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- [00:02]
Ann Berry
For Friday, February 20th, it's Brew Markets Daily and I'm Ann Berry. Health insurance. Yes, we buy it, we use it, we usually get frustrated with it. And from a market's perspective, the jargon around health insurance stocks is often as intimidating as the jargon in the products themselves. But the US Health insurance sector is not going anywhere. It's massive, more than one and a half trillion dollars in size. And right now, it's incredibly dynamic. Technology is shifting it, personalization trends are shaping it, and policy change is a foot in this midterm election year. So as investors, we all need to pay attention. Well, to break it all down, we welcome Scott Blackley, chief financial officer of Oscar Health, to the show. Founded in 2012, Oscar is a relative newcomer to the health insurance space. But it's been growing quickly to over 3 million members, nearly $12 billion of revenue, and $3 billion of market cap today. And after a tough loss making 2025, it's dusted itself off and is aiming for aggressive financial targets for 2026. Well, your eyes will not glaze over as we unpack what's going on. And that's because Scott manages to describe this maze of an industry in an engaging but substantive way. So stick with us for that conversation in just a moment. But first, a word from our sponsor, Charles Schwab. Trading at Schwab is powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills. Access new online courses, insightful websites, articles, engaging videos, more or curated just for traders.
- [01:32]
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- [01:41]
Ann Berry
Learn more@schwab.com trading and now my conversation with Scott Blackley, the Chief Financial Officer for Oscar Health. So, Scott, I have to confess I have a little bit of background with Oscar. I remember meeting some of the co founders of the business back in 2012 and at the time, um, Oscar was in a, in a very glamorous part of, of Manhattan in the city. And the vision of the business was described to me as trying to help people navigate these sort of labyrinthine, incomprehensible systems of trying to take out health insurance and ultimately filing claims. And I remember thinking that lots of folks who I knew had taken out Oscar Health insurance tended to be quite glamorous themselves. They were kind of the cool, independent designers that was then, that was, you know, 14 years ago. Now you've got 2 million members as of the end of 2025. What's the composition of your membership base now? Is it still that sort of independent contractor or self employed person, or is it more diverse than that?
- [02:43]
Scott Blackley
Well, that is a great question. The, the company has actually with the most recent open enrollment, which is where, you know, people get a chance to enroll in new health plans for 2026, we've now got 3.4 million members and as of February 1st, so significant growth in the business. And it really is a very diverse swath of America. And so I think the majority of our membership are people who don't have access to health insurance through their traditional jobs. So they're gig workers, they're self employed contractors, they're farmers. It is really a wide swath and we're really privileged to, you know, have a significant market share in the ACA this year.
- [03:30]
Ann Berry
Let's talk about the aca, Oscar, because that is a place that you focus and just to paint the picture a bit, aca, otherwise known as Obamacare. Right. Currently, Oscar, I believe is operating in 18 states. And there is a question mark around whether the aca, which is the Affordable Care act programs, will survive this administration and whether there is going to be more change coming. And just to give that some context, I remember before Obamacare was rolled out, I remember being involved with a private equity backed health insurance company and it took years to be able to settle on a strategy as to where to go next. And I worry, but would love to get your perspective that is that kind of turmoil on the horizon.
- [04:14]
Scott Blackley
Again, I think that there's the potential, I'll call it the existential risk for the ACA marketplace. I think that's behind us. What we haven't seen in any of the political dialogue has been a view of we need to kill the aca, which we did hear going back to Trump's first administration. Then they were still talking about let's put an end to this marketplace. I think that dialogue has shifted to how do we improve the effectiveness and the impact, make it better, cheaper, better for the consumer, which we think is a really good shift and is headed in the right direction. I think the big things that the our current administration is focused on is how do we ensure that the marketplace is only serving those people who qualify to be in it. How do we get rid of the fraud that is happening on the edges? And we think all of those things are good things. So we're excited about the trajectory and the political dialogue that's going around it
- [05:20]
Ann Berry
and what does it mean for growth For Oscar Scott, just help. If you don't mind painting the picture of does Oscar go literally state to state to state to assess not only if it's a state that makes sense to enter, but also then to persuade regulators to let Oscar in. Just talk to us about that, the actual execution of that kind of geographic growth, if you don't mind.
- [05:42]
Scott Blackley
Yeah. Health insurance is a state by state business. So it's administered, overseen by state departments of insurance. And so we do have to go into each state as a new business for us. This year we entered into two new states. So we're up to 20 states now that we're serving. And you know, different, different marketplaces have bigger ACA footprints. The biggest one in the US is, is Florida. We also happen to be the largest in that marketplace. So what we've been doing is kind of carefully expanding our geographical footprint first in the markets that we know best, which are the states that we're already in. And then we enter into new states and we have kind of a playbook there that you go in, you kind of establish a foothold, learn the membership, learn how the health systems work and adjust your product mix and then you start to grow. So it's really a land and expand kind of strategy, which we've been doing very successfully. And again, entering two new markets this year is a nice step for us.
- [06:48]
Ann Berry
You know, you've given some sort of nuggets when it comes to your growth. Scott, just to put some firmer numbers around that off the back of your recent year end results, 2025 revenue, $11.7 billion. That's compared to 2024 of 9.2 billion. So very impressive growth there. But then when I take a look at your adjusted ebitda, which is a measure of profit, there's a massive swing from just under $200 million of adjusted EBITDA. So profitability in just under a $280 million loss for 2025. So just walk us through that. How did you have a situation where you had, you know, $2.6 billion of top line expansion but a swing from real profitability to a real loss at the end of the day?
- [07:36]
Scott Blackley
Yeah, 2025 was a really dynamic and challenging year for all carriers in really health insurance across multiple products. And the, the thing that happened there is there were some policy changes that impacted the market. You price a year in advance basically for your products. And if you don't know what the rules are that are going to be imposed, we all got caught a little bit offsides and we Think of it as a market reset year. So when I look through kind of the impacts of some of those shifts and look at the core business, I see strength in performance, which gives us confidence about. About transitioning back and returning to profitability in 26.
- [08:16]
Ann Berry
And what were some of those policy change changes, Scott, if you can give us some specifics.
- [08:21]
Scott Blackley
Yeah, sure. So there were really two that had significant impacts. The first is that CMS put into place a number of what they call program integrity initiatives, which are really validating. Are the people who are coming into that marketplace receiving the right amount of benefits? Those are subsidies that the government provides and doing more to ensure that any potential fraud was appropriately mitigated. We think all of those steps were, you know, headed in the right direction, but they came at a time where I think we were all. It impacted the number of people in the marketplace. And this is a marketplace where you underwrite all the people in the marketplace. You don't underwrite individual customers, you underwrite the marketplace. So when those rules changed, it changed the marketplace composition, and that had an impact. The second thing is we went through a period where a lot of individuals in Medicaid were kind of stranded in Medicaid during the COVID emergency coming out of COVID states, started doing Medicaid redetermination, where they looked at the people who were on Medicaid and transitioned them from Medicaid into the aca. And those people came in with much higher utilization patterns than I think any of us experience expected. And so the combination of Medicaid redetermination as well as the program and integrity initiatives drove losses in 25 for the industry. And we. We unfortunately suffered from that as well.
- [09:49]
Ann Berry
Well, one of the key ratios in this industry, one of the things we tried to do, Scott, on this show, is sort of bust through the jargon a bit to help folks subsequently be able to go and do their own homework to try to figure out what's going on. The medical loss ratio, the mlr, is a critical metric to assess how profitable a health insurance company can be. Put the numbers around that. In 2024, your MLR was just under 82%, ticked up to 87.4%, which is a meaningful jump up, particularly off the kinds of large revenue numbers that you've experienced. And in your 2026 guidance, you provided a full year outlook for this year. It looks as though Oscar is pretty confident that you're going to be able to drive MLRs back down by about 5 percentage points. How specifically is that going to be achieved?
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Scott Blackley
Well, the first and most important lever there is discipline pricing. And so when we look at all of the things that impact the marketplace and again the way the reason that you have MLRs is people use healthcare. And so you have to underwrite the whole system and try to determine how much utilization is going to happen in the marketplace and what has happened between 25 and 26, some of the subsidies that were provided by the government into the ACA expired. And so there is a portion of the members that were in the ACA who will no longer be able to afford health care. And so we expect them to transition out. Those members are most likely going to be healthy individuals that didn't use a lot of health care. And so the morbidity of the average market is going up. We've priced for that. We've built in our experience for 2025 and the impacts of losing those subsidies. 26 and so when we look at the pricing that we've done, which we and others have had a significant increase year over year in pricing, we think that we have built in all of that utilization risk that is, that is out there. And that's how you see our MLR is going from, you know, down by five points. As we were discussing.
- [11:55]
Ann Berry
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Ann Berry
And now back to my conversation with Scott Blackley, the chief financial officer for Oscar Help. There's almost a disconnect when I listen to you, Scott, talk about how underwriting happens in this industry. And I'll come back to the sort of the tech forward position that Oscar takes. On the one hand, you've said now several times that in health insurance you underwrite the market, but you price according to what the market broadly is going to look like. But if there's one buzzword that we hear in health care all the time now, it's personalization, right? Personalized medical records, personalized treatments. Where do you think this is going in terms of helping people square personalized access to health care, personalized need for health care, but still having to pay health insurance premiums that can be very disconnected from their own personal needs?
- [14:32]
Scott Blackley
It's such a profound point that you're making because when I look at at what is going on really across all businesses, it's this personalization point that you're making. When you go to buy a cell phone, you can take your phone number and go to any carrier you want and you can choose the plan that's best for you. If you want a different streaming service, you can pick from, you know, now what seems like, you know, hundreds of them. So everything that we're doing in our individual lives is to lean into choice and to be able to select that thing that works best for you. And one of the profound problems in health insurance today is most of our country receives health insurance from Their employer. And the employer is the one that makes the decision of what is the health plan we're going to offer our employees. And typically the employer will select 1, 2, 3 plans. And you have those options to pick from. And so, you know, you're stuck in that very narrow box of these are the choices you get. And what we're trying to do is to enable people to have choice. And that's what happens in the ACA is there are numerous carriers. You can pick a plan that meets your personal needs. If you have, you know, diabetes, for example, we have a diabetes plan that caters to people with those conditions. If you want a specific doctor, you can pick from whatever plan has that doctor in its network. And so the shift that we are trying to drive with Oscar is to move more people out of this kind of outmoded, employer sponsored type of plan into a more individual choice type of situation. And there's some vehicles we can talk about what those are to help make that happen. But we are really bullish about the people want choice. And the future of health insurance is a more individualized, you know, personal opportunity to pick your, your plan and to stick with the doctors that you want.
- [16:31]
Ann Berry
So talk about it then. So which are these vehicles, Scott, that can help you?
- [16:34]
Scott Blackley
So the, the one, it's got a terrible acronym called ichra, Individual Contribution hra.
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Ann Berry
Yeah, and so what it is, the
- [16:42]
Scott Blackley
best way to think about this is it's, it's like, you know, in the 60s, the employees received a defined benefit plan and the company funded your benefit plan that transitioned to a 401k where instead of the company putting money into its own account and then eventually paying it back to you, the company puts that in your 401 account and you make the decision as to how you want to invest it. ICHRA is kind of the same thing where instead of the employer buying the health plan for you, they put money into an account and then you're able to use that money to go out onto the ACA and buy the plan that's right for you.
- [17:20]
Ann Berry
So who wins and who loses in the world of icra, Scott, clearly you think Oscar's position to win in that world. I'd love to hear explicitly why. And then at whose expense? Who loses share in that world?
- [17:32]
Scott Blackley
Yeah, that is an important strategic question. Look, there's something like 75 million people who are in small and midsize businesses. And though the rates that those businesses have been playing on these commercial plans for employee sponsored health plans have been going up at, you know, High, double digit, like let's call it 15 to 25% a year. And the ACA has been increasing its prices, you know, on average 5%. And that takes into account the large increase that we just saw in the current year. So the price increases that employers are feeling are profound. And we think that is an opportunity to take advantage of that situation to help transition companies to say, why do you want to have this roll the dice every year with the increases in cost that you might experience. If you transition to a NICRA plan, you get more predictability, it is definitely going to be cheaper and your employees have more choice, which is what they want. And so that is, that's where we see this market going. Obviously the large incumbents, I won't go through and name them all, but there's a short list of, you know, who, who are those companies that have that market share? Those are the ones who are worried about the expansion of this market.
- [18:54]
Ann Berry
It's interesting to hear you describe that, Scott, because you're really, I guess, talking about persuading employers or perhaps you plan to go to the employees to have them go persuade their employers. But at the surface it sounds like you need the employers to get on with this. But at the same time, you've said that a lot of your members right now are self employed or they're gig economy workers. So how do you build that set of relationships with the group that ultimately could lobby to help this go further and inure to your benefit?
- [19:22]
Scott Blackley
It's a, it is, it is. The singular focus of our strategy right now is to, you know, so our 3.4 million members that we're going into 2026 with are primarily traditional ACA members. We have a small, you know, cohort of ICHRA members who have come through employer, you know, employer funded arrangements. And we've been working very hard to, to expand that marketplace. And so yes, it is a, an employer sell as, as a CFO who's always looking at the numbers like I look at the, the pitch, I'm like, this is such a no brainer, this has to work. But there are barriers to, to ICHRA coming really to fruition. One is organizations don't change their health plans easily. It impacts all of their employees. And so you really have to show the promise of, number one, that the ACA is a stable marketplace, number two, that it's cheaper. And why is it cheaper when you're in an employee sponsored health plan? The cost of that plan, it's an average, right? It's the average cost of all those employees. And so if you have five diabetics, a hemophiliac, several people that are going to have babies, those drive up the cost for everyone in that, that plan. If instead you take all those people and you put them into a 24 million live market, the average morbidity of that market doesn't move very much. And so it's more predictable and it's cheaper in the long run. So that is like, that's the hook of why is this? Why does the play work, work?
- [21:00]
Ann Berry
We'll talk in a moment, Scott, about how that may play into your share price. But before we go there, let's talk a bit about technology and the role that it plays in supporting the kind of growth and innovation that you're talking about. Talk to us about Oswell AI. This is one that, a better name, by the way, than the ICRA acronym. So talk to us about what that is.
- [21:19]
Scott Blackley
We, we chose Oswell. ICHRA was, was selected by the government, so no surprise there. But I think that the thing that's happening with Oswell is it's taking the best of large language models and then it's feeding it with all of the systems and data that we have about a member. It's a very curated, customized individual experience where our members are able to engage with Oswell, ask whatever questions they may want to learn about. Hey, I just had this test done. What did my lab say? I'm interested in learning more about my benefits. Is this doctor and network all the kinds of questions that members have to ask. Oswald can engage with you and answer those. And we've just seen a profound shift in the speed of the answer, the accuracy of the answers, and the satisfaction of our members. So it's really, first and foremost, it's providing our members with the ability to get those answers when they want them on their schedule, you know, in the way that they want. And that's the best part of this, is it's improving our customer satisfaction. And that's really the thing that Oscar's focused on is, you know, how do we surprise and delight our members every day? You know, when I step back from Oswell, it's, it's just one example of how we are using AI to change our business, you know, and I don't think that you can think about AI as being like just something you do to try to change your cost curve. I think if you think about it that way, you're probably missing the opportunity to change your customer experience, to change how you design and build products. And so really Thinking we are thinking at Oscar. How do we leverage our number one, we're cloud native, we build all of our own technology. We have one data environment. All of our systems talk to each other so we can plug in AI in a really efficient, efficient, quick way. So I think we're differentiated against our peers in that regard.
- [23:25]
Ann Berry
And is that why you call yourself a leading health care technology company, Scott, as opposed to leaning into the nomenclature of insurance?
- [23:33]
Scott Blackley
I think we are an n of 1 in that, you know, I don't know of any other health insurer who has a completely custom built tech chassis. And all of the functions that we need to deliver health care have been, you know, purpose built and they're interoperable. They, they work seamlessly. And we have one data environment which I think is a profound difference. So we can, we can deploy AI, use cases that are able to talk to all of our systems, pull data from everywhere. And if you want to have a question about claims, we can talk to you about claims. If you have a question about I had this customer, you know, conversation with one of your call agents. It pulls up that information. It can go through and read that what you, you know, what you experienced. If you have questions about cost, about what types of medications you might be doing, all those things can be looked at by Oswell and be brought into that conversation. So our tech is, we think about every business problem as an opportunity to use our tech to solve it. And I would just say this, this isn't something that we're only thinking about the back end of our business. You know, I really believe that as leaders we have to understand how large language models agentic AI works. I had my whole entire finance leadership team this week. We spent three hours with our engineers getting trained on tools and how do we solve just the problems that we have in finance using these tools. So I just, I think we're on the very front end of being able to both manage our costs and improve our MLR and expand our product set in ways that maybe even two years ago we could not have ever imagined that it would have been possible.
- [25:17]
Ann Berry
So let me ask you a question, Scott. You've a lot of experience in public companies. You're the CFO of Capital One before you joined Oscar and I hear the story and I look at 2025 was a rough year from a profitability perspective. There's no getting around it. But you've laid out a pretty compelling picture of how Oscar moves forward in a differentiated fashion from here where they plan to navig gate There can be puts and takes in the regulatory environment. But the question I have for you as someone who's looking at your stock is Oscar went public in kind of the go go days, right. Of 2021. And you're not alone. There are lots of tech stocks that went out there at very enthusiastic valuations. And you look at where the share price is now and it's down more than 60% since its IPO. So that being said, what, what do you say to the market? Do you say to them, look, we were just overvalued when we went out. It was a moment in time. The market was doing what it was doing. Where we are now, we should be part of the AI tech trade. But how do you get people or investors who've been in your stock for a long time, as you go out and speak to your shareholder base and say to them, there is a chance we get back up there, we get back to where we were.
- [26:28]
Scott Blackley
Yeah, and look, this is a scale business and the thing that we have now that we didn't have in 2021 is scale. And so we're now able to really lean into so many more types of things where we can really extract value as part of our business because of the scale. Just like the leverage that we get on our fixed cost base of going from 11.7 billion of revenue last year to something like 19 billion next year. That's a huge bottom line driver. So really the message that we have for our shareholders is, number one, you know, we believe that we can grow faster than the market and this is a market that's going to continue to grow. We've demonstrated that, you know, over every year of our history. We think that there is a significant opportunity to deliver improvements in SGA and in mlr. We've talked a lot about that in our, in our investor day that we had now a couple of years ago. And that is how we're running the company. We've got, you know, specific things that, that we are driving inside the company around medical cost management to help our members have more affordable care. That's all driven by technology and by, you know, the insights that we're able to glean from, from the tech that we, we deploy. So I think of this as really a story of like, I think most investors right now are looking for us to prove the case. And we think that 26 is going to be the year where we can really demonstrate that we are a differentiated player in a very big market. And so, you know, I think it's a terrific time from an entry point to come into the stock. We do think there's plenty, plenty of room for value to increase over time, and we're right on the front end of that.
- [28:17]
Ann Berry
Well, Scott Blackley, CFO of Oscar Health, please come back. As you said, this is a big, big year for your business. High expectations have been set. So we'd love to hear how it's all going. Come see us in studio.
- [28:26]
Scott Blackley
I appreciate it. Thank you, Anne.
- [28:28]
Ann Berry
Huge thanks to Scott Blackley for joining us. Great conversation and we look forward to having him back. That's it for today's Brew Markets Daily.
- [28:34]
Sponsor/Ad Voice
Brew Markets Daily is hosted by Anne Barry and produced by John Curto, Tarkab del Atif and Emily Millar. Our technical director is Uchenawa Ogu. Jim Orso is our audio engineer. Booking by A.B. silver. The President of Morning Brew Inc. Is Devin Emery. If you have any feedback or company you'd like us to COVID leave a comment or send an email to brewmarketshoworning
- [28:52]
Ann Berry
brew.com well, have a great weekend and we'll see you back here on Monday, same time, same place.