Oscar Health Inc.

11/06/2025 | Press release | Distributed by Public on 11/06/2025 15:35

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited Consolidated Financial Statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") included in our Annual Report on Form 10-K for the year ended December 31, 2024 that was filed with the SEC on February 20, 2025. Unless the context otherwise requires, references in this MD&A to "we," "us," "our," "Oscar," "Oscar Health, Inc," and the "Company" mean the business and operations of Oscar Health, Inc. and its consolidated subsidiaries.
Index to this MD&A
Management's discussion and analysis of financial condition and results of operations is comprised of the following sections:
Page
Overview
26
Recent Developments, Trends and Other Key Factors Impacting Performance
27
Critical Accounting Policies and Estimates
30
Components of Our Results of Operations
30
Results of Operations
32
Liquidity and Capital Resources
34
Overview
Oscar is a leading healthcare technology company built around a full stack technology platform and a relentless focus on member experience. We have been challenging the status quo in the healthcare system since our founding in 2012, and are dedicated to making a healthier life accessible and affordable for all. Oscar serves individuals, families, and employees through the Patient Protection and Affordable Care Act ("ACA"). We also offer health technology solutions that power the healthcare industry through +Oscar. In May 2025, the Company purchased 100% of the equity interests in three businesses operating in the individual market: INSXCloud, Inc. (an approved enhanced direct enrollment platform), IHC Specialty Benefits, Inc. (an insurance agency that sells individual medical and supplemental health products), and Healthinsurance.org, LLC (an online resource providing educational content for consumers navigating health insurance and the ACA marketplace). Our technology drives superior experiences, deep engagement, and high-value clinical care, earning us the trust of approximately 2.1 million effectuated members ("members") as of September 30, 2025. Effectuated members are those who are actively enrolled in one of the Company's plans and whose required premium payments have either been made or are within the payment grace period.
We regularly review our 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. to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, and make strategic decisions. We believe these operational and financial measures are useful in evaluating our performance, in addition to our financial results prepared in accordance with GAAP.
Total Revenue
Total revenue includes Premium revenue (net of risk adjustment transfers), Investment income, and Other revenues. We believe Total revenue is an important metric to assess the growth of our business, as well as the earnings potential of our investment portfolio.
MLR
MLR is a metric used to calculate medical expenses as a percentage of net premiums before ceded quota share reinsurance. The impact of the federal risk adjustment program is included in the denominator of our MLR. We believe MLR is an important metric to demonstrate the ratio of our costs to pay for the healthcare of our members to the net premium before ceded quota share reinsurance. MLRs in our products are subject to various federal and state minimum requirements.
SG&A Expense Ratio
The SG&A expense ratio reflects the Company's selling, general, and administrative expenses, as a percentage of Total revenue (net of risk adjustment transfers). We believe the SG&A expense ratio is useful to evaluate our ability to manage our overall selling, general, and administrative cost base.
Earnings (Loss) from Operations
Earnings (loss) from operations is the Company's Total revenue less Total operating expenses. We believe Earnings (loss) from operations is an important primary metric for assessing operating performance.
Net Income (Loss) Attributable to Oscar Health, Inc.
Net income (loss) attributable to Oscar Health, Inc. is Net earnings (loss) allocated to the Company after net income (loss) attributable to noncontrolling interests. It is a key indicator of the Company's profitability and operational efficiency, allowing management to evaluate performance and make informed decisions on strategic planning, cost management, and resource allocation.
Recent Developments, Trends and Other Key Factors Impacting Performance
Regulatory Developments and Trends
Our operations are subject to comprehensive and detailed federal, state, and local laws and regulations, which continue to rapidly evolve and change. Developments related to the regulatory regimes under which we operate have in the past impacted, and are expected to continue to impact, our results of operations. The following regulatory developments have impacted our operations during the periods presented in the financial statements contained elsewhere in this Quarterly Report on Form 10-Q, or are expected to impact our results of operations in future periods.
The ACA
The ACA established significant subsidies to support the purchase of health insurance by individuals, in the form of advanced premium tax credits ("APTCs"), available through Health Insurance Marketplaces. The American Rescue Plan Act ("ARPA") increased the size of APTCs for 2021 and 2022, and the Inflation Reduction Act of 2022 renewed the enhanced APTCs for three years through the end of 2025. If Congress does not take action, the enhanced APTCs will expire at the end of 2025. If the enhanced APTCs are not renewed, insurance coverage could become unaffordable for certain individuals.
The Centers for Medicare & Medicaid Services ("CMS") is increasingly focused on improving integrity in the Health Insurance Marketplace eligibility and enrollment process, and we expect this focus to continue. During the second half of 2024, CMS enacted new measures to respond to increases in unauthorized changes in consumer enrollments by agents and brokers and to reduce consumer burdens related to unauthorized enrollments. While these measures are important to prevent unauthorized enrollments, they may also make it more difficult for individuals to complete valid enrollments in new plans, switch from one plan to another, or obtain APTCs. In addition, on June 25, 2025, CMS issued a rule that created stricter eligibility verification processes for APTCs, as well as other requirements related to ACA plan enrollment, including shorter open enrollment periods and the suspension of certain special enrollment periods (the "Program Integrity Rules"). On August 22, 2025, in connection with City of Columbus vs. Kennedy, in which the plaintiffs alleged certain provisions of the Program Integrity Rules are contrary to law, a federal district court in Maryland issued a nationwide stay on several provisions of the Program Integrity Rules pending a final ruling on the merits of the case. We do not expect that the litigation will conclude before 2026 and CMS has confirmed that the stayed provisions will not be in effect during the 2026 open enrollment period. Many of the stayed provisions would have otherwise impacted enrollment processes and APTC eligibility during the 2026 open enrollment period. For example, the court stayed the application of a $5 monthly premium to enrollees in $0 premium
plans who do not actively reenroll during open enrollment. Provisions of the Program Integrity Rules unaffected by the stay became effective on August 25, 2025. Furthermore, on July 4, 2025, the President signed into law the One Big Beautiful Bill Act (the "OBBBA") which, among other relevant matters, limits the eligibility of APTCs for certain populations, and requires additional verification procedures to confirm member eligibility for APTCs.
The implementation of the Program Integrity Rules, the OBBBA, and the discontinuation of the enhanced APTCs (if not renewed at the end of 2025), will likely reduce overall participation in the Health Insurance Marketplaces, and any resulting market contraction could negatively impact market morbidity. Furthermore, if the enhanced APTCs are extended before the end of the year, there could be operational and financial impacts to Oscar. For additional details on how these factors may impact Oscar, see "Risk Factors-Most Material Risks to Us-Our success and ability to grow our business depend in part on retaining and expanding our member base. If we fail to add new members or retain current members, or manage our membership growth appropriately to meet our business objectives, our business, revenue, operating results, and financial condition could be harmed"and "Risk Factors-Most Material Risks to Us-Failure to accurately estimate our incurred medical expenses or effectively manage our medical costs or related administrative costs could negatively affect our financial position, results of operations, and cash flows"in this Quarterly Report on Form 10-Q and "Risk Factors-Most Material Risks to Us-Any changes to the ACA and its regulations could materially and adversely affect our business, results of operations, and financial condition"and "Business-Government Regulation-Ongoing Requirements and Changes to the ACA"in our Annual Report on Form 10-K for the year ended December 31, 2024.
Medicaid redeterminations began on April 1, 2023 and CMS announced a Special Enrollment Period ("SEP") that began March 31, 2023 and ended November 30, 2024 to facilitate enrollment in the ACA by individuals who lost Medicaid coverage under the redetermination process. While CMS announced in 2024 that all unwinding-related renewals for beneficiaries enrolled in Medicaid or the Children's Health Insurance Program ("CHIP") must be completed no later than December 31, 2025, our understanding is that the majority of states substantially completed their unwinding processes in 2024. We believe these Medicaid redeterminations have previously contributed to increases in our membership, however, we anticipate that any future impact on our membership will not be as significant as the membership growth we previously experienced. We believe that members who have enrolled in the ACA through the Medicaid redetermination process are higher utilizers of care and have increased the overall morbidity of the Health Insurance Marketplace. For additional details, see "Risk Factors-Most Material Risks to Us-Failure to accurately estimate our incurred medical expenses or effectively manage our medical costs or related administrative costs could negatively affect our financial position, results of operations, and cash flows" in this Quarterly Report on Form 10-Q and "Business-Government Regulation-Ongoing Requirements and Changes to the ACA" in our Annual Report on Form 10-K for the year ended December 31, 2024.
Proposed Tariffs
The Trump administration has indicated that new tariffs may be imposed on a variety of products relevant to our business, including certain pharmaceutical products and ingredients and medical devices and supplies imported into the United States. If such tariffs are imposed, the potential impact could include, among other things, higher costs for medical providers and facilities, higher pharmaceutical prices, higher costs of medical devices, and supplies and shortages of certain medicines and medical supplies. Shortages in medicines and supplies may also impact the health of our members, which in turn may result in higher medical costs. The unprecedented nature of these types of tariffs, as well as uncertainty around their implementation, could impact our ability to accurately estimate and effectively manage the impact on our medical expenses, which in turn could adversely affect our results of operations and financial position. For additional details, see "Risk Factors-Most Material Risks to Us-Failure to accurately estimate our incurred medical expenses or effectively manage our medical costs or related administrative costs could negatively affect our financial position, results of operations, and cash flows" in this Quarterly Report on Form 10-Q.
Members
Our membership is measured as of a particular point in time. Membership may change due to the pricing of, and benefits offered under, our plans both relative to our competitors and considered on a stand-alone basis, our expansion into or exiting of certain markets, and may vary throughout the year due to disenrollments, SEP, and other market dynamics that are in effect such as Medicaid redeterminations, enhancements, extensions, reductions or eliminations of APTCs, other legislative or regulatory actions, such as recent CMS initiatives to improve the integrity in the ACA eligibility and enrollment process, pre-enrollment verification procedures required by OBBBA, or other factors that cause the overall market to grow or decline.
Risk Adjustment
The risk adjustment programs in the markets we serve are administered federally by CMS and are designed to mitigate the potential impact of adverse selection and provide stability for health insurers. Under this program, each plan is assigned a risk score based upon demographic information and current year claims information related to its members. The risk score is used to adjust plan revenue to reflect the relative risk of the plan's enrolled population. We reevaluate our risk adjustment transfer estimates as new information and market data becomes available, until we receive the final reporting from CMS in later periods, up to twelve months in arrears. In July 2025, the Company received third-party reports, based on industry claims data through April 2025, providing estimates of the market risk score (a measure of market morbidity) for the states where it participates in the ACA. As a result of this new data, the Company significantly increased its estimate of the risk adjustment transfer as of June 30, 2025. The Company further increased its estimate of the risk adjustment transfer as of September 30, 2025 based on the updated estimates of the market risk score received in September 2025 relating to industry claims data through July 2025.
Our risk transfer estimates are subject to a high degree of estimation and variability, and are affected by the relative risk of our members, and in the case of ACA, that of other insurers. The data that we rely upon to calculate these estimates includes data received from independent third parties. In addition, the data may be incomplete, can vary considerably from period to period, requires considerable judgment in interpretation, lacks context, and provides limited insight. Moreover, our risk transfer estimates are subject to change due to factors outside of our control, such as changes in legislation, regulations, regulatory enforcement, enrollment in government health plans, inflation, market size, market morbidity, the actions of our competitors, and other uncertainties. There is a higher degree of uncertainty associated with estimates of risk adjustment transfers earlier in the policy year or, in the case of SEP driven enrollment, throughout the policy year, resulting from the fact that risk scores are based on lagged claim data. There is additional uncertainty for both markets and blocks of business that experience outsized growth, compounded by the lack of credible experience data on the newly enrolling population, including SEP driven enrollees and new members moving from one government program to another. Furthermore, there is also uncertainty associated with changes in other carriers operations, which may impact the ultimate degree of market-level risk. Actual risk adjustment calculations and transfers have in the past materially differed, and could materially differ in the future, from our assumptions.
Claims Incurred
Our medical expenses are impacted by unit costs and utilization, as well as seasonal effects on medical costs, such as the utilization of deductibles and out-of-pocket maximums over the course of the policy year, which shift more costs to us in the second half of the year as we pay a higher proportion of covered claims costs, and the number of days and holidays in a given period. Our medical and pharmacy costs can also exhibit seasonality depending on selection effects or changes in the risk profile of our membership and the proportion of our membership that is new in the calendar year. The emergence of medical and pharmacy claims is influenced by the aforementioned drivers, and further mix shifts may continue to alter claims incurred patterns in future periods.
Seasonality
Our business is generally affected by the seasonal patterns of our member enrollment, medical expenses, and health plan mix shift and product design. SEP or other market dynamics that drive enrollment and/or mix changes throughout the year may impact the per member levels of premiums, claims, and/or risk adjustment transfers.
SEP Market Dynamics Developments and Trends
During the year ended December 31, 2024, the increase in our membership was due in part to an increase in member enrollments through SEP which impacted our MLR. Higher SEP growth in certain markets throughout 2024 may have contributed to the increase in our risk transfer payable for the year ended December 31, 2024 and the nine months ended September 30, 2025. SEP enrollment volumes across the ACA market in 2025 are largely back to historical baselines as are the associated MLR risks that those enrollments introduce.
Reinsurance
We believe our reinsurance agreements help us achieve important goals for our business, including risk management and capital efficiency. Our reinsurance agreements are contracted under two different types of arrangements: quota share reinsurance contracts and excess of loss ("XOL") reinsurance contracts. In quota share reinsurance, the reinsurer agrees to assume a specified percentage of the ceding company's losses in exchange for a corresponding percentage of premiums. In XOL reinsurance, the reinsurer agrees to assume all or a portion of the ceding company's losses in excess of a specified amount. Under XOL reinsurance, the premium payable to the reinsurer is negotiated by the parties based on losses on an individual member in a given calendar year and their assessment of the amount of risk being ceded to the reinsurer. In the case of federal and state-run reinsurance programs, no reinsurance premiums are paid. The reinsurance agreements do not relieve us of our primary medical claims incurred obligations. Refer to "Note 9 - Reinsurance"included elsewhere in this Quarterly Report on Form 10-Q for a description of the accounting methods used to record our quota share reinsurance arrangements.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of the Company's significant accounting policies is included in "Note 2 - Summary of Significant Accounting Policies,"in our Annual Report on Form 10-K for the year ended December 31, 2024. Certain of our accounting policies are considered critical, as these policies require significant, difficult or complex judgments by management, often requiring the use of estimates about the effects of matters that are inherently uncertain. As of September 30, 2025, there were no significant changes to our critical accounting estimates from what was reported in our Annual Report on Form 10-K for the year ended December 31, 2024.
Components of Our Results of Operations
Premium
Premium revenue includes direct policy premiums collected from our members and subsidies received from the federal government, net of risk adjustment transfers, and assumed policy premiums we earned as part of our reinsurance arrangement under our former Cigna+Oscar Small Group plan offering, and is net of ceded premium from XOL and run-off quota share reinsurance contracts accounted for under reinsurance accounting. The Company did not renew the Cigna+Oscar Small Group arrangement after the expiration of the initial term on December 31, 2024.
Investment Income
Investment income primarily includes investment income, interest earned, and gains (losses) on our investment portfolio.
Other Revenues
Other revenues include revenue earned through brokerage, enhanced direct enrollment platform, and market education services, fees for services performed via the +Oscar platform, revenue sharing from virtual credit card rebates, and sublease income.
Medical
Medical expense primarily consists of both paid and unpaid medical expenses incurred to provide medical services and products to our members. Medical claims include fee-for-service claims, pharmacy benefits, capitation payments to providers, disputed provider claims, and various other medical-related costs. Under fee-for-service claims arrangements with providers, we retain the financial responsibility for medical care provided and incur costs based on actual utilization of hospital and physician services. Medical claims are recognized in the period healthcare services are provided. Unpaid medical expenses include claims reported and in the process of being settled, but that have not yet been paid, as well as healthcare costs incurred but not yet reported to us, which are collectively referred to as benefits payable or claim reserves. The development of the claim reserve estimate is based on actuarial methodologies that consider underlying claim payment patterns, medical cost inflation, historical developments, such as claim inventory levels and claim receipt patterns, and other relevant factors. The methods for making such estimates and for establishing the resulting liability are continuously reviewed and any adjustments are reflected in the period determined. Medical expense also reflects the net impact of our ceded reinsurance claims from XOL and run-off quota share reinsurance contracts accounted for under reinsurance accounting.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses primarily include distribution and servicing costs, premium taxes, exchange fees, other taxes and fees, employee-related expenses, costs of software and hardware, stock-based compensation, the impact of quota share reinsurance, and other administrative costs.
Other Expenses (Income)
Other expenses (income) consists primarily of miscellaneous expenses or income that are not core to our operations, including profit sharing arrangements with our co-branded health plans and changes in the fair value of financial instruments.
Income Tax Expense (Benefit)
Income tax expense (benefit) consists primarily of changes to our current and deferred federal and state tax assets and liabilities. Income taxes are recorded as deferred tax assets and deferred tax liabilities based on differences between the book and tax bases of assets and liabilities. Our deferred tax assets and liabilities are calculated by applying the current tax rates and laws to taxable years in which such differences are expected to reverse.
Net income (loss) Attributable to Noncontrolling Interests
Net income (loss) attributable to noncontrolling interests represents the share of the Company's earnings allocated to the Company's joint venture partner.
Results of Operations
The following table sets forth our results of operations for the periods indicated:
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except percentages) 2025 2024 2025 2024
Revenue
Premium $ 2,923,968 $ 2,368,257 $ 8,723,233 $ 6,626,055
Investment income 53,215 50,326 153,331 143,309
Other revenues 8,801 4,899 19,628 15,764
Total revenue 2,985,984 2,423,482 8,896,192 6,785,128
Operating Expenses
Medical 2,586,330 2,003,979 7,398,954 5,267,475
Selling, general, and administrative 521,592 460,377 1,538,836 1,289,745
Depreciation and amortization 7,312 7,500 21,012 22,912
Total operating expenses
3,115,234 2,471,856 8,958,802 6,580,132
Earnings (loss) from operations (129,250) (48,374) (62,610) 204,996
Interest expense 6,857 5,815 18,698 17,708
Other expenses (income) 3,184 (1,877) 3,308 173
Earnings (loss) before income taxes (139,291) (52,312) (84,616) 187,115
Income tax expense (benefit) (1,807) 2,076 5,853 7,709
Net income (loss) (137,484) (54,388) (90,469) 179,406
Less: Net income (loss) attributable to noncontrolling interests (34) 208 71 427
Net income (loss) attributable to Oscar Health, Inc. $ (137,450) $ (54,596) $ (90,540) $ 178,979
Medical loss ratio (MLR) 88.5 % 84.6 % 84.8 % 79.5 %
SG&A expense ratio 17.5 % 19.0 % 17.3 % 19.0 %
Premium
Premium revenue increased $555.7 million or 23% for the three months ended September 30, 2025, compared to the same period in 2024,and increased $2,097.2 million,or 32%, for the nine months ended September 30, 2025, compared to the same period in 2024. This increase was driven by higher membership, partially offset by an increase in the net risk adjustment transfer accrual. As of September 2025, membership increased by 0.5 million, or 28%, compared to September 2024, primarily driven by above market growth during the 2025 Open Enrollment period.
The following table summarizes the Company's membership by offering:
As of September 30,
Membership by Offering 2025 2024
Individual and Small Group 2,111,736 1,602,993
Cigna+Oscar (1)
5,168 51,291
Total Members (2)
2,116,904 1,654,284
(1) Represents total membership for our former co-branded partnership with Cigna.
(2) Represents effectuated members. Effectuated members are those who are actively enrolled in one of our plans and whose required premium payments have either been made or are within the payment grace period. A member covered under more than one of our health plans counts as a single member for the purposes of this metric.
Investment Income
Investment income increased $2.9 million or 6% for the three months ended September 30, 2025, compared to the same period in 2024, and increased $10.0 million, or 7%, for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to a larger asset base, partially offset by lower yield.
Medical Expenses and MLR
Medical expenses increased $582.4 million, or 29% for the three months ended September 30, 2025, compared to the same period in 2024, and increased $2,131.5 million, or 40%, for the nine months ended September 30, 2025, compared to the same period in 2024. This increase was primarily due to increased membership and medical cost trend.
MLR increased for the three months and nine months ended September 30, 2025, compared to the same periods in 2024, primarily driven by an increase in average market morbidity that resulted in an increase in the net risk adjustment transfer accrual, partially offset by favorable prior period development.
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except percentages) 2025 2024 2025 2024
Medical $ 2,586,330 $ 2,003,979 $ 7,398,954 $ 5,267,475
Less: Ceded quota share reinsurance claims (1)
- 2,036 - (2,879)
Net claims before ceded quota share reinsurance (A)
$ 2,586,330 $ 2,001,943 $ 7,398,954 $ 5,270,354
Premium $ 2,923,968 $ 2,368,257 $ 8,723,233 $ 6,626,055
Less: Ceded quota share reinsurance premiums (1)
- 2,971 - (1,865)
Net premiums before ceded quota share reinsurance (B)
$ 2,923,968 $ 2,365,286 $ 8,723,233 $ 6,627,920
Medical loss ratio (A divided by B)
88.5 % 84.6 % 84.8 % 79.5 %
(1)Represents prior period development for claims and premiums, respectively, ceded to reinsurers pursuant to quota share treaties accounted for under reinsurance accounting, which are in runoff.
Selling, General, and Administrative Expenses and SG&A Expense Ratio
Selling, general, and administrative expenses increased $61.2 million or 13% for the three months ended September 30, 2025, compared to the same period in 2024, and increased $249.1 million, or 19%, for the nine months ended September 30, 2025, compared to the same period in 2024. This increase was primarily driven by higher membership year over year, resulting in higher volume-driven costs such as broker commissions and taxes and fees, partially offset by lower unit cost economics.
The SG&A expense ratio decreased 153 basis points to 17.5% for the three months ended September 30, 2025, compared to 19.0% for the same period in 2024. The SG&A expense ratio also decreased 170 basis points to 17.3% for the nine months ended September 30, 2025, compared to 19.0% for the same period in 2024. The decrease was primarily due to greater fixed cost leverage, lower exchange fee rates, and disciplined cost management, partially offset by the impact of higher risk adjustment as a percentage of premium.
Liquidity and Capital Resources
Overview
We maintain liquidity at two levels of our corporate structure, through our health insurance subsidiaries (any subsidiary of Oscar Health, Inc. that has applied for or received a license, certification or authorization to sell health plans by any state Department of Insurance, Department of Financial Services, Department of Health, or comparable regulatory authority) and through our holding company (our parent company, Oscar Health, Inc., on a standalone basis ("Parent") and subsidiaries excluding our health insurance subsidiaries).
The majority of the assets held by the holding company are in the form of cash and cash equivalents and investments. As of September 30, 2025 and December 31, 2024, total cash and cash equivalents and investments held by the holding company were $540.9 million and $189.8 million, respectively, of which $9.7 million and $12.8 million was restricted as of September 30, 2025 and December 31, 2024, respectively.
The majority of the assets held by our health insurance subsidiaries are in the form of cash and cash equivalents and investments. As of September 30, 2025 and December 31, 2024, total cash and cash equivalents and investments held by our health insurance subsidiaries were $4.3 billion and $3.8 billion, respectively, of which $18.2 million and $18.0 million, respectively, was on deposit with regulators as required for statutory licensing purposes. These amounts are classified as restricted deposits on the balance sheets.
Our health insurance subsidiaries' states of domicile have statutory minimum capital requirements that are intended to measure capital adequacy, taking into account the risk characteristics of an insurer's investments and products. The combined statutory capital and surplus of our health insurance subsidiaries was estimated to be approximately $1.3 billion and $1.2 billion as of September 30, 2025 and December 31, 2024, respectively, which was in compliance with and in excess of the minimum capital requirements for each period. The health insurance subsidiaries historically have required capital contributions from Parent to maintain minimum levels. The health insurance subsidiaries in aggregate exceeded the minimum statutory RBC requirement by approximately $734 million as of December 31, 2024 and are estimated to have approximately $564.1 million of excess capital as of September 30, 2025. The health insurance subsidiaries may be subject to additional capital and surplus requirements in the future, as a result of factors such as increasing membership and medical costs or changes in risk adjustment transfer estimates, which may require us to incur additional indebtedness, sell capital stock, or access other sources of funding in order to fund such requirements. During periods of increased volatility, adverse securities and credit markets, including those due to rising interest rates, may exert downward pressure on the availability of liquidity and credit capacity for certain issuers, and any such funding may not be available on favorable terms, or at all.
As certain of our health insurance subsidiaries have become profitable and to the extent their levels of statutory capital and surplus exceed minimum regulatory requirements, we may make periodic requests for dividends and distributions from our subsidiaries to fund our operations or seek to enter into transactions or structures that enable us to efficiently deploy this excess capital, which may or may not require approval by our regulators. During the nine months ended September 30, 2025, our health insurance subsidiaries made loan repayments of $15.0 million. During the nine months ended September 30, 2024, our health insurance subsidiaries issued dividends and made loan repayments of $133.0 million to Parent.
During the nine months ended September 30, 2025 and September 30, 2024, respectively, Parent made $65.8 million and $99.8 million of capital contributions to the health insurance subsidiaries. Our health insurance subsidiaries also utilize quota share reinsurance arrangements to reduce our minimum capital and surplus requirements, which are designed to enable us to efficiently deploy capital to fund our growth. We estimate that had we not had any quota share reinsurance arrangements in place, the health insurance subsidiaries would have been required to hold approximately $671.8 million and $553.8 million of additional capital as of September 30, 2025 and December 31, 2024, respectively, which the Parent would have been required to fund to the extent the applicable insurance subsidiary did not have excess capital to cover the requirement.
Short-Term Cash Requirements
The Company's cash requirements within the next twelve months include benefits payable, risk adjustment transfer payables, current lease liabilities, interest payable on debt, other current liabilities and purchase commitments and other obligations. We expect the cash required to meet these obligations to be primarily funded by cash available for general corporate use, cash flows from current operations, and/or the realization of current assets, such as accounts receivable. Based on our current forecast, we believe the Company's cash, cash equivalents, and investments, not including restricted cash, will be sufficient to fund our operating requirements for at least the next twelve months.
Long-Term Cash Requirements
Our long-term cash requirements under our various contractual obligations and commitments include operating leases. We expect the cash required to meet our long-term obligations to be primarily generated through future cash flows from operations. See"Note 13 - Leases"in our Annual Report on Form 10-K for the year ended December 31, 2024 for further detail of our obligations and the timing of expected future payments.
Convertible Senior Notes
On February 3, 2022, we issued $305.0 million in aggregate principal amount of convertible senior notes due 2031 (the "2031 Notes") in a private placement to funds affiliated with or advised by Dragoneer Investment Group, LLC, Thrive Capital, LionTree Investment Management, LLC, and Tenere Capital LLC (the "Initial Purchasers"). In connection with the sale and issuance of the 2031 Notes, on January 27, 2022, we entered into an investment agreement with the Initial Purchasers (the "Investment Agreement") and on February 3, 2022, we entered into an indenture with U.S. Bank, as Trustee (the "2031 Indenture"). On September 11, 2025, we entered into an amendment to the Investment Agreement. The purpose of the Amendment was to permit the private offering of the 2030 Notes (as defined below) under the Investment Agreement.
The 2031 Notes bear interest at a rate of 7.25% per annum, payable in cash, semi-annually in arrears on June 30 and December 31 of each year, commencing on June 30, 2022. The 2031 Notes will mature on December 31, 2031, subject to earlier repurchase, redemption, or conversion.
The holders of the 2031 Notes may require us to repurchase the 2031 Notes for cash, upon a fundamental change (as defined in the 2031 Indenture) or on June 30, 2027 and each anniversary thereof until June 30, 2030. In addition, we may redeem the 2031 Notes on or after December 31, 2026 if certain Class A common stock sales price and other conditions are satisfied.
The 2031 Notes may be converted at the election of the holders under certain circumstances, including if we call the 2031 Notes for redemption or upon satisfaction of a Class A common stock sale price condition. During the quarterly period ended September 30, 2025, the Class A common stock sale price condition was satisfied. As a result, the 2031 Notes are convertible during the fourth quarter of 2025 at the option of the holder. Upon conversion, we may elect to settle the 2031 Notes in shares of Class A common stock, cash, or a combination of both, unless an Initial Purchaser of the 2031 Notes elects to receive the consideration due upon conversion solely in shares of Class A common stock pursuant to the terms of the Investment Agreement.
In October 2025, the Company received conversion notices from certain of the Initial Purchasers to convert a total of $20.0 million in aggregate principal amount of the 2031 Notes. The Company elected to issue approximately 2.4 million shares of Class A common stock to settle these conversions.
On November 3, 2025, the Company and Oasis FD Holdings, LP ("Dragoneer") entered into an Exchange Agreement (the "Exchange Agreement") pursuant to which, until December 14, 2025, Dragoneer may elect to exchange up to $250,000,000 aggregate principal amount of the 2031 Notes, representing the balance of its 2031 Notes, for aggregate consideration consisting of (A) a number of shares of Class A common stock based on the conversion rate set forth in the 2031 Indenture, and (B) up to $17.8 million, payable in shares of Class A common stock and/or cash, pursuant to the terms of the Exchange Agreement and subject to the satisfaction of certain conditions. On November 5, 2025, Dragoneer exchanged $187,500,000 aggregate principal amount of the 2031 Notes in exchange for 23,273,179 shares of Class A common stock.
In connection with the Exchange Agreement and the related transactions, as of November 5, 2025, the debt covenants in the Investment Agreement were extinguished, and the 2030 Notes (as defined below) ceased to be subordinated to the 2031 Notes.
For more information on our 2031 Notes, including details relating to repurchase, redemption and conversions of the 2031 Notes, see "Part II, Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Convertible Senior Notes"and "Note 9 - Debt"to our Consolidated Financial Statements, each in our Annual Report on Form 10-K for the year ended December 31, 2024, and, "Note 8 - Debt"to our Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.
Convertible Senior Subordinated Notes
On September 18, 2025, the Company issued $410.0 million aggregate principal amount of convertible senior subordinated notes due 2030 (the "2030 Notes"). The 2030 Notes were issued pursuant to an indenture (the "2030 Indenture"), dated as of September 18, 2025, between the Company and U.S. Bank Trust Company, National Association, as trustee.
The 2030 Notes will accrue interest at a rate of 2.25% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2026. The 2030 Notes will mature on September 1, 2030, unless they are earlier repurchased, redeemed, or converted.
The holders of the 2030 Notes may require us to repurchase the 2030 Notes for cash, upon a fundamental change (as defined in the 2030 Indenture), subject to certain conditions. In addition, we may redeem the 2030 Notes on or after September 6, 2028, if certain Class A common stock sales price and other conditions are satisfied.
Before June 1, 2030, noteholders may only convert their 2030 Notes upon the occurrence of certain events. From June 1, 2030 until the second scheduled trading day before the maturity date, noteholders may elect to convert their 2030 Notes at any time. Upon conversion, the Company may choose to settle the 2030 Notes in shares of Class A common stock, cash, or a combination of both.
On September 15, 2025, in connection with the pricing of the offering of 2030 Notes, the Company entered into privately negotiated capped call transactions (the "Base Capped Call Transactions") with certain of the 2030 Notes initial purchasers or their affiliates and certain other financial institutions (the "Option Counterparties"). In addition, on September 16, 2025, in connection with the initial purchasers' exercise of their option to purchase additional 2030 Notes, the Company entered into additional capped call transactions (the "Additional Capped Call Transactions," and, together with the Base Capped Call Transactions, (the "Capped Call Transactions") with each of the Option Counterparties. The Capped Call Transactions cover the aggregate number of shares of the Company's Class A common stock that initially underlie the 2030 Notes (subject to customary anti-dilution adjustments), and are expected to reduce potential dilution to the Company's Class A common stock upon any conversion of 2030 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 2030 Notes, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call Transactions.
For more information on our 2030 Notes, including details relating to repurchase, redemption and conversions of the 2030 Notes, and the Capped Call Transactions, see "Note 8 - Debt" to our Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.
Revolving Credit Facility
On December 28, 2023, we entered into a third amendment to our senior secured credit agreement with Wells Fargo Bank, National Association, as lender and administrative agent, and certain other lenders party thereto from time to time (collectively, the "Lenders"), and Oscar Management Corporation, as a subsidiary guarantor, which amended the senior secured credit agreement, dated as of February 21, 2021 (as previously amended by the First Amendment to Credit Agreement, dated as of January 27, 2022 and the Second Amendment to Credit Agreement, dated as of July 21, 2023, the "Amended Credit Agreement"). The Amended Credit Agreement provided for a revolving loan credit facility (the "Revolving Credit Facility") in the aggregate principal amount of $115.0 million, with proceeds to be used for general corporate purposes of the Company. On September 18, 2025, we terminated the Revolving Credit Facility. At the time of termination, there were no outstanding borrowings under the Revolving Credit Facility.
Investments
We generally invest our cash in U.S. Treasury instruments, federal and state agency securities, investment grade corporate bonds, and asset backed securities to improve our overall investment return. These investments are purchased pursuant to board-approved investment policies that reflect our obligations under our credit agreement and conform to applicable state laws and regulations.
Our investment policies are designed to provide liquidity, preserve capital, and optimize the total return on invested assets. These policies also align with the constraints of state regulations governing the types of investments our health insurance subsidiaries can hold. These investment policies require that our investments in U.S. corporate bonds and asset backed securities have final maturities of no more than five years from the date of issuance and U.S. federal and state government obligations have final maturities of no more than seven years from the settlement date. Professional portfolio managers operating under documented guidelines manage our investments and a portion of our cash equivalents. Our portfolio managers are directed to obtain our prior approval before selling investments in a loss position.
Net investment income on a consolidated basis was $53.2 million and $50.3 million for the three months ended September 30, 2025, and 2024, respectively, and $153.3 million and $143.3 million for the nine months ended September 30, 2025 and 2024, respectively. Net investment income for our health insurance subsidiaries was $50.6 million and $47.8 million for the three months ended September 30, 2025 and September 30, 2024, respectively, and $146.7 million and $135.3 million for the nine months ended September 30, 2025, and September 30, 2024, respectively.
Our restricted investments consist primarily of cash and cash equivalents and U.S. Treasury securities; we have the ability to hold such restricted investments until maturity. The Company maintains cash and cash equivalents and investments on deposit or pledged to various state agencies as a condition for licensure. We classify our restricted deposits as long-term given the requirement to maintain such assets on deposit with regulators.
Summary of Cash Flows
Our cash flows used in operations may differ substantially from our net income due to non-cash charges or due to changes in balance sheet accounts.
The timing of our cash flows from operating activities can also vary among periods due to the timing of payments made or received. Some of our payments and receipts, including loss settlements, rebates from our pharmacy benefit manager, risk adjustment transfers, and subsequent reinsurance receipts, can be significant. Therefore, their timing can influence cash flows from operating activities in any given period. The potential for a large claim under an insurance or reinsurance contract means that our health insurance subsidiaries may need to make substantial payments within relatively short periods of time, which would have a negative impact on our operating cash flows.
Our primary operating cash flow sources are premiums and investment income. Our primary operating cash flow uses are payments for claims, risk adjustment transfers, and operating expenses, including interest expense. For the nine months ended September 30, 2025, net cash provided by operating activities was $423.0 million as compared with $631.4 million provided by operating activities for the same period in 2024. The decrease was primarily due to higher claim disbursements, risk adjustment payments, premium taxes, and broker expenses, partially offset by higher premiums.
Cash flows from investing activities primarily include the purchase and disposition of financial instruments. For the nine months ended September 30, 2025, net cash used in investing activities was $192.4 million as compared to net cash used in investing activities of $1,356.0 million for the same period in 2024. The change was primarily due to a reduction in the purchases of securities, partially offset by a lower level of maturing investment.
Cash flows from financing activities may include proceeds from the issuance of debt securities, proceeds from stock option exercises, and tax payments related to the net settlement of share-based awards. For the nine months ended September 30, 2025, net cash provided by financing activities was $391.0 million as compared to $64.6 million for the same period in 2024. The increase was due to proceeds from newly issued convertible notes.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily attributable to potential changes in interest rates and/or inflation and the resulting impact on investment income. We do not hold financial instruments for trading purposes.
Interest Rate Risk
We are subject to interest rate risk in connection with the fair value of our investment portfolio, which consists of U.S. Treasury and agency securities, corporate notes, and certificates of deposit. Our primary market risk exposure is driven by changes to Federal fund effective rates. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors, and other factors beyond our control. Assuming a hypothetical and immediate 1% increase in interest rates on September 30, 2025, the fair value of our investments would decrease by approximately $43.6 million.Any declines in interest rates over time would reduce our investment income.
Oscar Health Inc. published this content on November 06, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 06, 2025 at 21:36 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]