Oscar Health - High Growth Insurtech Scales into Profitability
Summary
Streamlined tech platform and standout brand
57% revenue growth in 2024, far outpacing the industry’s broader expansion.
Oscar Health scaled into net income profitability in 2024, while growing adjusted EBITDA from -$45m in 2023 to $199m in 2024.
Disclaimer: This writeup is not investment advice. I am sharing my research insights and positioning on individual companies for informational and entertainment purposes. In particular, I do not take into account any reader’s personal financial situation. Please do your own research.
Can Oscar Health by the next Root?
My long-term readers know that I have a weakness for insurtech-companies. My investment in online car insurer Root is up almost 10x since my writeup almost precisely one year ago. With the advance of AI, I believe that my overarching investment case for insurtechs has only improved. If we take a relatively small tech company that can reasonably be expected to 10x its revenues over the course of the next 10-15 years, then the potential for operating leverage should be even stronger in the age of AI where the potential to automate tasks is only increasing. Digital-first companies should be way more agile in implementing technololgical advancement versus incumbent players that are largely built on the technology of the last century. Think of the potential revenue per employee and it becomes quickly clear how big of an advantage it may be to be a fast-growing tech player vs. human workforce-intense player that will meet A LOT of resistance to conduct business operations in a more efficient way.
The most promising insurtech that I am aware of in the current market is Oscar Health. Oscar Health has emerged as one of the most dynamic players in the Affordable Care Act (ACA) marketplace, combining rapid membership growth, a consumer-centric digital platform, and disciplined management to carve out an impressive share of a U.S. market now approaching 24 million enrollees.
The current setup of the investment case resembles Root in many ways. While I would not got as far as saying that - once again - a 10x increase in the share price is imminent, I believe there is a solid potential for very high short term returns and a potential 10x over the mid-to-long term.
Here is a big quick comparison of the Root set up one year ago vs. the Oscar Health set up today:
One year ago, the market cap of Root was $248m vs. a prior year revenue (in 2023) of $455m, a price-to-sales ratio of 0.56x. Today, the market cap of Oscar Health is $3.95b vs. a prior year revenue (in 2024) of $9.18b, a price-to-sales ratio of 0.43x.
One year ago, Root grew revenues 46.4% (2023 vs. 2022). Today, Oscar Health just reported revenue growth of 56.5% (2024 vs. 2023).
One year ago, Root reported its first quarter of break-even adjusted EBITDA (-$0.3m in Q4 2023), however, for the full year 2023, Root’s adjusted EBITDA was still negative with -$43m vs. -$186m in 2022. On the other hand, Oscar Health reported $199m in adjusted EBITDA for 2023 vs. -$45m for 2022.
In many ways, Oscar Health seems to be a much more mature company than Root one year ago, while also trading cheaper based on price-sales, AND while growing faster than Root.
So we essentially have a high growth insurtech business at a potentially highly attractive entry point. At the same time, the business seems to be scaling very well into profitability, while taking share from competitors in a growing market. Below is an excerpt from the recent earnings call:
“Oscar is one of the largest ACA carriers following the 2025 open enrollment period. The individual market grew 13% year-over-year to a record 24 million lives. Our growth outpaced the market by close to 3x at 37%. We are now privileged to serve 1.8 million members as of February 1, 2025. Our competitively priced products, technology and superior member experience drove strong growth in retention across Oscar's 18-state footprint. Our disciplined pricing strategy gives us another year of above-market growth, which we expect will drive significant year-over-year increase in operating margin with continued administrative cost efficiencies and improved MLR performance.
Source: CEO Bertolini at the Oscar Health Q4 2024 earnings call held on Feb 4, 2025.
Overall, this is a setup that gets me really excited as an investor. The aim of this writeup is to have a closer look at why Oscar is so successfully taking share, what moats may underlie its model, while also addressing regulatory risk factors. At the end I will share my perspective on valuation with a potential return outlook.
A Brief Explanation of the ACA
For readers outside the United States, the Affordable Care Act (ACA)—often called “Obamacare”—is a 2010 law designed to expand access to health insurance through federal subsidies, state-based or federal health insurance marketplaces, and regulations preventing insurers from refusing coverage for preexisting conditions. Americans without employer-sponsored coverage or who do not qualify for government programs like Medicare and Medicaid can shop for ACA-compliant private insurance on these marketplaces. Each plan must meet minimum coverage requirements, including essential benefits and certain preventive services, and it is subject to a minimum medical loss ratio (MLR) of at least 80%. This means that an insurer must spend at least 80 cents of every premium dollar on medical claims rather than on overhead, marketing, or profit. The ACA has helped millions of individuals—particularly freelancers, small-business employees, and those in the “gig economy”—obtain coverage at more manageable premiums, often aided by income-based subsidies.
Oscar Health’s Positioning and Growth Prospects in the ACA Market
Oscar Health has been gaining share in the Affordable Care Act (ACA) individual insurance market by expanding its footprint and attracting a growing member base. The insurer’s enrollment has surged in recent years – ending 2024 with nearly 1.7 million members, up from 1.0 million a year prior. This 70% jump far outpaced overall ACA marketplace growth, implying Oscar captured additional market share. Oscar now insures roughly 6–7% of all ACA marketplace enrollees nationally, making it one of the top marketplace insurers. Oscar has plans to reach 70% of the addressable ACA market by 2027 (up from ~50% in 2023) through geographic expansion. This disciplined footprint growth, combined with strong member retention, has enabled Oscar to consistently increase its market share.
Consumer-Friendly Pricing and Plan Design
A key driver of Oscar’s share gains is its competitive pricing strategy. Industry observers note that Oscar and similar upstart insurers “largely pursue a narrow network strategy, partnering with a smaller pool of selected providers to offer coverage at lower prices.” By focusing on cost-effective networks (for example, partnering with top systems like Mount Sinai in New York), Oscar can often price its Bronze and Silver tier plans below rival offerings. In addition, Oscar’s plan design tends to be member-centric: many plans include $0 copay virtual visits, free preventive care, and generic drugs at no cost. This rich benefit structure (unusual for lower-cost plans) makes Oscar’s products attractive to price-sensitive consumers who still value access to care.
By undercutting incumbents on price in many markets while still meeting ACA coverage requirements, Oscar has successfully pulled in a large share of exchange shoppers. Notably, enhanced federal subsidies in recent years have further lowered out-of-pocket premiums for many Oscar customers, bolstering enrollment.
Digital-First Customer Experience
Oscar’s most distinctive competitive advantage is its technology-driven, “digital-first” approach to health insurance. From its founding in 2012, Oscar has prioritized a sleek user experience and robust tech platform in an industry often known for clunky interfaces. Oscar offers a user-friendly mobile app and website that serve as a one-stop portal for members: they can search for doctors, track deductibles, view claims, and even talk to a doctor via telemedicine – all with a few clicks. This resonates especially with younger, tech-savvy consumers on the ACA exchanges. Oscar’s app integrates a free 24/7 telehealth service (Doctor on Call), allowing members to consult physicians at no charge, which not only adds value but can reduce costly urgent care and ER visits.
The company’s “Care Team” concierge model is another differentiator – each member is assigned a team (including a nurse and care guides) that can answer questions, coordinate care, and help find in-network providers via the app or phone. Such high-touch support is uncommon in individual insurance and drives customer satisfaction.
Oscar’s heavy investment in a full-stack technology platform (built in-house) enables features like real-time claims processing and personalized health reminders, which streamline the insurance experience. The result is a modern, convenient customer experience that contrasts sharply with many incumbents. This digital convenience and transparency have helped Oscar earn the trust of consumers.
Notably, the Oscar Health app is phenomenally well rated with an average rating of 4.9 out of 5 on iOS (for 15,835 ratings). The result also shows in an end-to-end experience that members clearly value. As of Q3 2024, Oscar’s Net Promoter Score (NPS) stood at 66, whereas the industry average among health insurers has been pegged at around 3, according to Forrester research. In other words, members are 21 times more likely to recommend Oscar than the standard insurer.
Brand and Engagement Moats
Over several years, Oscar has built a recognizable brand in the ACA marketplace as a “smart, simple” insurance option for individuals. Its quirky branding and member-centric ethos (“health insurance that actually works for you” in marketing materials) appeal to those frustrated with traditional insurers. This brand positioning, combined with positive word-of-mouth, gives Oscar a leg up in attracting first-time exchange shoppers. Oscar also boasts a very low complaint ratio relative to its size – one analysis found Oscar’s NAIC complaint index was just 0.12, indicating far fewer member grievances than industry averages. A low complaint rate is a strong signal of customer satisfaction (and perhaps a result of Oscar’s concierge service and easy-to-use tools). Satisfied customers are more likely to renew coverage and recommend Oscar to others, fueling organic growth. Oscar further differentiates itself via data-driven member engagement. The company analyzes data from member visits and claims to proactively identify care opportunities and cost-saving tips. For example, Oscar’s systems might nudge a member to see an in-network specialist known to provide high-quality, cost-effective care for their condition. These personalized interventions improve health outcomes and help keep Oscar’s costs down – a win-win that entrenches Oscar’s value proposition. In short, Oscar’s combination of tech savvy, user-centric design, and proactive care management creates a sticky user experience that is difficult for competitors to replicate quickly.
Business Model Defensibility
Oscar’s leadership believes that its integrated technology platform and innovation culture form a defensible moat against imitators. Unlike legacy insurers that often rely on patchwork legacy systems, Oscar built its claims systems, provider directory, billing, and member app all on a unified platform. This allows for greater agility – e.g. deploying updates or new features across the ecosystem simultaneously – and lower administrative costs per member as the company scales. Oscar’s tech investment in member experience has “created a defensible moat around [its] product” which it can leverage in other areas.
Moreover, Oscar’s culture and talent add to its moat. As a tech-forward company based in New York, Oscar has attracted engineers and designers from top tech firms, giving it a pool of talent not typically seen at insurance carriers. This talent advantage means Oscar can continuously improve its app and analytic models faster than stodgier rivals. The focus on consumer experience as “specialized weaponry” – in the words of Oscar’s new CEO, they have “more sophisticated, specialized [tools] for the task at hand: plundering the incumbents” – suggests that Oscar sees its nimbleness and innovation as core defenses.
“I sort of see Oscar as a pirate ship with cannons, amidst Spanish galleons filled with gold. They’re called big insurance companies.” – Mark Bertolini, CEO Oscar Health
Additionally, Oscar’s growing member base and data create network effects: the more members it has, the more data it gathers to refine underwriting and care management, which can lead to better outcomes and pricing, attracting even more members. Scale in the ACA segment itself becomes a moat, as Oscar can spread fixed costs and negotiate favorable deals as one of the larger exchange players (Oscar is now the third-largest for-profit insurer in the individual market by membership. While Oscar’s model can be emulated by new entrants, its head start and accumulated experience in the ACA niche provide a competitive buffer.
In summary, Oscar is gaining share because it offers affordable plans with a superior digital experience, backed by a business model that uses technology and data as a strategic moat to defend and extend its position.
Competitors
Oscar Health stands out in a highly competitive exchange landscape by pairing nimble, tech-driven execution with a focus on user experience—a strategy that helps it both counter the scale of incumbents and avoid the fate of failed upstarts. Centene (Ambetter) has over 3 million exchange enrollees and the largest overall market share, leveraging its Medicaid contracts to feed its ACA plans. However, it has suffered persistent service issues and lawsuits over network adequacy, opening the door for Oscar—now serving 1.6+ million members across 18 states—to thrive in targeted urban centers through stronger brand loyalty and more transparent technology.
UnitedHealthcare, meanwhile, is America’s largest insurer overall, with deep financial reserves and broad networks, yet Oscar’s specialization in individual plans and local pricing agility let it compete effectively, retaining members who prize its digital convenience and dedicated Care Team over a legacy carrier’s scale.
On the other end of the spectrum, Bright Health collapsed after an overly aggressive push that saw it exceed 1 million ACA members but run up massive losses. Oscar avoided this fate by restricting its footprint to markets it could manage, pricing plans more prudently, and gradually refining its narrow-network model. That discipline paid off when Bright withdrew from nearly all ACA states in 2023, leaving hundreds of thousands of members in limbo; Oscar absorbed much of that displaced enrollment without undermining its margins (which hovered around the low-80s% MLR range). By balancing deliberate growth with consumer-centric features, Oscar has proven its staying power—distinguishing itself from overstretched startups and holding its own against established heavyweights that, while better capitalized, often cannot match Oscar’s tech-forward approach and user-friendly offerings.
Regulatory Risks
Because Oscar’s business is built around the ACA exchanges, it is highly vulnerable to any adverse changes in ACA policy or regulations. That means any policy change—especially involving the enhanced ACA subsidies currently set to expire by the end of 2025—could significantly alter exchange enrollment.
If the expanded subsidies (i.e., the enhanced federal premium tax credits) expire after 2025 without any replacement, a sizeable portion of ACA enrollees could see their out-of-pocket premium costs rise, especially those above 400% of the federal poverty level who currently benefit from subsidies that didn’t exist under the original ACA. This price shock would likely prompt some members—particularly healthier or price-sensitive ones—to drop coverage or move to lower-tier plans, reducing Oscar’s potential enrollment and revenue growth.
That said, Oscar has already built its official long-range forecasts (which I will address below) around an assumption that enhanced subsidies will lapse, so there is potential upside if Congress or a future administration extends them. Nonetheless, a worst-case scenario—no replacement for the expiring subsidies—would likely slow Oscar’s membership growth or require product adjustments to keep premium costs manageable for enrollees losing extra tax credits.
A bigger risk, in management’s view, would be modifications to subsidies or risk adjustment formulas. But they reiterate that Oscar’s business model rests on more stable foundations than those of yesteryear’s “insurtechs,” owing to its measured expansion and improved underwriting. While the Trump administration might try to weaken the ACA, Oscar believes the impetus to maintain historically low uninsured rates will outweigh overt repeal attempts. CEO Bertolini has called a complete subsidy rollback unlikely: “63% of Oscar’s members reside in red states,” and many of those states appreciate how the ACA keeps coverage levels high.
Growth Beyond the ACA: The ICRA Opportunity
One of Oscar’s most promising expansion channels is ICRA (Individual Coverage Health Reimbursement Arrangement). Under ICRA, employers (especially small and mid-sized businesses) can offer a defined contribution for employees, who then use those funds to buy their own ACA plans. This effectively shifts people from traditional group insurance into the individual market. Oscar has begun several partnerships with ICRA platforms, such as Stretch Dollar, aimed at funneling part-time, gig-economy, and small-business employees into Oscar coverage.
Currently, the ICRA membership is modest—around 3,700 lives as of late 2024—but the potential is large if state regulators continue passing ICRA-friendly rules. CEO Bertolini calls ICRA “one of the biggest long-term growth drivers” if enough employers embrace defined-contribution models.
Although Oscar has not yet fully baked large ICHRA volumes into near-term forecasts, management clearly views it as an ongoing regulatory opening that could expand Oscar’s addressable market in the future.
CEO Profile: Mark Bertolini’s Impact
A major driver of Oscar’s profitability pivot has been Mark Bertolini, the former CEO of Aetna who joined Oscar in early 2023. With a reputation for championing consumer-focused solutions at Aetna—and successfully merging it with CVS—Bertolini combines deep insurance know-how with a forward-looking stance on health care reform.
Even as he reined in unprofitable lines (like direct Medicare Advantage) to focus on the ACA, Bertolini also supports Oscar’s “tech-forward” ethos. In each earnings update, he references how AI and data analytics can reduce overhead and improve care coordination.
Bridging 2024 Financials to 2025 Outlook and 2027 Guidance
Oscar’s Investor Day in June 2024 outlined a plan to achieve ≥20% annual revenue growth and a 5% operating margin by 2027. A crucial aspect of this plan involves sustaining a low SG&A ratio, enabled by Oscar’s tech stack. Rather than layering new tools on top of legacy systems, Oscar’s engineers continuously refine a single integrated platform that tracks claims, membership, and care coordination. The company also retains a “concierge” element, assigning each member a Care Team equipped with smart software to handle everything from benefits questions to specialist referrals. This blend of automation and personalized support is something CEO Mark Bertolini calls “a unique moat” in a highly regulated industry.
During the fourth quarter of 2024, Oscar Health not only solidified its first full year of net income profitability, but also outlined an ambitious plan for 2025. CFO Richard Scott Blackley highlighted that Oscar’s 2024 revenue rose by 57% year over year to $9.2 billion, driven largely by strong open enrollment retention, special enrollment additions, and above-market growth in key states. The fourth quarter itself saw revenue of $2.4 billion, representing a 67% jump from the same period in 2023. Meanwhile, Oscar’s medical loss ratio (MLR) for the full year was 81.7%, a modest 10-basis-point increase amid higher-than-expected SEP enrollment and incremental risk adjustment accruals. Yet, the company’s operating discipline shone through on the expense side, with its SG&A ratio improving by more than 500 basis points to 19.1% for 2024. As CEO Mark Bertolini put it, “2024 was an exceptional year for Oscar”—the company not only scaled membership, but also produced a $25 million net income and $199 million in adjusted EBITDA, surpassing its profitability commitment well ahead of many investor expectations.
Looking to 2025, management projects another year of outpacing the broader individual market. The CFO estimates total revenue between $11.2 billion and $11.3 billion, driven by further open enrollment gains and ongoing strong retention. The 2025 revenue guidance represents 23% growth over 2024, which I consider “on track” with the 2027 plan. One year ago, Oscar guided for 2024 revenue that was some 10% lower than the actually achieved growth.
To reflect the growing emphasis on operating fundamentals, Oscar will shift from focusing primarily on adjusted EBITDA to reporting “earnings from operations.” The company expects that measure to reach $225 million to $275 million, while adjusted EBITDA should be around $140 million higher, implying a figure of roughly $365 million to $415 million. Oscar’s enterprise value is currently $2.14b, which puts the current EV/EBITDA multiple at 5.5x at the midpoint of the adj. EBITDA guide.
Guidance also calls for a MLR of 80.7% to 81.7%, reflecting both a less pronounced SEP impact in 2025 and the benefit of retaining 2024 SEP members at a more favorable risk score. Meanwhile, the SG&A ratio is anticipated to drop another 125 basis points to 17.6–18.1%, underscoring Oscar’s continued cost leverage and increasing reliance on AI initiatives. Overall, the leadership team expects 2025 not just to sustain Oscar’s membership gains—estimated at 1.8 million paying members as of February 1—but also to deliver higher margins as the company advances toward its longer-range targets of at least 20% annual revenue growth and a 5% operating margin by 2027.
Valuation and Return Potential