Oscar Health, Inc.

Good afternoon. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to Oscar Health's 2022 Fourth Quarter and Full Year Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn it over to Cornelia Miller, Vice President of Corporate Development and Investor Relations, to begin the conference.

Thank you, Regina, and good evening, everyone. Thank you for joining us for our fourth quarter and year-end 2022 earnings call, where we'll discuss our execution against our annual plan, our expectations around insurance co-profitability, and our path to total co-profitability. Mario Schlosser, Oscars co-founder and chief executive officer, and Sid Sankaran, OSCAR's Chief Financial Officer, will host this afternoon's call, which can also be accessed through our investor relations website at ir.hioscar.com. Full details of our results and additional management commentary are available in our earnings release, which can be found on our investor relations website. Any remarks that OSCAR makes about the future constitute forward-looking statements within the meaning of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in our quarterly report on Form 10-Q for the quarterly period ended September 30, 2022, filed with the SEC, and our other filings with the SEC, including our annual report on Form 10-K to be filed with the SEC. Such forward-looking statements are based on current expectations as of today. OSCAR anticipates that subsequent events and developments may cause estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. The call will also refer to certain non-GAAP measures. A reconciliation of these measures to most directly comparable GAAP measures can be found in the fourth quarter 2022 press release, which is available on the company's IR website. With that, I would like to turn the call over to our CEO, Mario Flosser.

Thank you, Cornelia. Good evening, everyone, and thank you for joining the call today. Before we get to fourth quarter and full year 2022 results, I would like to provide some context on our story to date. For the past five years, we have seen a 75% compound annual growth rate for direct and some policy premiums. We have improved the medical loss ratio by approximately 12 points since 2017. Our net promoter score has increased more than 20 points over the same time periods. Our members were the first to get access to free virtual urgent care. Our $3 drug list has made medications more affordable for them. And our $0 virtual primary care medical group has been helping more of the members get importance preventative care. Fast forward to today, the fourth quarter capped off a transformative year for the company. We have talked a lot about how 2022 was a year of monumental growth for the business. We nearly doubled membership and crossed the 1 million member milestone. And while that is impressive, what's more impressive for us is how we managed that growth. We knew that heading into 2022, the step change in membership required us to put all of our focus on operating at scale and that our technology, our operations, and our people would be under pressure to deliver our targeted MLR and expense ratios. To meet these challenges, we organized the company around three key objectives, medical cost management, sculpting the portfolio, and admin cost management. As our year-end results show, We were able to execute against the plan we set out for the business in these areas, and we applied our learnings gathered throughout the year to position the company for profitability. Let's first take a look at the medical cost management. Despite doubling in size and welcoming a large number of new members that we knew little about, we reduced the medical loss ratio by 360 basis points, hitting 85% for 2022. We applied the best of our technology to our efforts, And we also spent the year implementing and scaling the traditional managed care processes in medical loss ratio management. We realigned operations against a more localized operating model to respond to regional trends more quickly. And we developed targeted medical cost mitigation strategies. We were able to drive higher utilization of less invasive, more cost-effective procedures and reduce hospital readmission rates supported by changes to medical policies and by thoughtful case management. We also applied our member engagements to medical cost management, utilizing our campaign builders capabilities. The team developed campaigns and strategies to ensure our members seek the highest quality, lowest cost options for site of care and for drugs. We believe that our member engagement model allowed us to make further progress in bringing down medical costs in 2022. And we're very excited here for what else we will deploy in the course of 2023. With regards to the seconds of our levers, portfolio sculpting. Getting into 2023, we prioritized margin over growth in our IFP strategy, and we took high single-digit rate increases on average across the book. Our localized operating model has also enabled us to restructure our networks in certain markets, reduce unit costs, and drive improved quality with our provider partners. We continue to sculpt our portfolio, both in terms of plan designs and markets, to ensure we allocate our capital in places we view as most attractive and most sustainable. As the third lever, we tackled the challenges of bringing down our administrative costs. Throughout 2022, we took a disciplined approach to expense management, which improved our insurance company admin ratio by 125 basis points year over year. This work, which included leveraging our technology to find fixed admin cost efficiencies across our customer service operations, as well as increasing automation throughout our clinical operations, has set us up very well for 2023. As part of this app and efficiency work, we also moderated the acquisition costs of our 2023 IFP book, and we took other decisive cost actions that positioned us to enter the year with a lower cost base. Overall, coming into 2023, on the cost and margin side, we have already completed much of the work needed to achieve our 2023 targets. And with a greater portion of our book consisting of returning members than ever before in our history, we have better line of sight into our member population and the related cost structure. In summary, we proved our technology can scale and there continue to be opportunities for efficiency going forward. We also did all of this while delivering an all-time high in a promoter score of now 47. In 2023, we expect the majority of our tech resources will be focused on impacting insurance company operating results. In the near term, that means less focus on growing Plus Oscar platform revenue. That being said, we have continued to develop our first Plus Oscar standalone module, Campaign Builder, and during this quarter, we signed our first Campaign Builder deal with a South Florida-based MSO, which is leveraging the tool to power their value-based care operations, drive primary care utilization, and manage medical spends. We intend to grow Campaign Builder at a thoughtful pace with a modest rollout pace in 2023 as we build our execution muscles here and ensure a successful deployment with our initial clients. As we think about Plus Oscar longer term, we believe that focusing our tech on increasing efficiency and profitability in our insurance business will translate to even better capabilities we can bring to the markets. And before I hand it over to Sid, I want to talk about what we like to call internally the Oscar magic. I remember engagements. this part of our company continued to be a differentiator for us in 2022 we maintained high levels of digital engagements and as our membership has grown and changed from a demographics perspective we have added channels to increase engagement with members who have historically been harder to reach give you one example here an sms campaign we launched to drive active renewals and auto pay enablements that campaign saw about a 33 response rate compared to about a 2% rate you would get for a similar email campaign targeting similarly non-digitally engaged members. And then 78% of those members have responded yes to keeping their plan, ultimately renewed into their same plan, and nearly 10% activated auto-pay. We made some exciting strides towards leveraging this member engagement engine with our provider partners as well. We told you that here we are investing to bring our tools to bear for providers, and we've begun to use our real-time data more and more to deepen our provider relationships on the ground. With the most closely aligned provider partners we have, we are co-creating campaigns to improve outcomes and to lower total cost of care. For example, we spend 2022 piloting campaigns focused on annual wellness visits, closing heaters gaps, and other care quality campaigns. In fact, you can see a demo of this technology on our IR site, ir.hiosco.com, I think, Lilia, right? Yes, go there and click. And we are excited to scale these campaigns and with new ones to our 2023 as well. There's a lot of successes we think in 2022, and that gives us a strong momentum into 2023 across the business. And here we believe we are better positioned than ever before to hit profitability based on discipline execution in 2022. You've got a very clear roadmap for the organization to achieve our goals for the year, which is profitability in insurance business in 23 and total company profitability in 2024. And we believe we have enough cash to get us there. And Sid will walk you through the plan for this in his part of the prepared remarks. Fundamentally, Oscar is a growth company and we are positioned well in any environments where the consumer has increasingly greater choice in buying power. The ACA continues to be the fastest-growing health insurance segment, projected to hit 20 million enrollees in the near term. And we see shifts toward programs like individual coverage HRAs as another signal that the marketplace offers unique value for individuals and increasingly also employers. With these market tailwinds, we're excited to return to top-line growth in 2024. And with that, let me get Sid on here, and he will walk you through the numbers in more detail.