Q4 2024 Oscar Health Inc Earnings Call
Good evening My name is Rob and I'll be your conference operator today at this time I would like to welcome everyone to Oscar Health fourth quarter and full year 2024 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. During this time simply press star.
Chris: <unk> followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one. Thank you I will now turn the conference over to Chris <unk>, Vice President of Treasury and Investor Relations.
Chris: Good evening, everyone. Thank you for joining us for our fourth quarter and full year 2024 earnings call Mark Bertolini, Oscars, Chief Executive Officer, and Scott Blackley, Astra's, Chief Financial Officer will host this evenings call.
Chris: This call can also be accessed through our Investor relations website at IR Dot Hi, Oscar Dotcom.
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 Dotcom.
Chris: 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 <unk>.
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 quarterly report on Form 10-Q for the period ended September 32024 filed with the Securities and Exchange Commission and other filings with the SEC, including our annual report on Form 10-K for the.
Chris: The period ended December 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: We 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 fourth quarter and full year 2024 earnings press release available on the company's Investor Relations website at IR Dot Hi, Oscar Dotcom.
Chris: We have not provided a quantitative reconciliation of estimated full year 2025, adjusted EBITDA as described on this call to GAAP net income because oscar's unable without making unreasonable efforts to calculate certain reconciling items with confidence.
Chris: With that I would like to turn the call over to our CEO Mark Bertolini.
Mark Bertolini: Good evening, Thank you, Chris and thank you all for joining US. This afternoon Oscar reported the strongest year of financial performance in our history.
Mark Bertolini: Our results were driven by record high membership bottom line profitability and continued product innovation.
Mark Bertolini: Oscar reached two significant milestones in 2024 first we reported total company adjusted EBITDA profitability growing to $199 million, a 245 million dollar year over year improvement.
Mark Bertolini: Second we achieved net income profitability net income was $25 million, a $296 million increase over the prior year.
Mark Bertolini: Our improved bottom line was driven by strong performance in all parts of our business. We grew total revenue by 57% year over year to $9 $2 billion.
Mark Bertolini: Our medical loss ratio was stable year over year, increasing 10 basis points to 81, 7%.
Mark Bertolini: We also drove greater efficiency in our business as our SG&A ratio improved more than 500 basis points year over year to 19, 1% through operating leverage and disciplined expense management.
Mark Bertolini: Our 2024 performance reflects the strength of our strategic plan and our ability to deliver long term profitable growth.
Speaker Change: Overall 2024 was an exceptional year for Oscar our results reflect our growing maturity as a company and we are committed to delivering at least 20% revenue CAGR and a 5% operating margin by 2027.
Speaker Change: Scott will review, our fourth quarter and full year results in a few moments first I will cover key business highlights.
Speaker Change: Oscar is one of the largest ACI carriers following the 2025 open enrollment period.
Speaker Change: The individual market grew 13% year over year to a record 24 million lives.
Speaker Change: Our growth outpaced the market by close to three times at 37%.
Speaker Change: We are now privileged to serve 1.8 million members as of February one 2025.
Speaker Change: Our competitively priced products technology and superior member experience.
Speaker Change: Drove strong growth in retention across the Oscars 18th state footprint.
Speaker Change: Our disciplined pricing strategy gives us another year of above market growth, which we expect will drive significant year over year increase in operating margin with continued administrative cost efficiencies and improved MLR performance.
Speaker Change: Our above market growth demonstrates the oscars growing prominence across our service areas, we drove market share gains with strong positions in kiosk or states, including Florida, Tennessee and Texas.
Speaker Change: We also performed well in new geographies, including North Carolina.
Speaker Change: The strength of our eye of P brand network and expansive product portfolio also led to new equity growth across our footprint.
Speaker Change: We grew our <unk> membership with gains in Atlanta, Columbus, Kansas City, Miami, and New Jersey markets.
Oscars high value products continue to resonate in the market, we are attracting new members and creating a loyal membership base with plans built for individual needs.
Speaker Change: We had strong enrollment in our new Tech first HMO and multi condition plan, our condition focused plans addressing diabetes asthma and COPD had high retention.
Speaker Change: Spanish first solutions attracted more Hispanic and Latino members engaging them with culturally relevant providers health resources and care teams are leading N. P. S. As proof that Oscar's meeting rising consumer expectations.
Speaker Change: Consumers have more control over their health care with Oscar our plans are meeting consumer demand for choice transparency and affordability a value proposition that drove new employee initiations in open enrollment.
Speaker Change: We introduced new services with acre platforms, including convenient shop by Inderal solutions and personal care guides to welcome employees to Oscar.
Speaker Change: We will build on this momentum in 2025 and introduce more solutions for employers and employees.
Speaker Change: <unk> is positioned to take share from traditional group plans and engaged employers that do not offer insurance today.
Speaker Change: Nascar's powerful technology platform continues to unlock long term value across all areas of the business.
Speaker Change: I remain central to our strategy and we are realizing its potential faster than others in the market.
Speaker Change: We are personalizing clinical care.
Speaker Change: Our team is integrating large language models into more of our capabilities, including tools that keep follow up care on track after ER visits.
Speaker Change: Initial results show the tool lowered readmission rates by close to 10% for a major health system clients.
Speaker Change: We continue to reduce provider administrative tasks more than 50% of Onboarding in post care instructions today, our AI powered and Oscar urgent care.
Speaker Change: Our actions are reducing provider paperwork improving speed to care.
Speaker Change: We are also deploying applications at greater speeds significantly reducing implementation time.
Speaker Change: All of this is possible because of our industry, leading platform, which continues to fuel major strides in operational efficiency member engagement and affordability.
Speaker Change: In summary, 2024 was another remarkable year for the company we generated record revenue drove all time high membership and achieved both adjusted EBITDA and net income profitability for the first time in Oscar's history.
Speaker Change: These milestones are a solid foundation for strong profitable growth in 2025, we have a proven playbook to mature our existing markets and enter new ones with the technology to efficiently scale the profitable business.
Speaker Change: As I have said before Oscars committed to having the strongest leadership team in the individual market.
Speaker Change: Today, we are welcoming healthcare veteran Janet Liang to our team to help drive our next phase of growth.
Speaker Change: <unk> joins as president of Oscar insurance and will be responsible for all insurance functions. She comes to Oscar from Kaiser Permanente, where she served as group President and Chief operating officer of care delivery.
Speaker Change: Janet has strong operational expertise and a track record of growing markets.
Speaker Change: Oscar is stronger than ever our growth in the individual markets growth demonstrated its durability and the power of Reorienting health care around the consumer.
Speaker Change: The market is giving consumers the ability to choose plans that fit their needs, which is driving competition lower costs and the lowest uninsured rate in our country's history.
Speaker Change: Direct to consumer markets simply work better the individual market will continue to unlock new growth and replace traditional insurance models and Oscar is leading the way.
Speaker Change: I am incredibly proud of the Oscar team and their leadership in achieving our best year, yet we look forward to delivering strong results for our members and partners in 2025, I will now turn the call over to Scott Scott.
Scott Blackley: Thank you Mark.
Scott Blackley: And good evening, everyone 2024 was a strong year for Oscar we delivered the best financial performance in the Companys history, including above market growth in adjusted EBITDA and net income profitability.
Speaker Change: We are well positioned to achieve our long term targets of at least 20% top line compound annual revenue growth and a 5% operating margin by 2027.
Speaker Change: On a few fourth quarter highlights before shifting to our full year performance.
Total revenue increased 67% year over year to approximately $2 4 billion in the fourth quarter.
The fourth quarter medical loss ratio increased by 170 basis points year over year.
Speaker Change: In the fourth quarter adjusted EBITDA loss was approximately $113 million essentially flat year over year.
Speaker Change: Turning to the full year total revenue increased 57% year over year to $9 2 billion driven.
Speaker Change: Driven primarily by membership growth during the 'twenty 'twenty four open enrollment strong retention and special enrollment period member additions.
Speaker Change: The full year medical loss ratio was 81, 7%, a slight 10 basis point year over year increase.
Speaker Change: Overall utilization for the year was modestly favorable compared to our pricing expectations and we had continued favorable prior period development.
Speaker Change: Strong SCP membership growth during the year was a headwind for the full year MLR and we increased our risk transfer payable in the fourth quarter based on the most recent interim risk adjustment report.
Speaker Change: Our risk transfer as a percentage of premiums for 2024 was largely consistent year over year at approximately 14, 5%.
Speaker Change: Switching to administrative costs, the 'twenty 'twenty four SG&A expense ratio significantly improved by 520 basis points year over year to 19.1% driven by higher fixed cost leverage and variable cost efficiencies.
Speaker Change: In 2024, we delivered on our commitment for adjusted EBITDA profitability.
Speaker Change: For the full year, adjusted EBITDA was 199 million, representing a substantial $245 million year over year improvement.
Speaker Change: We also reported net income profitability of $25 million.
Speaker Change: Shifting to the balance sheet, our capital position remains very strong.
Speaker Change: We ended the year with $4 billion of cash and investments, including $190 million of cash and investments at the parent.
Speaker Change: As of December 31, 2024, our insurance subsidiaries had approximately $1.2 billion of capital and surplus including $774 million of excess capital driven by strong operating performance.
Speaker Change: Given the excess capital in our insurance subsidiaries, we expect funding of our 2025 growth capital requirements to have minimal impact on parent cash.
Speaker Change: With respect to quota share reinsurance, we expect our ceding percentage to be largely consistent year over year at approximately 50% in 2025.
Speaker Change: Before I turn to the 2025 outlook I want to highlight that starting with our first quarter 2025 results will be shifting the focus of our conversations to earnings from operations rather than adjusted EBITDA. While we will continue to provide both metrics. We believe earnings from operations is the best metric to show our progress.
Speaker Change: Yes towards our goal of a 5% operating margin by 2027.
Speaker Change: Turning now to 2025 full year guidance.
Speaker Change: We expect to execute on our strategic plan and deliver above market growth and meaningful margin expansion. This year.
Speaker Change: We expect total revenues to be in the range of $11 2 billion to $11 3 billion driven by solid retention and another year of above market growth during open enrollment.
Speaker Change: We remain committed to our disciplined pricing strategy balancing growth and profitability.
Speaker Change: We expect our medical loss ratio to be in the range of 87 to 81, 7%, representing a 50 basis point year over year improvement at the midpoint.
Speaker Change: Our outlook reflects lower year over year C. P member additions as Medicaid Redetermination are largely complete.
Speaker Change: On MLR seasonality, we expect the first quarter to be the lowest in the fourth quarter to be the highest as members meet their deductibles.
Speaker Change: For 2025, we expect risk adjustment as a percentage of premiums to be largely consistent year over year based on our updated membership mix.
Speaker Change: We expect our SG&A expense ratio to be in the range of 17.6 to 18, 1%, representing an approximate 125 basis points year over year improvement at the midpoint.
Speaker Change: As a reminder, this ratio includes stock based compensation expense, which in 2024 was approximately $110 million.
Speaker Change: With respect to seasonality.
Speaker Change: We expect our SG&A expense ratio to modestly increase each quarter as the year progresses.
Speaker Change: We expect earnings from operations to be in the range of 225 million to $275 million, representing a significant $193 million improvement year over year at the midpoint.
Speaker Change: We would expect adjusted EBITDA to be roughly 140 million higher than earnings from operations.
Speaker Change: Additionally, we expect positive net income in 2025.
Speaker Change: In closing <unk>.
Speaker Change: <unk> thousand 24 was a successful year for Oscar we delivered strong growth adjusted EBITDA and net income profitability and we've turned the page to the next chapter in the company's trajectory one.
One of continuing to meet consumers' needs with differentiated and innovative product offerings.
Speaker Change: And meaningfully improved financial performance.
Speaker Change: That I will turn the call over to the operator for the Q&A portion of our call.
Speaker Change: Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star. One again, we ask that you. Please limit yourself to one question and one follow up.
Speaker Change: Our first question comes from the line of Stephen Baxter from Wells Fargo. Your line is open.
Stephen Baxter: Hi, Thanks, there is a lot of focus in the market currently.
Stephen Baxter: About payment integrity, and individual health exchanges and potential changes from certain re verification program as being back in place for this year that may have been relaxed from prior periods. So I guess could you give us more of a detailed discussion around what youre seeing when it comes to things like if actuation rates and then what youre assuming in terms of enrollment declines throughout the year.
Stephen Baxter: Potentially maybe there can be an above average lapse in payment rates any kind of detailed discussion around the assumptions you're making on this issue would be greatly helpful. Thank you.
Mark Bertolini: Sure This is mark.
Mark Bertolini: I'll start with defining of actuated membership, which.
Mark Bertolini: Is new enrollment, which obviously has passed muster with the government and getting people into the plan and then renewals. That's the gross number if we were to report that number as it sits today for us it will be 1.98 million members.
Mark Bertolini: We have decided to start tracking actual numbers, we can members we can put.
Mark Bertolini: Premiums on a numbers on and so today. The number we shared with you 1.8 million is Rs is our knowledge of $1 8 million people were paid their premiums.
Mark Bertolini: And therefore in the plan.
Mark Bertolini: And that is the number against which we put together guidance for revenue.
Mark Bertolini: So we believe there's about a 9.1%.
Mark Bertolini: Impact of effectuate shown against actually what will show up paid by the end of the first quarter.
Mark Bertolini: Scott.
Stephen Baxter: Steve I think that what we tried to do in providing the information of how we would think that if actuation rates year over year should be about the same which is exactly what we've seen.
Stephen Baxter: But we also know what how many of the new members have paid already and so $1 8 million members have started making payments for us and we think that is the most relevant number to look at and that's why we provided that.
Stephen Baxter: With respect to what's going on overall with with payment integrity issues I'd just make a few comments number one.
Stephen Baxter: The issues of verifying social security numbers verifying that you've got all the right data.
Mark Bertolini: As Mark talked about that's already happened in open enrollment the broker of record restrictions those things have already happened through open enrollment. So we believe most of those types of issues are behind us.
Mark Bertolini: And with respect to the questions around vial to reconcile.
Mark Bertolini: That topic I think is actually quite complicated and so just to simplify things.
Mark Bertolini: <unk> that they filed a reconcile is working CMS and the IRS worked on what portion of members in.
Mark Bertolini: D. A C E have not filed.
Mark Bertolini: For 'twenty, two and 'twenty three.
Mark Bertolini: They tend to notice to those members in November that highlighted hey, you need to complete your filed a reconcile process.
Mark Bertolini: And it instructed people to go on to the CMS website and click a box that said I have completed my filed a reconcile process if they didn't do that.
Mark Bertolini: They would have lost their subsidy in open enrollment and so as of January one they would be getting a full premium on subsidized and they would not be included in our February 1st paid count should they have not paid the full premium amount.
Mark Bertolini: Now that we understand that CMS and the IRS will go back and verify in April that for those who click the box that said I did filed a reconcile that that in fact happened again. This is members. These are people that were in the HCA in 'twenty, two and 'twenty three that's the basis of what Theyre, making the adjustment for.
Mark Bertolini: We've incorporated our estimate of what that filed the reconciled process may do and so we've built that into our full year revenue guidance that we gave the street. So again 1.8 million members is the number of members that are paying Oscar as of February 1st.
Mark Bertolini: We built in all of the risks that we see from this fall the reconcile process as well as the other CMS payment integrity thing, we have put that into our guidance and we think that growing roughly.
Mark Bertolini: Roughly 23% on revenue year over year is a remarkable delivery against our plans and we are super excited about the the what 25 is going to bring for us in terms of our ability to grow margin and delivered terrific results for our shareholders and just for a comparison year over year last year.
Our difference between effectuate, it and paying customers was four 1%.
Mark Bertolini: We looked at the file and we had some rate changes in markets, where we had zero premium members that actually starting to have to pay.
Mark Bertolini: We assume those people would not.
Ultimately renew and so we took that up to nine 1%.
Mark Bertolini: And that's an actual those are the actual numbers so between infatuation in payment rates are those the difference that mark indicated.
Speaker Change: Okay. Thanks, I'll jump back in the queue.
Speaker Change: Our next question comes from the line of Josh Raskin from Nephron Research. Your line is open.
Josh Raskin: Hi, Thanks that was a super helpful answer to the last one I'll start with the I guess two questions here just the MLR.
Josh Raskin: It came in above the high end of guidance. Despite the lower revenues. So you know I heard the higher risk transfer payable maybe you could quantify that but were there any other one timers or any drivers of the MLR increase and then just this move to <unk>.
Josh Raskin: Income front right.
Josh Raskin: Adjusted earnings from operations is there any material change to interest expense coming in the next year or two I'm. Just curious does that seem to be the biggest difference between EBITDA and the new metric.
Josh Raskin: Just I'll start with one point on that I think is really important to understand our.
Josh Raskin: Utilization came in as expected actually slightly better.
Josh Raskin: So what youre seeing in the change in the MLR is not worsening utilization, it's the relative risk of our book versus others and the impact of risk adjustment settlements at the end of the year.
Scott: Scott Yes.
Scott: So.
Speaker Change: Think that on the MLR I'll start there so for MLR as Mark just talked about what we have seen is utilization actually came in.
Speaker Change: Slightly favorable to what we would have anticipated and we saw risk or development proceeding as we would have anticipated based on the claims that we've had and when we got the fourth order risk report from.
Speaker Change: Our friends at Wakely, we observed that in several markets. There had been an increase in the risk scores of the market versus what we were expecting so we took that information and updated.
Speaker Change: Our accruals for that so that is really what drove the pressure in MLR. It also as a result, when you increase your risk transfer. It also drove a shortfall in revenue. So it was the same thing driving both those effects.
Speaker Change: I would also point out that we had favorable prior period development in the fourth quarter.
Speaker Change: Which offset some of the pressure from the risk adjustment true up and those same drivers had an effect on the full year MLR, but to a lesser degree.
Speaker Change: Got you and then just the interest expense.
Speaker Change: And then on an interest I think that interest is there.
The biggest delta between adjusted EBITDA and earnings from operations is going to be stock compensation and.
Speaker Change: Depreciation and amortization and we would anticipate that as I said in my talking points, it's about $140 million difference between earnings from operations and adjusted EBITDA in terms of our 2025 guidance. So.
Speaker Change: So those are the biggest drivers, but by the way on interest expense I would expect that to be consistent year over year, because we don't have any new indebtedness.
Speaker Change: Okay.
Speaker Change: Alright. Thanks.
Speaker Change: Your next question comes from the line of Michael Hall from Baird. Your line is open.
Speaker Change: Yeah.
Speaker Change: Hi, Thank you.
Speaker Change: Yes, so I think 2025 guidance there might be some confusion amongst investors about the new EBIT guide versus what that implied.
Speaker Change: On EBITDA and got it. Thank you just answered it but just want to.
Speaker Change: Okay, very clearly clarify clear up any confusion, if we take care of 225.
Speaker Change: <unk> five starting EBIT guide back out DNA back out stock based comp the implied EBIT guide would be around $400 million right. So thats basically roughly inline with street.
Speaker Change: Yeah. So the top end of our guidance for earnings from operations was $275 million at $140 million of that should get you to around $415 million, which would be the top end of <unk>.
Speaker Change: Adjusted EBITDA.
Speaker Change: Got it thank you and then.
Speaker Change: Just to clarify so $1 8 million people that pay their premium so from now through April and the final FERC check happens and is it fair to say the low scenario is now already built in and from now through April you can only potential upside on membership at CRV check exactly so not exactly right Michael.
Speaker Change: That's what we're trying to do to Derisk. This is you've seen us do this both in our Investor day is to try to make this simple for you guys. So we took out the rest of the actuation.
Speaker Change: Being higher than then ultimately the membership that we would realize so we're starting with paid members.
Speaker Change: There is a potential that we could see some of the people that haven't paid.
Speaker Change: The state actually make a payment.
Speaker Change: And become and finally, if actuated out into the first quarter, but at this point.
Speaker Change: We built the risk and so there's more upside to our plan that downside and again, that's largely and that renewal book.
Speaker Change: And largely around people, we thought that we're going to go away from zero dollar plans to having to pay out of pocket.
Speaker Change: Got it and if I could squeeze in one more.
Speaker Change: The Oscar 25 earnings bridge, what makes it so attractive in our opinion quite all of the additional S&P lives and 24 are retaining those members capturing our full year risk adjusted revenue to be 10% MLR improvement.
Speaker Change: And if my math is right just a very large part of the bridge into 'twenty five.
I'm wondering how is your retention rate on the S&P lied.
Speaker Change: And are there any notable dynamics, whether it's member mix shift there or anything else that might prevent you in any way from feeling that that powerful MLR tailwind play out.
Speaker Change: Look I think that as we talked about in our talking points, we had solid retention.
Speaker Change: No.
Speaker Change: A year ago. The retention was was incredibly high we were expecting that we expected a little bit softer retention, we saw that but we still saw terrific retention and we saw retention in the <unk> cohort. So all of the dynamics of building momentum and building that SCP membership in 'twenty four is playing out.
Speaker Change: With the growth that we're seeing in 2025.
Speaker Change: We also have high confidence that that those members from last year, who came in through SDP will also have a MLR in 2025 debt looks like the rest of OE. So all of that is built into our guidance.
Speaker Change: And again utilization in 'twenty four for US was was really good it was favorable to our expectations. So we think that we've got a lot of momentum going into 'twenty five in terms of the performance of.
Speaker Change: Our MLR and the risk scores will mature on that S&P population.
Speaker Change: Which we did not get full advantage of in 2024. So we will see that happen. The demographics are largely the same 52% male 48% female.
Speaker Change: Largely 71% in silver plans.
Speaker Change: I think the issue that we saw in the aircraft was actually people choosing more gold and bronze plans as we saw the <unk> come in small sample, but still on an interesting dynamic in a different way of purchasing.
Speaker Change: Great. Thank you very much.
Speaker Change: Again, if you'd like to ask a question press star one on your telephone keypad. Your next question comes from the line of Jonathan Young from UBS. Your line is open.
Jonathan Young: Alright, Thanks for taking my question I guess just in relation to the one 8 million lives are you assuming any attrition throughout the year as people get jobs or perhaps to stop paying throughout the year or are you assuming a full static.
Jonathan Young: One 8 million lives and then just on G&A.
Jonathan Young: Does that step down from the $1 98 to 1.8 does that you obviously have a good G&A ratio for this year, but does that change kind of your how the trajectory might look to moving forward. Thanks.
Jonathan Young: So I.
Jonathan Young: I think that on the SG&A.
Jonathan Young: We see continued opportunity for SG&A improvement.
Jonathan Young: That's going to be.
Jonathan Young: We've seen that in our guidance.
Jonathan Young: I'd just say that in 2025, we are making some investments to continue to accelerate our opportunities for growth and efficiency. So that's already baked into the guidance. So the fact that we're improving our SG&A performance, while continuing to invest in our future I think is.
Jonathan Young: It's a strong example of how we think long term for the company.
Jonathan Young: And then with respect to.
Jonathan Young: Okay.
Jonathan Young: The operator.
Jonathan Young: On the operating leverage it's based on the $1 eight.
Jonathan Young: Yes, so <unk>.
Jonathan Young: Fluctuation comes down from $191 98 to $1 eight.
Jonathan Young: Still have a tie that one for Nate yeah, and basically on your churn question. The we anticipate that membership will be roughly flat throughout the year. We would anticipate yeah. We believe that we will see.
Jonathan Young: Lapse, that's at or around what we've experienced historically potentially with some.
Jonathan Young: Some.
Jonathan Young: A little bit of pressure from what I talked about in terms of the April.
Jonathan Young: Final CMS process, we've built that into our expectations and then we expect that some of the factors that drove growth in this market in terms of new people coming in whether it's through the gig economy or through other sources of growth that have been the bedrock of what's been driving DHA over the last couple.
Jonathan Young: The years, so that we expect those to continue so again flat membership throughout the year on the AI front, we did not project.
Jonathan Young: AI.
Jonathan Young: Enhancements in our three year projections that we shared with you in June but last year, we put in 11, new use cases, and this coming year, we're going to we have 10 more in the pipeline for just the first quarter. So we continue to find ways to use these tools to help us drive the SGA down and Thats why quite frankly, our numbers ahead of us.
Jonathan Young: Where we thought we were going to be when we put together the three year projection.
Jonathan Young: Great. Thanks.
Speaker Change: Your next question comes from the line of Jessica <unk> from Piper Sandler Your line is open.
Speaker Change: Hi, guys. Thank you for taking my question.
Speaker Change: My first one is a quick one can you just quantify the total prior period development in 2024, and then specifically in the fourth quarter.
Speaker Change: Yeah. So prior period development for the full year was $126 million and it was $62 million in the fourth quarter.
Speaker Change: Thank you and then.
Speaker Change: Can you, maybe discuss Oscars pricing strategy and kind of specifically the extent to which.
Speaker Change: Silver plans are priced above the benchmark and how that pricing kind of insurers that oscar's only really enrolling.
Speaker Change: Active unintentional premium paying members.
Speaker Change: Yeah, well I would say that.
Speaker Change: First off we always take an approach to pricing, which is we want to have.
Speaker Change: Disciplined pricing strategy that balances our desire to both grow the book and to create.
Speaker Change: Margin for us so that's kind of thing one when we think about the different pricing for each of the metal tiers, we do that primarily with the view of we want all of our book to perform in a way that creates margin for the business. So that's probably the most important lens. So we.
Speaker Change: Buildup, what do we think the trend is going to be and then we create margin by basically having affordability initiatives that allow us to experience an MLR that is below the or experienced an increase in medical cost that is below the trend. So that's kind of what we do there with respect to <unk>.
Speaker Change: Pro Doc.
Speaker Change: Dollar.
Speaker Change: And the comments you made around is there more.
Speaker Change: Risk of fraud.
Speaker Change: We are.
Speaker Change: <unk> engaged with CMS in trying to do everything we can to make sure that we only have valid members and CMS is actually the one who does all of the income verification. What we do is we police the brokers that we do business with.
Speaker Change: We're actively looking at to try to find any kind of irregularities or were things that we see brokers doing that caused us to <unk>.
Speaker Change: If there is something going on that we should be talking to CMS about we report those brokers to CMS. They are the ones that do those investigations, but we don't have any interest in Harbin.
Speaker Change: Any kind of members that are there without being there on purpose.
Speaker Change: And we do everything we can to support Cms's payment integrity efforts, what we have found in a number of our zero premium plans are a large number of members that don't use care, all that significantly and thats largely as an insurance policy for them in case, there's an accident or someone can sell they don't lose the house.
Speaker Change: So it's a very different purchasing decisions on their buying and planning zero premium that gives them some coverage for catastrophic catastrophic events.
Speaker Change: That's really helpful. Thank you.
Speaker Change: And your final question comes from the line of Adam Ron from Bank of America. Your line is open.
Speaker Change: Hey, I just had a question about SG&A it seems like.
Speaker Change: Last quarter, you got it for $19 four and then you pointed to $19 one for the year. So in the quarter that implies pretty significant outperformance curious, what's driving that if that's related to AI or.
Speaker Change: Okay.
Speaker Change: For example, slowed youre hiring or something you could point to that.
Speaker Change: So that would be helpful. Yes, yes.
Speaker Change: Yes.
Speaker Change: Look I think that SG&A is just a bright spot in terms of.
Speaker Change: Number one the.
Speaker Change: In the quarter.
Speaker Change: I think that we saw just continued strong performance of our initiatives of making sure that we drive variable efficiencies that we achieve our fixed cost leverage so all of the improvement there is sustainable and will move into 2025.
Speaker Change: Overall, SG&A I think that.
Mark Bertolini: Mark previously described seen some.
Mark Bertolini: Watermelons on the floor I think we have been very successful at harvesting those watermelons and a lot of what you see in SG&A is really from the blocking and tackling and then we're starting to see the front end of.
Mark Bertolini: A lot of the AI initiatives that we've been running and talking about in terms of the our ability to.
Mark Bertolini: Being more efficient company and I think theres more opportunity for us to drive that into the future.
Mark Bertolini: And we've just started to see the the first round of the effects of that on our cost structure.
Speaker Change: If I could squeeze one more and I thought it was interesting that the new hires coming from Kaiser given Mark is typically kind of bearish on capitation. So curious if Janet has a different view on that or change of strategy on value based care, but I appreciate all the questions.
Speaker Change: So kaiser's Mac appetite.
Speaker Change: Kaiser practices, a different form of medicine, and they organized in a way to practice better medicine.
Speaker Change: So.
Speaker Change: I would.
Speaker Change: I would say that she brings to us some skills that we.
Speaker Change: As we evaluate value based contracts and whether or not they work effectively should bring some really strong skills in.
Speaker Change: She did an amazing job in turning around Hawaii.
Speaker Change: When that program got in trouble and she's anxious to join US. So we're very pleased to have her.
Speaker Change: I appreciate it.
Speaker Change: And that concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: [music].