Q3 2023 Oscar Health Inc Earnings Call
Speaker 1: Good morning, my name is Roth and I will be your conference operator today. At this time, I would like to welcome everyone to Oscar House 2023 third quarter earnings conference call. All lines have been placed on mute to prevent any background noise.
Good morning, My name is Rob and I'll be your conference operator today at this time I would like to welcome everyone to Oscar Health 2023 third quarter earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session if you'd like to ask a question.
Speaker 1: 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. If you would like to withdraw your question, again press the star one. Thank you. I will now turn the conference over to Chris Pottscher, Vice President of Treasury and Investor Relations.
During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again Presti scar one. Thank you I will now turn the conference over to Chris Parker, Vice President of Treasury and Investor Relations. Good morning, everyone.
Speaker 2: Thank you for joining us for our third quarter 2023 earnings call, where we'll discuss our strong year to date results, our updated financial outlook for 2023, and the path to total company adjusted EBITDA profitability in 2024.
Thank you for joining us for our third quarter 2023 earnings call, where we'll discuss our strong year to date results our updated financial outlook for 2023, and the path to total company adjusted EBITDA profitability in 2024.
Speaker 2: Mark Bertilini Oscars Chief Executive Officer and Scott Blackley Oscars Chief Financial Officer will host this morning's call. This call can also be accessed through our investor relations website at ir.hiosker.
Mark Bertolini, Oscars, Chief Executive Officer, and Scott Blackley, Oscars, Chief Financial Officer will host this morning's call.
This call can also be accessed through our Investor relations website at IR Dot Hi, Oscar Dot com.
Speaker 2: 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.hioscar.com.
Full details of our results and additional management commentary are available in our earnings release, which can be found on our investor Relations website at IR Dot Hi, Oscar Dotcom.
Speaker 2: Any remarks that Oscar makes about the future constitute forward-looking statements within the meaning of safe harbor provisions under the Private Securities Litigation Reform Act of 1995.
Any remarks that Oscar makes about the future constitute forward looking statements within the meaning of Safe Harbor provisions under the private Securities Litigation Reform Act of 1995.
Speaker 2: Actual results may differ materially from those indicated by those forward looking statements as a result of various important facts.
Actual results may differ materially from those indicated by those forward looking statements as a result of various important factors, including those discussed in our quarterly report on Form 10-Q for the quarterly period ended June 30th 2023 filed with the SEC.
Speaker 2: including those discussed in our quarterly report on Form 10-Q for the quarterly period ended June 30, 2023, filed with the SEC.
Speaker 2: and other filings with the SEC, including our quarterly report on Form 10Q for the quarterly period ended September 30th, 2023, to be filed with the SEC.
And other filings with the SEC, including our quarterly report on Form 10-Q for the quarterly period ended September 30th 2023 to be filed with the SEC.
Speaker 2: Such forward-looking statements are based on current expectations as of today. OSCQR 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.
Such forward looking statements are based on current expectations as of today.
Oscar anticipates that subsequent events and developments may cause estimates to change while the company may elect to update these forward looking statements at some point in the future, we specifically disclaim any obligation to do so.
The call will also refer to certain non-GAAP measures a reconciliation of these measures to the most directly comparable GAAP measures can be found in the third quarter 2023 press release, which is available on the company's Investor Relations website at IR Dot Hi, Oscar Dot com.
Speaker 2: A reconciliation of these measures to the most directly comparable GAAP measures can be found in the third quarter 2023 press release, which is available on the company's investor relations website at ir.hiosker.com
Speaker 2: With that, I would like to turn the call over to our CEO , Mark Bertolini.
With that I would like to turn the call over to our CEO Mark Bertolini.
Speaker 3: Thank you Chris, good morning everyone, thanks for joining our call.
Thank you Chris Good morning, everyone. Thanks for joining our call.
Speaker 3: Today I will review strategic drivers of Asker's Momentum and preview our plant deliver sustainable growth and profitability.
Today, I'll review strategic drivers of Oscars momentum and preview our plan to deliver sustainable growth and profitability.
Speaker 3: We had another strong quarter with solid core business performance, increasing our optimism for 2024, total company adjusted EBITDA profitability.
We had another strong quarter with solid core business performance, increasing our optimism for 2024 total company adjusted EBITDA profitability.
Speaker 3: We had a strong membership retention across our book and our leading NPS increased to a record high of six.
We had a strong membership retention across our book and our leading NPS increased to a record high of 60.
Speaker 3: our insurance business is performing well with all core ratios improving meaningfully year over year in three Q and year today.
Our insurance business is performing well with all core ratios improving meaningfully year over year, and three Q and year to date in.
Speaker 3: In the quarter, our medical loss ratio improved 610 basis points year over year to 83.8% driven by our discipline pricing strategy and execution under total cost of care initiative.
In the quarter, our medical loss ratio improved 610 basis points year over year to 83, 8% driven by our disciplined pricing strategy and execution and our total cost of care initiatives.
Insurance company adjusted EBITDA profitability remains solidly on track for this year.
Speaker 3: Insurance company adjusted EBITDA profitability remains solidly on track for this year.
Speaker 3: We also maintain total company profitability through the first nine months of 2023 with adjusted EBITDA of $66 million.
We also maintain total company profitability through the first nine months of 2023 with adjusted EBITA of $66 million.
Speaker 3: Given our year-to-date out performance, we are raising our full year 2023 adjusted EBITDA out.
Given our year to date outperformance, we are raising our full year 2023, adjusted EBITDA outlook.
Speaker 3: Scott will walk us through a more detailed view of our financial metrics later in the course.
Scott will walk us through a more detailed view of our financial metrics later in the call.
Speaker 3: Now I will turn to our business highlights. We are one week into open enrollment, marking Oscar Health Insurance's 11th year as a prominent player in the ACA market.
Now I will turn to our business highlights we are one week into open enrollment, marking Oscar health insurances, 11th year is a prominent player in the HCA market start.
Speaker 3: Starting in 2024, we will bring new technology enabled individual and family plans to 165 new counties in 11 states across our broader 18th-stake foot.
Starting in 2024, we will bring new technology enabled individual and family plans to 165, New counties in 11 states across our broader 18th state footprint.
Speaker 3: Based on our competitive positioning, we expect to achieve direct premium growth at or above market in 2024.
Based on our competitive positioning we expect to achieve direct premium growth at or above market in 2024.
Our growth strategy includes several expansion drivers focused on accessibility affordability and member experience.
Speaker 3: Our growth strategy includes several expansion drivers, focused on accessibility, affordability, and member experience.
Speaker 3: First, we are expanding in states as well, including Iowa, Ohio and Georgia.
First we are expanding in states, Oscar knows well, including Iowa, Ohio and Georgia.
Speaker 3: The expansion appropriately balances risk and includes rural counties that build off of our existing provider rate structures and distribution channels.
The expansion appropriately balances risk and includes rural counties that build off of our existing provider rate structures and distribution channels.
Speaker 3: Second, we are enhancing our leading Ola Oscar program for our growing Spanish speaking member.
We are enhancing our leading all Oscar program for our growing Spanish speaking member base.
Speaker 3: The program delivers culturally authentic experiences, including providers who speak the language.
The program delivers culturally authentic experiences, including providers, who speak the language.
Speaker 3: Our Spanish-speaking members have an even higher MPS than our overall member average, and represent a growing segment of the ACA market. Third, we are introducing...
Our Spanish speaking members have an even higher NPS than our overall member average and represent a growing segment of the ACO market.
Third we are introducing more personalized plan designs, our newest plan breathe easy aligns benefits with the needs of members suffering from COPD and asthma.
Speaker 3: Our newest plan, Breathe Easy, aligns benefits with the needs of members suffering from COPD and asthma.
Breathe easy builds on the success of our diabetes care plan, which has generated notable results, including 9% better medication adherence, 17% increases and eye exams, and 12% higher rates of kidney disease screenings.
Speaker 3: Breathe easy builds on the success of our diabetes care plan, which has generated notable results, including 9% better medication adherence, 17% increases in eye exams, and 12% higher rates of kidney disease screening.
The processes, we implemented in 2023 give us confidence in our execution in 2024, our strategy balances growth with sustainable margin expansion. The core building blocks include our one disciplined pricing strategy to administrative expense initiatives and.
Speaker 3: The processes we implemented in 2023 give us confidence in our execution. In 2024, our strategy balances growth with sustainable margin expansion. The core building blocks include our one discipline pricing strategy, two administrative expense initiatives, and three total cost of care of.
Three total cost of care efforts.
Speaker 3: We plan to reduce medical expenses through substantial PBM contract savings, fraud, waste, and abuse initiatives, and network recontracts.
We plan to reduce medical expenses through substantial PGM contract savings fraud waste and abuse initiatives and network re contracting.
Speaker 3: All of these factors lay an achievable path to total company adjusted EBITDA profitability in 2024.
All of these factors lay an achievable path to total company adjusted EBITDA profitability in 2024.
Now turning to plus Oscar This morning, we announced a new agreement with Sanford Health plan, a provider sponsored plan supporting one of the largest U S health systems.
Speaker 3: This morning we announced a new agreement with Stanford Health Plan, a provider-sponsored plan supporting one of the largest U.S. health
Speaker 3: The multi-year agreement leverages our campaign builder technology to drive member engagement and interconactivity through their operation.
The multiyear agreement Leverages, our campaign builder technology to drive member engagement and Interconnectivity through their operations.
Speaker 3: Focus areas include improving member growth and retention, appropriate PCP utilization, clinical program engagement, and adherence.
Focus areas include improving member growth and retention appropriate PCP utilization clinical program engagement and adherence are Stanford health plan partnership demonstrates the growth potential of plus Oscar after just one year of offering campaign builder to third parties, we have grown to serve five.
Speaker 3: Our Stanford Health Plan partnership demonstrates the growth potential of Plus Oscar. After just one year of offering Campaign Builder to third parties, we have grown to serve 500,000 lives.
500000 lives the.
Speaker 3: The addition of Stanford Health builds on campaign pay builders success with plus us for clients.
The addition of Sanford Health Bilson came pay builders success with plus us for clients. A recent example includes a large physician group in <unk>, where we initiated an annual wellness visit campaign, which successfully engaged approximately 86% of patients.
Speaker 3: A recent example includes a large physician group in MSO where we initiated an annual wellness visit campaign.
Speaker 3: which successfully engaged approximately 86% of patients.
Speaker 3: That outreach drove a 10% increase in PCP utilization within 30 days of campaign execution.
That outreached drove a 10% increase in PCP utilization within 30 days of campaign execution.
Speaker 3: In addition, we continue to build new campaign builder features that integrate OpenAI for Plus Oscar clients and Oscar health insurance.
In addition, we continue to build new campaign builder features that integrate open AI for plus Oscar clients and Oscar Health insurance.
Speaker 3: These enhancements synthesize data from multiple sources to deliver high frequency, personalized interventions, and intelligently monitor for signals that route better care.
These enhancements synthesize data from multiple sources to deliver high frequency personalized interventions and intelligently monitor for signals that route better care.
Speaker 3: These successes demonstrate the impact that OSCQR is making to improve access and quality for OSCQR health insurance and the potential to power the broader health care system.
These successes demonstrate the impact plus the Oscars banking to improve access and quality for Oscar health insurance and the potential to power the broader health care system.
Speaker 3: Looking ahead, our leadership team continues to evolve our strategy. Near term, we remain committed to our profitability targets. Longer term, we are focused on continued margin expansion.
Looking ahead, our leadership team continues to evolve our strategy near term, we remain committed to our profitability targets longer term. We are focused on continued margin expansion. We have a strong operating plan that lays the groundwork for 2024 and sets us up for success in 2025, our focus includes one running.
Speaker 3: We have a strong operating plan that lays the groundwork for 2024 and sets us up for success in 2025. Our focus includes, one, running a great company, two, continually enhancing the member experience, three, accelerating plus-Oscar revenue by commercializing our technology platform, and four, driving further momentum in Oscar Health Insurance by diversifying beyond the ACA.
A great company to continually enhancing the member experience three accelerating plus Oscar revenue by commercializing our technology platform and for driving further momentum in Oscar health insurance by diversifying beyond the ACI.
Speaker 3: Over the next several months, we will continue to map out our strategy and look forward to sharing it with the market at an Investor Day in 2024. With that, I will turn it over to Scott.
Over the next several months, we will continue to map out our strategy and look forward to sharing it with the market had an investor day in 2024 with that I will turn it over to Scott.
Thank you Mark and good morning, everyone.
Speaker 2: Our strong third quarter and year-to-date results demonstrate that we are executing well against our plan. All of our core ratios saw meaningful year-over-year improvement, and we are tracking at, or above, our profitability target.
Our strong third quarter and year to date results demonstrate that we are executing well against our plan all of our core ratio some meaningful year over year improvement and we are tracking at or above our profitability targets.
We ended the quarter with nearly 1 million members largely in line with our expectations.
Speaker 4: We ended the quarter with nearly one million members, largely in line with our expectations.
Speaker 4: Membership increased modestly by 1% in the quarter driven by higher retention due to lower lapse rates and increased special enrollment additions as compared to the second quarter.
Membership increased modestly by 1% in the quarter driven by higher retention due to lower lapse rates and increased special enrollment additions as compared to the second quarter.
Speaker 4: We continue to monitor SCP membership trends, including Medicaid redetermined lives. Our data continues to indicate that SCP members are healthier than expected and are not exhibiting anti-selection patterns.
We continue to monitor SCP membership trends, including Medicaid Redetermination lives. Our data continues to indicate that S&P members are healthier than expected and are not exhibiting anti selection patterns.
Speaker 4: Our direct and assumed policy premiums were $1.6 billion in the quarter, a 5% decrease year-over-year driven by lower membership, partially offset by rate increases.
Our direct and assumed policy premiums were $1 6 billion in the quarter of.
A 5% decrease year over year, driven by lower membership, partially offset by rate increases.
Speaker 4: Similar to trends we saw last quarter, our premiums before seeded reinsurance, which includes the impact of our lower risk adjustment transfer, grew 6% year-over-year to $1.4 billion.
Similar to trends, we saw last quarter premiums before ceded reinsurance, which includes the impact of our lower risk adjustment transfer grew 6% year over year to $1 4 billion.
Turning to medical costs, the medical loss ratio significantly improved by 610 basis points year over year to 83, 8% in the quarter due to our disciplined pricing actions and total cost of care initiatives.
Speaker 4: Turning to medical costs, the medical loss ratio significantly improved by 610 basis points year over year to 83.8% in the quarter due to our disciplined pricing actions and total cost of care initiative.
Our overall claims trends were in line to slightly favorable relative to our pricing expectations.
Speaker 4: Our overall claims trends were in line to slightly favorable relative to our pricing expectations.
Speaker 4: Within specific service categories, trends remained consistent with last quarter. Compared to our pricing assumptions, inpatient performed in line, outpatient and Rx were slightly above, and professional well below.
Within specific service categories trends remained consistent with last quarter compared to our pricing assumptions inpatient performed in line outpatient in Rx, we're slightly above and professional well below.
Speaker 4: On risk adjustment, we continue to expect a lower risk transfer as a percent of premiums this year due to our member profile shifting closer to the overall ACA population.
On risk adjustment, we continue to expect a lower risk transfer as a percent of premiums this year due to our member profile shifting closer to the overall HCA population.
Speaker 4: We received the second weekly report for 2023, and we recognized 27 million of risk adjustment benefit in the quarter as the data continued to be favorable relative to our expectations.
We received the second Wakely report for 2023, and we recognized $27 million of risk adjustment benefit in the quarter as the data continued to be favorable relative to our expectations.
We continue to maintain a cautious approach to our risk adjustment reserves.
Speaker 4: we continue to maintain a cautious approach to our risk adjustment reserve.
Speaker 4: Switching to administrative costs, the insurance company administrative expense ratio improved 330 basis points year over year to 17.4% in a quarter, driven by lower risk transfer per member as a percent of premiums and distribution optimization.
Switching to administrative costs, the insurance company administrative expense ratio improved 330 basis points year over year to 17, 4% in the quarter driven by lower risk transfer per member as a percent of premiums and distribution optimization.
Speaker 4: Taken together, the insurance company combined ratio significantly improved by 935 basis points year-over-year to 101.3% driven by both an improved MLR and admin cost efficiency.
Taken together the insurance company combined ratio significantly improved by 935 basis points year over year to 101.3% driven by both an improved MLR and admin cost efficiencies.
Speaker 4: Year date, the combined ratio significantly improved by 560 basis points to 97.6%, reflecting a consolidated profit across the insurance
Year to date, the combined ratio significantly improved by 560 basis points to 97, 6%, reflecting a consolidated profit across the insurance companies.
Our insurance company adjusted EBITDA up $30 million in the quarter improved by nearly $150 million year over year.
Speaker 4: On a year-to-date basis, insurance company adjusted EBITDA of $218 million, improved by $365 million year-over-year.
On year to date basis insurance company, adjusted EBITDA of 218 million improved by $365 million year over year.
Speaker 4: Our third quarter 23 adjusted administrative expense ratio of 20.3% improved 445 basis points year-over-year due to the aforementioned improvements in the insurance company admin ratio and higher net investment income.
Our third quarter twenty-three adjusted administrative expense ratio of 23% improved 445 basis points year over year due to the aforementioned improvements in the insurance company admin ratio and higher net investment income.
Speaker 4: A significant year-over-year increase in investment income was driven by the higher interest rate environment.
A significant year over year increase in investment income was driven by the higher interest rate environment.
Speaker 4: Investment income is a core fundamental of our business given the capital we hold and the carry we receive on assets we hold against reserve.
Investment income is a core fundamental of our business given the capital we hold and the carry we receive on the assets we hold against reserves.
Speaker 4: We have maintained a short duration in our investment portfolio this year, allowing us to benefit from rising rates.
We have maintained a short duration in our investment portfolio this year, allowing us to benefit from rising rates.
Speaker 4: Based on attractive rates and our strong capital base, we have begun extending our duration.
Based on attractive rates and our strong capital base, we have began extending our duration.
Speaker 4: We expect investment income will continue to be a tailwind in 2024.
We expect investment income will continue to be a tailwind in 2024.
Our third quarter twenty-three adjusted EBITDA loss of 20 million improved by $140 million year over year.
Speaker 4: Our third quarter 23 adjusted EBITDA loss of $20 million improved by $140 million year-over-year. On a year-to-date basis, Total Company continues to be profitable with adjusted EBITDA of $66 million, a significant improvement of $340 million year-over-year. Our strong
On a year to date basis total company continues to be profitable with adjusted EBITDA of 66 million, a significant improvement of $340 million year over year.
Our strong operating results to date position us well to deliver our total company adjusted EBITDA profitability target for 2024.
Speaker 4: to date position as well to deliver our total company adjusted EBITDA profitability target for 2024.
Shifting to the balance sheet, we ended the third quarter with $2 6 billion of cash and investments, including $239 million of cash and investments at the parent.
Speaker 4: Shifting to the balance sheet, we ended the third quarter with $2.6 billion of cash and investments, including $239 million of cash and investments at the parent.
Speaker 4: Recall the second quarter was expected to be a high watermark for both cash and investment income for the year as we paid out the 2022 risk adjustment transfer in the third quarter.
Recall, the second quarter was expected to be a high watermark for both cash and investment income for the year as we paid out the 2022 risk adjustment transfer in the third quarter.
Our capital position remains very strong as.
Speaker 4: As of September 30, 2023, our insurance subsidiaries had approximately $870 million of capital in surplus, including $320 million of excess capital driven by strong operating performance through the first nine months of the year.
As of September 30th 2023, our insurance subsidiaries had approximately $870 million of capital and surplus including $320 million of excess capital driven by strong operating performance through the first nine months of the year.
Speaker 4: We continue to believe our excess capital positions as well to fund future growth and allows us additional opportunities to optimize our capital position over time.
We continue to believe our excess capital positions us well to fund future growth and allows us additional opportunities to optimize our capital position over time.
Turning now to updates on our full year guidance, we now expect direct and assumed policy premiums will be at the high end of the 6.4 to $6 6 billion range.
Speaker 4: We now expect direct and assumed policy premiums will be at the high end of the $6.4 to $6.6 billion range.
Speaker 4: We continue to expect our MLR will be at the low end of the 82 to 84% range, representing a 330 basis point year over year improvement.
We continue to expect our MLR will be at the low end of the 82% to 84% range, representing a 330 basis point year over year improvement.
We expect our insurance company administrative ratio will be near the midpoint of the 17% to 18% range, reflecting an improvement of 310 basis points year over year.
Speaker 4: We expect our insurance company administrative ratio will be near the midpoint of the 17 to 18 percent range, reflecting an improvement of 310 basis points year over year.
Given the strong performance of our insurance business. We now expect our insurance company adjusted EBITDA will be a profit of approximately $155 million to $165 million.
Speaker 4: Given the strong performance of our insurance business, we now expect our insurance company Adjusted EBITDA will be a profit of approximately $155 to $165 million.
Speaker 4: We also expect the adjusted administrative expense ratio will be near the midpoint of the 20.5 to 21.5 percent range, reflecting a 380 basis point year-over-year improvement.
We also expect the adjusted administrative expense ratio will be near the midpoint of the 25% to 21.5% range, reflecting a 380 basis point year over year improvement.
Speaker 4: Notably, we now expect our total company adjusted EBITDA loss will be in the range of $50 million to $60 million, representing a more than $400 million year-over-year improvement.
Notably, we now expect our total company adjusted EBITDA loss will be in the range of 50 million to $60 million, representing a more than $400 million year over year improvement.
Looking ahead to 2024 based on our competitive positioning we expect to achieve direct premium growth at or above market. In 2024. We also expect margin expansion driven by our total cost of care initiatives and its administrative savings related to automation and technology driven improvements.
Speaker 4: Looking ahead to 2024, based on our competitive positioning, we expect to achieve direct premium growth at or above market in 2024. We also expect margin expansion driven by our total cost of care initiatives and administrative savings related to automation and technology driven improvement.
As Mark mentioned within total cost of care, we expect significant expense reductions from our new P. B M arrangement.
Speaker 4: Mark mentioned within total cost of care, we expect significant expense reductions from our new PBM arrangement.
Speaker 4: fraud, waste, and abuse initiatives in network recontract.
Fraud waste and abuse initiatives and network re contracting.
Speaker 4: At this point in the year, many of the actions to drive margin expansion next year have already been taken, providing a clear line of sight to achieving our target for total company adjusted EBITDA profitability in 2024. And with that, let me turn the call back over to
At this point in the year many of the actions to drive margin expansion next year have already been taken providing a clear line of sight to achieving our target for total company adjusted EBITDA profitability in 2024.
And with that let me turn the call back over to Mark for closing remarks.
Speaker 3: Thanks, Scott. In summary, we had another great quarter and we are on track to deliver a strong 2023.
Thanks, Scott in summary, we had another great quarter and we're on track to deliver a strong 2023.
Oscar is disruptive and growing.
Speaker 3: Our solid performance here today demonstrates the strength of our strategic
Our solid performance year to date demonstrates the strength of our strategic direction.
Notably, we expect significant insurance company adjusted EBITDA profitability this year.
Speaker 3: Notably, we expect significant insurance company adjusted EBITDA profitability this year.
Speaker 3: with a considerably lower total company adjusted EBITDA loss compared to 2022.
With a considerably lower total company adjusted EBITDA loss compared to 2022.
These trends support our optimism for 2020 for total company profitability.
Speaker 3: These trends support our optimism for 2024 total company profitability.
And Oscar Health insurance, we continue to capture tail winds in the ACI.
Speaker 3: In Oscar Health Insurance, we continue to capture tailwinds in the ACS.
Speaker 3: Reinforcing our belief that the individual market can be the market for everyone.
Reinforcing our belief that the individual market can be the market for everyone.
Speaker 3: In PlusOscar, we are well-positioned to serve as a technology solution for more of the healthcare ecosystem.
In plus Oscar we are well positioned to serve as a technology solution for more of the health care ecosystem.
Speaker 3: Finally, I would like to thank our employees for delivering the Oscar magic to our stakeholders. It is a privilege to serve our nearly 1 million members.
Finally, I would like to thank our employees for delivering the Oscar magic to our stakeholders.
It is a privilege to serve our nearly 1 million members.
We could not do it without our teams commitment to our vision.
Speaker 3: With that, I would like to turn the call over to our operator for Q&A.
With that I would like to turn the call over to our operator for Q&A.
Speaker 1: At this time I would like to remind everyone in order to ask a question press star then the number one on your telephone keypad. We ask you please limit yourself to one question and one follow-up. Your first question comes from a line of Stephen Baxter from Wells Fargo. Your line is open.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. We ask you. Please limit yourself to one question and one follow up your first question comes from the line of Stephen Baxter from Wells Fargo. Your line is open.
Speaker 5: Hey, thanks. Good morning. So, I know you only just entered open enrollment, but was hoping you could update us on your view of what you're expecting for market-level premium growth in 2024 that you're going to grow at or above. And then, just as a follow-up to that, I guess as the pricing data has become more completely available for your competitors, how's your view of your competitive positioning evolve? It seems like a couple of the national players will be repricing for 2024, but you may have already been contemplating that and you're thinking. Thank you.
Hey, Thanks, Good morning, I'm, sorry, if you only just entered open enrollment, but was hoping you could update us on your view of what youre expecting for market level premium growth in 2024 that youre going to grow at or above and then just as a follow up to that I guess is the pricing data has become more completely available for your competitors how is your.
You have your competitive positioning evolved it seems like a couple of the national players will be repricing for 2024, but you may have already been contemplating that in your thinking thank you.
Thanks, Tom on the first question, we still Im totally weekend. So we don't have a whole lot of data and we do track. It every day trends look.
Speaker 3: Thanks, I'm on the 1st question. We still I'm totally weekend. So we don't have a whole lot of data and we do track it every day. Trends look.
Speaker 3: on target to having high teens membership growth and low 20s.
On target to.
Having high teens membership growth and low twenties.
Speaker 3: premium growth. So we would call it too early, but we are pleased so far.
Premium crops. So we would we would call it too early but we are pleased so far.
Speaker 3: On the second point, our rates are all out. Yes, that's true. However, what is included in our rates this year are this notable total cost of care reductions we've created and also our operating efficiencies. So unless you look relatively over year over year, multiple years, you won't see the impact of our impact on leverage, operating leverage, and total cost of care.
On the second point.
Our rates are all our guests that's true however.
What is included in our rates. This year are this notable total cost of care reductions, we've created and also our operating efficiencies. So unless you look relatively over year over year.
Multiple years, you won't see the impact of our impact on the leverage operating leverage and.
Total cost of care.
So we're comfortable with our rich.
Are you comfortable.
Speaker 3: Yeah, and then just in terms of the competitors, I guess, has there been anything surprising in terms of what you've seen as their positioning has become more fully available for 2024? You know, I think the big carriers, you know, the big players, the carrier level action, they've, they've,
And then just in terms of the competitors I guess has there been anything surprising in terms of what <unk> seen is their positioning and has become more fully available for 'twenty 'twenty four.
Yeah.
The big carriers.
Beyond the <unk>.
Big players the carrier level action, they've actually retrenched and pull back we think the market overall stable and rational.
Speaker 3: and pull back. We think the market overall is stable and rational. We've seen CBS.net increase their footprint to four new states.
We've seen Cvs Aetna increase their footprint to four new states, but they're less price competitive than they were in prior years Centene remains in the middle of the market and modestly priced.
Speaker 3: but they're less price competitive than they were in prior years. Centene remains in the middle of the market and modestly priced. UnitedHealthcare is a new entry in Wisconsin only, but generally improving its competitiveness. And Blue Cross Blue Shield is probably the most aggressive group out of the group so far in the market.
<unk> healthcare.
As a new entry in Wisconsin only.
But generally improving its competitiveness and Blue Cross Blue Shield is probably the most aggressive group out of the group so far in the markets we serve.
Speaker 1: Your next question comes from a line of Adam Ron from Bank of America. Your line is open.
Your next question comes from the line of Adam Ron from Bank of America. Your line is open.
Speaker 6: Hey, thanks for the question, guys. First of all, congrats on the major progress you've made this year. But that kind of goes to the first question I have, which is, for the last three years, I think you've increased total company-adjusted EBITDA margins around 800 basis points a year, on my math, if you use the adjusted revenue. And so, you know, with next year, you're targeting adjusted EBITDA break-even. That would imply, on the new guidance, roughly 100 basis points of adjusted EBITDA improvement.
Hey, Thanks for the question guys first of all congrats on the major progress you've made this year.
But that kind of growth to the first question I have which is for the last three years I think you've increased total company adjusted EBITDA margins.
800 basis points of year on my math.
If you use the adjusted revenue.
And so with next year Youre targeting adjusted EBITDA breakeven that would imply on the new guidance roughly 100 basis points of adjusted EBITDA improvement.
Speaker 6: And so given the momentum coming out of this year, all the initiatives you've highlighted, all the tailwinds you've highlighted, 20% market growth next year. Are there any headwinds we should think about in context of the margin improvement magnitude you've had over the last three years?
And so given the momentum you have coming out of this year all the initiatives you've highlighted all the tailwind as you've highlighted 20% market growth next year are there any headwinds we should think about in context.
Margin improvement magnitude you've had over the last three years.
That shouldnt argue for a much lower rate of margin improvement.
Speaker 6: that should argue for a much lower rate of margin improvement.
Speaker 3: Thanks, Adam. We have not updated our guidance for 2024. We're in the midst of finishing our operating plan and presenting it to the board this week.
Thanks, Adam we have not updated our guidance for 2024 were in the midst of finishing our operating plan and presenting it to the board. This week. So we'll have more guidance on that later fourth quarter call.
Speaker 3: So we'll have more guidance on that later for a quarter call. But I would say it's too early to make a year-over-year adjustment to where you think our earnings are going.
But I would say, it's too early to make a year over year adjustment to where you think our earnings are growing Scott.
Speaker 4: Scott. Yeah, Adam, just a couple of thoughts. So one, I appreciate you calling out the trajectory in those metrics, because we think that really speaks to the company's strategy and plan. And we are leveraging those same trends and the same set of activities that we've used to drive that trend over the last several years to take us forward into 24. So.
Scott, Yes, Adam.
Just a couple of thoughts one I appreciate you calling out the trajectory.
Trajectory in those metrics, because we think that really speaks to the company's strategy and plan.
We are we are leveraging those same trading trends and the same set of activities that we've used to drive that trend over the last several years two to take us forward into 'twenty four or so.
Speaker 4: You know, when we think about the things that that we will see in 24, I think that, you know, we're expecting you talked about being breakeven on a justity, but we're expecting to be profitable on on an adjustability basis for the total company. We look forward to giving you some more clarity on the exact amounts in the fourth quarter call.
When we think about the things that we will see in 'twenty four I think that we're expecting you talked about being breakeven on adjusted EBITDA, we're expecting to be profitable on an adjusted EBITDA basis for the total company and we look forward to giving you some more clarity on the exact amounts in the fourth quarter call.
Thanks, and then a couple of clarifications. So you talked about risk adjustment related to 2022 and I think.
Speaker 6: Thanks. And then a couple of clarifications. So you talked about risk adjustment related to 2022 and I think
Speaker 6: You know, one of your major competitors in Florida, according to a CMS report, kind of had like a shortfall in the risk adjustment payments they were supposed to make, and there was a CMS report saying it was like $200 million in Florida alone, and two of your competitors took, you know, kind of like reserve accruals, assuming that they wouldn't be collecting on those payments, and so I'm wondering if that flows through to you at all, and if you've already made an adjustment for that.
One of your major competitors in Florida.
There was according to the CMS report kind of had like a shortfall on the risk adjustment payments. They were supposed to make and there was a CMS report, saying it was like $200 million in Florida alone.
And two of your competitors.
Kind of like reserve accruals, assuming that they wouldn't be collecting on those payments and so I'm wondering if that flows through to you at all and if you have already made an adjustment for that.
Yes.
Speaker 4: So just a couple of points, Adam. So in the quarter, we recognize $27 million of risk adjustment benefit related to 23. And with respect to risk adjustment, we are a payer. So we're not exposed to collection of receivables that others in the market are exposed to. So the issues related to some exiting carriers don't apply to us.
So just a couple of points Adam so in the quarter, we recognized $27 million.
Risk adjustment benefit related to 'twenty.
And with respect to risk adjustment, we're a payer so we're not exposed to collection of receivables that others in the market are exposed to so.
The issues.
Related to some exiting carriers don't apply to us.
Okay great.
Speaker 6: Okay, great. And then my last question is, you pointed to $320 million, I think, of excess capital to subsidiaries. Do you think...
And then my last question is you pointed to a $320 million I think of excess capital at the subsidiaries to think.
Speaker 6: A lot of companies talk about having excess capital, and I'm not sure if the goal is to run some amount of excess capital, but given that amount, do you feel comfortable with if the market grows 20%, you grow 20%, that you can fund all of your statutory capital outlays through just that excess capital alone, or do you actually need a substantial portion to come from the parent? Thanks.
A lot of companies talk about having excess capital I'm not sure. If the goal is to run some amount of excess capital but.
Given that amount do you feel comfortable with if the market grows 20% <unk> grew at 20% that you can fund all of your statutory capital outlays through just that excess capital alone or do you actually need a substantial portion to come from the parent.
Yes, great question and so as I said in my talking points, we do think that our excess capital positions us to to fund the growth next year.
Speaker 4: Yeah, great question. And so, you know, as I said in my talking points, we do think that our excess capital positions us to to fund the growth next year, based on our estimates. And not only do we have excess capital, but, you know, that excess capital is backed by our quarter share reinsurance. So we don't fund 100% of the growth and we will continue to use
Based on our estimates and not only do we have excess capital, but that excess capital is backed by our quota share reinsurance. So we don't fund 100% of the growth and we will continue to use quota share next year, and we will evaluate our total footprint.
Speaker 4: to share next year and we'll evaluate our total footprint. I think that there's a likelihood that we increase that modestly in certain states as opposed to taking it down. So I think that at this point, we feel very comfortable that we have the right level of excess capital to support growth in most of the scenarios that we see.
I think that there is a likelihood that we increase that modestly in certain states as opposed to taking it down. So I think that at this point, we felt very comfortable that we have the right level of excess capital to support growth and most of the scenarios that we see.
Great. Thank you so much.
Speaker 1: And again, if you'd like to ask a question, it's star one in your telephone keypad. Your next question comes from the line of Josh Raskin from Nefron Research. Your line is open.
And again, if you'd like to ask a question at Star one on your telephone Keypad. Your next question comes from the line of Josh Raskin from Nephron Research. Your line is open.
Speaker 7: Hi, thanks. Two questions for me. The first one just on the new plus Oscar arrangement with Stanford is that, is there any risk involved? There's just fees at risk or, you know, sort of any risk on the revenue side. And then more importantly, can you speak to your strategy in the small group market? I'm just curious your views on, you know, expansion of the partnership with Cigna. How important the ICHRA opportunity is longer term and kind of what you're trying to do with the small group market. Hi, Josh.
Hi, Thanks.
Two questions from me the first one just on the new plus Oscar arrangement with Stanford is that.
Is there any risk involved there just fees at risk or sort of any risk on the revenue side and then more importantly can you speak to your strategy in the small group market I'm just curious your views on expansion of the partnership with Sigma how important the <unk> opportunity is longer term and kind of what youre trying to do with the small group market.
Hey, Josh.
<unk>.
The Sanford Health agreement there is no risk.
Speaker 3: All of our campaign builder relationships are no risk at this point, don't expect to have any in the future. This is really a program that reaches out and engages patients for medical groups and others and so we see this being a.
All of our campaign builder.
<unk> chips are no risk at this point don't expect to have any in the future. This is really a program that reaches out and engages patients for medical groups and others and so we see this being a high margin high.
Speaker 3: high margin product and a good growth product for us. Just the first of many that we'll roll out through Buff Oscar.
Our high margin products and a good growth product for US just the first of many that we will rollout through plus Oscar.
Speaker 3: On the small group market, we are in the midst of putting together a strategy to approach it correctly.
On.
The small group market, we are in the midst of putting together a strategy to approach across not only in the small group market, but the middle market.
Speaker 3: not only in the small group market, but the middle market. We continue to value our relationship with Cigna, and that will continue to move forward.
Continue to value our relationship with Cigna and that will continue to move forward.
Speaker 3: And we see the small group market evolving as well as the middle market. And we think that it will be more individualized and digitized. And so we look forward to driving that change.
And we see the small mark Scott small group market evolving as well as the middle market and we think that it will be more individualized and digitized and so we look forward to driving that change.
Speaker 3: and looking for ultimately partners and distribution to be able to make that work across the country. I'll look.
And looking for ultimately.
Partners in distribution to be able to make that work across the country.
Okay.
The update thank you.
Okay.
Josh I'll just add one thing.
Speaker 4: Let me just add one thing on C plus O. So, you know, in the same way that 2023 for our IFP business, we really took.
Let me just add one thing on <unk>. So you know.
In the same way that 2023 for our ISP business, we really took.
Speaker 4: measured approach at trying to drive strong performance. I think in C plus O, growth rates there have been slower than what we've seen in the prior year, and that's primarily a focus on making sure that we're disciplined in the way we execute against the marketplace. So continue to be excited about the potential for that business. But I think we've really just taken a measured approach at making sure we can create a business and we're happy with the outcome.
Measured approach at trying to drive strong performance I think in C plus so.
Both rates there has had been slower than what we've seen in the prior year and that's primarily a focus on making sure that we are disciplined in the way we execute against the marketplace. So continue to be excited about the potential for that business, but I think we've really just taken a measured approach at making sure. We can create a business we're happy with the outcomes.
Speaker 1: And there are no further questions at this time. This concludes today's conference call. Thank you for your participation. You may now disconnect.
And there are no further questions at this time. This concludes today's conference call. Thank you for your participation you may now disconnect.
Please wait the conference will begin shortly.
Speaker 8: Please wait. The conference will begin shortly. Thank you for watching.
[music].
Okay.
[music].
Yes.
Okay.
Yes.
Yes.
Yes.
[music].
Yeah.
Yes.