Oscar Health withdraws from 2 states


Dive Letter:

  • Oscar Health is withdrawing from Arkansas and Colorado in 2023 as the insurtech looks to reach profitability next year.
  • The departures won’t have a material effect on Oscar’s income, and leaving the two states should reduce Oscar’s overhead in areas like compliance work and statutory reporting, according to Oscar CEO Mario Schlosser.
  • “It really just reduces distraction, and allows us to focus on where we have the right to win and where we really want to put our energies towards,” Schlosser said on a Tuesday call with investors on Oscar’s first quarter results.

Dive Insight:

Amid revenue growth and an improved medical loss ratio coming into this year, Oscar wants to refocus on markets it can perform better in, according to the 10-year-old company.

“Those give us confidence in the fullest opportunity to focus on markets where we can win. As such we are focused on modifying our portfolio mix by markets and by products,” Schlosser said, noting Arkansas and Colorado are “relatively small markets for us” and Oscar intends to make the exits “as seamless as possible” while continuing to cover the states ‘members this year.

A number of factors contributed to the decision to depart the two states, according to CFO Scott Blackley, including Oscar never achieving scale, and not seeing opportunities there that were any better than in other small markets.

In addition, recent regulatory changes in both markets would have increased Oscar’s compliance work, so it’s easier to exit the markets, Blackley said.

Oscar entered Arkansas for the first time for the 2022 plan year, and also expanded its footprint in Colorado.

At the end of 2021, Oscar covered almost 2,900 people in Colorado, according to an annual financial filing with the Securities and Exchange Commission. That’s fewer than 1% of its enrollees. For context, however, seven other states also have fewer than 1% of Oscar’s members.

The exits shrink Oscar’s geographic footprint to 20 states.

Oscar, which went public in March 2021, is targeting profitability in 2023. In the first quarter, the company reported a net loss of $77.3 million, a slight improvement from its $88.9 million loss at the same time last year.

Oscar ended the quarter with 1.1 million members, an increase of 98% year over year due to growth in its individual Affordable Care Act and small group businesses, Blackley said.

Oscar covers one in every 13 ACA lives, according to the company. The exchanges set up by the ACA are a major driver of Oscar’s growth.

Direct and assumed policy premiums doubled year over year due to higher membership and business mix shifts toward higher-premium silver plans, blackley said.

Oscar expects the individual market to become a “more dominant force in US healthcare,” Schlosser said.

Regulatory changes, like impending Medicaid redeterminations and the Biden administration’s elimination of the so-called ‘family glitch’, have the potential to push the ACA market up to 20 million members next year, the CEO told investors.

A record number of Americans signed up for ACA plans this year, partially due to temporary grants set to expire at the end of this year. President Joe Biden has pushed to make the subsidies permanent, though Congress has stalled on any meaningful legislation. Progressives have cited the enhanced premium assistance as one factor in improving coverage rates in the US

In light of the reduced uninsured rates, “it would take a lot of political irrationality to undo those subsidies,” Schlosser said.

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