Health insurance company Oscar Health (NYSE: OSCR) fell short of the markets revenue expectations in Q3 CY2025, but sales rose 23.2% year on year to $2.99 billion. On the other hand, the company’s full-year revenue guidance of $12.1 billion at the midpoint came in 0.5% above analysts’ estimates. Its GAAP loss of $0.53 per share was 6.8% below analysts’ consensus estimates.

Is now the time to buy OSCR? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Oscar Health’s third quarter results fell short of Wall Street’s expectations, reflecting persistent challenges in the individual health insurance market. Management attributed the underperformance mainly to increased market morbidity, which refers to a higher proportion of sicker individuals entering the risk pool, driven in part by Medicaid redeterminations and program integrity efforts. CEO Mark Bertolini described 2025 as a “reset moment” for the market, noting, “Overall risk adjustment data from Wakely in the third quarter show continued higher market morbidity, which we attribute to Medicaid lives entering the market and the initial impacts of program integrity efforts.” The company also pointed to disciplined cost controls and improved administrative expense ratios as partial offsets to these headwinds.

Looking into the next year, Oscar Health’s guidance centers on disciplined pricing and margin expansion, with a strategic focus on profitability in 2026. Management emphasized a weighted average rate increase of approximately 28% for 2026, aimed at addressing elevated market morbidity and the potential expiration of enhanced premium tax credits. CFO Richard Blackley explained, “Our 2026 pricing strategy balanced growing market share and improving profitability,” while also highlighting ongoing cost reduction initiatives and the use of artificial intelligence to streamline operations. The company remains wary of further market contraction and regulatory changes but believes its proactive approach positions it to grow profitably even as the competitive landscape shifts.

Key Insights from Management’s Remarks

Oscar Health’s management linked third quarter performance to membership growth, higher morbidity in the insured population, and ongoing product and technology initiatives. The company’s cost management efforts and product innovation were emphasized as responses to evolving market conditions.

• Membership-driven revenue growth: Oscar’s 28% year-over-year membership increase supported revenue gains, primarily through strong retention and above-market new enrollments, despite headwinds from higher medical claims.
• Elevated market morbidity: Management cited data showing that sicker individuals—often those transitioning from Medicaid—comprised a larger share of the risk pool, leading to a higher medical loss ratio and impacting operating margins.
• Risk adjustment impacts: The third quarter saw a notable increase in risk adjustment liabilities, which are payments between insurers to balance differences in member health status. The company faced a $130 million increase in risk adjustment payables, partially offset by favorable prior period developments.
• Cost control and AI initiatives: Administrative expenses declined 150 basis points year-over-year as Oscar leveraged fixed cost efficiencies and adopted artificial intelligence (AI) models to automate and streamline operations, with further SG&A reductions targeted for 2026.
• Product diversification and innovation: Oscar continued expanding condition-specific plans and introduced HelloMeno, a menopause-focused product, as well as the Oswell AI agent, aiming to deliver personalized care and manage health costs more effectively.

Drivers of Future Performance

Oscar Health’s outlook for the next year centers on disciplined pricing, margin improvement, and adapting to policy and market shifts.

• Pricing for market contraction: Management expects a 20-30% contraction in the individual market if enhanced premium tax credits expire, planning to use a 28% average rate increase to balance membership and profitability. This approach anticipates elevated risk and aims to buffer against further morbidity increases.
• Cost reductions and AI adoption: The company has identified $60 million in administrative cost reductions for 2026 and will continue to deploy AI-driven automation to maintain variable cost flexibility, especially in the face of potential membership declines.
• Strategic product and network positioning: Oscar’s expansion into new states and markets, combined with a differentiated product lineup—including narrow provider networks and tailored plan designs—positions it to capture share from competitors retreating or pricing aggressively, while mitigating adverse selection risks.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will monitor (1) the effectiveness of Oscar’s 2026 pricing strategy as the individual market contracts, (2) progress on administrative cost reductions and AI-driven efficiency gains, and (3) early enrollment trends in new and existing markets, especially as enhanced premium tax credits and program integrity measures evolve. The impact of product diversification and technology adoption will also be important to track.

Oscar Health currently trades at $16.31, down from $17.05 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).

Stocks That Trumped Tariffs

Fresh US-China trade tensions just tanked stocks—but strong bank earnings are fueling a sharp rebound. Don’t miss the bounce.

Don’t let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.