Oscar Health: Can Its AI & Tech Advantage Sustain Growth in Health Insurance?

Oscar Health OSCR has recently garnered significant market attention, not just for its ambitious vision to transform the complex health insurance landscape, but also for a crucial shift in its financial trajectory. After years of operating as a high-growth yet unprofitable insurtech start-up, the company recorded its first full year of net income profitability in 2024, a milestone reinforced by solid first quarter 2025 results. This newfound discipline and operational efficiency signal a potential turning point for a company that has long championed a technology first approach to healthcare. Investors are now asking whether Oscar's tech-driven approach to health insurance can give it an edge over competitors and sustain its growth.

In this article, I will dissect Oscar Health's business model, its operational strengths, the competitive landscape, financial health, and valuation to provide a comprehensive understanding.

Business Overview

Oscar Health is a health insurance provider focused on the Affordable Care Act (ACA) individual and family market, with a smaller presence in related areas. Founded in 2012, Oscar set out to disrupt traditional health insurance through a full-stack technology platform and consumer-centric philosophy. The company offers individual ACA plans across 18 states (504 counties as of 2025) and formerly offered Medicare Advantage and small group plans, though it has since streamlined its focus to the ACA market. By the end of 2024, Oscar's membership had grown to about 1.68 million members, up 62% from 1.04 million a year earlier, and as of the first quarter of 2025, membership stands around 2.04 million. This rapid growth has been driven by expansion into new states and counties and by capturing market share in existing markets.

Oscar's business model is built on an end-to-end technology platform designed to streamline the entire insurance process. This includes a member-centric mobile app that provides health insights and medication reminders, and it boasts high user review rates. This emphasis on user-friendly digital interfaces aims to simplify complex healthcare interactions.

The company offers convenient access to healthcare professionals through free telemedicine calls, enhancing accessibility and affordability. Oscar also provides transparent pricing tools to help members understand their healthcare costs, fostering trust and simplifying the insurance process.

A key component of Oscar's strategy is its vertically integrated tech stack, which has been productized into the +Oscar platform. This platform is licensed to regional and provider-led health plans, automating critical functions like eligibility verification, risk adjustment, and claims processing. This enables smaller insurers to achieve economies of scale similar to those of large national carriers.

The strategic decision to productize and license the +Oscar platform introduces platform optionality, allowing Oscar to generate revenue from technology services in addition to insurance premiums. Data indicates that platform revenue is growing faster than insurance premium revenue, with third-party contracts contributing the majority of newly generated gross profit. This diversification strategy is crucial for mitigating the inherent volatility and typically lower margins of the pure insurance business.

The United States individual health insurance market was valued at approximately $1.60 trillion in 2022 and is projected to grow at a compound annual growth rate of 6.08% to reach $2.54 trillion by 2030. The public segment, which includes Medicare, Medicaid, and ACA plans, dominates this market. The ACA exchanges have more than 24 million people enrolled during the open enrollment period for 2025. Oscar's own enrollment growth significantly outpaced the overall market, capturing share in existing and expansion markets and driving superior customer satisfaction and record-high retention. Oscar is exiting the Medicare Advantage market and its small group relationship with Cigna because the arrangements it had in place were unsustainable.

Oscar's current share is roughly 8 to 10% of ACA enrollees, making it one of the larger players in the individual market. Some big insurers have retrenched from ACA exchanges. UnitedHealth's UNH Aetna unit, for example, exited exchanges covering one million members, citing unsustainable economics. Meanwhile, certain upstart competitors have struggled. Bright Health, for instance, withdrew from all ACA markets amid financial distress. These developments underscore both the challenges and the opportunities for Oscar.

As peers pull back, Oscar can fill the void, but what sets Oscar apart?

The company emphasizes a high-tech, user-friendly member experience. Oscar's mobile app and website enable digital doctor visits, 24/7 telemedicine, quick price comparisons, and on-demand support. The company assigns members to Concierge service teams to help coordinate care and answer questions, aiming to improve customer satisfaction and health outcomes.

Every member interaction, from app usage to telemedicine conversations and specialist referrals, feeds into Oscar's underwriting models in real time. This data is then used to compress the medical loss ratio (MLR), guide members to low-cost medical locations, and automatically handle provider paperwork. This proactive use of data allows Oscar to make adjustments before adverse selection becomes a loss.

Oscar is aggressively leveraging artificial intelligence (AI) for operational efficiency. Its AI-powered Oscar+ telehealth tool has shown tangible results, reducing emergency room visits by 20%. AI is also being implemented to improve claims adjudication, call center efficiency, and member engagement. A new AI tool for care guides is designed to address member needs more quickly.

The company's mobile-first approach facilitates an average online registration time under ten minutes, near instantaneous claims processing, and push notifications that replace traditional mail. This focus on user experience has resulted in a Net Promoter Score (NPS) of 66, about double the industry average, driving organic growth and keeping customer acquisition costs low.

Source: Oscar

Oscar's platform also powers personalized health programs, for example, specialized plans for chronic conditions such as diabetes, COPD, and asthma, which feature zero-dollar copays for certain specialists and services.

Oscar combines its superior user experience with deep provider collaboration. The company has begun to commercialize its platform via +Oscar. Management noted that all of its +Oscar clients expanded their use of the platform, adding more members to Oscar's campaign and care management tools. Oscar's launch in partnership with Cleveland Clinic is a prime example, providing members access to a vast network while offering the medical system detailed usage data to enable early intervention and prevent downstream cost inflation. This success has encouraged other regional systems to white label the +Oscar platform, integrating doctors more closely into the insurer's framework. This approach improves care coordination and further compresses the MLR. While this tech licensing business is nascent, it represents an optional long-term growth driver with higher margin potential if Oscar can gain traction as a software partner for the healthcare industry.

The combination of a superior consumer experience (high NPS, low customer acquisition cost, high retention) and deep collaborations creates a powerful, self-reinforcing feedback loop. Satisfied members are more likely to stay and refer new members. Providers who adopt the +Oscar platform benefit from increased efficiency and better data, making them more inclined to deepen their partnership with Oscar. This continuous engagement increases the volume and quality of data flowing into Oscar's AI models. This enhanced data, in turn, improves underwriting accuracy, optimizes care pathways, and refines cost management, enabling Oscar to offer more competitive premiums and attract even more members.

Oscar has ambitious plans to double its market footprint, aiming to enter 150 new metropolitan areas by 2027. For 2025, the company is offering individual plans in 504 markets across 18 states. Strategic product introductions include Buena Salud, a Spanish-first health insurance product, and multi-condition plans designed to reduce costs for chronic diseases. Oscar also stopped selling small group policies in favor of ICHRAs for 2025. Buena Salud is another differentiator because one-third of its members are Hispanic. It connects members with Spanish-speaking providers and care guides. By meeting members in their preferred language and culture, Oscar is tapping into a fast-growing segment.

Source: Oscar

While Oscar has achieved impressive growth in the ACA market, this segment faces potential headwinds due to subsidy expiration and enrollment challenges. In contrast, Medicare Advantage plans are less reliant on subsidies and benefit from federal incentives for quality outcomes. The strategic decision to stop selling small group policies in favor of ICHRAs also indicates a calculated shift towards a growing and potentially more stable market segment.

Financial Overview

Oscar's financial profile has transformed significantly in the past year. The company is now growing fast while moving into profitability, a combination that was elusive during its earlier years.

Source: Gurufocus

Oscar's top line is expanding at a blistering pace. In 2024, total revenue was $9.2 billion, up 57% YoY. This was driven primarily by a leap in membership during the 2024 open enrollment period (when Oscar entered many new counties), along with strong member retention throughout the year. Special Enrollment Period additions also contributed. Growth has continued in 2025. In Q1 2025, revenue came in at $3.1 billion, a 42% YoY increase, again mainly due to higher membership count. Oscar's growth far outpaces the broader health insurance industry, reflecting both market share gains and underlying expansion of the ACA market.

In Q1 2025, the MLR was 75.4%, better (lower) than 74.2% in Q1 2024. However, investors should be careful in extrapolating that improvement as quarterly MLRs can swing with seasonality and accounting adjustments. For example, Q1 2025 benefited from the influx of new premium-paying members (who may not have had time to incur many claims yet), whereas later quarters could see higher claims. Moreover, Q1 2025 included an unfavorable adjustment of $31 million due to higher-than-expected 2024 risk adjustment payable. Over a full year, Oscar seems to be managing an MLR around the 8082% range. This is important because ACA insurers are required to keep MLR at 80% or above (or else issue rebates to members) on a rolling 3-year basis.

Oscar has been showing operational leverage. The Selling, General, and Administrative (SG&A) Expense Ratio for the full fiscal year 2024 showed significant improvement, falling 520 basis points YoY to 19.1%. In Q1 2025, Oscar achieved its lowest quarterly SG&A expense ratio in company history at 15.8%, a 260 basis point improvement YoY.

The substantial efficiency gains derived from fixed cost leverage and the strategic implementation of AI-powered operations are directly translating into improved financial performance.

With that being said, 2024 was the first profitable year in Oscar's history, with net income of $25.4 million. While $25 million is a slim margin (0.3% of revenue), it marks a $296 million improvement from the $271 million net loss in 2023. Q1 2025 net income was $275.3 million (or $0.92 per share), roughly a 9% net margin. However, bear in mind Q1 is seasonally Oscar's strongest quarter due to the influx of new members paying premiums early in the year, while medical costs accrue over time. As noted earlier, later quarters tend to be weaker (for example, Oscar lost $153 million in Q4 2024 alone).

Looking at the balance sheet, Oscar has $3.0 billion in cash and cash equivalents and $300 million in debt. However, benefits payable increased to $1.47 billion from $1.36 billion. The risk adjustment transfer payable significantly increased to $1.95 billion from $1.56 billion. This increase was a primary driver of the unfavorable prior period development impact on MLR in the first quarter of 2025.

One point to monitor is dilution. For the full year 2024, the diluted shares outstanding increased 20% due to stock-based compensation and prior fundraising. In the first quarter of 2025, diluted shares were 306 million, up only 4%.

Guidance

Oscar reaffirmed its full fiscal year 2025 revenue guidance, projecting total revenue in the range of $11.2 billion to $11.3 billion. This indicates management's confidence in continued revenue momentum. Despite a strategic shift towards profitability, Oscar is not sacrificing growth. The company expects earnings from operations in the range of $225 million to $275 million.

Oscar's longer-term goal is clearly to expand margins further, and there is room, considering the ACA 80% MLR rule leaves up to 20% for administration and profit. If Oscar eventually stabilizes with, say, a 15% SG&A ratio and an 80% MLR, it could achieve a 5% pretax margin. For now, it is operating around a 1 to 2% margin, but the trajectory is upward.

Valuation

Oscar Health's valuation needs to be viewed through a hybrid lens, combining characteristics of a traditional insurer with a technology platform. The stock currently trades at $4.2 billion in market capitalization. Oscar's price to sales (P/S) ratio is 0.45x, its forward P/S trades at 0.4x, and its forward price to earnings (P/E) is 36. This is a high P/E, but it is normal for companies that have just become profitable and are expected to have significant earnings growth.

Source: Gurufocus

Oscar's P/S ratio is in line with the healthcare plans industry ratio. When comparing Oscar with individual names, both traditional insurers and other insurtech companies, the picture varies.

For example, Molina Healthcare MOH, a Medicaid and ACA focused insurer, trades at about 0.3x times sales, and Centene CNC, the leading ACA insurer by membership, plus a big Medicaid business, trades around 0.1x times sales due to its huge revenue base. Traditional insurance stocks often have low P/S ratios because their profit margins are thin. On the other hand, insurtech companies such as Lemonade LMND and Root ROOT have higher P/S multiples well above Oscar's.

Source: Author

Insurers are often valued relative to book value, since that gauges financial stability and liquidation value. Oscar's price to book (P/B) value is 3.1x. This is above large insurance peers such as Elevance and Molina, but in line with UnitedHealth and Centene. The higher P/B for Oscar compared with traditional insurers partly reflects expectations that the company will generate higher return on equity as profitability improves. Oscar's return on equity is still low given its small profits, so investors are pricing in a rise in earnings on equity.

Looking at the full picture, Oscar's revenue is estimated to grow faster than its peers, except for Lemonade. Its P/S, P/B, price to free cash flow, and price to tangible book value are below industry averages. Oscar is almost unique as a publicly traded pure-play ACA insurer, and looking at these metrics suggests that Oscar may be undervalued. However, the market might be discounting that growth could be limited, as Wall Street estimates a drop in revenue in two years.

All considered, Oscar stock is notably volatile. The stock's year-to-date performance has been choppy. Oscar shares dipped nearly 18% in early 2025, then rebounded after the first quarter's big beat. In July, the stock fell almost 20% in a single session in sympathy with Centene after it pulled its 2025 guidance due to rising medical costs and margin pressure. This volatility suggests that expectations are high but also that the market is quick to react to any signs of trouble.

That said, there have not been many guru transactions in the last quarter. After increasing 52% of its position in Oscar in the fourth quarter of 2024, Mason Hawkins (Trades, Portfolio) reduced it by 33% in the first quarter of 2025. Similarly, Jefferies Group (Trades, Portfolio) opened a new position in Oscar in the fourth quarter of 2024 but sold it out in the first quarter of 2025.

Risks

Oscar's biggest swing factor is policy. The enhanced premium tax credits that have turbocharged ACA enrollment will lapse on 31 December 2025. Washington state regulators warn that premiums for 2026 filings already assume a 21% jump because of the subsidy cliff and that as many as 80,000 consumers could drop coverage if Congress does nothing. A Politico survey of state exchanges reached the same conclusion: without federal action, about one in four marketplace enrollees could lose their plan, pushing the risk pool toward sicker members and driving medical costs higher. Chief Executive Mark Bertolini conceded on the first quarter call that subsidy loss would disrupt risk pools, a direct shot at Oscar's low to middle income core membership. Add CMS proposals to end the year on 15 December and scrap the continuous special enrollment window for very low-income households, and the 2026 outlook could tighten both the addressable market and its health mix at the same time.

Competition and execution risks come next. Though some giants are quitting the exchanges, others can still undercut on price or flex provider leverage. Aetna's retreat in 2026 frees up roughly one million members but also highlights how brutal exchange economics can be. Oscar's defensive moat is service and technology, not scale; if Blue plans or Medicaid incumbents decide to spend to win, Oscar's narrow networks could be a soft target. Internally, the company is only one full year into profitability, and small mispricing errors are costly. Risk adjustment transfers have already climbed to $1.95 billion. Any surge in high-cost claims, delayed pharmacy savings, or bad actuarial picks could push the MLR back above 85% and erase margins.

Finally, Oscar is a single-segment insurer. It exited Medicare Advantage and will sunset the Cigna plus Oscar small group partnership, leaving all revenue tied to the individual market. If the ACA stumbles, there is no second act on deck.

My Final Take

Oscar has proved that a digital first insurer can reach profitability, but investors should recognize how lean the economics still are. Margins are capped as the MLR cannot go below the statutory 80% floor, leaving only a sliver of gross margin to fund overhead and profit. Yes, management has squeezed SG&A costs to record lows, yet every added dollar of claim cost or risk adjustment payment quickly erodes that thin spread.

Revenue momentum is real yet heavily expansion-driven. In 2024, revenue jumped 56.5% and membership rose roughly six hundred forty thousand, but the company itself admits the lift came primarily from new county entry during open enrollment plus special enrollment adds, not from deeper penetration of existing markets. In other words, Oscar grows by planting flags rather than by unlocking more value per member. That strategy can work while white space remains, yet every new state brings fresh regulatory filings, network negotiations, and risk adjustment uncertainty.

On the positive side, Oscar's tech stack, concierge service model, and cultural tailoring have built brand loyalty that legacy carriers lack. The company now generates cash instead of burning it and holds more than $1 billion of equity, giving it cushion for policy shocks. If Congress extends enhanced subsidies beyond 2025, Oscar could keep adding members and leverage its platform into meaningfully higher earnings over time.

The bear case is just as clear. The subsidy cliff, a possible shorter enrollment window, and the end of continuous special enrollment would shrink the addressable market and skew the risk pool toward sicker members. Competitive pricing from larger Blue plans could further pressure margins. With no diversification outside the individual ACA segment, Oscar would take the hit in full.

After weighing upside and downside, I am keeping Oscar on a watch list. The company has demonstrated real operational skill, and the stock could run if policy winds blow its way. For now, however, the risks outweigh the potential, in my opinion.