be literally the same as the members that came in that we had previously had in our OE. So.
That's going to be the same.
Okay, great. Thank you and then Mike I would just have to ask about class Oscar.
Recently.
A more active role instead of leaving the plus Oscar effort. So maybe you can discuss kind of like.
What are kind of like you're most focused on and what are you seeing in terms of the pipeline.
Yeah.
Yeah.
It's fantastic for me to be out on the roads and those conversations going with potential clients want and so on what we're seeing is.
There's clearly a recognition that continues to be the case coming out of the pandemic shift towards value and thinking about how do you rebuild with an aging systems. How do you get closer to the member who is going to occupy this hot central member engagements.
And everybody's minds.
Lots of interest in our equipment systems lots of interest in our member experience lots of interest in our campaign bidder and if all of those.
The thing we're now most proud of is that we were able to already essentially start selling our first SaaS module and we talked about this a little bit at the Investor day that that was the plan that we will be moving towards that.
And again the plan is continue to sell D paths make the full platform available over time as a SaaS solution. But then also start modular rising smaller modules, we can land and expanse and let's have a shorter sales cycle and via our first offerings in all of the campaigns better and we're out there selling that lead to a larger portfolio of clients than even before including respond.
Physician practices and other folks like that.
So the trend is very much alive I think whats happening is were.
We're hitting a real nerve there in terms of the pipeline and on the <unk> side as I said in the in the Investor day, which has longer sales cycles and were in the market there for 2024 for various opportunities still.
In the meantime, pushing on the modernization and fulfilling clients' needs. There so stay tuned for that but everything I think.
Describing what's going on out there is very much alive and feels very much like what people are looking for it.
Thank you.
Your next question is from Stephen Baxter from Wells Fargo. Your line is open.
Hi, Thanks, I just wanted to ask first I guess on the ACA expanded subsidy is obviously, it's in fits and starts trying to get the subsidy has expanded I was hoping you could give us an update.
On your exposure and membership with these expanded subsidies and then I guess just further as we think about this in the balance of the year, how should we think about the relative risk profile and profitability of this membership versus your overall book I mean seems to stand to reason that they'd be good risk, but we'd like to get your perspective on that.
Yeah. So let me take the first part of this maybe Scott you can talk a bit more about the membership risk there as well.
Let me draw a bit of a bigger picture there.
We are now at record ACI enrollments right I think $14 5 million historically highest when once an increase from 2021 I think a lot of signs out there of the ECA market is working you saw the re low cost trends the last couple of years.
Increase the reduced now.
Uninsured rates that the that came through a couple of days ago. There was also a societal things and good for the health care system overall.
So that means I think it would take a lot of irrationality in the political process, particularly given the things that the subsidies have been really important for Florida, Texas. For example would take a lot of political irrationality to undo those subsidies and my starting point would be to think that there'll be found a way in a way.
It will be found to extend them, whether it's in the lame duck session, where before the end of the year I think we shall see but that is my best guess currently.
Just kind of what always happened in the last couple of using the ACA. It's an entitlement that works one of the people.
That is not with us.
Good clearly works for the health care system overall provider of some members in Swan until Thats My starting point now.
The where to go away.
It probably by a range of 10% to 20% increase in membership purely from the subsidies. However that isn't the nets and I'd remind you the year that's.
Look at the net change in membership you'd have to include Medicaid redetermination the fixing of the family Glitch, maybe other things that could happen before next year like no Medicaid capsule out there as well.
All of those things pushed very much in the other direction.
And so that is why we're not sitting there at the moment and saying how do these all these things net out to a mostly saying hey, we've got a great product.
They will take membership epic membership base to go after and therefore, that's the that's the.
That's the plan.
The impact on the MLR.
The new membership.
As Scott said I'll Echo hidden there between the three cohorts members, who renews members, who came last year and most recently we.
We don't see a lot of difference at the moments and MLR and they all have slightly different characteristics, but there's also a difference in how that all nets out that's where things like this doesn't work.
So in other words people patients came in last year and half are a o'brien against them when that goes away and <unk> got them basically at a reason seem MLR as everybody else that seems to be coming through what I'd see one small thing which is that then lastly, we talked about the ECP population, we observed that they have slightly higher somewhat higher preventative utilization when they come in and they have some.
Higher utilization when they come in and the preventative utilization is now back to where it used to be for that population. So that suggests it was sort of like an early catching up.
Our utilization still slightly higher and not enough to throw off the MLR in the order book on that cohort, but it just suggests that there is still more management that we can do.
And we're certainly on that.
Scott do you want to add.
No I think you covered it.
Okay and then just just one secondary question here it looks like the.
The SG&A progression might be a little bit different than this year than you've seen in the past I think you are starting out closer to the mid point and than in previous years and are you seeing much more of a ramp kind of throughout the year just remind us. How you guys are thinking about SG&A seasonality for the balance of the year and what some of the moving parts are for that thank you.
Yep. Thanks for the question Steve.
No.
With respect to the insurer co admin ratio.
Couple of things that I would call out there on the one hand.
In the quarter, we had more membership that came.
Into our book via brokers and that drove higher distribution expenses and then on the other hand, we saw.
Really variable cost efficiencies and operating leverage from scale and net net those two things.
Kind of offset each other and that was really the driver of why we saw flat year over year results in terms of first quarter.
And then kind of to your specific question.
On seasonality, what I would say there is that I'm expecting based on.
Kind of just the business that we've got now that including the broker.
With that I, just talked about we're going to see probably modestly.
Less amount of seasonality and specifically there I would say that I would expect that we're going to see.
Pretty flat levels of.
Sure.
The admin expense ratio for most of the year with a slight notch up in Q4. So I do think that we should see lower seasonality in that book.
Your next question is from Jonathan Young from Credit Suisse. Your line is open.
Jonathan Young your line is open.
Hi can you hear me.
We can you hear me, okay, sorry about that I guess.
Just as you think about the enhanced subsidy is it sounds like you guys are heading into.
Into incident pricing.
Assuming that the enhanced subsidies will be there, but I guess, if it wasn't extended how much of a lift would it be to reorient. The overall G&A LOE to maintain the goal of ensuring profitability in 2023.
Yes, I mean, let me start and I'd start by seeing that.
Again, if we net out all the changes it's not clear to me that the market would get smaller even without the subsidy strides Medicaid Redetermination Pamela Glitz and all these things these things are pushing the other direction. So.
We're not too worried there.
Second thing is we remain totally committed as we've said to insurance company profitability next year or so.
We need to do there now in terms of.
The kind of levers we have in the ovens caught up yet.
Look I think that what I would say is depending on.
How all of all of these regulatory shifts might play out youre going to have a couple of different factors to the extent that.
We see subsidized members.
The subsidies are going away and we're not able to pick up those members certainly we've already capitalized our insurance entities. So that would be favorable with respect to kind of from a capital and cash flow perspective on the other side of that.
It also would then reduce.
For purposes of.
Scale, we would be going backwards, a little bit on our fixed scale that we picked up.
That would be.
Certainly a bad Guy I think on the side of variable costs, we would be able to pull out a significant amount of variable costs roughly half of our costs in.
In the insurance company.
Administrative ratio are within our control and variable so we would be able to make adjustments to those for the size of the book and then I would just comment on the other side of the Ledger, we were able to see an increase in membership.
Going into 'twenty, three whether it was redetermination or the family glitch or any of these things there I think the fact that going into 'twenty, three where where we're able to price for the risk that comes along with that membership group.
That has the potential of being a real tailwind for US certainly if we saw Medicaid redetermination come in in 'twenty two.
And depending on the pacing, it's so difficult to exactly predict when the health care emergency might end, but depending on the pacing of that we could see that be a headwind to 'twenty two.
What that would certainly be a tailwind in 'twenty three as we would expect those members to have high retention into the following year.
Final thing maybe added steps from a regulatory point of view. This is obviously, a regulator's mind as well and so theres. Some theres a lot of work with the regulators and the pricing process to figure out what exactly we are in terms of timelines we could use there.
Okay, Great and then I guess, just kind of sticking with the enhanced subsidies.
If it was not extended and I guess for this year specifically.
Is there an expectation or thought of.
Members, possibly over utilizing their benefits heading into the end to the end of the year given the knowledge that they may not have insurance in 2023, I guess is there any thought to that.
I would argue a little bit with historical experience here in this.
So it will be similar to what happened in 2016 and 2017.
Sure.
The kind of shift towards silver loading into one.
It is actually in the takeaway for the year was that members do not necessarily read.
CMS guideline publications every single month, the way that you do from them shortly topic.
In Idaho.
So we did not see a big impact to sit back in those in those days. So my starting point there would be it's not a huge concern, but I think now we're behind the whole bunch of hypotheticals, but you'd have to multiply together so.
Not really something we're concerned about right now.
Okay I appreciate it thanks.
The next question is from Gary Taylor from Cowen Your line is open.
Hi, good afternoon.
I had two quick numbers questions for Scott and then a question for Mario about marketplace.
Numbers.
Could you quantify that.
The adverse <unk>.
In the quarter I mean, we will see it in the Q in a few days here, but just since you had mentioned it was curious I think there was a positive.
$5 million and the <unk> 'twenty one.
Yes in terms of the total year over year in dollars on.
Prior period development, it was unfavorable year over year by $17 million $12 million of that related to unfavorable 80 in the current year quarter.
So that's the quantification of that and remind what was the second part of your question.
Oh that was it my second numbers question was.
The other expense in the quarter through three <unk> five thats getting added back to EBITDA, what's that represent.
That one I'm going to send Cornelia back to you later after the call to give you the answer because I honestly don't know off the top of my head what that is.
Okay.
And then Mario just slow were sort of talking about potential changes to AC marketplace.
Are you thinking about the finalized rules, where you have to offer a standardized.
AC plan at every middle level, and every rating area, where you offer a.
Non standardize plan I think you guys have had a lot of success with some of the innovation.
And your plan offerings. So does this constitute an.
And incremental administrative burden to be able to.
Or those are not material and do you think it changes the competitive dynamic in the market at all.
Yeah.
Yes. The good thing is that the ability of having other plans in the marketplace doesn't go away.
So we still have a lot of flexibility and a lot of ability of putting more interesting designs out there and I think that is really important there are some states, where there is more and more constrained already.
I I personally don't think that that is always a great thing.
Better to have more smart regulation, obviously in there, but more ability for defining better benefit designs and the creativity flow. They are really in a good way.
So glad that that doesn't get taken away.
It is an interesting change I think it is.
I would generally say I don't have a huge opinion as to whether it's going to be grateful to market or not.
Whatever I think generally I would say any change as it relates to plan design is certainly a good thing for us because we can often act more quickly and we.
Because our systems will have to go to vendor and whatever item and configure these things more easily and more directly.
And price out exactly what that will mean, so that part I like.
I think it'll be interesting to see what it means that they'll probably be more goldblatt compliance back in the marketplace and those are things, we're going to have to see what that what that means and where you can bet that we're working through with now the latest CMS rule was not that much of a surprise related to what they had talked about before so we have some time.
We're going to pay for it.
Therefore.
I think it's we're in the middle of pricing season, and it's all systems go on working through the price of commodities. There every week.
But from this distance, it's not like a clear additional material administrative costs just to offer and maintain.
Many more plans and new trading area, that's is that fair.
No that's definitely fair I mean, we.
Have more administrate burden from the Union States, we are subscale, which is one of the reasons why we said, we're leaving two states have outgrown the better markets.
When it comes to running benefits networks side by side and that's one of the reasons. We believe that one system. Then we have a lot of flexibility.
Got it thank you.
Yes.
Your next question is from Josh Raskin from Nephron Research Your line is open.
Hi, Thanks, So just first one just a quick clarification on the change in ceded premiums I understand the shift to deposit accounting for the new books. So did I hear right that it's 46% of premiums this year being seeded and I assume the accounting has no impact on EBITDA and I assume certainly nothing on cash flow right.
Yeah. So.
You are right. It is overall what were going to call. The reinsurance coverage rate, which is kind of the effective amount of reinsurance is 46% for the first quarter.
And then when you look at kind of how that translates through into the accounting youll see ceded premiums of around 28% and the difference there basically is the new treaties that will be.
Running through on one line item as you said using deposit accounting and Youre right. There is.
Really.
No impact on the.
The treatment in.
Adjusted EBITDA.
It was just a presentation thing it's not it doesn't affect the bottom line.
And then just on the medical management side.
I'm curious if you're starting to get any leverage or new conversations that are coming up with providers.
I don't know if this weaves into plus Oscar opportunities as well, but as you grow membership with the providers thinking about Oscar in totality differently and then maybe how are you working specifically we've heard a lot about member engagement, but how are you working specifically with providers to better manage costs.
Yeah.
So on the provider side and the shift towards risk there.
We are at a record level of certainly this year in terms of dollars flowing through value based care arrangements that is both with physician groups and with health systems.
And we have several health system contracts right now with longstanding partners, we're shifting more towards towards risk and those in negotiation. So I wouldn't want to go through the rest and everything but.
That's happening as well and I think thats, a nice votes in terms of confidence that we can on the MLR at a reasonable level at a good level and also in the fact that we have operations now we do what we can make sure that the data flows and a good way and things like that.
How we are managing risk with providers.
It's a lot of bread and butter right now I would say one of the things we really brush up on in the last six months nine months or so is to just have.
And look more regimented.
Management, and orchestration and provide a value based care the yields.
Have any kind of customized some data flow going there or whatever but an internal system that we can spin up very easily new data sharing with providers and so on.
The boring basics oftentimes, but all things are working with them what we do.
We.
We.
A variety of running campaigns to closely align partners I mentioned the complaint about BCP distribution earlier today.
Remarks that was the campaign, we actually run with one of the.
<unk> health system that has risk with us and we help them get PCP attribution and <unk>.
That campaign builder as well.
One of the places, where we can get a little truth out right now from from driving there and then lots of small things.
That I think we want to maybe talk a bit more about in the next quarter or so as well in terms of how the product changes when youre in the risk of unusual deal for example.
As a super small, but if you renew your your prescription in the App that will go to your attribute provider in an easy way now where if you go into the K route or would you search will PCB youll provider with magic the float to the top there and things like that so very very simple stuff. Good testing ground for Russell provider clients. If you take all of this.
<unk>.
<unk>.
Big push and win more of their we call them internally in networks delivering value in <unk> and a lot falls under that kind of general rubric from PC beta PCP attribution use of member engagement and a data sharing better pushing up into the point of care as well and some of those kind of things.
And Mario when you talk about value based care, you're talking about two sided upside downside risk or are you talking about incentive providers upside on may type of step value.
To help you with your cost management.
Yes, if you take everything with wing on Eden.
Just a little bit of upside whatever I mean, then our prisoners of valley basically a pretty large but yes, when I say value based care really I mean, the upside downside like the contracts I'm in today that we are negotiating this year with health systems to really do risk that's upside downside.
Okay.
Exactly.
Alright, and ladies and gentlemen, this will be the last question for today's call and it will come from Nathan Rich from Goldman Sachs. Your line is open.
Great. Thanks for the question.
Mario you highlighted the decision to exit two markets I think you said, Arkansas in Colorado.
Could you maybe talk about just what went into the decision to exit those markets.
Is it are those two markets material from an EBITDA standpoint, I understand you haven't gotten scale. There are some not material from a premium standpoint and then.
Talked about looking at other remediate markets at the Analyst day could you maybe just talk about where the company is in the process of evaluating those markets and potential to see decisions to exit additional markets in the future.
Let me, let me just jump in on the from the financial side of exiting those.
Those markets Nathan.
They have they're really small so from a P&L perspective, they don't have.
Significant or even close to material effect. There is a benefit though from just reducing the amount of overhang that we have to do whether thats. The compliance work, we have to do or the statutory reporting that we have to do so there is a small benefit it really just reduces distraction and allows us to focus on where we have.
The right to win and where we really want to put our energies towards.
Yes in terms of decision to exit the year. So you're exactly right. These were in the remediate buckets that we talked about in the Investor day.
<unk>.
There were a number of commercial factors starting with the fact that we just did not get the scale there and we didn't really see a great rights to win for us.
With relatively speaking the bigger than in many other markets. We are in right. We have plenty of markets, where we don't have scale, yet, but we see a great path because we can work with different provider partner, where we can launch the product and things like that we didn't think that these markets were at the top of that list and they will also recent regulatory changes in both markets that's made it a bit more.
Sort of like a decision that made them to do right now rather than leaning into those regulatory changes, including the work of working through our systems.
Meaning therefore through the decision right now to withdraw although with newmont to comment on the regulatory changes they are I'd like.
So we need to say anything bad about that but it just makes sense for us to save us at work. If we don't think we have a right to win in those markets.
Okay that makes sense and just a quick follow up.
Scott you mentioned the membership profile this year being in line with your expectations I know the risk adjustment has created some uncertainty on MLR just in the exchange market I. Just can you maybe just talk about how you feel like you've been kind of executing on this and when when when we should expect kind of better visibility on what the impact should be for the <unk>.
All year.
Yes.
So obviously the first quarter is really the starting point for getting information and we're just starting to see claims data coming through as you go into.
The second quarter, that's when you start to see your first kind of report outs in terms of performance. So really I would expect we're going to get our first really good view in terms of the.
The characteristics and what we should be anticipating any true ups that we need to make around our estimates for risk adjustment, we will see that.
In the second half.
Right it honestly at the end of.
The second quarter So June of.
<unk>.
Plenty to.
Okay, great. Thank you.
Ladies and gentlemen, this concludes Oscar Health's first quarter conference call. Thank you for participating you may now disconnect.
Okay.
[music].