Chit Chat Stocks Episode Summary: Oscar Health Stock – Undervalued or Overhyped? (Ticker: OSCR)
Release Date: July 30, 2025
Hosts: Ryan Henderson and Brett Shafer

1. Introduction to Oscar Health and the ACA Marketplace

In this episode, Ryan Henderson and Brett Schafer delve into Oscar Health (Ticker: OSCR), a company making waves in the health insurance sector. Brett initiates the discussion by highlighting the company's popularity on platforms like Twitter, noting significant investor interest and growth metrics. He remarks, “There are so many different moving parts with this business today that I think it gets a little misunderstood on the bull side” (01:22).

Ryan underscores the complexity of the American healthcare system, especially the Affordable Care Act (ACA) marketplaces, which Oscar Health primarily operates within. He states, “Oscar Health is kind of one that separated itself from the path it went through” (02:36), emphasizing their unique positioning compared to other disruptors in the industry.

2. Personal Experiences with ACA Marketplaces

Brett shares his personal experience as an ACA marketplace user, detailing his choice of Ambetter (owned by Centene Corporation) due to affordability despite it being “clunky” (03:10). Ryan adds his frustrations with user interfaces, noting, “Once you finally get through it, you navigate it all that” (10:09). Both agree that while purchasing insurance through the marketplace is manageable, dealing with the insurance companies themselves can be cumbersome.

3. Economics and Medical Loss Ratio (MLR)

The hosts explore the financial mechanics of health insurers, focusing on the Medical Loss Ratio (MLR), which mandates that insurers spend at least 80% of premium income on healthcare claims and quality improvements. Brett explains, “In the individual and small group markets, insurers must spend at least 80% of their premium income on health care claims” (11:46). This restricts profitability to a mere 20%, pushing insurers like Oscar Health to differentiate through user experience and technology.

Ryan elaborates on how Oscar Health leverages technology to streamline processes, stating, “Ease of use is the biggest thing and they're working against fortunately for them a lot of clunky solutions” (16:10).

4. Management and Leadership Transition

A pivotal moment for Oscar Health came in March 2023 when the company faced a drastic drop in stock price and increasing losses. To steer the company back to profitability, Oscar Health hired Mark Bertolini, former CEO of Aetna, as the new CEO. Brett highlights Bertolini’s impact, saying, “He saved at least $100 million by renegotiating with pharmacy benefit managers” (23:46). Under his leadership, Oscar Health turned a net loss of $606 million in 2022 to a net income of $123 million over the past year, demonstrating a successful turnaround.

5. Market Opportunity and Competition

Oscar Health currently holds a 7% market share within the ACA marketplaces across 18 states, with significant growth in states like Iowa, where their market share surged from 4% to 18% (09:19). Competitors include Centene, Elevance Health, and United Healthcare, all established players. However, Oscar’s focus on technology and customer experience sets them apart. Brett mentions, “Given the restrictions, as Ryan mentioned, given the fact that you can't even differentiate on the health plan finder websites, the fact that they're able to do that shows how much better the product is” (30:03).

The potential expansion of Individual Coverage Health Reimbursement Arrangements (ICHRA) could further amplify Oscar’s market opportunity by unlocking an estimated 75 million new payers, significantly expanding their addressable market (37:00).

6. Valuation and Financial Analysis

The hosts discuss the complexities of valuing Oscar Health, cautioning against treating it purely as a tech company due to its insurance business constraints. Brett points out the importance of underwriting profitability over mere revenue growth, stating, “What matters first is underwriting profitable insurance” (50:44). Despite current challenges, including a revised 2025 guidance predicting an operating loss of $230 million, Oscar Health maintains a strong balance sheet with nearly $5 billion in liquid assets.

Ryan remains cautiously optimistic, noting, “There is much higher uncertainty here compared to a typical business” (50:06). However, he acknowledges the potential for significant upside if Oscar achieves its projected operating margins, potentially turning the stock into a “four bagger” (55:33).

7. Future Prospects: Oscar Plus and Emerging Moat

Oscar Health’s ambitious initiative, Oscar Plus, aims to integrate unified data for patients and providers, enhancing the customer experience and creating additional revenue streams. Brett describes it as a “moonshot,” comparing it to systems like EPIC but tailored for Oscar’s network (46:43). This move could establish an emerging moat by differentiating Oscar through superior technology and integrated services.

Moreover, Brett argues that Oscar possesses an emerging moat through its scale and technological advancements, which allow for risk diversification and a more extensive provider network. He asserts, “I think Oscar Health can do the same in health insurance and that they have, I would say, definitely an emerging moat” (59:07).

8. Hosts' Final Thoughts and Investment Considerations

Concluding the episode, Brett and Ryan weigh the risks and rewards of investing in Oscar Health. Brett tentatively expresses interest, citing the company’s growth potential and management’s effectiveness in navigating industry challenges. Ryan mirrors this sentiment, acknowledging the short-term uncertainties but recognizing the long-term upside.

Brett summarizes, “There is more uncertainty here than the average stock that we look at,” but also emphasizes the potential for substantial returns if Oscar Health successfully scales and capitalizes on emerging opportunities like ICHRA and Oscar Plus (58:32).

Key Quotes:

• Brett Schafer (01:22): “There are so many different moving parts with this business today that I think it gets a little misunderstood on the bull side.”

• Ryan Henderson (02:36): “Oscar Health is kind of one that separated itself from the path it went through.”

• Brett Schafer (23:46): “He saved at least $100 million by renegotiating with pharmacy benefit managers.”

• Brett Schafer (30:03): “Given the restrictions, as Ryan mentioned, given the fact that you can't even differentiate on the health plan finder websites, the fact that they're able to do that shows how much better the product is.”

• Ryan Henderson (55:06): “It seems pretty uncertain to me. Yeah, it feels like 5% was kind of a hopeful figure.”

• Brett Schafer (59:07): “I think Oscar Health can do the same in health insurance and that they have, I would say, definitely an emerging moat.”

Conclusion

The "Chit Chat Stocks" hosts provide a comprehensive analysis of Oscar Health, balancing its innovative technological approach and market positioning against the inherent uncertainties of the health insurance industry. While acknowledging short-term financial challenges, they highlight Oscar’s potential for growth and establishing a competitive edge through technology and customer-centric strategies. Investors are encouraged to weigh the promising long-term prospects against the immediate risks associated with regulatory changes and market dynamics.

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