Company Overview - Oscar Health Inc. (OSCR) has experienced significant growth since its IPO in 2021 and achieved profitability in 2024 [1] - The company faced challenges in 2025 but is expected to return to a profitable trajectory [1] Leadership and Expertise - Stefan, the CIO/Founder of Sunshine Kapital, has a BA in Finance and twenty years of institutional experience in Research and Portfolio Management, focusing on distressed situations and value opportunities [1]

Financial Data and Key Metrics Changes - The company reiterated its 2025 outlook, indicating improved utilization trends throughout the second quarter and into the third quarter, with no significant concerns regarding core performance [3][4] - Membership loss due to dual enrollment and failure to reconcile was modest and deemed immaterial, suggesting positive trends for market morbidity in 2025 [5][8] - The company expects an increase in Medical Loss Ratio (MLR) in the second half of the year, aligning more closely with 2023 dynamics rather than 2024 [11][12] Business Line Data and Key Metrics Changes - The company has seen a strong amount of Special Enrollment Period (SEP) growth, but anticipates less pressure from SEPs in the second half of the year due to the end of continuous SEP for individuals at 150% of the federal poverty level [11][12] - Membership is expected to be modestly below second quarter amounts by the end of the year, but more member months are anticipated in the second half compared to the first half [19][20] Market Data and Key Metrics Changes - The company is preparing for the 2026 rate re-filing, considering various factors including market morbidity shifts and the expiration of subsidies [21][22] - Pricing strategies for 2026 are being built on historical trends and expected market conditions, with a focus on ensuring appropriate pricing for risks [22][24] Company Strategy and Development Direction - The company is optimistic about the ICHRA market, having launched new plans and formed partnerships to enhance community engagement [59][61] - There is a focus on leveraging technology to improve operational efficiency and reduce costs, with ongoing initiatives in areas like fraud prevention and administrative expenses [55][57] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current market environment, noting that utilization trends are not causing concern [4][35] - There is cautious optimism regarding the potential extension of enhanced subsidies, which could positively impact financial performance [42][43] Other Important Information - The company has significant excess capital and feels well-positioned to fund operations across various scenarios, with minimal leverage on its balance sheet [48][49] - The company is actively working with brokers to ensure members are informed about changes and can navigate potential subsidy losses effectively [30][29] Q&A Session Summary Question: What are the expectations regarding dual enrollment and FTR populations? - Management noted that the impact of dual enrollment and FTR populations has been modest, with a slight positive effect on market morbidity [7][8] Question: How does the company view MLR progression in the first half of the year? - Management expects MLR to increase in the second half, aligning more with 2023 trends, and has built expectations for increased utilization in Q4 [11][14] Question: What is the company's strategy for pricing in 2026? - The company is stacking risks in pricing for 2026, considering various factors including market morbidity shifts and the expiration of subsidies [22][23] Question: How does the company plan to manage capital levels? - Management feels confident about capital levels, indicating that they have adequate resources to fund operations and minimal leverage on the balance sheet [48][49] Question: What are the prospects for the ICHRA market? - Management remains optimistic about the ICHRA market, highlighting recent partnerships and the potential for growth despite short-term pricing challenges [59][61]

Financial Data and Key Metrics Changes - The company reiterated its 2025 outlook, indicating an improvement in utilization trends throughout the second quarter and into the third quarter, with utilization trends returning to expected levels for the risk in the book [3][4] - Membership loss due to dual enrollment and failure to reconcile was modest and immaterial, suggesting positive trends for market morbidity in 2025 [5][8] - The company expects an increase in Medical Loss Ratio (MLR) in the second half of the year, aligning more closely with 2023 dynamics rather than 2024 [12][13] Business Line Data and Key Metrics Changes - The dual enrollment population saw about 18,000 members lose their subsidies, which is consistent with overall market trends, indicating a modest effect on the company's book [6][7] - The company anticipates that membership in the second half of the year will be modestly below the second quarter amounts, but expects more member months in the back half compared to the first half [20][21] Market Data and Key Metrics Changes - The company is preparing for the expiration of enhanced subsidies at the end of the year, which may lead to a significant reduction in market size, but has positioned itself to offer alternatives to members losing subsidies [29][30] - The pricing strategy for 2026 incorporates various risks, including the expiration of subsidies and market morbidity shifts, with a focus on ensuring appropriate pricing for the risks involved [22][24] Company Strategy and Development Direction - The company is optimistic about the ICHRA market, having launched partnerships to enhance community engagement and product offerings, viewing it as a rapidly growing sector in the individual market [59][61] - The company is focused on cost reduction initiatives, leveraging technology and AI to improve operational efficiency and reduce administrative expenses [56][57] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current environment, noting that utilization trends are not causing concern and that the impact of dual enrollment and failure to reconcile is less severe than anticipated [37] - There is cautious optimism regarding the potential extension of enhanced subsidies, which could positively impact financial performance if realized [44][46] Other Important Information - The company has significant excess capital and feels confident about its liquidity position, with adequate resources to fund operations in various scenarios [49][50] - The company is actively engaging with regulators to ensure appropriate pricing and has had constructive conversations regarding market conditions [26][27] Q&A Session Summary Question: What are the expectations regarding utilization trends? - Management noted that utilization trends have moderated and returned to expected levels, with no significant concerns about core performance [4] Question: How is the company addressing the impact of dual enrollment and failure to reconcile? - The company reported modest membership loss from these factors, which is not expected to significantly impact market morbidity [5][8] Question: What is the outlook for MLR in the second half of the year? - Management expects MLR to increase in the latter half of the year, aligning more closely with previous years' trends [12][13] Question: How is the company preparing for the expiration of enhanced subsidies? - The company has planned for the expiration and is ensuring that members have alternative options to maintain coverage [29][30] Question: What is the company's strategy for the ICHRA market? - The company is excited about ICHRA opportunities and has launched partnerships to enhance community engagement and product offerings [59][61] Question: How does the company view its capital position? - Management expressed confidence in the company's capital position, indicating sufficient resources to fund operations and growth [49][50]

Core Viewpoint - The most shorted stocks on Wall Street, including Rocket Companies Inc, Oscar Health Inc, and Hims & Hers Health Inc, are positioned precariously, with significant short interest indicating potential for volatility and short squeezes [1][2][6]. Group 1: Company Performance - Rocket Companies has seen a remarkable increase of over 75% year-to-date, with a market capitalization nearing $40 billion and 37% of its shares sold short [3]. - Oscar Health has rebounded with a 25% increase this year, maintaining a short interest just under 30% and only 1.5 days to cover, indicating a potential for a quick squeeze [4]. - Hims & Hers has experienced a staggering 170% rise over the past year, although it has recently pulled back nearly 25%. It has a market cap of $9.7 billion and 35% of its float remains shorted, making it a high-risk short position [5]. Group 2: Market Dynamics - The current market environment is characterized by high short interest ratios and thin days to cover, suggesting that Rocket, Oscar, and Hims could transition from being heavily shorted to experiencing significant upward momentum if retail traders engage [2][6]. - The presence of retail traders looking for the next potential squeeze adds to the volatility of these stocks, making them susceptible to rapid price changes [2][6].

Core Viewpoint - The article discusses the lack of investment positions held by Parkev Tatevosian and The Motley Fool in the mentioned stocks, emphasizing their disclosure policy and potential compensation for promoting services [1] Group 1 - Parkev Tatevosian, CFA, has no position in any of the stocks mentioned [1] - The Motley Fool also has no position in any of the stocks mentioned [1] - The disclosure policy of The Motley Fool is highlighted, indicating transparency in their operations [1]

Core Viewpoint - Oscar Health Inc. is experiencing a decline in stock price despite a year-to-date gain of approximately 15%, attributed to a recent partnership with Hy-Vee to launch a new employer health insurance plan [1][5]. Group 1: Company Developments - Oscar Health announced a partnership with Hy-Vee to introduce "Hy-Vee Health with Oscar," an employer health insurance plan aimed at covering 400,000 local employees in Des Moines, Iowa, starting November 1, 2025 [1]. - The new insurance plan is expected to save businesses 20% to 30% and employees between $500 to $1,000 annually [2]. - Oscar Health reported second-quarter revenue of approximately $2.86 billion, an increase from $2.2 billion year-over-year, but fell short of the consensus estimate of $2.91 billion [3]. Group 2: Financial Performance - The company reported a loss of 89 cents per share for the second quarter, missing the consensus estimate of 86 cents [3]. - The medical loss ratio for the second quarter of 2025 was 91.1%, up from 79.0% in the same quarter of 2024, primarily due to increased market morbidity [4]. - Oscar Health reaffirmed its fiscal 2025 sales guidance of $12 billion to $12.2 billion, exceeding Wall Street's estimate of $11.32 billion, and expects a medical loss ratio of 86% to 87% for 2025 [4]. Group 3: Market Sentiment - The health insurance sector received a positive sentiment boost following investments from notable investors like Michael Burry and Warren Buffett in UnitedHealth Group, benefiting peers such as Oscar Health [5].

Core Insights - Oscar Health (NYSE: OSCR) released its Q2 earnings, which aligned with preliminary results, indicating stability in performance [1] - Following the earnings release, Oscar's stock price has rebounded from recent lows, suggesting positive market sentiment [1] Company Analysis - Oscar Health is focused on high-quality growth, emphasizing sustainable competitive advantages and expanding market opportunities [1] - The company is also involved in turnaround situations and contrarian investments, targeting fundamentally sound companies that are undervalued due to temporary challenges [1] Market Commentary - The analysis reflects a broader understanding of market conditions, macroeconomic trends, and sector rotations, which are crucial for informed investment decisions [1]

Core Insights - The article emphasizes the importance of fundamental analysis in identifying undervalued, best-in-class companies, similar to the strategies employed by renowned investors like Warren Buffett and Peter Lynch [1]. Company and Industry Summary - The analyst has a long position in shares of OSCR, CNC, and UNH, indicating a positive outlook on these companies [2]. - The article does not provide specific financial metrics or performance data for the mentioned companies, focusing instead on the investment philosophy [1][2].

Core Viewpoint - Oscar Health (OSCR) is experiencing a short-term reset that the market has misinterpreted as a long-term structural failure [1] Financial Performance - The company's Q2 earnings showed significant results at a surface level, indicating potential for recovery despite market misreadings [1] Leadership & Management Analysis - Oscar Health has a proven track record in scaling businesses, demonstrating smart capital allocation and insider ownership [1] - The company has shown consistent revenue growth and credible guidance, which are critical for investor confidence [1] Market Positioning - Oscar Health benefits from a strong technology moat and first-mover advantage, which positions it well in the competitive landscape [1] - The company is leveraging network effects that drive exponential growth and has achieved market penetration in high-growth industries [1] Financial Health - Oscar Health is characterized by sustainable revenue growth and efficient cash flow, contributing to its financial stability [1] - The company maintains a strong balance sheet and a long-term survival runway, which are essential for navigating market challenges [1] Investment Methodology - The investment strategy focuses on identifying high-conviction opportunities with a balanced portfolio construction, including core positions, growth bets, and speculative investments [1]

[Forward-Looking Statements](index=3&type=section&id=FORWARD%20LOOKING%20STATEMENTS) This section outlines future-oriented statements and key risks related to strategy execution, membership, profitability, and regulatory compliance - Forward-looking statements cover future results, financial position, risk adjustment payments, industry trends, business strategy, membership growth, and operational objectives[11](index=11&type=chunk) - Key risks include the ability to execute strategy and manage growth, retain members, accurately estimate medical expenses, maintain profitability, manage risk adjustment programs, comply with regulations (ACA changes, APTCs), heightened competition, and data security breaches[12](index=12&type=chunk)[16](index=16&type=chunk) [Part I - Financial Information](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements of Oscar Health, Inc. for the periods ended June 30, 2025, and 2024, including statements of operations, comprehensive income, balance sheets, stockholders' equity, and cash flows, along with detailed notes explaining the company's organization, accounting policies, and specific financial line items [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements of Oscar Health, Inc. for the periods ended June 30, 2025, and 2024, including statements of operations, comprehensive income, balance sheets, stockholders' equity, and cash flows, along with detailed notes explaining the company's organization, accounting policies, and specific financial line items [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, expenses, and net income or loss over specific periods, highlighting changes in profitability Three Months Ended June 30, 2025 vs. 2024 | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :-------------------------------- | :------------------ | :------------------ | :----------- | | Premium Revenue | $2,803,444 | $2,164,116 | +29.5% | | Total Revenue | $2,863,945 | $2,219,341 | +29.0% | | Medical Expenses | $2,552,973 | $1,708,722 | +49.4% | | SG&A Expenses | $534,485 | $435,206 | +22.8% | | Earnings (loss) from operations | $(230,483) | $67,812 | From profit to loss | | Net income (loss) attributable to Oscar Health, Inc. | $(228,361) | $56,207 | From profit to loss | | Basic EPS | $(0.89) | $0.24 | From profit to loss | | Diluted EPS | $(0.89) | $0.20 | From profit to loss | Six Months Ended June 30, 2025 vs. 2024 | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :-------------------------------- | :------------------ | :------------------ | :----------- | | Premium Revenue | $5,799,265 | $4,257,798 | +36.2% | | Total Revenue | $5,910,208 | $4,361,646 | +35.5% | | Medical Expenses | $4,812,624 | $3,263,496 | +47.5% | | SG&A Expenses | $1,017,244 | $829,368 | +22.7% | | Earnings (loss) from operations | $66,640 | $253,370 | -73.7% | | Net income (loss) attributable to Oscar Health, Inc. | $46,910 | $233,575 | -79.9% | | Basic EPS | $0.19 | $0.99 | -80.8% | | Diluted EPS | $0.17 | $0.82 | -79.2% | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents net income or loss alongside other comprehensive income items, such as unrealized gains or losses on investments Three Months Ended June 30, 2025 vs. 2024 | Metric | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Net income (loss) | $(228,491) | $56,312 | | Net unrealized gains (loss) on securities available for sale | $4,119 | $(31) | | Comprehensive income (loss) attributable to Oscar Health, Inc. | $(224,242) | $56,176 | Six Months Ended June 30, 2025 vs. 2024 | Metric | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Net income (loss) | $47,015 | $233,794 | | Net unrealized gains (loss) on securities available for sale | $15,547 | $(3,934) | | Comprehensive income (loss) attributable to Oscar Health, Inc. | $62,457 | $229,641 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time As of June 30, 2025 vs. December 31, 2024 | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------- | | Total Assets | $6,384,127 | $4,840,496 | +31.9% | | Cash and cash equivalents | $2,598,942 | $1,527,186 | +70.2% | | Short-term investments | $938,102 | $624,461 | +50.2% | | Long-term investments | $1,845,884 | $1,815,254 | +1.7% | | Total Liabilities | $5,222,777 | $3,824,071 | +36.6% | | Benefits payable | $1,551,632 | $1,356,730 | +14.4% | | Risk adjustment transfer payable | $2,647,187 | $1,558,341 | +69.9% | | Total Stockholders' Equity | $1,161,350 | $1,016,425 | +14.3% | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement tracks changes in the equity accounts, including accumulated deficit and other comprehensive income, over the reporting period - Total stockholders' equity increased from **$1.016 billion** as of December 31, 2024, to **$1.161 billion** as of June 30, 2025[23](index=23&type=chunk)[25](index=25&type=chunk) - Accumulated deficit decreased from **$(2.851) billion** at the beginning of the six-month period to **$(2.804) billion** at the end, reflecting net income for the period[25](index=25&type=chunk) - Accumulated other comprehensive income (loss) significantly improved from **$(1.8) million** to **$13.7 million**, primarily due to unrealized gains on investments[25](index=25&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement categorizes cash inflows and outflows from operating, investing, and financing activities, showing the overall change in cash Six Months Ended June 30, 2025 vs. 2024 | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :-------------------------------- | :------------------ | :------------------ | :----------- | | Net cash provided by operating activities | $1,387,609 | $1,131,514 | +22.6% | | Net cash used in investing activities | $(342,435) | $(778,216) | -56.0% (less cash used) | | Net cash provided by financing activities | $27,006 | $46,011 | -41.3% | | Increase in cash, cash equivalents and restricted cash equivalents | $1,072,180 | $399,309 | +168.5% | | Cash, cash equivalents, restricted cash and cash equivalents—end of period | $2,623,298 | $2,291,280 | +14.5% | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and additional information supporting the condensed consolidated financial statements [Note 1 - Organization](index=10&type=section&id=Note%201%20-%20Organization) This note describes the company's business, operations, market presence, and recent acquisitions - Oscar Health, Inc. is a leading healthcare technology company, traded on NYSE under "OSCR"[28](index=28&type=chunk) - Operates as one reportable segment, selling insurance through federal and state healthcare exchanges and leveraging its technology platform via +Oscar[29](index=29&type=chunk) - Acquired INSXCloud, IHC Specialty Benefits, and Healthinsurance.org in May 2025 to expand individual market presence[29](index=29&type=chunk) - Serves approximately **2.0 million** effectuated members as of June 30, 2025[30](index=30&type=chunk) - Recorded a **$14.9 million** adjustment in SG&A expenses in Q2 2025 related to prior periods (2023-2024), deemed immaterial[33](index=33&type=chunk) [Note 2 - Earnings Per Share](index=12&type=section&id=Note%202%20-%20Earnings%20Per%20Share) This note explains the calculation of basic and diluted earnings per share and the treatment of potentially dilutive securities - Basic EPS is calculated by dividing net income (loss) attributable to Oscar Health, Inc. by weighted-average common shares outstanding[38](index=38&type=chunk) - In net loss periods (e.g., Q2 2025), potentially dilutive securities are excluded, resulting in basic EPS equaling diluted EPS[38](index=38&type=chunk)[39](index=39&type=chunk) Earnings Per Share (EPS) | Period | Basic EPS | Diluted EPS | | :-------------------------------- | :-------- | :---------- | | Three Months Ended June 30, 2025 | $(0.89) | $(0.89) | | Three Months Ended June 30, 2024 | $0.24 | $0.20 | | Six Months Ended June 30, 2025 | $0.19 | $0.17 | | Six Months Ended June 30, 2024 | $0.99 | $0.82 | - As of June 30, 2025, **70.2 million** potential common shares were excluded from diluted EPS calculation due to their anti-dilutive effect[39](index=39&type=chunk) [Note 3 - Revenue Recognition](index=13&type=section&id=Note%203%20-%20Revenue%20Recognition) This note details the components of premium revenue and other revenues, including risk adjustment transfers and direct policy premiums - Premium revenue includes direct policy premiums, assumed policy premiums, and risk adjustment transfers, net of ceded reinsurance premiums[40](index=40&type=chunk) Direct Policy Premiums from CMS (in thousands) | Period | 2025 | 2024 | | :-------------------------------- | :--------- | :--------- | | Three Months Ended June 30, | $3,244,700 | $2,350,000 | | Six Months Ended June 30, | $6,387,100 | $4,463,800 | Risk Adjustment Transfers (in thousands) | Period | 2025 | 2024 | | :-------------------------------- | :----------- | :----------- | | Three Months Ended June 30, | $(692,245) | $(432,895) | | Six Months Ended June 30, | $(1,065,994) | $(702,293) | - Other revenues include services from the +Oscar platform, virtual credit card rebates, revenue from three companies acquired in May 2025, and sublease revenue[42](index=42&type=chunk) [Note 4 - Investments](index=13&type=section&id=Note%204%20-%20Investments) This note provides information on net investment income, fair value of available-for-sale securities, and their contractual maturities Net Investment Income (in thousands) | Period | 2025 | 2024 | | :-------------------------------- | :--------- | :--------- | | Three Months Ended June 30, | $54,004 | $49,994 | | Six Months Ended June 30, | $100,116 | $92,983 | - The increase in investment income is primarily due to a larger asset base, partially offset by lower yield[132](index=132&type=chunk) Fair Value of Available-for-Sale Securities (June 30, 2025, in thousands) | Security Type | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | | :-------------------------- | :------------- | :--------------- | :---------------- | :--------- | | U.S. treasury and agency securities | $2,139,743 | $14,703 | $(2,410) | $2,152,036 | | Corporate notes | $591,655 | $2,134 | $(286) | $593,503 | | Asset-backed securities | $35,987 | $71 | $(20) | $36,038 | | Total | $2,769,794 | $16,908 | $(2,716) | $2,783,986 | Contractual Maturity of Fixed Maturity Securities (June 30, 2025, in thousands) | Maturity Period | Amortized Cost | Fair Value | | :-------------------------- | :------------- | :--------- | | Due in one year or less | $936,157 | $938,102 | | Due after one year through five years | $1,725,382 | $1,736,500 | | Due after five years through ten years | $105,846 | $106,975 | | Total | $2,767,385 | $2,781,577 | [Note 5 - Fair Value Measurements](index=15&type=section&id=Note%205%20-%20Fair%20Value%20Measurements) This note categorizes assets measured at fair value into Level 1, Level 2, and Level 3 based on input observability - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[50](index=50&type=chunk)[52](index=52&type=chunk) Assets Measured at Fair Value (June 30, 2025, in thousands) | Asset Type | Level 1 | Level 2 | Level 3 | Total | | :-------------------------- | :-------- | :---------- | :-------- | :---------- | | Cash equivalents | $104,475 | $— | $— | $104,475 | | U.S. treasury and agency securities | $— | $2,152,036 | $— | $2,152,036 | | Corporate notes | $— | $593,503 | $— | $593,503 | | Asset-backed securities | $— | $36,038 | $— | $36,038 | | Restricted investments (U.S. treasury securities) | $— | $6,730 | $— | $6,730 | | Total assets | $104,475 | $2,788,307 | $— | $2,892,782 | - No assets were measured using Level 3 inputs as of June 30, 2025[51](index=51&type=chunk) [Note 6 - Restricted Cash and Restricted Deposits](index=16&type=section&id=Note%206%20-%20Restricted%20Cash%20and%20Restricted%20Deposits) This note details the amounts and purposes of restricted cash, cash equivalents, and investments - Restricted cash and cash equivalents totaled **$24.4 million** as of June 30, 2025, up from **$23.9 million** at December 31, 2024[55](index=55&type=chunk) - Restricted investments totaled **$6.7 million** as of June 30, 2025, down from **$6.9 million** at December 31, 2024[55](index=55&type=chunk) Restricted Deposits (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Restricted cash and cash equivalents | $24,356 | $23,932 | | Restricted investments | $6,730 | $6,946 | | Total Restricted deposits | $31,086 | $30,878 | - These deposits are pledged to state agencies for insurance licensure or property leases[54](index=54&type=chunk) [Note 7 - Benefits Payable](index=17&type=section&id=Note%207%20-%20Benefits%20Payable) This note explains the changes in benefits payable, including claims incurred and prior period development - Benefits payable, net, increased from **$1.298 billion** at the beginning of the six-month period to **$1.532 billion** at June 30, 2025[57](index=57&type=chunk) - Claims incurred and CAE for the current year totaled **$5.017 billion** for the six months ended June 30, 2025[57](index=57&type=chunk) - Favorable prior period development of **$(163.6) million** was recognized for the six months ended June 30, 2025, primarily from lower than expected paid claims for 2024[57](index=57&type=chunk) [Note 8 - Debt](index=18&type=section&id=Note%208%20-%20Debt) This note describes the company's convertible senior notes and revolving credit facility, including their terms and carrying amounts - The 2031 Notes have an aggregate principal amount of **$305.0 million**, bear **7.25%** interest, and mature on December 31, 2031[58](index=58&type=chunk) - The Class A common stock sales price condition was satisfied in Q2 2025, making the 2031 Notes convertible at the option of the holder during Q3 2025[61](index=61&type=chunk) - As of June 30, 2025, the net carrying amount of the 2031 Notes was **$299.9 million**, with an estimated fair value of **$807.5 million** (Level 3 measurement)[62](index=62&type=chunk) - The company has a **$115.0 million** Revolving Credit Facility, available until December 28, 2025, with no outstanding borrowings as of June 30, 2025[64](index=64&type=chunk)[66](index=66&type=chunk) [Note 9 - Reinsurance](index=19&type=section&id=Note%209%20-%20Reinsurance) This note outlines the company's reinsurance strategies, ceded premiums, and medical expenses reconciliation - The company uses quota share and XOL reinsurance to limit risk and capital requirements[67](index=67&type=chunk) - For the six months ended June 30, 2025, **49%** of premium was ceded under reinsurance contracts accounted for under deposit accounting (**55%** in 2024)[70](index=70&type=chunk) Medical Expenses Reconciliation (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :-------------------------- | :--------- | :--------- | | Direct claims incurred | $4,830,401 | $3,203,712 | | Ceded reinsurance claims | $(53,215) | $(49,652) | | Assumed reinsurance claims | $35,438 | $109,436 | | Medical expenses | $4,812,624 | $3,263,496 | Reinsurance Recoverable Balance (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Reinsurance premium and claim recoverables | $190,938 | $288,878 | | Reinsurance ceding commissions | $7,002 | $6,996 | | Experience refunds on reinsurance agreements | $(5,242) | $(4,338) | | Total Reinsurance recoverable | $192,698 | $291,537 | - Reinsurers have financial strength ratings of A+ or higher[73](index=73&type=chunk) [Note 10 - Business Arrangements](index=22&type=section&id=Note%2010%20-%20Business%20Arrangements) This note discusses the consolidation of Variable Interest Entities (VIEs) and their collective assets and liabilities - The company consolidates financial results of Variable Interest Entities (VIEs), which include integrated health systems and medical professional corporations[76](index=76&type=chunk) Collective Assets and Liabilities of VIEs (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Assets | $104,253 | $102,550 | | Liabilities | $67,295 | $63,114 | [Note 11 - Related Party Transactions](index=22&type=section&id=Note%2011%20-%20Related%20Party%20Transactions) This note discloses transactions with related parties, specifically regarding convertible notes and registration rights - The 2031 Notes were issued to funds affiliated with Thrive Capital, which are related parties[78](index=78&type=chunk) - Notes and Class A common stock issued upon conversion are subject to registration rights under the Investors' Rights Agreement[78](index=78&type=chunk) [Note 12 - Commitments and Contingencies](index=22&type=section&id=Note%2012%20-%20Commitments%20and%20Contingencies) This note details the company's exposure to legal proceedings, regulatory reviews, and other contingent liabilities - Subject to reviews by state insurance and healthcare regulatory authorities, which may result in fines or practice changes[79](index=79&type=chunk) - Involved in legal proceedings, including class actions, related to claims payment, contracts, employment, and intellectual property[80](index=80&type=chunk) - A securities class action lawsuit (Carpenter v. Oscar Health, Inc., et al.) was dismissed with prejudice on April 22, 2025[81](index=81&type=chunk) - Received an estimated net recovery of **$24.1 million** in Q1 2025 from a settlement related to halted ACA CSR subsidy payments[84](index=84&type=chunk) - Estimates of losses from legal and regulatory matters are inherently difficult to predict[82](index=82&type=chunk) [Note 13 - Segment Information](index=24&type=section&id=Note%2013%20-%20Segment%20Information) This note confirms the company operates as a single reportable segment and provides consolidated financial metrics - The company operates and reports as a single reportable segment[86](index=86&type=chunk) - The CODM reviews consolidated Net income (loss) attributable to Oscar Health, Inc. and Earnings from operations[86](index=86&type=chunk) Segment Financials (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :-------------------------------- | :--------- | :--------- | | Total revenue | $5,910,208 | $4,361,646 | | Medical expenses | $4,812,624 | $3,263,496 | | Selling, general, and administrative expenses | $1,017,244 | $829,368 | | Earnings (loss) from operations | $66,640 | $253,370 | | Net income (loss) attributable to Oscar Health, Inc. | $46,910 | $233,575 | - The majority of total revenue comes from health insurance policy premiums, primarily from CMS subsidies (Advanced Premium Tax Credit program)[90](index=90&type=chunk) [Note 14 - Risk Adjustment](index=25&type=section&id=Note%2014%20-%20Risk%20Adjustment) This note explains the risk adjustment program, its impact on revenue, and the variability of related estimates - Risk adjustment programs mitigate adverse selection and stabilize health insurers by adjusting plan revenue based on member risk scores[91](index=91&type=chunk) Net Risk Adjustment Balance (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Beginning balance | $1,493,562 | $1,005,016 | | Change in accrual, net | $1,066,008 | $701,887 | | Ending balance | $2,559,570 | $1,706,903 | - The company significantly increased its estimate of the net risk adjustment payable for the 2025 policy year due to new third-party reports indicating a meaningful market-wide increase in morbidity[94](index=94&type=chunk) - Risk adjustment estimates are subject to high variability and uncertainty, influenced by market data, legislation, and competitor actions[91](index=91&type=chunk)[113](index=113&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, discussing key performance indicators, recent developments, regulatory trends, and critical accounting policies. It analyzes revenue, expenses, and profitability metrics for the reported periods [Overview](index=26&type=section&id=Overview) This section provides a high-level introduction to the company's business model, recent strategic actions, and key performance indicators - Oscar is a healthcare technology company focused on member experience, serving individuals, families, and employees through the ACA and offering health technology solutions via +Oscar[97](index=97&type=chunk) - Acquired INSXCloud, IHC Specialty Benefits, and Healthinsurance.org in May 2025 to strengthen its individual market presence[97](index=97&type=chunk) - Serves approximately **2.0 million** effectuated members as of June 30, 2025[97](index=97&type=chunk) - Key metrics reviewed include Total Revenue, Medical Loss Ratio (MLR), Selling, General, and Administrative Expense Ratio (SG&A Expense Ratio), Earnings from Operations, and Net Income (loss) attributable to Oscar Health Inc[98](index=98&type=chunk) [Recent Developments, Trends and Other Key Factors Impacting Performance](index=27&type=section&id=Recent%20Developments,%20Trends%20and%20Other%20Key%20Factors%20Impacting%20Performance) This section discusses external and internal factors, including regulatory changes and market dynamics, influencing the company's performance [Regulatory Developments and Trends](index=27&type=section&id=Regulatory%20Developments%20and%20Trends) This subsection analyzes the impact of government policies, such as APTCs and CMS rules, on the healthcare marketplace and company operations - Enhanced APTCs under ARPA are set to expire at the end of 2025, potentially making insurance unaffordable for some individuals if not renewed[105](index=105&type=chunk) - CMS enacted new measures in H2 2024 to improve marketplace integrity, potentially making valid enrollments and APTC acquisition more difficult[106](index=106&type=chunk) - CMS issued Program Integrity Rules (effective Aug 25, 2025) creating new eligibility verification processes, shortening open enrollment, and requiring APTC reconciliation[106](index=106&type=chunk) - The One Big Beautiful Bill Act (OBBBA) limits APTC eligibility for certain populations and requires additional verification[106](index=106&type=chunk) - Medicaid redeterminations (began April 1, 2023) contributed to ACA membership increases, but future impact is expected to be less significant, while also increasing market morbidity[108](index=108&type=chunk) - Proposed tariffs on pharmaceutical products and medical devices could increase costs and impact medical expenses[109](index=109&type=chunk) [SEP Market Dynamics Developments and Trends](index=29&type=section&id=SEP%20Market%20Dynamics%20Developments%20and%20Trends) This subsection examines how Special Enrollment Periods and other market dynamics affect premiums, claims, and risk adjustment transfers - Special Enrollment Period (SEP) and other market dynamics can impact per member premiums, claims, and risk adjustment transfers[110](index=110&type=chunk) - Higher SEP growth in 2024 may have contributed to an increase in the risk transfer payable for 2024 and H1 2025[110](index=110&type=chunk) [Members](index=30&type=section&id=Members) This subsection discusses factors influencing membership changes, including pricing, market expansion, and regulatory actions - Membership changes are influenced by pricing, benefits, market expansion/exit, disenrollments, SEP, Medicaid redeterminations, and regulatory actions (e.g., CMS integrity initiatives, OBBBA)[111](index=111&type=chunk) [Risk Adjustment](index=30&type=section&id=Risk%20Adjustment) This subsection elaborates on the risk adjustment program's role in mitigating adverse selection and the uncertainties in its estimates - Risk adjustment programs mitigate adverse selection by adjusting plan revenue based on member risk scores[112](index=112&type=chunk) - The company significantly increased its risk adjustment transfer estimate as of June 30, 2025, due to new third-party reports indicating a market-wide increase in morbidity[112](index=112&type=chunk) - Estimates are subject to high variability and uncertainty from factors like legislation, market morbidity, and competitor actions[113](index=113&type=chunk) [Claims Incurred](index=30&type=section&id=Claims%20Incurred) This subsection analyzes the drivers of medical expenses, including unit costs, utilization, and seasonal effects - Medical expenses are impacted by unit costs, utilization, and seasonal effects (e.g., deductibles, out-of-pocket maximums shifting costs to H2, holidays)[114](index=114&type=chunk) - Medical and pharmacy costs can also show seasonality based on selection effects or changes in membership risk profile[114](index=114&type=chunk) [Seasonality](index=30&type=section&id=Seasonality) This subsection describes the seasonal patterns affecting member enrollment, medical expenses, and product mix - Business is affected by seasonal patterns in member enrollment, medical expenses, and health plan mix shift/product design[115](index=115&type=chunk) [Reinsurance](index=31&type=section&id=Reinsurance) This subsection explains the use of reinsurance for risk management and capital efficiency, noting changes in agreements - Reinsurance agreements (quota share and XOL) are used for risk management and capital efficiency[116](index=116&type=chunk) - The Cigna+Oscar Small Group arrangement was not renewed after December 31, 2024, but transition and run-off services continue[68](index=68&type=chunk)[118](index=118&type=chunk) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms the consistency of critical accounting estimates with the prior annual report - No significant changes to critical accounting estimates from the Annual Report on Form 10-K for the year ended December 31, 2024[117](index=117&type=chunk) [Components of our Results of Operations](index=31&type=section&id=Components%20of%20our%20Results%20of%20Operations) This section defines and explains the key revenue and expense categories contributing to the company's financial performance - **Premium:** Direct policy premiums (from members and federal government), assumed policy premiums (from former Cigna+Oscar Small Group plan), net of risk adjustment transfers and ceded premiums[118](index=118&type=chunk) - **Investment Income:** Primarily investment income, interest earned, and gains/losses on the investment portfolio[119](index=119&type=chunk) - **Other Revenues:** Services via +Oscar platform, virtual credit card rebates, revenue from acquired companies (May 2025), and sublease revenue[120](index=120&type=chunk) - **Medical:** Paid and unpaid medical expenses for services/products, including fee-for-service claims, pharmacy benefits, capitation, and disputed claims, net of ceded reinsurance claims[122](index=122&type=chunk) - **Selling, General, and Administrative Expenses:** Distribution and servicing costs, premium taxes, exchange fees, employee-related expenses, software/hardware costs, stock-based compensation, and impact of quota share reinsurance[123](index=123&type=chunk) - **Other Expenses (Income):** Miscellaneous non-core expenses/income, including profit sharing and fair value changes of financial instruments[124](index=124&type=chunk) - **Income Tax Expense (Benefit):** Changes to current and deferred federal and state tax assets and liabilities[125](index=125&type=chunk) - **Net income (loss) attributable to noncontrolling interests:** Share of earnings allocated to joint venture partner[126](index=126&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance, including revenue, expenses, and profitability metrics [Premium](index=34&type=section&id=Premium) This subsection analyzes changes in premium revenue, attributing them to membership growth and other factors - Premium revenue increased by **$639.3 million** (**+30%**) for Q2 2025 YoY and **$1.542 billion** (**+36%**) for YTD 2025 YoY[129](index=129&type=chunk) - Membership increased by **0.4 million** (**+28%**) to **2,027,148** as of June 30, 2025, primarily due to above-market growth during the 2025 Open Enrollment period[129](index=129&type=chunk)[130](index=130&type=chunk) - Cigna+Oscar membership decreased from **58,293** in 2024 to **10,090** in 2025[130](index=130&type=chunk) [Investment Income](index=34&type=section&id=Investment%20Income) This subsection discusses the drivers of investment income, including asset base and yield - Investment income increased by **$4.0 million** (**+8%**) for Q2 2025 YoY and **$7.1 million** (**+8%**) for YTD 2025 YoY[132](index=132&type=chunk) - This increase was primarily due to a larger asset base, partially offset by lower yield[132](index=132&type=chunk) [Medical Expenses and MLR](index=34&type=section&id=Medical%20Expenses%20and%20MLR) This subsection examines the trends in medical expenses and the Medical Loss Ratio, explaining the underlying causes - Medical expenses increased by **$844.3 million** (**+49%**) for Q2 2025 YoY and **$1.549 billion** (**+47%**) for YTD 2025 YoY[133](index=133&type=chunk) - The increase was primarily due to increased membership and medical cost trend[133](index=133&type=chunk) Medical Loss Ratio (MLR) | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three Months Ended June 30, | 91.1 % | 79.0 % | | Six Months Ended June 30, | 83.0 % | 76.7 % | - The MLR increase was primarily driven by an increase in average market morbidity, leading to a higher net risk adjustment transfer accrual[134](index=134&type=chunk) [Selling, General, and Administrative Expenses and SG&A Expense Ratio](index=35&type=section&id=Selling,%20General,%20and%20Administrative%20Expenses%20and%20SG%26A%20Expense%20Ratio) This subsection analyzes changes in SG&A expenses and the SG&A Expense Ratio, identifying key drivers - SG&A expenses increased by **$99.3 million** (**+23%**) for Q2 2025 YoY and **$187.9 million** (**+23%**) for YTD 2025 YoY, primarily due to higher membership[136](index=136&type=chunk) SG&A Expense Ratio | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three Months Ended June 30, | 18.7 % | 19.6 % | | Six Months Ended June 30, | 17.2 % | 19.0 % | - The SG&A Expense Ratio improvement was mainly due to lower exchange fee rates and greater fixed cost leverage, partially offset by higher risk adjustment as a percentage of premium[137](index=137&type=chunk) [Income Tax Expense (Benefit)](index=35&type=section&id=Income%20Tax%20Expense%20(Benefit)) This subsection presents the effective tax rate and its components for the reporting periods Effective Tax Rate | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three Months Ended June 30, | 2.2 % | 7.6 % | | Six Months Ended June 30, | 14.0 % | 2.4 % | [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations and manage its capital [Overview](index=35&type=section&id=Overview_Liquidity) This subsection provides a high-level view of the company's liquidity structure, capital levels, and regulatory compliance - Liquidity is maintained at two levels: health insurance subsidiaries and the holding company[139](index=139&type=chunk) Cash and Investments (in millions) | Entity | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Holding Company | $205.1 | $189.8 | | Health Insurance Subsidiaries | $5,208.9 | $3,808.0 | - Combined statutory capital and surplus of health insurance subsidiaries was estimated at **$1.2 billion** for June 30, 2025, exceeding minimum requirements[142](index=142&type=chunk) - Health insurance subsidiaries had approximately **$579 million** of excess capital as of June 30, 2025[142](index=142&type=chunk) - Parent made **$19.3 million** in capital contributions to health insurance subsidiaries for YTD 2025[144](index=144&type=chunk) - Quota share reinsurance reduced required capital by an estimated **$655.0 million** as of June 30, 2025[144](index=144&type=chunk) [Short-Term Cash Requirements](index=36&type=section&id=Short-Term%20Cash%20Requirements) This subsection identifies immediate cash needs and the expected sources of funding - Short-term cash requirements include benefits payable, risk adjustment transfer payables, current lease liabilities, interest payable, and other current liabilities[145](index=145&type=chunk) - Expected to be funded by available cash, operating cash flows, and current asset realization[145](index=145&type=chunk) - Company believes current cash, cash equivalents, and investments (excluding restricted cash) are sufficient to fund operating requirements for at least the next twelve months[145](index=145&type=chunk) [Long-Term Cash Requirements](index=36&type=section&id=Long-Term%20Cash%20Requirements) This subsection outlines future cash obligations and their anticipated funding sources - Long-term cash requirements primarily relate to operating leases[146](index=146&type=chunk) - Expected to be funded by future cash flows from operations[146](index=146&type=chunk) [Convertible Senior Notes](index=36&type=section&id=Convertible%20Senior%20Notes) This subsection details the terms and convertibility status of the company's senior notes - The **$305.0 million** convertible senior notes due 2031 became convertible at the option of holders during Q2 2025 due to a Class A common stock sale price condition[147](index=147&type=chunk)[149](index=149&type=chunk) - Settlement upon conversion can be in Class A common stock, cash, or a combination, unless an Initial Purchaser elects solely stock[149](index=149&type=chunk) - No conversions have occurred as of the report date[149](index=149&type=chunk) [Revolving Credit Facility](index=37&type=section&id=Revolving%20Credit%20Facility) This subsection describes the available credit facility and its current utilization - A **$115.0 million** revolving credit facility is available until December 28, 2025, subject to compliance with financial covenants[151](index=151&type=chunk)[152](index=152&type=chunk) - No outstanding borrowings under the facility as of June 30, 2025[152](index=152&type=chunk) [Investments](index=37&type=section&id=Investments_Liquidity) This subsection outlines the company's investment strategy, portfolio composition, and income generated - Invests cash in U.S. Treasury instruments, federal/state agency securities, investment grade corporate bonds, and asset-backed securities[154](index=154&type=chunk) - Investment policies prioritize liquidity, capital preservation, and total return, adhering to credit agreement and state regulations[155](index=155&type=chunk) - Net investment income was **$54.0 million** for Q2 2025 and **$100.1 million** for YTD 2025[156](index=156&type=chunk) [Summary of Cash Flows](index=38&type=section&id=Summary%20of%20Cash%20Flows) This subsection summarizes the cash flow changes from operating, investing, and financing activities - Net cash provided by operating activities increased to **$1.388 billion** for YTD 2025 (from **$1.132 billion** in YTD 2024), driven by higher premium receipts and reinsurance recoverables[160](index=160&type=chunk) - Net cash used in investing activities decreased to **$342.4 million** for YTD 2025 (from **$778.2 million** in YTD 2024), due to reduced security purchases[161](index=161&type=chunk) - Net cash provided by financing activities decreased to **$27.0 million** for YTD 2025 (from **$46.0 million** in YTD 2024), primarily due to lower proceeds from stock option exercises[162](index=162&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the company's exposure to market risks, primarily interest rate risk, and how these risks could impact its financial position and investment income - Primary market risk exposure is interest rate risk, impacting investment portfolio fair value and investment income[163](index=163&type=chunk)[164](index=164&type=chunk) - A hypothetical immediate **1%** increase in interest rates at June 30, 2025, would decrease the fair value of investments by approximately **$47.1 million**[164](index=164&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures, concluding their effectiveness, and reports no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of June 30, 2025[165](index=165&type=chunk)[166](index=166&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[167](index=167&type=chunk) [Part II - Other Information](index=40&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section refers to the detailed disclosures on legal proceedings and commitments and contingencies provided in Note 12 to the financial statements, emphasizing the inherent uncertainties and potential material adverse effects on the company's business, results of operations, financial condition, or cash flows [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the detailed disclosures on legal proceedings and commitments and contingencies provided in Note 12 to the financial statements, emphasizing the inherent uncertainties and potential material adverse effects on the company's business, results of operations, financial condition, or cash flows - Information on legal proceedings is set forth in "Note 12 - Commitments and Contingencies"[169](index=169&type=chunk) - Uncertainty of proceedings means no assurance that they will not have a material adverse effect on the business[169](index=169&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section updates and reiterates key risks, including challenges in retaining and expanding the member base due to competition, regulatory changes (e.g., APTCs, Program Integrity Rules, OBBBA), and market dynamics. It also highlights risks associated with accurately estimating and managing medical and administrative costs, and the significant uncertainties and potential financial impacts of risk adjustment programs, including the need for additional capital [Member Base Retention and Expansion Risks](index=40&type=section&id=Our%20success%20and%20ability%20to%20grow%20our%20business%20depend%20in%20part%20on%20retaining%20and%20expanding%20our%20member%20base.%20If%20we%20fail%20to%20add%20new%20members%20or%20retain%20current%20members,%20or%20manage%20our%20membership%20growth%20appropriately%20to%20meet%20our%20business%20objectives,%20our%20business,%20revenue,%20operating%20results,%20and%20financial%20condition%20could%20be%20harmed.) This section highlights risks to business growth from failing to retain or expand the member base due to competition, regulatory changes, or market dynamics - Success depends on retaining and expanding the member base, which is influenced by competitive pricing, provider networks, broker relationships, and regulatory changes[171](index=171&type=chunk)[172](index=172&type=chunk)[178](index=178&type=chunk) - Expiration or reduction of enhanced APTCs after 2025 could make insurance unaffordable and reduce membership[172](index=172&type=chunk) - CMS Program Integrity Rules (effective Aug 25, 2025) and the OBBBA will create stricter eligibility verification, shorten open enrollment, and limit APTCs, likely reducing Health Insurance Marketplace participation and impacting membership[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - Competition from other health insurers with greater resources and broader product offerings poses a risk to member attraction and retention[178](index=178&type=chunk) [Medical Expense and Administrative Cost Management Risks](index=42&type=section&id=Failure%20to%20accurately%20estimate%20our%20incurred%20medical%20expenses%20or%20ef%20ectively%20manage%20our%20medical%20costs%20or%20related%20administrative%20costs%20could%20negatively%20af%20ect%20our%20financial%20position,%20results%20of%20operations,%20and%20cash%20flows.) This section addresses the financial risks associated with inaccurate estimation and ineffective management of medical and administrative costs - Profitability depends on accurately estimating and effectively managing medical and administrative costs, which are impacted by numerous factors beyond control[179](index=179&type=chunk)[180](index=180&type=chunk) - Factors include changes in healthcare regulations, impact of regulatory actions (Program Integrity Rules, OBBBA, APTCs, Medicaid redeterminations) on member morbidity, increases in healthcare facility/service costs, pharmaceutical prices (e.g., tariffs), and broker fees[180](index=180&type=chunk) - Medicaid redeterminations have increased overall market morbidity, and future ACA enrollment patterns and their impact on underwriting margin and MLR are uncertain[181](index=181&type=chunk) - Inability to accurately estimate claims liability or control administrative expenses (e.g., distribution, scaling, personnel) could materially affect financial results[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk) [Risk Adjustment Program Impact Risks](index=43&type=section&id=The%20result%20of%20risk%20adjustment%20programs%20may%20impact%20our%20revenue,%20add%20operational%20complexity,%20and%20introduce%20additional%20uncertainties%20that%20have%20a%20material%20adverse%20ef%20ect%20on%20our%20results%20of%20operations,%20financial%20condition,%20and%20cash%20flows.) This section discusses the significant financial and operational uncertainties and potential adverse effects stemming from risk adjustment programs - Risk adjustment programs significantly impact revenue, and estimates are subject to high variability and uncertainty due to program mechanics, risk scores, market-level factors, and reliance on third-party data[185](index=185&type=chunk)[186](index=186&type=chunk) - A material adjustment to risk adjustment transfer estimates (e.g., due to increased market morbidity in 2025) could negatively impact results and require additional capital contributions to insurance subsidiaries[186](index=186&type=chunk) - CMS audits of risk adjustment data could lead to refunds, penalties, or underpayment for care, materially affecting financial condition[187](index=187&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section states that there were no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities during the reported period [Item 3. Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section reports that there were no defaults upon senior securities during the period [Item 4. Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[190](index=190&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) This section reports no other material information, specifically noting no director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[192](index=192&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, certifications, and XBRL-related documents - Includes Amended and Restated Certificate of Incorporation and Bylaws[193](index=193&type=chunk) - Certifications of CEO, CFO (Rule 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350)[193](index=193&type=chunk) - Inline XBRL Instance Document and Taxonomy Extension Documents[193](index=193&type=chunk) [Signatures](index=46&type=section&id=SIGNATURES) This section provides the official signatures of the company's key executives, certifying the report's contents - Signed by Mark T. Bertolini (CEO), R. Scott Blackley (CFO), and Victoria Baltrus (CAO) on August 7, 2025[199](index=199&type=chunk)