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Oscar Health: A Disruptive Insurer Trading at a Discount
- Elias Zeekeh, MBA, CPA, CMA
- Jul 25
- 5 min read
Oscar Health (NYSE: OSCR) has long promised to reinvent health insurance through superior technology and crisp consumer‐centric branding After a decade of red ink, the company finally posted its first full-year profit in 2024, yet the stock still changes hands at barely a third of sales. For investors willing to stomach regulatory twists and competitive dogfights, Oscar offers an intriguing blend of high-octane growth, undervalued shares, and emerging operational discipline. The following deep dive lays out the bullish case—along with the risks an investor must weigh—in a style familiar to readers of Barron’s or The Wall Street Journal.
The Turn to Profitability
Oscar’s 2024 numbers marked a decisive break from its loss-making past. Revenue surged 56.5% to $9.2 billion, and net income crept into the black at $25.4 million—an eye-popping $296 million swing from 2023’s loss. Adjusted EBITDA followed suit, hitting $199 million after a negative $45 million the prior year. Membership ended 2024 at 1.7 million, up 70% in just twelve months.[1][2][3][4]
Momentum accelerated in Q1 2025. Revenue rose 42% year-over-year to $3.05 billion, while net income leapt to $275 million. Membership broke the 2 million milestone, up 41% from Q1 2024. Operating margin reached 9.8%, a 110-basis-point improvement.[5][6][7][8]
These metrics show Oscar finally harnessing the fixed-cost leverage embedded in its tech stack: SG&A fell to 15.8% of revenue in Q1 2025, the lowest ratio in company history.[6]
Why It Matters
Insurance is a scale game. Once a network, brand, and claims-processing engine are in place, each incremental life throws off disproportionate margin. Oscar is entering that sweet spot.
Growth Still in Hyperdrive
Oscar has upped its full-year 2025 revenue outlook twice—first to $11.2 billion and, after July’s risk-adjustment update, to $12 billion–$12.2 billion. Even the midpoint implies a three-year revenue CAGR near 20%, in line with management’s 2027 target.[2][9][10]
The growth engine rests on three pillars:
1. ACA Exchange Expansion. Oscar plans to enter an additional 150 metropolitan areas by 2027, potentially doubling addressable lives.[10]
2. ICHRA Opportunity. Individual Coverage Health Reimbursement Arrangements let employers shift workers onto exchange plans. Oscar’s early push into this market adds a quasi-group business at attractive risk-pools.[11]
3. AI-Enabled Efficiency. Tools like Virtual Urgent Care chat triage have cut provider response time by 90% and boosted provider efficiency 28%. AI care-guide software has already eliminated the equivalent of 200 full-time roles, shaving SG&A.[11]
Valuation: Cheap for the Growth
Oscar’s sub-0.4 P/S sits well below the S&P 500’s 3.1 average and undercuts slower-growing managed-care peers like UnitedHealth. On a 2025 revenue guide of $12.1 billion, the forward P/S slips to roughly 0.30—compelling for 40%-plus organic growth.[19]
Profit Metrics
After years of triple-digit P/E readings, Oscar’s trailing P/E has fallen to 33 on the back of 2024 profits. More importantly, Wall Street expects EPS to climb from $0.28 TTM to $0.74 next year, implying a forward multiple in the low-20s.[20][21]
Competitive Moat: Tech and Brand
Oscar’s Net Promoter Score routinely tops 50, double the industry norm. Members use the mobile app for 68% of provider searches and interact digitally four times more often than with legacy carriers. That engagement funnels richer data back into Oscar’s risk engines, sharpening pricing and care-management.[10]
Partnerships reinforce the moat. A recent tie-up with FindHelp connects members to social-care resources such as food and housing support—services that can lower costly medical events down the line. Hiring Kaiser’s former care-delivery COO, Janet Liang, as President of Insurance adds operational heft.[5][2]
Tailwinds: Policy and Market Share
ACA enrollment hit a record 24 million in 2024, aided by enhanced subsidies set to run through 2025. Bipartisan support for the exchanges has hardened, making a wholesale repeal improbable even in polarized Washington. If subsidies are extended—as many observers expect—Oscar’s core market enjoys structural tailwinds.[11]
Competitors are exiting several exchange counties, citing high MLRs. Oscar’s tech-driven cost discipline positions it to pick up orphaned lives at favorable pricing.[5]
Risk No. 1: Regulatory Flux
July’s prelim Q2 release showed why exchange carriers can’t coast. Higher-than-expected market risk scores forced Oscar to lift its 2025 MLR outlook to 86%-87% and guide to an operating loss of $200–$300 million. The stock slid and several analysts cut ratings.[9][22][23]
Investors must recognize that ACA risk adjustment is zero-sum. A deterioration in peer medical acuity can leave Oscar writing a check even if its own trends are stable. Management says it will re-file 2026 rates in 98% of markets to reflect new data, but that underscores ongoing volatility.[9]
Risk No. 2: Competitive Pricing Wars
Humana’s P/S of 0.22 shows managed-care giants can cut price if threatened. Oscar’s ability to stay on the right side of risk corridors depends on predictive analytics holding up at scale. A mispriced book could erase margin gains quickly.[16]
Risk No. 3: Subsidy Sunset
Enhanced premium subsidies expire at end-2025. Without congressional action, net premiums could rise sharply for many exchange buyers. Management’s 2027 plan already assumes a normalized market size if subsidies lapse, yet the political optics—higher premiums for gig workers—make a lapse less likely. Still, investors must factor that cliff into discounted-cash-flow work.[10]
Catalysts for the Bull Case
1. Rate-Filing Reset. If 2026 rates capture higher acuity, Oscar could swing back to operating profit faster than the Street currently models.
2. Subsidy Extension. A one-year renewal in the year-end budget dance would remove a major overhang.
3. ICHRA Flywheel. As more employers adopt reimbursed individual plans, Oscar’s MLR mix should improve; these lives often skew healthier and tech-savvy.
4. Take-Out Appeal. Trading at a 0.3 forward P/S, Oscar is digestible even for mid-tier insurers seeking tech upgrades. CEO Bertolini previously sold Aetna to CVS; few doubt his deal instincts.
Bottom Line
Oscar Health is no widows-and-orphans stock. Headline risk around ACA policy and risk-adjustment math will keep volatility elevated. Yet the company is finally proving it can scale profitably—and the market isn’t paying for it. At roughly one-third of sales and a forward P/E in the 20s, investors get hyper-growth, a sticky digital brand, and expanding AI moats at a discount. For those with a multi-year horizon and tolerance for regulatory cross-currents, Oscar looks like a compelling long-term bet in an otherwise stodgy insurance landscape.
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