Oscar Health’s Medicare Advantage business all but shutters

Oscar Health has all but abandoned Medicare Advantage after attracting few policyholders during its four years in the market, CEO Mario Schlosser said during the company’s third-quarter earnings call with investors Tuesday.

Oscar Health offered Medicare Advantage plans in New York and Texas this year but has pulled out of those states for next year. The company’s lone remaining Medicare Advantage product is a plan sold in Broward County, Florida, that is jointly marketed with Trinity Health’s Holy Cross Health in Fort Lauderdale and Memorial Healthcare System in Hollywood. The insurtech did not immediately respond to questions about whether it would sell this plan in 2023, but the policy is listed on Medicare.gov as available.

The insurtech offered its first Medicare Advantage plans in 2019 after receiving a $375 million investment from Alphabet. Oscar Health inked the deal with Holy Cross Health and Memorial Healthcare the following year. “We’re confident that our approach will ensure long-term, sustainable growth in Medicare Advantage—unlocking a new opportunity to bring consumers a health insurer that puts them first,” Schlosser wrote in 2018.

Oscar Health counted 4,577 Medicare Advantage members during the third quarter of this year, up 17.9% from this time last year, but representing a tiny fraction of its more than 1 million policyholders.

“We’re eyeing an increased focus on [Affordable Care Act] plans and family plans,” Schlosser said. “We hope to eventually go back to doing more in the MA market, and the way for us to be in this market is to partner. That is the future of our +Oscar business.”

Oscare Health reiterated its plan to pause full integrations of its +Oscar technology platform for the next 18 months as it seeks to achieve profitability in its insurance arm in 2023 and across the entire company in 2024. Some provider groups are using elements of the software to navigate risk-based relationships, Schlosser said. The insurtech is also using the platform to manage care for its members, he said.

“We’re going to focus, until 2024, on not rolling out anymore bigger +Oscar deals,” Schlosser said. “We’ve got to solve for how to sell in a more effective and efficient way and implement third parties in a more effective and efficient way.”

Additional expenses related to deploying its existing +Oscar technology contracts contributed to a net loss of $193.5 million during the third quarter, which is an improvement of $18 million compared to the year-ago quarter. In August, the nonprofit integrated system Health First announced it would end its technology agreement with Oscar Health. The Rockledge, Florida-based company was the first customer to completely and publicly buy in to the +Oscar platform.

Higher-than-expected marketing costs caught the insurtech off-guard, Chief Financial Officer Scott Blackley said during the call.

Ninety-five percent of Oscar Health’s more than 1 million members come from the individual and small group markets. The health insurance exchange special enrollment periods President Joe Biden implemented as part of COVID-19 relief caused Oscar Health’s exchange membership to balloon 74.7%. That led to a sicker, costlier risk pool than the insurer anticipated. Oscar Health will exit the Arkansas and Colorado exchange markets next year.

The company had planned to stop paying marketers to promote its products after the second quarter. But the Centers for Medicare and Medicaid Services updated its guidance to prohibit insurers from changing broker compensation mid-year, Blackley said. “That was not implicit in our initial guidance and was a headwind to our administrative expense ratio, as well as drove up our adjusted EBITDA loss,” he said, referring to the company’s adjusted loss on earnings before interest, taxes and depreciation.

Next year, Oscar Health aims to keep its membership steady and has priced its products for margin. But competitors exiting the exchanges make it hard to forecast what enrollment growth will look like next year, Schlosser said. Bright Health Group ended its exchange coverage for 2023 and Friday Health Plans dramatically reduced its footprint, for example.

Oscar Health holds $3.9 billion in cash and investments and has enough money to fund operations through 2024, Blackley said. A Cowen analysis from August concluded that Oscar Health needs to raise $400 million to get to 2024.

“We built in pricing to improve margin this year so, while we have a competitive position and we’re certainly across a variety of markets, we’re slightly less competitive than we’ve been in the past,” Blackley said.

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