Q1 2024 Oscar Health Inc Earnings Call
Good morning, My name is Lee and I will be conference operator today at this time I would like to welcome everyone to Oscar helps first quarter 'twenty 'twenty four earnings Conference call. Please note that this call is being recorded.
Ellie: Good morning. My name is Ellie, and I will be your conference operator today. At this time, I would like to welcome everyone to Oscar Health's first quarter 2024 earnings conference call.
Ellie: Please note that this call is being recorded. If you'd like to ask a question later, you can press the star and the number 1 on the telephone keypad. If you'd like to withdraw your question, you can press the pound key. Thank you. I will now turn the conference over to Chris Potochar, Vice President of Treasury and Investor Relations. Please go ahead.
If you'd like to ask a question later you can press star and then number one on the telephone keypad, if you'd like to raise all your question you can touch on the pound.
I will now turn the conference over to Chris for the chart.
Chris: Rice President of Treasury and Investor Relations. Please go ahead.
Chris Potochar: Good morning, everyone. Thank you for joining us for our first quarter 2024 earnings call. Mark Bertolini, Oscar's Chief Executive Officer, and Scott Blackley, Oscar's Chief Financial Officer, will host this morning's call. This call can also be accessed through 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.hioscar.com. And remarks that Oscar makes about the future constitute forward-looking statements within the meaning of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.
Chris: Good morning, everyone. Thank you for joining us for our first quarter 2024 earnings call Mark Bertolini, Askers, Chief Executive Officer, and Scott Blackley After as 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.
Chris: Full details of our results and additional management commentary are available in our earnings release, which can be found on our investor Relations website at IR Dot Hi, Oscar Dot com.
Chris Potochar: 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 annual report on Form 10-K for the period ended December 31, 2023, filed with the SEC, and other filings with the SEC, including our quarterly report on Form 10-Q for the quarterly period ended March 31, 2024, to be filed with the SEC. Such forward-looking statements are based on current expectations as of today.
Chris: And 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 1095.
Chris: 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 annual report on Form 10-K for the period ended December 31, 2023 filed with the SEC and other filings with the SEC, including our quarterly report on Form 10-Q.
Chris: For the quarterly period ended March 31, 2024 to be filed with the SEC.
Chris: 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.
Chris Potochar: 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, Oscar specifically disclaims 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 first quarter earnings press release available on the company's investor relations website at ir.hioscar.com. With that said, I would like to turn the call over to our CEO, Mark Bertolini.
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 our first quarter earnings press release available on the company's Investor Relations website at IR Dot Hi, Oscar Dot com.
Chris: With that I would like to turn the call over to our CEO Mark Bertolini.
Mark Bertolini: Good morning. Thank you, Chris, and thank you all for joining us. This morning, OSCQR reported strong first-quarter results with solid year-over-year improvement across all core metrics. Underlying our first quarter performance, we reported total revenue of $2.1 billion. Our revenue increased 46% year-over-year, led by strong retention, above-market membership growth during Open Enrollment, and SEP member addition. Oscar achieved an important milestone in the quarter. We reported positive net income for the first time in our history.
Mark Bertolini: Good morning, Thank you, Chris and thank you all for joining us.
Mark Bertolini: This morning, Oscar reported strong first quarter results with solid year over year improvement across all core metrics.
Mark Bertolini: Underlying our first quarter performance, we reported total revenue of $2 $1 billion.
Mark Bertolini: Our revenue increased 46% year over year led by strong retention.
Mark Bertolini: Above market membership growth during open enrollment and SCP member additions.
Mark Bertolini: Oscar achieved an important milestone in the quarter, we reported positive net income for the first time in our history with.
Mark Bertolini: We generated $178 million of net income, a significant $217 million improvement year over year. Our medical loss ratio improved 210 basis points year-over-year to 74.2%, and overall utilization was in line with our expectations. In addition, we achieved total company-adjusted EBITDA of $219 million, a $168 million improvement versus the prior year.
Mark Bertolini: We generated $178 million of net income a significant $217 million improvement year over year.
Mark Bertolini: Our medical loss ratio improved 210 basis points year over year to 74, 2% and overall utilization was in line with our expectations.
Mark Bertolini: In addition, we achieved total company adjusted EBITDA of $219 million, a $168 million improvement versus the prior year, our strong momentum positions us to deliver on our total company adjusted EBITDA profitability target this year.
Mark Bertolini: Our strong momentum positions us to deliver on our total company-adjusted EBITDA profitability target this year. We are seeing real earnings power in our insurance business. The business has scaled to a point where we are driving strong membership growth and improved profitability. We are delivering on our commitments, and we remain on a solid path to grow sustainably over the long term. In a few moments, Scott will provide a more detailed review of our first quarter results.
Mark Bertolini: We are seeing real earnings power in our insurance business.
Mark Bertolini: The business has scaled to a point, where we are driving strong membership growth and improve profitability.
Mark Bertolini: We are delivering on our commitments and we remain on a solid path to grow sustainably over the long term.
In a few moments Scott will provide a more detailed review of our first quarter results first I will cover key business highlights.
Mark Bertolini: First, I will cover key business highlights. Oscar closed the quarter with a strong 2024 open enrollment period, alongside record enrollment in the ACA marketplace. Total membership increased 42% year-over-year, exceeding our expectations. We captured share in existing expansion markets and drove superior customer satisfaction and record high retention. Our growth demonstrates that our value proposition continues to resonate with consumers. Oscar's affordable and personalized plans, driven by our disciplined pricing and total cost of care initiatives, attract consumers.
Mark Bertolini: Oscar closed the quarter with a strong 2020 for open enrollment period alongside record enrollment in the ACA marketplace.
Mark Bertolini: Total membership increased 42% year over year exceeding our expectations.
Mark Bertolini: We captured share in existing and expansion markets and drove superior customer satisfaction and record high retention.
Mark Bertolini: Our growth demonstrates that our value proposition continues to resonate with consumers.
Mark Bertolini: Oscar is affordable and personalized plans driven by our disciplined pricing and total cost of care initiatives attract consumers.
Mark Bertolini: Our superior member experience, driven by our technology, retains We ended the quarter with another record high NPS of 66. During the quarter, we continue to meet consumer needs through our technology. We drove more members to affordable, benefit-rich plans in key states where other carriers retreated, including Georgia and Kansas. We also launched new products for our fast-growing and diverse member population, which attracted differentiated member profiles in several new geographies. As an example, we launched our Spanish-first program, Hola Oscar, to better support our Hispanic and Latino member base in Georgia. The program drives personalized care interventions through our engagement capabilities in their native language.
Mark Bertolini: Our superior member experience driven by our technology retains them.
Mark Bertolini: We ended the quarter with another record high NPS of 66.
Mark Bertolini: During the quarter, we continued to meet consumer needs through our technology.
Mark Bertolini: We drove more members to affordable benefit rich plans in key states, where other carriers retreated, including Georgia and Kansas.
Mark Bertolini: We also launched new products for our fast growing and diverse member population, which attracted differentiated member profiles and several new geographies.
Mark Bertolini: As an example, we launched our Spanish first program all Oscar to better support our Hispanic and Latino member base in Georgia the <unk>.
Mark Bertolini: Program drives personalized care interventions through our engagement capabilities in their native language.
Mark Bertolini: Early results show 247% growth and 93% retention in our Spanish-speaking membership in Georgia in just one year. Our teams also successfully launched diabetes-focused campaigns through All Us. Hispanic adults are 70% more likely than non-Hispanic adults to be diagnosed with diabetes.
Mark Bertolini: Early results show, 247% growth and 93% retention in our Spanish speaking membership in Georgia in just one year.
Mark Bertolini: Our teams also successfully launch diabetes focused campaigns through all Oscar.
Mark Bertolini: The Spanish adults are 70% more likely than non Hispanic adults to be diagnosed with diabetes.
Mark Bertolini: Our campaigns introduce culturally relevant messaging to increase diabetes screening rates, including eye exams and kidney screening, and Closed Gaps in Care. Tailored health engagement programs like these help drive our strong MPS of 87 among Spanish students. Finally, we continue to externalize key aspects of our member engagement and experience capabilities to power the health care system through Plus Austin. Our efforts are gaining traction. In the quarter, all of our clients added more lives to our campaign builder platform, including a key provider group that expanded the relationship by 35,000. We are pleased with PlusOscar's momentum.
Mark Bertolini: Our campaigns introduced culturally relevant messaging to increase diabetes screening rates, including eye exams, and kidney screenings and close gaps in care.
Mark Bertolini: Tailored health engagement programs like these helped drive our strong NPS of 87, among Spanish speakers.
Mark Bertolini: Finally, we continue to externalize key aspects of our member engagement and experience capabilities to power the health care system through plus Oscar.
Mark Bertolini: Our efforts are gaining traction in.
Mark Bertolini: In the quarter all of our clients added more lives to our campaign builder platform, including a key provider group that expanded the relationship by 35000 lives we.
Mark Bertolini: We are pleased with plus Oscars momentum, we continue to mature the product set and have an active RFP pipeline.
Mark Bertolini: We continue to mature the product set and have an active RFP pipeline. Our strong performance in the quarter sets a solid foundation for 2024 and positions us to achieve our total company adjusted EBITDA profitability. Looking ahead, we remain focused on long-term strategic priorities that enable Oscar to play a leading role in expanding the individual market. The ACA now has more than 21 million people enrolled and is the fastest-growing health insurance segment driven by the gig economy, consumerization, and government policy.
Mark Bertolini: Our strong performance in the quarter sets, a solid foundation for 2024 and positions us to achieve our total company adjusted EBITDA profitability goals.
Mark Bertolini: Looking ahead, we remain focused on long term strategic priorities that enable Oscar to play a leading role in expanding the individual market.
Mark Bertolini: The HCA now has more than 21 million people enrolled and is the fastest growing health insurance segment, driven by the gig economy consumers Asian and government policies.
Mark Bertolini: The market has reached a size that makes it a permanent, attractive option, supporting our country's most diverse and vulnerable population, filling a critical gap in the insurance market. The ACA's continued growth affirms that individual plans meet consumer needs of affordability, access, and quality and are a viable alternative to the conventional employer-based model. We see a long-term opportunity to grow the individual market by serving a broader set of consumers and markets. With this in mind, we are not renewing the Cigna plus Oscar small group offering in 2025 to better align with our strategic direction.
Mark Bertolini: The market has reached the size that makes it a permanent attractive option supporting our country's most diverse and vulnerable populations.
Mark Bertolini: A critical gap in the insurance market.
Mark Bertolini: The Acs continued growth of firms had individual plans to meet consumer needs of affordability access and quality and are a viable alternative to the conventional employer based models.
Mark Bertolini: We see a long term opportunity to grow the individual market by serving a broader set of consumers and markets with this in mind, we are not renewing the cigna plus Oscar small group offering in 2025 to better align with our strategic direction.
Mark Bertolini: We continue to believe in the value of small business and look forward to serving this market in new ways in the future. In summary, we are off to a good start in 2020. Oscar is building a highly competitive franchise in the ACA market, and the business has a sizable runway ahead to further scale and grow. We continue to execute, drive the excellence required to run a mature company, and generate solid business returns.
Mark Bertolini: We continue to believe in the value of small businesses and look forward to serving this market in new ways in the future.
Mark Bertolini: In summary, we are off to a good start in 2024.
Mark Bertolini: Oscar is building a highly competitive franchise in the AC market and the business has a sizable runway ahead to further scale and grow.
Mark Bertolini: We continue to execute drive the excellence required to run a mature company and generate solid business returns.
Mark Bertolini: I am confident in Oscar's long-term growth process. We look forward to sharing more details on our long-term strategic plan, including our equity strategy, at Oscar's upcoming Investor Day on June 7 in New York. With that, I will turn the call over to Scott.
Mark Bertolini: I am confident in <unk> long term growth prospects, we look forward to sharing more details on our long term strategic plan, including our anchor strategy at <unk> upcoming Investor Day on June seven in New York.
Mark Bertolini: With that I will turn the call over to Scott Scott.
Richard Scott Blackley: Thank you, Mark, and good morning, everyone. Our first quarter financial results demonstrate a solid start to the year. We continue to deliver on our commitments and reported approximately $178 million of net income in the first quarter, or $0.62 per diluted share, an important milestone for Oscar. We're well positioned to achieve our target for total company adjusted EBITDA profitability this year. Before I get into the details of our financial performance this quarter, as a reminder, we implemented a new financial reporting structure beginning with the first quarter in order to increase transparency and improve comparability.
Richard Scott Blackley: Thank you Mark and good morning, everyone. Our first quarter financial results demonstrate a solid start to the year, we continue to deliver on our commitments and reported approximately $178 million of net income in the first quarter were <unk> 62 per diluted share an important milestone for Oscar.
Richard Scott Blackley: We are well positioned to achieve our target for total company adjusted EBITDA profitability this year.
Richard Scott Blackley: Before I get into the details of our financial performance. This quarter as a reminder, we implemented a new financial reporting structure, beginning with the first quarter in order to increase transparency and improve comparability.
Richard Scott Blackley: Our discussion of financial results and guidance is focused on the performance of the total company. In conjunction with today's earnings release, we filed an 8K, which includes supplemental information on 2023 quarterly results under our new financial reporting framework.
Richard Scott Blackley: Our discussion of financial results and guidance is focused on performance of the total company and.
Richard Scott Blackley: In conjunction with today's earnings release, we filed an 8-K, which includes supplemental information on 2023 quarterly results under our new financial reporting framework.
Richard Scott Blackley: Turning to our financial performance, total revenue increased 46 percent year-over-year to $2.1 billion in the first quarter, driven by higher membership, rate increases, and lower risk adjustment as a percentage of premium. We ended the quarter with more than 1.4 million members, an increase of 42% year-over-year. Membership growth was driven by strong retention, growth in existing markets and new service areas, as well as robust SEP member additions.
Richard Scott Blackley: Turning to our financial performance total revenue increased 46% year over year to $2 1 billion in the first quarter driven by higher membership rate increases and lower risk adjustment as a percentage of premiums.
Richard Scott Blackley: We ended the quarter with more than one 4 million members, an increase of 42% year over year membership growth was driven by strong retention and growth in existing markets and new service areas as well as robust at CP member additions.
Richard Scott Blackley: On medical costs, the first quarter medical loss ratio improved by 210 basis points year-over-year to 74.2 percent, driven by our disciplined pricing strategy and total cost of care initiatives. Overall, utilization trends were in line with our expectations at this point in the year. Switching to administrative costs, the first quarter SG&A expense ratio significantly improved by approximately 870 basis points year-over-year to 18.4%. The significant year-over-year improvement was driven by variable cost efficiencies and improved fixed cost leverage, as well as lower risk adjustment as a percentage of premiums, which collectively resulted in 505 basis points of year-over-year improvement in the ratio. The remaining 365 basis points of improvement were due to accelerated stock-based compensation expense recognized as a result of the cancellation of the Founders' Awards, which we recognized in the prior year period.
Richard Scott Blackley: On medical costs, the first quarter medical loss ratio improved by 210 basis points year over year to 74, 2% driven by our disciplined pricing strategy and total cost of care initiatives.
Richard Scott Blackley: Overall utilization trends were in line with our expectations at this point in the year.
Richard Scott Blackley: Switching to administrative costs, the first quarter SG&A expense ratio significantly improved by approximately 870 basis points year over year to 18, 4% the.
Richard Scott Blackley: The significant year over year improvement was driven by variable cost efficiencies and improved fixed cost leverage as well as lower risk adjustment as a percentage of premiums, which collectively resulted in 505 basis points over year over year improvement in the ratio.
Richard Scott Blackley: The remaining 365 basis points of improvement was due to accelerated stock based compensation expense recognized as a result of the cancellation of the founders of awards.
Richard Scott Blackley: Which we recognized in the prior year period.
Richard Scott Blackley: We continue to make significant progress on improving profitability. Net income of approximately $178 million was significantly improved by $217 million year over year in the first quarter. Total company adjusted EBITDA of $219 million was also significantly improved by $168 million year-over-year in the first quarter. Shifting to the balance sheet, our capital position remains very strong. We ended the first quarter with approximately $3.7 billion of cash and investments, including $159 million of cash and investments at the parent.
Richard Scott Blackley: We continue to make significant progress on improving profitability net income of approximately $178 million with significantly improved by $217 million year over year in the first quarter.
Richard Scott Blackley: Total company adjusted EBITDA of $219 million also significantly improved by $168 million year over year in the first quarter.
Richard Scott Blackley: Shifting to the balance sheet, our capital position remains very strong.
Richard Scott Blackley: We ended the first quarter with approximately $3 7 billion of cash and investments, including $159 million of cash and investments at the parent.
Richard Scott Blackley: As of March 31st, 2024, our insurance subsidiaries had approximately $990 million of capital in surplus, including $540 million of excess capital, which was driven by our strong operating performance. Turning now to our 2024 full-year guidance. Based on the first quarter results, we are reaffirming all of our full year guidance metrics. We expect total revenues in the range of $8.3 billion to $8.4 billion, a medical loss ratio in the range of 80.2% to 81.2%, and an SG&A expense ratio in the range of 20.5% to 21%.
Richard Scott Blackley: As of March 31, 2024, our insurance subsidiaries had approximately $990 million of capital and surplus including $540 million of excess capital, which was driven by our strong operating performance.
Richard Scott Blackley: Turning now to our 2020 for full year guidance based on the first quarter results. We are reaffirming all of our full year guidance metrics.
Richard Scott Blackley: We expect total revenues in the range of $8 3 billion to $8 4 billion.
Richard Scott Blackley: Our medical loss ratio in the range of 82% to 81, 2% and.
Richard Scott Blackley: And SG&A expense ratio in the range of 25% to 21%.
Richard Scott Blackley: We continue to expect to achieve total company adjusted EBITDA profitability in the range of $125 million to $175 million. As a reminder, as the new policy year matures, our overall per-member claims levels may change with corresponding impacts on our estimate for risk transfer. Such changes would impact the numerator and the denominator of the MLR, but we would not expect them to have an impact on our per-member underwriting economics. In addition, we continue to expect our quarterly MLR seasonality to be similar to 2023, although with a steeper slope.
Richard Scott Blackley: We continue to expect to achieve total company adjusted EBITDA profitability in the range of 125 million to $175 million.
Richard Scott Blackley: As a reminder, as the new policy year matures. Our overall per member claims levels may change with corresponding impacts to our estimate for risk transfer.
Richard Scott Blackley: Such changes would impact the numerator and the denominator of the MLR, but we would not expect them to have an impact on our per member underwriting economics.
Richard Scott Blackley: In addition, we continue to expect our quarterly MLR seasonality to be similar to 2023, although with a steeper slope.
Richard Scott Blackley: In closing, we've had a solid start to the year. We delivered net income profitability for the first time in Oscar history, and we are well positioned to achieve total company adjusted EBITDA profitability this year. With that, let me turn the call back over to Mark for closing remarks.
Richard Scott Blackley: In closing we've had a solid start to the year, we delivered net income profitability for the first time in Oscar's history, and we are well positioned to achieve total company adjusted EBITDA profitability. This year with that let me turn the call back over to Mark for closing remarks.
Mark Bertolini: Thank you, Scott. In closing, our first quarter performance lays a strong foundation for 2024. Oscar continues to deliver on our commitments, and I can see the momentum in our business. We are confident we will achieve our total company adjusted EBITDA goal this year. Our team remains focused on our long-term growth objective, which positions us to capture emerging innovation opportunities in healthcare. Oscar is purpose-built to meet the rising expectations of consumers and bring the market more tech-first solutions.
Mark Bertolini: Thank you Scott and closing our first quarter performance lays a strong foundation for 2024.
Mark Bertolini: Oscar continues to deliver on our commitments and I can see the momentum in our business.
Mark Bertolini: We are confident we will achieve our total company adjusted EBITDA goal this year.
Mark Bertolini: Our team remains focused on our long term growth objectives, which position us to capture emerging innovation opportunities in health care.
Mark Bertolini: Oscar is purpose built to meet the rising expectations of consumers and bring the market more tech <unk> solutions.
Mark Bertolini: I want to thank all of our employees for their efforts in delivering another strong quarter. As I walk the halls, I feel our team's dedication and passion. Their commitment to serving our members and partners drives our continued results, which we laid out in our impact report last month. We continue to build a more sustainable and equitable future, both at Oscar and in the communities we serve. I look forward to speaking with many of you at our Investor Day next month. With that, I will turn the call over to the operator for the Q&A portion of our call.
Mark Bertolini: I want to thank all of our employees for their efforts in delivering another strong quarter as I walked the halls, I feel our team's dedication and passion.
Mark Bertolini: Their commitment to serving our members and partners drives our continued results.
Mark Bertolini: Which we laid out in our impact report last month.
Mark Bertolini: We continue to build a more sustainable and equitable future both at Oscar and in the communities we serve.
Speaker Change: I look forward to speaking with many of you at our Investor Day next month with that I will turn the call over to the operator for the Q&A portion of our call.
Operator: Hello, we are now opening the floor to questions and answers. If you'd like to ask a question, please press star and number one on your telephone keypad. Please note that each analyst is allowed to ask one question each. If you'd like to ask a follow-up question, kindly go back to the queue. Having said that, our first question comes from Stephen Baxter of Wells Fargo. Your line is now open.
Speaker Change: Hello, we are now opening the floor for question and answer session. If you'd like to ask a question. Please press star and number one on your telephone keypad. Please note that each analyst is allowed to ask one question each.
Speaker Change: If you'd like to ask a follow up question kindly go back to the queue having.
Speaker Change: Having said that our first question comes from Stephen Baxter of Wells Fargo. Your line is now open.
Stephen C. Baxter: Hi, thanks for the questions. So I wanted to get an update on your expectations around the performance of your membership growth in 2024. I guess how's the mix of those numbers compared to your expectations? And can you update us on where you sit in terms of metal mix and how that's changed over the year?
Stephen C. Baxter: Hi, Thanks for the questions.
Stephen C. Baxter: So wanted to get an update on the expectations around the performance of your membership growth in 2020 for I guess, how is the mix of those numbers compare to your expectations and can you update us on where you sit in terms of metal mix and how that's changed year over year and then I guess the last question would just be it sounds like you're not necessarily expecting.
Mark Bertolini: And then I guess the last question would just be, you know, it sounds like you're not necessarily expecting risk adjustment to be a big swing factor in terms of, you know, the guidance and where you sit for the full year. Obviously, the first quarter, I think, looks like a pretty solid starting point to kind of use your phrasing. What would you need to see in order to let, you know, the upside that it feels like you saw in the first quarter flow through the guidance? Thank you.
Stephen C. Baxter: Risk adjustment to be a big swing factor in terms of the guidance and where you sit for the full year. Obviously, the first quarter I think looks like a pretty solid starting point to kind of use. Your phrase then what would you need to see in order to let the upside that it feels like you saw in the first quarter flow through to the guidance. Thank you.
Speaker Change: Thanks, Steve.
Mark Bertolini: Thanks, Steve. We, you know, we reported 1.4 million members, and that's been stronger SEP growth than we expected this early in the year. We're not sure if that's a pull forward of what's going to happen later in the year, or it will continue to grow over time. And as we look at that growth rate, if it is longer over time, Medicare and Medicaid redetermination is through November. We would expect that we're going to have less and less insight on risk adjusters later in the year, which will work against us in the quarters, but we'll recover in the first quarter of next year when we get that data all submitted through CMS. Scott Yeah, so Steve, number one, I think that we're super excited.
Speaker Change: We reported $1 4 million members and that's been stronger SCP growth than we expected. This early in the year.
Speaker Change: We're not sure if that's a pull forward of what's going to happen later in the year or it will continue to grow over time and as we look at that growth rate. If it is longer over time Medicare Medicaid Redetermination is through November.
Speaker Change: We would expect that we're going to have less and less insight on risk adjusters later in the year, which will work against us in the quarters, but will recover in the first quarter of next year, when we get that data all.
Speaker Change: Submitted through through Cmos.
Richard Scott Blackley: Yeah, so Steve, number one, I think that we're super excited about a strong first quarter, strong membership growth, medical expenses on the plan, and SG&A that was, you know, slightly favorable to what we were expecting. So, a good start to the year.
Speaker Change: Got it.
Speaker Change: So Steve number one I think that.
Speaker Change: We're super excited about our strong first quarter strong membership growth in medical expenses on plan.
Speaker Change: SG&A that was slightly favorable to what we were expecting so a good start to the year.
Richard Scott Blackley: You know, with respect to SEP membership growth, as we told you in our call at the end of the year for Q4, we did anticipate in our plan that we would see strong SEP growth. And, you know, that growth typically has an MLR that's about 10% higher than what we would see in OE. You know, we have a history of retaining a high portion of those members. So in the next year, you know, they tend to have MLRs that look just like other OE members.
Speaker Change: With respect to the SCP membership growth.
Speaker Change: As we told you in our call at the end of.
Speaker Change: The year for for Q4, we did anticipate in our plan that we would see strong SCP growth and.
Speaker Change: That growth typically has an MLR, that's about 10% higher than what we would see in OE.
Speaker Change: Sure.
Speaker Change: We have a history of retaining a high portion of those members. So in the next year.
Speaker Change: They tend to have MLR still look just like other OE members. So grabbing that STP. This year is a good thing for.
Richard Scott Blackley: So, you know, grabbing that SCP this year is a good thing for 2025. In the current year, as Mark talked about, the big question for us at the moment is: we saw, you know, really robust SEP membership growth in Q1. And is that, you know, a trend that's going to persist, or is that a pull-back of membership at this point in time? We just don't have enough visibility to know for certain.
Speaker Change: For 2025.
Speaker Change: In the current year as Mark talked about the the big question for US at the moment is we saw really robust STP membership growth in Q1 and is that is that.
Speaker Change: Trend thats going to persist or is that a pull forward of membership at this point in time, we just don't have enough visibility to know for certain.
Richard Scott Blackley: And so that's impacting a little bit of our full-year guidance and thinking about if we do see more SEP growth in the back half, that will come with some MLR impacts. And, you know, we just think we've got a great position to start the year with a strong first quarter.
Speaker Change: And so thats impacting a little bit of.
Speaker Change: Our full year guidance and thinking about if we do see more STP growth in the back half that will come with with somehow MLR.
Speaker Change: Impacts and we just think we've got a great position to start the year with a strong first quarter.
Adam Matan Ron: Our next question comes from Adam Ron from Bank of America. Your line is now open.
Speaker Change: Our next question comes from Ethan Wang from Bank of America. Your line is helpful.
Mark Bertolini: Hey, thanks for the question. I think in the past, you've mentioned that you don't want Oscar to be a single product line company. But this quarter, you're exiting Medicare Advantage, and it sounds like you are leaving the Cigna and Oscar small group relationship. So we'd love to hear a little bit more color on what exactly, you know, is the rationale behind the exit for Cigna plus Oscar and, then, you know, to the extent you still believe that the company won't be a single product line business.
Ethan Wang: Okay. Thanks for the question I think in the past you've mentioned that you don't want ask her to be a single product line company, but this quarter youre exiting Medicare advantage.
Ethan Wang: And it sounds like exiting the stigma and after a small relationships I would love to hear a little bit more color on what exactly.
Ethan Wang: The rationale behind the exit first thing plus offer and then.
Ethan Wang: To the extent, we still believe that.
Ethan Wang: The company won't be a single product line business like what are the major opportunity is it.
Mark Bertolini: Like, what are the major opportunities? Is it, you know, Health IT and UC ICRA as a separate line? So just more color on, you know, what you expect from those two businesses, just because it seems like the services revenue only grew by 12% in the quarter. So we'd just love to hear longer term what the expectations around that are, or if, you know, there are things beyond ICRA and health IT that you see opportunity in. Thank you.
Ethan Wang: That helps.
Ethan Wang: And do you see it grows the separate lines. So just more color on.
Ethan Wang: What you expect from those two businesses because it seems like the services revenue only grew by 12% in the quarter.
Ethan Wang: So would just love to are longer term.
Ethan Wang: Yes, the expectations around that are or if there are.
Ethan Wang: Things beyond <unk> and.
Speaker Change: <unk> see opportunity again thanks.
Mark Bertolini: Thanks, Adam. We did pull out of Medicare in large part because the provider relationships we had in place were unsustainable, and there wasn't anything we could do to fix them from the standpoint of getting to a profitable product. We do anticipate entering the market in a different way, which we'll talk about in June when we have our Investor Day, but the near-term opportunity for us is ICHRA. And with ICHRA, we believe we have access to over 70 million lives in the under-50 and middle-market segments, and we'll talk a lot about the significant progress we've made on that set of products and the pilots we'll be doing this year and launching in mid-25.
Speaker Change: Thanks, Adam.
Speaker Change: We did pull out of Medicare in large part because the provider relationships. We have in place are unsustainable and there wasn't anything we could do to fix them.
Speaker Change: From the standpoint of getting to a profitable product.
Speaker Change: We do anticipate entering the market a different way, which we'll talk about them in June when we have our investor day, but the near term opportunity for us as the aircraft.
Speaker Change: And with <unk>, we believe we have access to over 70 million lives.
Speaker Change: In the under 50 in middle market <unk>.
Speaker Change: Segments, and we will talk a lot about the significant progress we've made on that.
Speaker Change: Set of products and the pilots will be doing this year in launching in the 25.
Mark Bertolini: I think on C plus O, both companies tried very hard over the last five years to get the thing to a place where, from an underwriting standpoint, it was profitable. I think owner economics get in the way when you have different pieces of the revenue stream going to different organizations, and we just couldn't rationalize that in a way that would make the product work longer term.
Speaker Change: I think on <unk>.
Speaker Change: We tried both companies tried very very hard over the last five years to get the thing to a place where we're from an underwriting standpoint. It is profitable I think owner economics get in the way.
Speaker Change: When you have different pieces of the revenue stream going to different organizations.
Speaker Change: We just couldnt rationalize that in a way that will make the product work longer term.
Mark Bertolini: But more importantly, we believe ICHRA is the solution for small, group, and middle market, and we believe that that will be a much bigger opportunity, and we want to focus on getting that right, plus Oscar. We have work going on now about how we use that platform, the externalized platform. We need work and investment on it in order to make sure it's ready for the market in a way that clients can use it appropriately as a full platform. So today, we're rolling out components. We'll have more to say about plus Oscar when we get to the investor dance.
Speaker Change: But more importantly, we believe <unk> is the solution.
Speaker Change: For small group and middle market, and we believe that that will be a much bigger opportunity we want to focus on getting that right.
Speaker Change: Plus Oscar.
Speaker Change: We have work going on now about how we use that platform I'm externalized platform, we need work and investment on it in order to make sure it's ready for the market in a way that clients can use it appropriately as a full platform. So today, we're rolling out components, we'll have more to say about plus Oscar and when we get to the Investor day in June.
Speaker Change: Okay. Thanks.
Operator: The next question comes from John Ransom from Raymond James. Your line is now open.
Speaker Change: Next question comes from John Ransom from Raymond James Your line is now open.
John Joy: Hey, good morning. Just looking at your SG&A line and as you look out a few years, what do you think is the sustainable level of SG&A to revenue to kind of get you to your ultimate targeted margin?
John Joy: Hey, good morning.
John Joy: Just looking at your SG&A line and you look as you look out a few years what do you think is the.
John Joy: The sustainable level of SG&A to revenue to kind of get you to your ultimate targeted margin.
Richard Scott Blackley: Yeah, John, thanks for the question. Look, we certainly were excited about the performance of SG&A year-over-year, you know, the significant improvement in that line item. And the improvement there, you know, obviously we called out the one-timer related to the Founders Award, but the rest of the improvement is sticky and will continue going forward. I have seen a lot of impacts of our technology making our operations more efficient. We're seeing fixed cost leverage
John Joy: Yes, John Thanks for the question.
John Joy: Look we certainly were excited about the performance of SG&A.
John: Year over year significant improvement in that line item.
John: And the improvement there, obviously, we called out the.
Speaker Change: The one timer related to the Founders' award, but the rest of the improvement is sticky and will continue going forward.
Speaker Change: <unk> seen a lot of impacts of our technology, making our operations more efficient we're seeing fixed cost leverage and those are two themes that I think will continue for us and so.
Richard Scott Blackley: And those are two things that I think will continue for us. And so, you know, we'll get into more of where we think our destination economics are for the business at investor day, but I would say that we anticipate that there's still, you know, more improvement that we will expect in SG&A over the future. And, you know, the trends that we've seen thus far give us confidence that we'll be able to continue to drive it to even better levels in the future.
Speaker Change: We will get into more of where we think our destination economics are for the business at the Investor day, but I would say that we anticipate that there is still more improvement that we will expect in SG&A over the future and.
Speaker Change: The trends that we've seen thus far gives us confidence that we will be able to continue to drive it.
Speaker Change: To even better levels in the future.
Speaker Change: Thank you.
Operator: The next question comes from Josh Raskin from Nephron. Your line is now open. Thank you.
Speaker Change: The next question comes from Josh Raskin from Nephron. Your line is now open.
Joshua Richard Raskin: Thanks. Good morning.
Joshua Richard Raskin: Thanks, Hey, good morning, just first a clarification on Cigna plus Oscar what's the revenue expectation this year embedded in the eight three to $8 4 billion and then my real question is just on the risk adjuster payable.
Richard Scott Blackley: Just first clarification on Cigna plus Oscar. What's the revenue expectation this year embedded in the $8.3 to $8.4 billion? And then my real question is just on the risk adjuster payable, down meaningfully year over year despite the increase in premiums. I know that was all expected, but I'm curious if you've got any external data at this point, sort of a first look or anything preliminary from Wakely or anyone else. And then how much of that improvement do you think is just better execution and coding? And how much of that is your membership, sort of a more normal risk?
Joshua Richard Raskin: Down meaningfully year over year. Despite the increase in premiums I know that was all expected, but I'm curious if you've got any external data at this point, that's sort of a first look or anything preliminary from wakely or anyone else and then how much of that improvement do you think is just better execution and coding and how much of that is your membership more sort of a more normal.
Risk pool.
Richard Scott Blackley: Okay, I'm sure I'm going to miss one of those questions, Josh, but I'll comment on the risk transfer. So, you know, risk transfer at this point in the year is mainly an internal estimate. We don't have, you know, a lot of external data.
Joshua Richard Raskin: Okay.
Speaker Change: I'm sure I'm going to Miss one of those questions Josh but.
Joshua Richard Raskin: I'll comment on the risk transfer so.
Speaker Change: Risk transfer at this point in the year is mainly an internal estimate we don't have a lot of external data.
Richard Scott Blackley: The risk transfer will, you know, we're expecting that the percentage of risk transfer is going to increase throughout the year. Part of that's just driven by the seasonality of the book, but there's also as SEP members come in, they typically are younger, and we end up having a higher risk transfer with that group. And so, as we are expecting SEP growth throughout the year into the second half, you know, that will drive risk transfer up.
Speaker Change: The risk transfer will we're expecting that the percentage of risk transfer is going to increase throughout the year.
Speaker Change: Or that's just driven by seasonality of the book, but there is also as SCP members come in.
Speaker Change: They have.
Speaker Change: Typically they're younger.
Speaker Change: And we ended up having a higher risk transfer with that group and so as we are expecting STP growth throughout the year into the second half.
Speaker Change: That will drive risk transfer going up so at this point I would say that we have.
Richard Scott Blackley: So, at this point, I would say that we have, you know, a very good process for collecting the codes that we need to support risk transfer. I think that that's an area where, you know, having a lot of history in ACA, we've got some very strong processes, including, you know, the deployment of AI and other techniques that allow us to get things in a very efficient way. And we deliver a lot of value in that process. So, you know, feel good about the opportunity for us to convert, making certain that we get full credit for the medical care that our members are receiving.
Speaker Change: A very good process for collecting the codes that we need to support risk transfer I think that thats an area that.
Speaker Change: Having a lot of history of <unk>, we've got some very strong processes, including deployment.
Speaker Change: AI and other.
Speaker Change: Techniques that allow us to get things at a very efficient way.
Speaker Change: We delivered a lot of value in that process. So feel good about the opportunity for us to convert making certain that we get full credit for the medical care that our members are receiving.
Richard Scott Blackley: And then just the C plus O revenues. Oh, sorry, that was the one I forgot.
Speaker Change: And then just to see plateau revenues.
Richard Scott Blackley: Oh, sorry, that was the one I forgot. On PLUSO, on CPLUSO, you know, I think that for 2024, that's probably in the range of $250 to $260 million in revenue. The bottom line, you know, has minimal impact on the bottom line. And going forward, you know, when that book goes into runoff in 2025, it'll have a much smaller revenue impact. But in both years, we would expect the bottom line to be insignificant.
Speaker Change: Oh, sorry that was the one I forgot on plus so on C. Plus so I think that for for 2024, that's probably in the range of $250 million to $260 million of revenue.
Speaker Change: Bottom line.
Speaker Change: Has minimal impact to the.
Speaker Change: The bottom line.
Speaker Change: And going forward when that book goes into runoff in 2025, it'll be a much smaller revenue impact, but in both years, we would expect the bottom line to be insignificant.
Speaker Change: Perfect. Thanks.
Operator: The next question comes from Nathan Rich from Goldman Sachs. Your line is now open.
Speaker Change: Next question comes from Nathan Rich from Goldman Sachs. Your line is now open.
Nathan Allen Rich: Great. Good morning, and thanks for the questions.
Nathan Allen Rich: Great Good morning, and thanks for the questions.
Nathan Allen Rich: Maybe just following up on the MLR.
Nathan Allen Rich: Scott It seemed like the underlying cost trend performance was in line with your expectations.
Nathan Allen Rich: And you kind of mentioned the steeper slope.
Richard Scott Blackley: Maybe just following up on the MLR, Scott, it seemed like the underlying cost trend performance was in line with your expectations. You know, and you kind of mentioned the steeper slope. I'd just be curious kind of how that MLR compared to your plan in the first quarter and any change in how you're thinking about cadence over the balance of the year. And then, you know, longer term, you know, maybe how you're seeing the long-term opportunity for MLR.
Nathan Allen Rich: Curious kind of how that MLR compared to your plan in the first quarter and any change in how youre thinking about cadence over the balance of the year and then longer term.
Nathan Allen Rich: Maybe how youre seeing the long term opportunity for MLR.
Richard Scott Blackley: I know some of your peers kind of operate in the high 70% range. Is that – do you feel like you can get to a level, you know, with your member mix and geographic exposure that would be more consistent with kind of those peer levels over time?
Nathan Allen Rich: I know some of your peers kind of operate in the high 70% range is that do you feel like you can get to a level with your member mix and geographic exposure that would be more consistent with kind of those those peer levels over time.
Nathan Allen Rich: Sure.
Richard Scott Blackley: Sure. Nathan, on MLR. You know, I think that the MLR we saw in the first quarter was more or less consistent with our expectations, where we saw utilization that was on plan. You know, there's always some fluctuations in utilization, but in summary, pretty much what we were anticipating. You know, at this point in the year, you don't have a huge amount of visibility into the full year performance of your book, and so it's still early days in terms of, you know, what we would take away from the performance thus far in the year.
Nathan Allen Rich: <unk>.
Nathan Allen Rich: Nathan.
Nathan Allen Rich: On the MLR.
Nathan Allen Rich: I think that the.
Speaker Change: <unk>, we saw in the first quarter was was more or less consistent with our expectations, where we saw utilization that was on plan, there's always puts and takes in utilization.
Speaker Change: In summary, pretty much what we were anticipating.
Speaker Change: At this point in the year, you don't have a huge amount of visibility into the full year performance of your book and so it is still early days in terms of.
Speaker Change: What we.
Speaker Change: It would.
Speaker Change: Takeaway from the performance, thus far in the year, but I would say that.
Richard Scott Blackley: But I would say that, you know, it's comforting that we're seeing what we expected. So, you know, we do think that the first quarter MLR is, you know, a good starting point. For the rest of the year, there is MLR seasonality. We've seen this historically in our business, and we would expect it to be there again this year. You know, the addition of SEP members throughout the year; we've talked about the risk adjustment dynamics of those members that do have, you know, some adverse effects.
Speaker Change: It is comforting that we're seeing what we expected and so we do think that.
Speaker Change: That first quarter MLR is.
Speaker Change: It was a good starting point for the rest of the year there is MLR seasonality.
Speaker Change: We've seen this historically in our business and we would expect it to be there again this year.
Speaker Change: The addition of SCP members throughout the year, we've talked about the risk adjustment dynamics of those members.
Speaker Change: That do have some.
Speaker Change: Some adverse effects and so that's another component of seasonality and I think that.
Speaker Change: We will see that this year.
Richard Scott Blackley: And so that's another component of seasonality, and I think that we will see that this year. With respect to MLR in the future, I would say that, you know, there are two components of that. One is your pricing.
Speaker Change: With respect to MLR in the future I would say that.
Speaker Change: There's two components of that one is your pricing.
Richard Scott Blackley: And, you know, we are always committed to making sure that we maintain disciplined pricing and that we have a price point that allows us to achieve, you know, the growth objectives that we want. So we balance those things out. I think we've got opportunities in the total cost of care for us to continue to improve medical expenses in a way that, you know, we always want to support our members. And so, you know, we think we see opportunities to continue to drive that down.
Speaker Change: We are we're always committed to making sure that we maintain disciplined pricing and that we have a price point that allows us to achieve the growth objectives that we want so we balance those things out I think we've got opportunities in total cost of care for us to continue to improve medical expenses.
Speaker Change: In a way that we always want to support our members and so we think we see opportunities to continue to drive that down but ultimately.
Richard Scott Blackley: But ultimately, you know, we will balance out the objectives of having, you know, a price in the market that allows us to grow and driving, you know, total cost of care that can lead into a trend of expenses over time. But really, there's no reason that our business can't perform at MLR levels that are competitive with the rest of our industry peers.
Speaker Change: We will balance out the objectives of having.
Speaker Change: Our pricing in the market that allowed us to grow and driving.
Speaker Change: Total cost of care that can eat into the trend of expenses over time, but really there is no reason that our business can perform at MLR levels that are competitive with the rest of our industry peers.
Speaker Change: Thank you.
Operator: Our next question comes from John Ransom on behalf of Eamon James. Your line is now open.
Speaker Change: Our next question comes from John Ransom from mainland James Your line is now open.
Speaker Change: Okay.
John Joy: Hey, good morning. I want you to know I will follow the rules and just ask one question. So, yes, give me a gold star.
John Joy: Hey, good morning.
John Joy: Once you know I'll follow the rules and just ask one question. So you guys gave me of Goldstar.
John Joy: The.
Richard Scott Blackley: The only MLR question is, if we look at the year over year improvement, what would you say are the key, kind of in order of magnitude, what were the key attributes there? I know you have a new PBM contract, you've adjusted your pricing, your mix has changed, but if you looked at the kind of menu of all those things, what were the top one, two, or three drivers of your MLR improvement year over year? Thanks.
John Joy: On the MLR question, if we look at the year over year improvement.
John Joy: What would you say are the key kind of an order of magnitude what was the key attributes there I know you have a new <unk> contract.
John Joy: Adjusted your pricing your mix has changed but if you look at the kind of menu of all of those things what were the kind of top one two or three drivers of your MLR improvement year over year. Thanks.
Richard Scott Blackley: Yeah, I think that the first thing I would just call out is, you know, pricing and margin expansion and being thoughtful about pricing for the risk that we were going to take, and really seeing that be a significant driver, and it's the most important driver in the year-over-year performance. We had, you know, a small amount of prior period development this year, or in the first quarter, it was about $17 million favorable, which was really run out on 2023 claims.
Speaker Change: Yes, I think that the.
Speaker Change: The first thing I would just call out is.
Speaker Change: Pricing and margin expansion and being thoughtful about pricing for the risks that we were going to take.
Speaker Change: Really seen that be a significant driver and it's the most important.
Speaker Change: The driver in the year over year performance, we had a small amount of prior period development. This year. It was in the first quarter it was about $17 million favorable.
Speaker Change: It was really run out on 2023 claims so that was that was good.
Richard Scott Blackley: So that was good. And, you know, the thing I would just say about MLR, the fact that what we're seeing in MLR are trends that, you know, I'm confident are going to persist is, you know, probably the most important takeaway we'd have from the first quarter MLR performance.
Speaker Change: And.
Speaker Change: The thing I would just say with MLR. The fact that what we're seeing in MLR trends that.
Speaker Change: I'm confident are going to persist as is <unk>.
Speaker Change: But really the most important takeaway about half from the first quarter MLR performance.
John Joy: and then the PBM, how much did that help? I'm sorry, but say it again.
Speaker Change: And then the <unk> how much did that help.
Speaker Change: Sure.
Speaker Change: I'm, sorry say again.
Richard Scott Blackley: The PBM. The PBM. How much did that help? You're over here. Yeah.
Speaker Change: The PVM recall, but frankly, how much did that help year over year and the PVM like we're not going to call out specifically the impact of that it is embedded in the performance of.
Speaker Change: Obviously, it really ultimately gets into what did you price for we built that PVM ended the pricing and we are seeing margin and so clearly <unk> is a significant driver of our ability to price at a level that was competitive and continue to drive margin improvement.
Speaker Change: Thank you.
Operator: We have reached the end of the question and answer session. Thank you for attending today's conference call. Have a wonderful day, and you may now disconnect.
Speaker Change: We have suites, we have a question and answer session. Thank you for attending today's conference call have a wonderful day and you may now.
Speaker Change: Good morning.
Speaker Change: Please wait the conference will begin shortly.
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Speaker Change: Thank you.
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