Q2 2023 Oscar Health Inc Earnings Call
Good afternoon, My name is Abby and it will be your conference operator today.
This time I would like to welcome everyone to offer health 2023 second quarter earnings Conference call.
All lines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Would like to withdraw your question again.
Dar one on your telephone keypad.
Limit yourself to one question and one follow up question.
Thank you I.
I will now turn the conference over to Cornelia Miller.
President of corporate development and Investor Relations.
Thank you and good evening, everyone. Thank you for joining us for a second quarter of 2023 earnings call.
Wherever I'll discuss our strong first half results disciplined execution and path to profitability, Mark Bertolini, Oscars, Chief Executive Officer, and <unk>, Oscars, Chief Financial Officer, well Who's This evening's call. This call can be accessed through our Investor Relations website, I I R Dot high Oscar Dot Com <unk>.
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 I R Dot high Oscar Dot com.
And he remarks that Oscar makes about the future constitute forward looking statements within the meaning of Safe Harbor provisions under the private Securities Litigation Reform Act of 1995 actual results may differ materially from those indicated by those forward looking statements as a result of various important factors, including those discussing or quarterly report on Form 10-Q for the currently period ended March 31 2020.
Three filed with the S E C and other filings with the S E C, including our quarterly report on Form 10-Q for the quarterly period ended June 30th 2023 to be filed with the S. E C.
Such forward looking statements are based on current expectations as of today Oscar anticipates that subsequent events and developments may cause estimates to change while the company may elect to update these forward looking statements at some point in the future, we specifically disclaim any obligation to do so.
The call will also refer to certain non-GAAP measures reconciliation of these measures to the most directly comparable GAAP measures can be found in the second quarter of 2023 press release, which is available on the company's Investor Relations website at I R. Dot high Oscar Dot com, but that I would like to turn the call over to our C E O Marc Bertolini.
Good evening everyone.
It asks for just over four months, though.
Continuing my deep.
<unk>.
Even more optimistic.
And when I joined the company of April .
I will discuss my humor in just a few moments, but let me begin by providing an overview of our second quarter performance.
We had a strong quarter and our results demonstrate that we're executing.
Profitability.
All of our key metric circle for me in line or favorable to plan at this point in the year.
M. P S increased to a record high of 57 this quarter.
Our medical loss ratio improved 230 basis points year over year.
79.
Person driven by our disciplined person strategy, the total cost of care initiatives.
We reached total company profitability for the second consecutive quarter.
Justin EBITDA $36 million.
First have adjusted EBITDA of $87 million <unk>.
Increasing her confidence in her total company adjusted EBITDA target for next year.
We continue to review insurance company profitability. This year in total company profitability next year is it.
Port milestones for us.
And we are very encouraged by our results today.
We'll walk us through a more detailed review of our financial metrics later in this call.
As we wish to next year, we plan to maintain a disciplined person strategy that we believe appropriately targets those growth and margin expansion.
Our growth strategy for 2024 focuses on leveraging the breath of our deep provider partnerships to expand into more rural areas.
We are planning to increase our service area footprint in more than half of our current states, which would meaningfully increase our overall Tam next year.
On the margin side, we have identified increased benefits from our total cost of care initiatives and areas, including the P. B M and fraud waste and abuse efforts.
We expect to drive further administrative cost savings from our increase scale and overall efficiencies from our technology.
Most importantly, though.
Spamming are innovative and affordable product offerings to continue providing an optimal remember experience.
For example.
Knowing the success of our diabetes plan, which targets members with a specific disease state.
We are introducing our breathe easy plan for members suffering from C O P D and other respiratory conditions.
Available in select markets in 2024, this plan will reward and Incentivise members around specific C. O P D related benefits.
With the end goal of driving better clinical outcomes and lower cost care.
With accessibility being central to our mission. We have also developed in the hands version of our Spanish speaking features to better serve the 30 per cent of our membership base for Spanish speaking.
Our consumer focused approach has resonated well with these members and we currently enjoying an M. P. S of 80.
As we strive to deliver a best in class member experience. We believe that these are the types of personalized offerings and consumer friendly features that can help us continually enhance our competitive advantage and industry leading M. P. S scores.
Let me now turn to some of my key observations over the last 128 days I have met with leaders across the organization of spent time digging deep into critical aspects of the business, including.
2024 pricing of market position.
Series of our operations, where I see opportunities for greater efficiency, and our longterm strategic position.
Overall I have been impressed with what I have five.
Well for our 10 year history, we have invested in our infrastructure and operations.
We have made great strides in right sizing our operations for scale.
But I see opportunities for even more value creation in core functions for example.
We have strong processes in place for risk adjustment.
But we can further enhance these capabilities and build even greater degree of efficiency and back.
There has already been material work underway that is yielding a positive result, and I plan to spend even more time in these areas going forward.
Our people are our most important asset could I have spent a fair amount of time assessing our team.
Getting a better understanding of their strengths and seeing where we can build upon our existing expertise.
As we look at the needs of the organization going forward, we are making some leadership changes in bringing in some key hires to enable us to better build and execute on our strategic priorities.
First.
As we have discussed <unk>, our interim Cfos's, leaving Oscar.
We are very appreciative of leadership and I look forward to continuing to work with him as a member of our board.
As we look to fill the position we conducted the very thorough external search.
However, it became clear throughout the process that we already have the best person to take on that role internally. We're thrilled to share that we are welcoming Scott blankly back to the role of CFO effective August 14th.
Over the last 10 months Scott has served as our chief transformation officer spending his time focused on a lining our overall revenues and costs enhancing our operational efficiency and building out our campaign builder product.
Today, we are on track to hit our key targets and we believe there's no better person for this next phase of Oscar that a seasoned leader who understands the nuances of our business.
As part of this transition I will be spending more time with our operations team, bringing my decades of experience as an operator to drive continue efficiency and momentum across key functions.
We're also bringing on two new hires to round out our leadership bench and industry veteran to run our corporate strategy and Institute, our management processes and a senior leader to lead and ensure we continue to expand our plus husker business.
I haven't had the privilege of working closely with both individuals during my other days they will be starting in the coming weeks. So you'll hear more about them during our next earnings call.
Let me spend a moment on how we're thinking about the future.
I have been embedding critical processes that will enable our long term strategic planning efforts.
As part of this work I have initiated and the new management process.
Framework for our multiyear plan reviewed our tech roadmap and met with the board to kick off a cadence of meetings that will focus on succession longterm strategy and performance.
I plan to spend the rest of the year driving continued performance improvements laying the groundwork for our multiyear strategy and accelerating plus Oscar to expand on our modular approach.
With respect to plus Oscar we haven't seen positive results with our first campaign builder clients.
Currently have 235000 unique patients active in the tool and have been seeing high engagement rates.
We expect to continue our momentum in the second half of 2023.
We look forward to bringing more modular components light campaigned builder to the market.
Speaking of our technology Mario has settled into his role as president of technology, and Chief Technology Officer, and among many other things is focused on how we can integrate AI into our tech and product Roadmaps.
As we have shared in the past are proprietary tech stack allows us to be exceptionally nimble and a response to major technological paradigm shifts like a I.
We have identified opportunities to further streamline the administrative processes enhanced decision, making capabilities and ultimately provide a more personalized experience for approximately 1 million members.
We have developed dozens of AI prototypes and I've made progress on a number of use cases and features that we plan to continue rolling out in the coming months.
One example is campaign builder AI actions, which leverages large language models to intelligently monitor for signals and deliver relevant interventions that better serve our members and patients clinical needs.
If you are interested in staying up to date on our latest AI insights and developments. Please visit high Oscar Dot Com Slash AI.
As it relates to the longterm strategy, we are working through an initial set of strategic pillars that will guide us through the next few years.
First we want to drive sustainable profitability and expanding margins through a market, leading and scalable operations second we believe that member engagement is one of our key differentiators, you'll want to continually invest in our member experience.
Third.
I believe we should look to diversify beyond our current offerings to leverage our members centric approach to an increasingly more individualized market.
And finally, we will continue to externalized, our tech platform. So that we can power others throughout the health care system.
I believe these are the rights strategic priorities for us over the next several years, we will share a more detailed longterm view of the company with you at an Investor Conference next year and with that I would like to turn the call over to <unk> said.
Thanks, Mark and good evening everyone.
As Mark noted our second quarter results show the business is performing in line to favorable with our expectations and that we are executing well against our plans. We ended the quarter with just under 1 million members, which was consistent with our pricing insurance assumptions.
The volume side membership has been slightly ahead of plan, while we have had limited S&P growth. This year relative to prior periods. This has been largely offset by Medicaid redeterminations.
At this point Medicaid Redeterminations resumed in all of our states early data indicates that the emerging Medicaid redeterminations are healthier than expected and are not exhibiting any anti selection patterns.
Also note that we are now eligible to enroll new members in Florida.
As I noted last quarter, our portfolio strategy purposely and successfully shifted our member mix closer towards the market average, we now have a higher proportion of renewals than any time in our recent history, which has resulted in an older membership that looks very similar to the overall HCA population.
Shifting our mix has been part of a deliberate strategy, which has resulted in lower projected risk transfer as a percent of premiums this year.
Direct and assume policy premiums were $1.6 billion in the quarter, a modest 3% decrease year over year, driven by membership and partially offset by rate increases.
Similar trends, we saw last quarter, our premiums before seeded reinsurance, which includes the impact of our lower risk transfer grew 8% year on year two $1.5 billion.
Turning to medical costs are medical loss ratio improved 230 basis points year on year to 79.9%.
Due to our discipline pricing actions in total cost of care initiatives.
Overall claims trends have been in line to slightly favorable relative to our pricing expectations for the first half of the year.
We're pleased with this trend and it includes are expected mix shift to members with higher risk scores as previously noted.
Within specific service categories inpatient is performing in line with our pricing assumptions.
Outpatient and Rx or slightly higher than expectations and professionals materially below.
Let me focus on risk adjustment for a moment.
Historically, we've had a younger and healthier population than the market average and have therefore been a large pair into the risk adjustment program.
The final CMS report for last year's risk adjustment was favorable to our expectations driven by outperformance in value capture initiatives, including a successful pilot application with AI. However.
However, we strengthen our razvi accrual and IBM, which largely offset the benefit.
While we expected a lower risk transfer this year due to our updated member mix. The initial Wakely report for 2023 still came in favorable to our expectations.
Given that we are only partway through the year, we have maintained and appropriately cautious approach to our risk adjustment reserve, which we will reevaluate in the coming quarters as we see more data.
Switching to administrative costs are ensure co administrative expense ratio improved 280 basis points year on year to 16.7% driven.
Driven by distribution optimization vendor efficiencies and operating leverage driven by the MLR and ensure co admin ratio benefits are combined ratio improved 500 basis points year on year to $96 seven per cent.
Are adjusted administrative expense ratio of 19.5% improved 420 basis points year on year due to the aforementioned improvements in the insurer co admin ratio lower holdco expenses and higher net investment.
Are strong operating results drove it another consecutive quarter of total company profitability with an adjusted EBITDA of $36 million.
Our first half 2023, adjusted EBITDA of $87 million is nearly $200 million higher than the same period last year.
We are very pleased with our results to date and the momentum we've seen throughout the first half of the year she.
Shifting to the balance sheet, we ended the second quarter with $3.8 billion of cash and investments.
$250 million of cash and investments of the parent.
As a reminder, we expect second quarter cash will be a high watermark for both cash and investment income for the year as a large working capital benefit from our are payable wears off next corner.
We expect to pay up to 2022 risk adjustment in August and are lower projected 2023 risk transfer will continue to build throughout the year.
R capital position remains very strong.
For some centuries had approximately $840 million of capital and surplus including $290 million of excess capital driven by solid operating performance through the first six months of the year.
We believe our excess capital positions as world on future growth and allows us additional opportunities to optimize our capital position over time.
Based on our encouraging first half results were making a few updates to our 2023 guidance.
We now expect or MLR will be towards the low end of the 82% to 84% range.
Lower MLR and higher investment income is also projected to drive our insurance company adjusted EBITDA to the top end of the 22 $120 million profit range.
Importantly, we anticipate our total company adjusted EBITDA loss will be at the high end of the range or towards a 75 million dollar loss for the year.
In summary, our first half results increase our confidence in achieving insurance company profitability. This year and lay a great Foundation from total company profitability next year.
We are very pleased with our progress to date and how we are positioned to execute in the back half of the year.
As we look to the future. We believe are disciplined pricing approach innovative offerings and industry, leading NPS sepsis up well to win for many years to come.
Finally, I'd like to say that coming back to an operating role Oscar has been a wonderful experience and a real privilege.
The finance teams in great hands with Scott and his contributions as chief transformation officer have set us up well for success.
As Mark also noted I'm feeling incredibly optimistic about the company's future and believe we have the right plan people and strategy in place to execute on our goals.
I look forward to continuing to work with Mark Scott and the rest of the management team for my seat on the board.
With that let me turn the call over to Mark for final comments. Thanks.
<unk> said.
In summary, we have had a strong first half of 2023 Ah results show the discipline focus and execution are delivering meaningful impact across our business.
We are on track with all of our key metrics. They would expect to achieve insurance company profitability. This year in total company adjusted EBITDA profitability in 2024.
As we look to the remainder of 2023, we see more Tailwinds, then headwinds, which we believe positions us well for 2024.
We believe that the individual market is the future and that our experience consumer focused approach technology and capabilities will enable us to continue thriving admits dynamic environment.
I would like to thank the asked for employees for their continued dedication and focus.
They are the reason why we continue to be in a position to serve our members and make health care more affordable convenient and accessible for people across the country.
With that I'd like to turn the call over to our operator for the Q&A portion of the call.
Oh, that's fine I would like to remind me one in order to ask a question.
<unk> and the number one on your telephone keypad.
Pause for just a moment to compile the question and answer roster.
Your first question comes from a line of Stephen Baxter from Wells Fargo, you're buying is open.
Hi, Thanks for the questionnaire just to make sure. We have this right you know I heard the commentary on the risk adjustment twice twice and came in safer bowl, but it didn't take much of it through to <unk>.
Maybe help us with the impact on either line and just have it translated to the piano that would be great.
Just to confirm the approach on 2023, it sounds like the initial read you're getting from Wakeless favorable relative to your initial assumptions, but that hasn't yet been reflected in either your results this quarter or the revised for your guide and can you provide it because you're taking a bit of a wait and see approach on that could you just confirm those couple of things.
Be very helpful for us thank you.
Hey, David sit here. Thanks for the questions Uhm first on 2022 effectively on 2022, we did see favre ability and our final or a submission that was offset somewhat by a cruel that we put up for <unk> and I would articulate our position as being cautious around margin with.
Respect of 2022 claims so we did top up the IBM are somewhat.
You looked at 2023.
While it's early I would say the initial wakely submission was more favorable than we had anticipated at this point in the air and we did highlight that we do expect lower risk transfer of 2023. So we did have some partial favor ability flow through into the piano all this quarter.
But I would say.
Relative to the initial Wakely report it was a small amount of favor ability and will follow our process over the course of the year. It is the data emerges and we'll get more confidence in the data will revisit that are cool in the coming quarters.
Okay. Thank you I'll come back and thank you.
Your next question comes from the line of Jonathan Jonathan Credit. Please your line is open.
Alright, Thanks for taking the question just wanted to go to Florida. Your enrollment cap was recently moved so how are you thinking about any benefit as members are determined in the back half of the year. It there and just in the markets generally and then separately I believe there was a a restriction on extracting capital from the Florida, That's part of the agreement just.
Curious how that changes your approach to the market so much of the capital Windsor, Florida. Thanks.
Well I think visiting new it said here. Thank you Jonathan.
Mmm.
New members will be eligible to enroll new members and we expect that that will occur is kind of standard business as usual as we returned to the exchange.
Members.
Previously talked about the profitability dynamics of S. N P members so.
Nothing nothing different there uhm.
A return to the Florida market I would just call out probably one thing.
The terms of our agreement are effectively consistent with our agreement when we entered the faith with respect to the regulator. So we always have targeted having constructive and proactive relationships with our regulators, we expect that to continue and we're very grateful for everyone.
Everyone's support as we entered Florida and are excited to you know you Gotta Gotta have another successful open enrollment.
Okay, Great and I think you mentioned that you see some increased benefits on the <unk> side Uhm, just curious what else you see on the <unk> side beyond the initial contracting that you conduct a text.
Uhm, Yeah notes in here again, nothing much I would add to that I think obviously, we've had a successful renegotiation two a P. B M contract I think you heard from Mark and prior call Sad.
That process well.
What is reevaluated with respect to a contract in 2023 and that we would anticipate that that benefit will continue to accelerate in 2024, so nothing new to add there.
We will continue this is mark will continue to work at the Mac list and pricing.
A quarter or as we talk with our with our Bender.
Okay, great. Thanks.
Your next question comes from the line of Michael.
Morgan Stanley Your line is open.
Yeah. Thank you.
The next year and your ability to enterprise profitability.
Given your optimism about membership growth next year, if you do a cheap very strong membership.
Their level of breath next here that you believe could potentially play some pressure on your ability to achieve profitability or do you believe.
Sure enough position now that economies of scale, we can realize enough operating leverage regardless of that magnitude.
Next year and then.
You also mentioned expanding your footprint.
And more than half of your state.
About the competition of that growth does it matter, where that growth ultimately car, Sean newer or older existing market and your ability to hit profitability. Thank you.
Hey, Michael sit here Uhm I'd, probably make two points you know in response to your question first.
<unk> Your first question I think.
I think it's important to just remind ourselves that Oscar really has been an execution story and get a quote Mark you know, we're very focused on increasing that internal capital Jenner generation. So.
As we grow in as evidence really by our financial performance in the first half of the year Uhm you see that on the MLR side, we've been pricing for March and expansion and we have had a real strong focus on best performing markets and <unk> disciplined so new membership and.
New membership growth is really positive operating leverage to our story and so.
We don't really see growth as a constrained to achieving that proper profitability target.
With respect to the second question I think we've also commented about this I think.
<unk> bulk of our markets right now are really performing at target Mlr's and so we've highlighted that in the individual market with some of the exits that we've made.
Very confident in our current market performance.
As you know pricing is just being released in early but you know obviously what pricing.
Line or above trends in so based on the current portfolio of having individual market is performing and again just looking at the financial performance through the first half of the year, you're starting to see that.
Definitively in the P&L, we feel good about both the expansion into new markets and how current Marcus you're performing so no real flag Sir.
Great. Thank you and if I can just ask one follow up question about I guess the bridge to membership crab net here, if you were to Bridget, which bucket what you <unk> the most significant.
<unk> 20 per cent premium revenue growth next year.
Florida enrollment cap of mobile Toughing broker commission back up or 2024 raised strategy any color there that'd be great. Thank you.
We're looking to diversify the smart Michael we're looking to diversify our revenue across four markets. So we're price.
Appropriately unconcerned in with larger than mine in certain markets, where we believe we can accelerate our growth in other markets, Florida will grow uhm, but it won't grow up to kind of rates have supported us in 2022, which allows us from an operating leverage standpoint to be a much more efficient.
In this world period than we were in 2022. So we don't see the kind of ramp that you would expect with grow up on a ladder quarter of the year enrolling into 2024.
Yeah, and I would just highlight a couple of things I think you heard in marks prepared remarks that R. M. P. S was at an all time high this quarter.
Really do not see.
You know any of our other competitors, bringing to bear the customer experience or innovation that Oscar does and so we're.
We're very pleased with with how N. P. S. S landed so far and expect to continue to invest in a member of experience.
Raising campaign builder as a tool and reenrollment.
And growth in this fall enrollment.
Begin to your address directly to our to our members from the opportunities I have here at Oscar.
Your next question comes in the line of Gary Taylor from Calvin Your line is open.
Hi, Good afternoon, I just had a couple of questions. One followed your commentary on the 22 and 23 risk adjustment.
Payable accrual and and the offset that you you called out for Wrathy accrual 19 or.
Question was why the claims payable on the balance sheet down about 100 million.
Sequentially with including this IP in our boost I mean, it just applies.
Inventories are down pretty substantially sequentially.
As I said in the first quarter call. We have worked very hard and making sure that we are efficient.
Collecting are risks congestion and information settlements would providers and or.
Assessed reinsurance coverage.
<unk> claims and backlog so we at work the backlog now.
And while we haven't pulled all the way that that through the triangles. We believe that it's it's a huge opportunity for us to.
Be more efficient and get as much internally generated capitalism.
Yes, I'm very just adding her to sit here, adding a little bit more color to that.
Did in particular this quarter to Mark's plan as part of a deliberate operational strategy uhm.
Three effectively large settlements that we cleared out this quarter. So one of the reasons you've seen our D. C. P. P. So high as we have had a fair amount of bulk reserves up for those settlement. So work down you know you should expect dcp's well come back a little bit more in line with <unk>.
I'll be higher than the market, but hopefully our trend line brings a D. C P style.
Sooner or later you run out of claims.
Yeah. So we should still expect that come down and there's no piano.
Fact that it's a cash flow.
Dynamic.
That's right.
Got it and then just one more for me since you know a I is is obviously very topical this.
This year Mark you discuss it a little bit can you give us a little more maybe some examples on you talked about AI interventions are you talking about you know medical interventions are flags with with clinicians and providers or would these be more.
Uhm interventions with your beneficiaries like what are what are some examples of you're talking about there.
Can you hear me on this microphone.
Okay.
Mark our barrio.
That's it Sir.
[laughter].
Samples that I loved the most and I really will invite people to go to the website. We made the decision to open source a bunch of my insights as we develop them in a bunch of our approaches <unk> applying it I took samples I liked the most one of them is having when we when we get <unk> claims traces of a claim system.
Which played a role will also and making sure. We can do up his claims black Lockdown does much we get these explanations auto claim system for how we pay the claim.
Very complicated look at some difficult to power since the one we have a language model now that can take those kind of system outputs and explain and much more natural language, which once you would've Leah white claim got paid it didn't get paid and that is now being used by the internal claims folks you just get it.
Quicker insight as to what the system did my particular situation before pushing this over time also to what's providers provide a web application that Oscar as to what's members and so that's a very Nifty example, because it relies on the smart claim system that needs to be there to begin with and then on top of that can language model can be conditional impact. The other one is also in the.
Claim system, it's the configuration provider contracts.
No matter contract, it's 100 page contract with <unk> with a hospice system compensated with a Texan.
It turns out that we can put that into the language model the model and a very nice way parse what's in there and kind of pre fill it for the total contract in person what the configuration of our system it looks like and rebuild Lois configuration too. It's also for the past two or three years or so now fueling them with the language model is very powerful and you.
Mark has particularly that that's we have big plans around plus Oscar Modernisation.
Further and further of this kind.
Single Fedex system that we built error is very powerful and I think.
Would be excited about bringing that some more and more organizations on the outside of Oscar as well and they can also benefit from these developments. We have I also Wanna come Slash AI again is the place to go to it does it come from those pay Sarah notion pays day you can we update all the time you can look up and.
And see how that looks.
Okay. Thanks, I'll take a look it sounds like the nearest term opportunities are still heavily focused on the administrative.
I think of some other stuff have talked about.
Understanding.
Yeah, I should ask for that part of your question as well Yeah. We have a couple of clinical use cases that are in the virtual primary care practice for example around some summarizing lab results, but they all have a human in the loop.
A lot of work happening right now around AI governance in clinical use cases, we tend to be at the forefront of helping do that's in there with one of these steam here uhm spearheading that's but on Depuration site. There's so much more that can be done. That's I think clinical use cases are incredibly interesting for us we can take a bit more time and <unk>.
Very thoughtfully.
They can.
Oh.
Your next question is on the line at Josh <unk>. Your line is open.
Hi, Thanks, good evening.
S G N a or I guess, just the G&A expenses when you take out stock cop in the quarter. It looks like they were up about I don't know eight 9 million sequentially and I don't know it's dot com is in any of the other line Adam So that may be messing, it up but I'm just curious if actual dollars, where I've been kind of what's driving that.
Yeah, Josh Mark that is investments in the back and things like fraud waste and abuse and other services that we're paying for that we're getting in in our underlying claims resolved.
Alright, and that is it is it fair to say more than reinvesting send the savings that you guys are fab in terms of dollars you know down significantly year over year.
Yes, okay.
Okay, and then Martinez made an interesting comment that you know over time I know, it's a longer term question you look to diversify beyond your current offerings and then juxtaposed that with the commentary you made a rabbit's an individual market should we be thinking about you know larger offerings back into M. A or other individual market I'm just curious more color on that.
45 million people in the individual.
Insured Romanian the insured employer market.
Small and middle market employers.
See mixed with our benefit plan designs focused on comorbidities in stabilizing the population of opportunity to move more ably towards defined contribution.
Flowers or less fearful of the fact that the U K.
Cases sick cases.
They're in their employee population will blow up a defined contribution pool and so if we can stabilize that part of the pool than we are able to offer more flexible benefit program for the remaining of the employers through a crime to fine contribution.
One approach we believe that's one where we have no fixed view of that market because we're not in a very significant way for our competitors will be Florida move and the approaching that marketplace. So that's a place we think we.
We can we can excel at large purposes of our platform and in our ability to reach customers more effectively and credit great remember experience. The other part is indeed Medicare advantage.
With the pressure.
And rates that will come from the federal government around risk adjustment.
We have nothing to lose others do we have an opportunity to power health systems, but I've taken a negative three per cent Medicare margins.
Does something positive, what's called a 4% versus a where they can perhaps they're both a business.
Flip the earnings profile of their Medicare business and have a huge advantage for their institutions. There's a lot of work that needs to be done there yet we have to be able to fully externalized platform nah just components needed to have a system integration partner or partners.
A number of people that we will consider in that space. So that we can do the right level of business process reengineering a partnership with these big health systems to get a new private label Medicare advantage business.
Okay Gotcha. So that's gonna be narrow of network you know M a Saturday.
Alright, which will be high cut.
Yep.
Okay perfect.
Perfect. Thank you.
Your next question comes in the line of Kevin Fish back from Bank of America. Your line is open.
Great. Thanks, I wanted to go to the Redetermination comment that you made earlier I think you said that.
At the risk pools come again, a little bit better than you thought I guess, what what had you been planning for as far as the the risk or did you think it would be equal to or worse than.
Your current restful.
Yeah, I think hey, Kevin and sit here previous even said that we thought it would be slightly higher acuity. So while it's still early and it hasn't been you know.
<unk> part of our portfolio is yet it's come in a little bit better than we've expected, but it's still early and will continue to watch it.
And I guess, when you think about the visibility into that I guess cause obviously, it's relatively new membership.
Do you feel like during pass F E DS when the new members come on that you have relatively real time information into that acuity or does it take.
A quarter or two before you can really get a sense for where that is.
Well I think Kevin as you know honestly every time you got a new member there's a lag in terms of risk, scoring and of course, you know some of the key drivers of the bulk like pharmacy, but I think with respect to our data and systems. We have has good data and systems around the spaces as anybody in the industry and so we feel we have a good line.
<unk>.
And so when you think about how you price next year cause I was sitting next year the memberships gonna be.
Coming in more fully from Redeterminations at least from a separate months perspective, but probably from a member as well did you also kind of assume that higher acuity into next year surfing.
<unk> the security of the tailwind or is that something that's still T V D and your final bits.
Well I think you know as you look to pricing you always want to have discipline and caution. So you know until you've realized the experience we wouldn't price. So I think we we still take a cautious view around those Medicare green determination and Uhm, obviously again from a pricing perspective as experienced.
Comes then we can revisit that over time.
And then you're just going back to another question about kind of that break out of the membership grocery. If you guys can do next year, how how fast do you think the market is it going to grow next year, let's make the determination and everything else like what what the industry is going to be growing.
We have said before I teams for membership and low twenties for premium.
<unk>. That's that's what you think the overall individuals the exchange market will do.
Yes.
Okay, Alright, great. Thank you.
Your next question comes from the line of Nathan Rich from Goldman Sachs. Your line is open.
Thanks, Good afternoon, Mark and said, maybe just building up the the last question could.
Can you maybe help put in context, the the geographic expansion I know you said, increasing your footprint in half your states, what's that kind of doing to the the tab that you can go after as we think about the potential membership growth next year.
Yeah, Uhm Megan It said why don't I take that I think you know first off and in the broader market.
We don't yet know where final pricing and thighs will be in terms of our growth, but you know <unk>.
We think there's a material Tam increase from us.
<unk> the biggest driver we've talked about is rural service areas, where we have deep provider relationships and.
Folks are excited to grow with US you know I think at the same time. Another unique driver. We have is innovative product offerings, which which marcus talked about in those enable us to tackle different segments of the marketplace. So.
Ideally for us as we think about it that's kind of double digit.
<unk>, but you know obviously a lot depends on final pricing and where where things land in different marketplaces.
Okay, great that that's helpful. And then Mark you'd mentioned, bringing a new leadership for plus Oscar any change in kind of priorities are opportunities for that that business from your point of view.
I.
Areas, where we will focus with the new leadership is to accelerate our bus Oscar development.
That we are comfortable with our ability to deliver on profitability, although we won't lose that focus.
I don't want to start hardening the platform in ways that we can get external to the market sooner rather than we otherwise thought we could.
Bringing a leadership on no not from the standpoint of development and building up a platform, which Mario and his team have done very well, so far and will continue to do.
More about the commercialization and go to market side, plus Oscar and how do we address the market the component driven approach, which which components will come next.
Also how do we see it on the market in a way where we can approach a full platform with Ah there are actors in the health care Uhm ecosystem. The other person coming on board as a person that will will help us focus on long term strategy and the cadence necessary to deliver on that strategy.
Time, and so I have a way of approaching strategy that we use the retina our management process of support said and a reward mechanism that in sunset and so we're building that out as we speak and this person coming on board will be the person that will help drive on that side of the business.
Great. Thanks very much.
There are no further questions Apple <unk>.
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