Oscar Health, Inc.

good afternoon my name is Lisa and I will be your conference operator today at this time I would like to welcome everyone to Oscar health 2023 first quarter earnings conference call if you would like to ask a question today please press star one on your telephone keypad I would now like to turn the conference over to Miss Cornelia Miller vice president of corporate development and investor relations please go ahead thank you and good evening everyone

Thank you for joining us for our first quarter 2023 earnings call, where we'll discuss our momentum early in the year and execution around our path to profitability. Mark Bertolini, Oscar's Chief Executive Officer, and Sid Sankaran, Oscar's Chief Financial Officer, will host this evening's call. And they're joined by Mario Schlosser, Oscar's Chief President of Technology. This call can also be accessed through our investor relations website at ir.highoscar.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 annual report on Form 10-K for the annual or period ended December 31, 2022, filed with the SEC. And our other filings with the SEC, including our quarterly report on Form 10-Q for the quarterly period, ended March 31, 2023, 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 the most directly comparable GAAP measures can be found in the first quarter 2023 press release, which is available on the company's IR website. With that, I would like to turn the call over to our CEO, Mark Bertolini.

Thank you, Cornelia. Good evening, everyone. I would like to start by restating our company's mission and why I joined Oscar. I have spent my career advocating for increased consumerism, more digitization and virtualization, and higher levels of value-based care within the healthcare industry. I believe that Oscar is not only uniquely positioned to leverage these industry trends, but is the single platform that can drive this change. Between our innovative technology stack and our high MPS, the company has the right collection of assets to be a disruptor for years to come. We have the ability to move faster than our competitors given our size, culture, and modern infrastructure. I see a clear right to win for our company. I have spent my first five weeks at Oscar doing deep dives across the business and getting to know the people and to understand the culture. The energy and morale of the company is very high and the team is excited to deliver. My high level priorities for the business remain. One, achieve insurance company profitability in 2023. It is still early in the year, but I believe we are executing well against that goal as you will hear today. Two, target total company adjusted EBITDA profitability for 2024. To achieve total company profitability, we will need to continue to improve the performance and profitability in our insurance business and manage the whole cold spend in line with our profitability targets. Three, continue to enhance the value of our technology through the Plus Oscar business and bring more of our capabilities to market. Based on my current view, all three of the priorities I just shared are not only within reach, but we are well on our way to achieving them. As it relates to profitability, we have a lot of positive activities already in flight and have identified even more opportunities. I'll touch on this in greater detail in a moment. Turning to the numbers, as you saw from our results this quarter, the fundamentals of the business are sound and we are executing against our plan and profitability targets. We continue to serve more than 1 million members in Q1, and our industry-leading NPS increased to 50. Our medical loss ratio improved more than 100 basis points year over year to 76%, and utilization was in line with our plan. Our insurance company achieved profitability in the first quarter with a combined ratio of 95%, an improvement of 230 basis points year over year. Importantly, our total company adjusted EBITDA of $51 million reflects overall profitability for the quarter. While this is a function of seasonality, and we expect that our adjusted EBITDA results will trend downwards over the course of the year, it is still an important milestone for us. Next year, we are targeting for this metric to be profitable for the full calendar year. Sid will provide a more detailed review of our results in a few moments. Oscar is in a very different place than we were a year ago. A year ago, we were focused on absorbing our increased scale and ensuring that our operations could handle a sizable increase in growth. Today, we are focused on advancing the capabilities and technology to best serve our members and have been able to shift our attention to implementing a series of initiatives aimed at improving the efficiency of our operations. The results of the quarter show progress, but I still see more opportunities to accelerate. Regarding insurance company profitability, I see the biggest levers falling into core buckets that management previously laid out. One, addressing our total cost of care. Two, focusing on the administrative efficiency. And three, improving sculpting. The combination of these three objectives coupled with our opportunities to enhance the value of our technology position us well to achieve our goals. Starting with the total cost of care. We're seeing strong performance across several areas, including payment integrity, network optimization, and savings from vendor contracts. However, I see pockets of opportunities for improved financial performance in areas where we are underperforming against our potential. Specifically, there are many traditional scale processes for payers where I see opportunities to drive the bottom line. As an example, increased scale has driven material pharmacy savings and improvements in our processes with our PBM partner. While we've had great progress to date, I view these activities as merely the starting point to help reduce total cost of care over time. Moving to administrative cost efficiency. We have solidified the majority of our efficiency efforts at this point in the year. For example, We successfully executed our distribution optimization efforts during open enrollment and expect these savings to continue throughout the year. We are also achieving scale benefits in our cost structure. As another example, we recently negotiated a new multi-year agreement with a large risk adjustment vendor. allowing us to realize significant savings going forward. Our technology is also having an impact on our efficiency. Recently, we rolled out a series of interactive automation features that provide instant answers to members for common questions. This technology has reduced inbound volume by 5 to 10% across customer service channels, while retaining consistent satisfaction ratings. Finally, portfolio sculpting remains a key tool to help us improve profitability as we exit underperforming markets. The company has been disciplined in managing its portfolio and improving the sustainability of our margins over time. We're announcing today that we have decided to pause our participation in the California individual market for plan year 2024, as the plan has not met our internal targets. We intend to reshape our strategy and product offerings in preparation to reenter the market in the future. Turning now to PlusOscar. As you can see in our solid first quarter results, our technology is clearly having a positive impact on the business. While we are focused on profitability for the insurance company, we are continuing to build and develop Campaign Builder, which is PlusOscar's engagement and automation tool. I'm happy to report that we are officially live with our first Campaign Builder client that we announced last year. Since launch, our client has seen an approximately 60% engagement rate with English speakers and a 65% engagement rate with Spanish speakers, which shows the power of provider-led communication. We're also excited about signing another Campaign Builder customer, a large value-based primary care group that serves hundreds of thousands of patients across commercial, Medicare Advantage, and Medicaid segments. We will partner with this group to drive primary care utilization to owned and affiliated PCPs, close process gaps, and streamline operations. Campaign Builder is just one example of the technology tools that we expect to bring to market over the next several years. Given the market context, I also want to share some thoughts on AI. We believe that our proprietary technology stack is a sizable benefit for deploying large language models with great impact. In our many pilots and tests, large language models are good at explaining in natural language how a claim got paid, but only if the claim system produces coherent structured output. Large language models are good at extracting which specialty a member is looking for, but only if the system has good provider data. Large language models are good at translating provider contracts into a system configuration file, but only if your claim system is easily configurable. We are unique in having built a proprietary tech stack, including a modern data lake that will enable us to use large language models across every aspect of healthcare. We believe this can become a competitive advantage for us and our Plus Oscar offering. As we look to the future, we continue to see many tailwinds for the ACA. Specifically, growth due to the resumption of Medicaid redeterminations, the proposed new rule to expand marketplace coverage to DACA recipients, and the continued shift of employers in the market through individual coverage HRAs. OSCAR should benefit from the marketplace growth with our individual industry-leading NPS and consumer engagement. While the ACA is the most individualized market in insurance, I believe our innovative products and technology are highly applicable to other individualized markets as well. Medicare advantages is a space I know well. Based on my experience, I see opportunities to form interesting partnerships with like-minded provider groups to participate in this space. With that, I'd like to turn it over to Sid to provide additional insight on our first quarter results.