Oscar Health, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing; the supplied text does not provide a complete standalone fourth-quarter income statement or cash-flow summary.
Business context
Oscar sells individual and small-group health plans, primarily through ACA marketplaces, and offers healthcare technology services through +Oscar. It exited Medicare Advantage for plan year 2024 and paused writing individual ACA business in California for that year. At year-end 2023, membership was 1,036,283, down 10% from 1,151,483 a year earlier. The company reported approximately 1.3 million Oscar insurance members as of January 2024 and about 500,000 client lives on +Oscar’s Campaign Builder platform.
Financial and operating results
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $5.863 billion | $3.964 billion |
| Premiums earned | $5.686 billion | $3.871 billion |
| Net loss | $270.6 million | $609.6 million |
| Adjusted EBITDA | $(45.2) million | $(462.3) million |
| Medical loss ratio (MLR) | 81.6% | 85.3% |
| InsuranceCo administrative expense ratio | 17.9% | 20.6% |
| InsuranceCo combined ratio | 99.5% | 105.8% |
| Adjusted administrative expense ratio | 21.0% | 24.6% |
| Net cash from operating activities | $(272.2) million | $380.3 million |
Revenue increased 48%, while premiums before ceded reinsurance rose 7% to $5.697 billion. The large reported increase in premiums earned partly reflects a change in quota-share reinsurance accounting: the 2023 arrangements were accounted for under deposit accounting, unlike a significant portion of the 2022 program. Administrative services revenue fell 75% to $15.4 million, primarily following the Health First arrangement’s termination and service transition. Investment income and other revenue rose to $161.4 million, principally on higher yields and interest rates.
MLR improvement reflected pricing actions and medical-cost management. Administrative ratio improvements were attributed mainly to lower distribution costs and other factors described by management. These operating ratios are company-defined measures and should be considered alongside GAAP results.
Liquidity, capital and debt
- At December 31, 2023, consolidated cash and cash equivalents were $1.870 billion; short- and long-term investments totaled approximately $1.055 billion. These assets are held across the parent and regulated insurance subsidiaries and are not all freely available to the parent.
- Holdco held $233.5 million in cash, cash equivalents and investments, including $12.6 million restricted. Insurance subsidiaries held $2.7 billion in these assets, including $17.3 million on deposit with regulators.
- Insurance subsidiaries’ statutory capital and surplus was $800.6 million, with projected excess capital of approximately $285 million above minimum RBC requirements. The company reported compliance with applicable requirements.
- Operating cash flow was negative $272.2 million; investing activities provided $577.2 million, and financing activities provided $6.4 million. Cash and restricted cash increased by $311.5 million. Management said available cash, cash equivalents and investments, excluding restricted cash, should fund operating requirements for at least 12 months.
- Long-term debt had a $298.8 million carrying value: $305 million principal of 7.25% convertible notes due 2031. The $115 million revolving credit facility, extended to December 2025, had no borrowings outstanding at year-end; the company reported covenant compliance.
Material changes, outlook and notable items
- Net loss narrowed by $339.0 million year over year, and Adjusted EBITDA improved by $417.0 million, but the company remained loss-making on both measures.
- Direct and assumed policy premiums declined 2.8% to $6.648 billion, with membership management actions partly offset by rate increases and Cigna+Oscar growth. Management had temporarily restricted new Florida enrollment before the 2023 plan year to manage capital; the restriction was removed in August 2023.
- Management reported that the insurance subsidiaries achieved Adjusted EBITDA profitability in 2023 and said it believed the company was tracking toward total-company Adjusted EBITDA profitability in 2024. This is a goal, not a guarantee; management cautioned that even achieving it could still leave the company with a GAAP net loss.
- A $46.3 million non-cash accelerated stock-compensation charge followed cancellation of the founders’ awards. Stock-based compensation totaled $166.8 million for the year.
- The company made an approximately $1.4 billion risk-adjustment program payment in the third quarter, primarily related to the 2022 policy year. Risk-adjustment estimates, claims reserves and related cash-flow timing remain significant sources of uncertainty.
- ACA exposure is substantial: approximately 97% of 2023 revenue came from health plans subject to ACA regulation, and approximately 85% of direct policy premiums in both 2023 and 2022 were subsidized by APTCs. Enhanced subsidies were extended through plan year 2025.
- The filing identifies a securities class action concerning alleged IPO disclosures and risk-adjustment audit controls. The company moved to dismiss; it said it could not estimate a possible loss. It also reports ongoing regulatory reviews and audits, without a clear estimate of any resulting aggregate exposure.
- The prior material weakness in IT general controls was reported as remediated in 2023. Management and the auditor concluded internal control over financial reporting was effective at year-end.
Key risks and investor verification points
- Verify the assumptions and later development of the $966.0 million benefits-payable estimate and $1.057 billion risk-adjustment transfer payable; the auditor identified both as critical audit matters. A 1% difference in benefits-payable assumptions could change reported earnings by about $109.5 million to $116.0 million, before potential offsets.
- Track 2024 total-company Adjusted EBITDA progress, GAAP net losses, cash burn and whether operating cash generation improves.
- Assess whether pricing and medical-cost actions sustain the improved MLR and combined ratio as membership and plan mix change.
- Monitor ACA marketplace enrollment, APTC policy through 2025, risk-adjustment settlements, Medicaid redeterminations and regulatory changes.
- Confirm that quota-share reinsurance remains available on acceptable terms and provides the expected regulatory capital benefit; the company estimated that without quota-share arrangements subsidiaries would have needed about $447 million in additional capital at year-end 2023.
- Assess parent-level liquidity separately from regulated subsidiary assets, including restrictions on dividends and capital transfers, and monitor revolving-credit covenants and the 2031 notes’ cash and conversion terms.
- Follow the securities litigation, regulatory audits, claims-system migration, cybersecurity and vendor risks, and the company’s ability to retain members and providers. The filing describes these exposures but does not provide a clear value for potential losses.