Oscar Health, Inc.

Good morning. My name is Jeannie and I will be your conference operator today. At this time, I would like to welcome everyone to Oscar Health's second quarter 2026 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. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Today, we do ask you limit yourself to one question and one follow-up. Thank you. I will now turn the call over to Chris Potochar, Vice President of Treasury and Investor Relations.

Good morning, everyone. Thank you for joining us for our second quarter 2026 earnings call. Mark Bertolini, Oscar Hell's Chief Executive Officer, and Scott Blackley, Oscar Hell's Chief Financial Officer, will host this morning's call. This call can also be accessed through our Investor Relations website at ir.hioscar.com. All details of our results and additional management commentary are available in our earnings release, which can be found on our investor relations website at ir.hioscar.com. 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 period ended December 31st, 2025 and the quarterly report on Form 10-Q for the period ended March 31st, 2026 each is filed with the Securities and Exchange Commission and other filings with the SEC including our quarterly report on Form 10-Q for the period ended June 30th, 2026 to be filed with the SEC. Such forward-looking statements are based on our 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 second quarter earnings press release available on the company's investor relations website at ir.highoscar.com. We have not provided a quantitative reconciliation of estimated full year 2026 adjusted EBITDA as described on this call to GAAP Net Income because OSCAR is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. With that, I will turn the call over to our CEO, Mark Bertolini.

Good morning. Thank you, Chris, and thank you all for joining us. Today, OSCAR Health announced strong second quarter 2026 results. with significant year-over-year improvement across all core metrics. OSCAR delivered record profitability for the first half of 2026, generating $1.1 billion in earnings from operations, then $1 billion in net income. In the second quarter, revenue grew 70% year-over-year to $4.9 billion. MLR improved 12 points to 79.2% year-over-year, with utilization moderately favorable to our expectations. Our SG&A expense ratio improved 450 basis points to a record low of 14.2%, reflecting discipline expense management, technology-driven efficiencies, and continuing operating leverage. Earnings from operations increased by $619 million year-over-year to $389 million. Our performance demonstrates superior execution against the fundamentals of our strategy. Discipline pricing, differentiated consumer products, and a scalable technology platform work together to fuel individual market growth. We are raising our full year 2026 outlook based on the strength of our operating performance and our model built for long-term profitable growth. Now I will share our view on trends in the individual market, then I'll dive into our business highlights. The individual market is vital to our nation's economy and was built for the labor market now taking shape. The market is expanding coverage for people outside of traditional employer plans, including a growing number of entrepreneurs, gig workers, part-time employees, and early retirees. Over the past decade, the market drove down the uninsured rate and prevented billions in uncompensated care. Over the next decade, its role will only grow as people move between full-time jobs, contract work, and retirement at twice the rate of prior generations. AI will accelerate that shift. Our nation's leaders should promote policies that put the next generation of American workers in charge of choosing their health care. OSCAR is leading the charge with portable coverage and experiences that meet the expectations of the people powering our economy. The future of American health care depends on a durable individual market, and 2026 trends reinforce our conviction in its long-term strength. Total ACA membership stands at 19.2 million, down 12% year over year, tracking favorable to our pricing assumptions and reflecting continued consumer demand. Wakely's first claim-based report of 2026 market morbidity is also favorable to our expectations, suggesting potential upside to our outlook. We expect further market contraction and remain cautious with only four months of morbidity data, but we expect both trends to remain favorable to our pricing assumptions. Looking ahead to 2027, we anticipate a rational pricing environment with rates that reflect the effects of CMS's program integrity efforts. Now I will review our business highlights. Oscar ended the second quarter with 2.96 million members, up 46% year-over-year. Membership reflects above-market open enrollment growth and solid retention. Our consumer products designed around clinical, lifestyle, and cultural needs are driving higher member satisfaction, and we continue to launch features that help members find high-value care and manage costs. We are also building momentum in ICRA with steady growth and demand from small businesses in the healthcare and professional services industries. Our technology continues to differentiate the member experience. This quarter, we piloted a radiology program with our Oswell agent. Oswell uses a member's claims history and clinical interactions to initiate their next step for care. It confirms coverage, guides members to high-quality providers based on cost, location, and availability. and shows estimated savings from switching facilities. One in four members choose Oswald's recommended site of care and save $75 on average for appointment. We will expand this capability to additional procedures using care standards from leading centers of excellence. AI is powering operations across benefits, billing claims, clinical care and member support. Our claims platform delivers 98.7% first pass accuracy and processes most claims in under 48 hours. We are also deploying AI and medical economics programs to identify cost signals early and act before they become trends. Pharmacy is a clear example. Our models analyze pharmacy activity alongside utilization, provider, broker and member data to flag outliers. Root cause analysis identifies the drivers so our teams respond with precision. We expect these capabilities to generate tens of millions of dollars in annual savings. Oscar's technology is transforming the economics of the business. The team is embedding intelligence into all core workflows across our platform, making it smarter and more efficient with every deployment. As membership grows, we can serve more members without adding headcount at the same rate. That scale fuels operating leverage, expands margins, and bends the medical cost trend for us and for our members. In summary, Oscar delivered a strong second quarter and record profitability in the first half of 2026. The fundamentals of the business are strong. Our performance is favorable to plan, and our improved 2026 outlook reflects that momentum. We are entering the second half of the year from a position of strength, with the technology, scale, and operating discipline to deliver profitable growth. The ACA is the only healthcare market where private insurers compete directly for the consumer. Our job is to give consumers real choices, real price transparency, and reward what they value. When that happens, the competitive market does what it does best. It drives out inefficiency, accelerates innovation, and lowers costs. Oscar is defining that future. We are replacing one-size-fits-all coverage with solutions that make healthcare as easy to use as any other consumer product. Our results reflect the team's focused execution across our products, platform, and strategy. We will outline how we translate that performance into durable growth and long-term value at our Investor Day on September 16th. I will now turn the call over to Scott. Scott?

Thank you, Mark, and good morning, everyone. This morning, we reported strong second quarter results, and we're raising our full year 2026 outlook to reflect our operating performance. Through the first half of the year, we delivered record profitability of approximately $1 billion of net income, or $3.16 per diluted share. The fundamentals of the business are strong and our results are favorable to our plan. Let me now turn to details on second quarter performance. We entered the second quarter with 2.96 million effectuated members, an increase of 46% year over year driven by above market growth during open enrollment and solid retention. Total revenue was 4.9 billion, an increase of 70% year over year driven by higher membership and rate increases Partially upset by higher risk adjustment payable accrual. The second quarter medical loss ratio was 79.2%, an improvement of nearly 12 points year over year. Recall that in the prior year period, we recorded the entire first half impact of the 2025 risk adjustment true up in the second quarter. The year over year MLR improvement was driven by our disciplined pricing strategy and a strong current year performance compared to the market reset experienced a year ago. We also benefited from favorable prior period reserve development in the quarter. Now I'll spend a moment on risk adjustment. In the second quarter, we received the final 2025 CMS risk adjustment report, which was approximately 160 million favorable to our first quarter accruals and fully recognized in the quarter. We also received the first risk adjustment report for 2026, covering claims through April. which showed market morbidity tracking quite favorable to both our pricing and first quarter accruals. With only four months of claims in the data, we recognized only a small portion of that favorability, which we believe is appropriate at this stage in the year. Through the first six months of the year, risk adjustments of percentage of direct premiums was approximately 20% consistent with our expectations for the full year. Overall year-to-date utilization was moderately favorable to our expectations. By category, inpatient, professional, and pharmacy utilization were favorable, while outpatient was elevated through the first six months of the year. On administrative expenses, we delivered another record low SG&A expense ratio. The second quarter SG&A expense ratio was 14.2%, a 450 basis point year-over-year improvement, and the lowest in the company's history. The improvement was primarily driven by disciplined expense management, including an increasing impact from technology and AI initiatives, fixed cost leverage, and lower risk adjustment as a percentage of premium. We reported earnings from operations of $389 million in the second quarter, a $619 million year-over-year improvement. Operating margin was 8%, a 16-point improvement year-over-year. Net income was $362 million, a $590 million increase year over year. Adjusted EBITDA was $415 million in the quarter, an increase of $615 million year over year. Through the first six months of 2026, our results reflect disciplined execution and strong year over year improvement across all key metrics. Shifting to the balance sheet, our capital position remains very strong. We ended the second quarter with approximately $10.2 billion of cash investments, including $462 million of cash investments at the parent. As of June 30, 2026, our insurance subsidiaries had approximately $1.9 billion of capital and surplus, including $994 million of excess capital, which was driven by our strong operating performance. Let me now turn to updates on our 2026 full-year guidance. Based on our first half performance, we are raising our full-year earnings from operations guidance to a range of $500 million to $700 million, an increase of $250 million from our prior outlook. We continue to expect total revenues of $18.7 billion to $19 billion. We now expect full-year MLR in the range of 81.5% to 82.5%. and improvement of 90 basis points at the midpoint from our prior outlook. On administrative expenses, we now expect our SG&A expense ratio to be in the range of 15.6% to 16.1%, an improvement of 20 basis points at the midpoint. We continue to expect adjusted EBITDA to run roughly 115 million above earnings from operations. Our improved outlook reflects our strong first half performance, including favorable prior period development, and an expectation of increasing membership churn in the back half of the year as CMS program integrity processes continue. As I mentioned, the market morbidity data that we received for claims through April was quite favorable to our expectations. Given this early stage in the year, we have not taken full credit for that favorability in our outlook. If the favorability holds as claims develop, that could present a tailwind to our full year outlook. In closing, our disciplined execution drove strong operating results and record profitability through the first half of the year. We are confident in our improved 2026 outlook and are on track to deliver our strongest performance to date. With that, let's turn the call over to the operator for the Q&A portion of our call.

At this time, I would like to remind everyone, in order to ask one question, one follow-up, press star, then the number one on your telephone keypad. And your first question comes from Andrew Mott with Barclays. Please go ahead.

Hi. Good morning. On utilization trends, you noted inpatient, professional, and pharmacy was favorable, but outpatient was elevated. Can you elaborate a bit on what you saw there, particularly on the outpatient side, and how you're thinking about the pace of utilization to the balance of the year? Thanks.

Yep. Good morning, Andrew. An outpatient, I would say that there are a handful of areas that we're paying attention to. Honestly, none of them is particularly outsized. And what I think is most important there is that we're seeing stability in these trends. And so while outpatient is a bit elevated, as you mentioned, we're seeing the other categories running favorable. And at this point, the trends are stable. And so the utilization looks very reasonable and is favorable to what we would expect at this point in the year.

Great, and appreciate all the comments that AI is accelerating the shift to untraditional employment. I would love to hear what you're observing in the market driving that commentary and how that impacts your view of intermediate term growth. Thanks.

A couple of things on AI. First, we don't see the massive unemployment that a lot of other CEOs have painted a very dark picture of. We see a transition to different kind of job groups. and those are in the gig economy that's in part-time work, that's in multiple part-time jobs, that's in early retirees. And in that economy, employer-based insurance doesn't necessarily work well. There are a lot of people who don't have coverage as a result. And we are now working with some very large groups around that on part-time employees, people who work in multiple places with multiple part-time jobs. So as that market evolves, we see it as a huge opportunity for ICRA in expanding the total TAM of the marketplace. In small group and middle market, there's 115 million lives alone that we think will have some impact on unemployment in growing these other jobs in our economy. As far as AI goes internally, Our investment is not something that we do separately. Every business owner has a platform. That platform has engineers, product management, AI and business people evaluating how we can advance every one of our platforms every day to reduce friction for our members and for the providers we work with. and it's through that analysis that we fund those projects with expected returns and expected investments. I note that the pressure here of billions of dollars being spent by our competitors and I would just make the point that we have one platform, we have one data set. As a result, we start with a huge advantage in being able to use AI at scale without having to make the investments in platform integration and data rationalization that a lot of our competitors do. And that is why we are so far ahead in deploying AI at scale in the organization.

Your next question comes from the line of Jessica Tassan with Piper Sandler. Please go ahead.

Hi, guys. Thank you for taking the question and congrats. So first question is just can you clarify that the 2025 reconciliation accounts for about 80 basis points of the 90 basis point MLR revision at the midpoint? And then just do you mind helping us kind of understand what you're seeing? I mean, you helped a little bit on utilization or a lot on utilization for this year, but just how do we get comfortable that you all have visibility into utilization just despite kind of the potentially deterrent effect of higher deductibles? How do we get comfortable, essentially, with the reiterated or the slightly raised core MDR guide? Thank you.

Yeah, Jess, starting off with MLR and the impacts from PPD, you know, I would say that MLR excluding PPD in the first quarter was a little bit over 82%. And MLR is impacted by two components of prior year development. There's the piece that impacts risk adjustment, which we talked about getting the final CMS report, and that was roughly $160 million. There's also favorable development around claims. And so when you look at all those things, I consider those core parts of the business and They give us confidence that the reserves that we're booking, our pricing, are headed in the right direction. So everything there looks appropriate and stable. Turning to your question on utilization and our confidence in the back half, I would just make a couple observations. One, at this point in the year, we've had enough time to have a pretty good sense of the risk of the membership that we've got. I would say that it is consistent with our expectations As I talked about with utilization, we're seeing trends that are stable. We're not seeing anything that looks to be kind of pushing and running from us. So when I step back and look at all of the components of our operations and our business, I am pleased with the stability and with the clarity and visibility that we have into our current book. And With the Wakely report that we got in the first quarter, it confirms a lot of what we thought was going to be shaping up for this year in terms of, I would characterize it as the reduction in membership that we had all planned for. Looks like that's coming in a bit lighter. That results in morbidity in the marketplace that's likely going to be less than what we priced for and could present a tailwind to our full year outlook.

And I would add one more thing, Justin. In our management process and the way we operate the business and our operating plans, we actually create targets for affordability and reducing the actual trend we put into pricing. And we measure the results of our programs that we're developing, including some of the things we talked about with AI today, that go against those targets. And so we're constantly measuring the opportunity and what we call flares where we see hotspots in the utilization, making sure we go after those immediately, that we're acting quickly and with precision and moving that utilization back to where we expect it to be.

Thank you. Your next question comes from the line of Parker Snure with Raymond James. Please go ahead.

Hi, good morning. Just curious on how you guys are thinking about the 2027 rate cycle. We're seeing some of the preliminary rate filings beginning to roll through, but just generally, how are you thinking about positioning of your rates within the market and baking in conservatism for all things that could happen?

Parker, thanks for the question. We believe the market so far has been rational. And again, we price by market. So we look at opportunities by market. And so comparing the overall rate filings is probably not a good way of measuring it. Just take a look at what happened in 26 based on our overall rate filings versus our competitors. We've done quite well in spite of what people thought was underpricing. and so I would suggest so far rational. We still have another bite at the apple as we go forward and as we look at what could happen with the MBPP or the stay, which we probably don't think will be released at all this year. But in event it does, we have an opportunity to change product and pricing should we need to do that. So we have more time. We're on it every day. We already have plans in place on how to do changes if we need to make them. So we're pretty confident that we're in a good place.

And if I can just get a follow-up, I know it's early, but how are you thinking about the overall ACA market enrollment in 2027 at this point in time? Do you think, you know, I know there's still some unknowns, but do you think it's relatively flat or you see some more declines or just some general thoughts there?

We think that based on what's already in place through regulation, because we are reacting to some to a few program integrity efforts through CMS that are coming through in regulation and review that absent any dramatic changes to the NBPB, which again we don't think will happen, that a lot of the program integrity efforts have been built into the marketplace. We think we're through all the enhanced premium tax credits impact from 2026. So we think that the market has opportunity in it. Obviously, we're not resting on our laurels and we're looking at things like ICRA and other markets to grow our total available market, but we believe there's still opportunity for the market to remain stable or grow and for us to take share.

Your next question comes from the line of Stephen Baxter with Wells Fargo. Please go ahead.

Hey, thanks for the question. I wanted to follow up on utilization. It looks like medical expense was up 17% quarter over quarter, and I think probably 20% on a PM-PM basis. Could you give us some color on what's driving that? It seems like a much sharper increase than what you might normally expect. Obviously, there's a lot of unusual dynamics this year. And then how should we think about kind of either the upward sloping of MLR or maybe medical cost expense PM-PM as we move through the balance of the year? And then I have a follow-up. Thank you.

Thanks, Steve. I think that in utilization, we're really seeing, and translating that into MLR and PMPMs, we're really just seeing the seasonal pattern of the membership that we have this year. As we've talked about, we saw some transition in our book from silver into higher deductible bronze plans. We also have more gold membership. I do think that that Thank you for joining us.

Just to follow up on that, you have obviously a lot of new members this year. You also have a lot of new members and new products. Can you speak at all to the performance of new members and some of the new products that you rolled out this year, like the new bronze and the new gold that you're speaking to? Thanks.

Yeah, I would say that when I look across the book, we're really... Pretty pleased with the performance overall of the new products. Membership behaving, as I talked about, pretty consistently with our expectations. The risk in the book looks very much with what we would have expected. So we're not really seeing any deviations in any particular metal. It is an interesting situation where Bronze now has a lot of members that moved out of silver and moved into bronze. Gold has members that moved out of silver and now in gold. So, you know, you can't really look at these metals in the same way historically. So we do a lot of, you know, trying to refactor how these metals are going to perform and against those, you know, adjusted expectations, I would say things are performing, you know, consistent or favorable to our plan.

Your next question comes from the line of Scott Fidel with Goldman Sachs. Please go ahead.

Hi, thanks. Good morning. First question, just hoping you could maybe just decompress the SG&A performance was quite strong in the quarter. Maybe walk us through that. And then were there any timing dynamics that in terms of expenses that may be sort of, you know, played out in other quarters. And then also maybe just talk about, you know, as you look towards the rest of this year, how you're thinking about investment spending that may be an SG&A as well.

Yep, sure. Good morning. So SG&A, I would just say that, as Mark talked about, we've really made tremendous progress in SG&A. And in the... Thank you so much for joining us. SG&A is being, you know, what you've seen in the first six months is a good indication of the rest of the year. I do think that we'll see the fourth quarter will be the highest SG&A, you know, ratio on a percentage basis. That is typically the pattern for us. And that really reflects our investments in future growth and getting ready for, you know, 27 enrollment. So, you know, from here, you know, pretty stable third quarter and then an increase in the fourth quarter.

Okay, and then just wanted to ask about, you know, just with some of the shifts that you have in the metal mix and with the shift to more bronze, how that affects the risk adjustment accruals that you're making, you know, clearly seems like utilization, you know, is coming in favorable, but at the same time, you also have this, the metal mix shift, I guess, and now that you've had the Wakeley report and If I could just layer into that, into the metal mix question, you know, because it's interesting you guys have that perspective, I guess, because obviously there's a big focus on seasonality in the exchanges with the market mix shift to bronze from silver, but you have the perspective of having both the bronze and the gold. How was that seasonality playing out so far this year in terms of, you know, did you see, you know, what would be expected in terms of different type of seasonality around the higher cost sharing bronze and sort of lower utilization as a result of that in the first half compared to gold? Or was there any, you know, any other observations that you found interesting there?

Yeah, I would say that on the metals, you know, against our refactored expectations, again, recognizing that a lot of our members that were historically silver are now in different metals. The performance there is coming in, you know, in line to favorable with our expectation, and the risk is as we would have expected to slightly favorable. Just a comment about risk adjustment. So, in general, we're a risk adjustment payer because our members skew younger. Thank you for joining us. The different benefit designs by different metals. That's always not a perfect exact science in terms of how those algorithms work there. But what we are seeing is we're getting what we would expect in terms of claims activity and the risk adjustment benefits from that. So at this point in the year, which we do have now, we're six months into the year, so we've got some visibility into this and all things are looking like they're running as we would have expected.

Your next question comes from the line of Raj Kumar with Stevens, Inc. Please go ahead.

Hey, good morning. Maybe kind of focusing on ICRA and I guess, you know, yesterday's announcement with a partnership that you're undergoing with ICRA-X. So curious on, you know, what type of capabilities that offers to your current platform and kind of how should we be thinking about kind of the kind of pace going into 2027 for that? for that offering.

So ICRA-X is an EDE that we built off of an ACA-approved, CMS-approved electronic data exchange that we purchased last year. We mentioned it in, I think, the third or fourth quarter call last year. And that EDE has a lower cost structure than current ACA alternatives as well as agreements to have all of our competitors as part of that platform. So we now have the rails upon which to run ICRA, which has not been the case in the past. How do we convert members from a defined benefit to a defined contribution? How does the employer step aside and allow these people to sign up? And what happens is because network's always an issue, for employers because they have to have wide area networks at higher costs, by the way, than we do in the ACA with narrow networks. Those employers want to know how we can get member coverage. And what we tell them is that we have all of our competitors on the platform and the members can select whatever competitor they want that has the network they need. So all of a sudden we have the largest PPO network in the nation at narrow network rates. and what that allows those employers to do is to stand down on the issue of is there enough network coverage. Couple that with benefit selection tools that we're using with brokers to get people into the right plan design allows savings as high as 26% of the employer's cost versus what the employee would need to pay by following this option. So that EDE, that ICRA-X invites all of our competitors to the table. They've all joined. We all get access to all those members as they convert. and then the real opportunity is on the front end of the conversion with the employer where they spend sizable sums to convert from defined benefit to defined contribution where the revenue is not regulated like insurance revenue, doesn't require reserves and has higher margins. And so that will allow for competition in that market. ICRA X is then connected to Lucy where we are now starting to have We have Allstate Health. We have Aflac. We have a lot of retailers that want to get access to our members. Mark Cuban is talking to us about coming on board. Other organizations that want to join us to be able to offer retail opportunities to our members once they have to shop for their out-of-pocket costs as members in the program.

got it uh and then maybe as a follow-up just kind of more on the technical side I guess kind of looking at you know your short-term investments that kind of increased uh quite a bit uh quarter of a quarter so curious on kind of that underlying dynamic given just the cash kind of being pretty steady quarter of a quarter so any color in that would be helpful I mean the investment is to get the platform ready um and and and so you know um but it's not sizable it's not

a big, big number. It's a pretty easy to use platform and easy to change platform.

Your next question comes from the line of Jonathan Young with UBS. Please go ahead.

Hey, thanks for taking the question. I guess when you guys think about the pricing that's being put into next year from yourself in the market, do you guys kind of see yourselves getting I appreciate the question. Look, I think that we set up some long-term targets and one of those was around SG&A ratio and we're basically getting there a year ahead of plan.

I still think there's opportunity for more leverage if we grow the top line faster than our cost structure. That's going to be a positive in terms of that ratio. So given everything we're doing with AI and focusing on running the most effective and efficient operation we can, I think there's more opportunity for improvement going forward.

Okay, and then I think in your prepared remarks, you said there was an expectation of increasing membership churn in the back half of the year. I just wanted to be sure, is that in line with the previous expectation of that 1% to 2% per month, or is it going to be a little bit more elevated than is typical? Thanks.

Yep. So we ended the second quarter, as we talked about, with 2.96 million effectuated members, which is basically flat in the second quarter. And What we saw in that quarter basically was significantly better than our expectations, so lapse was quite favorable. Some of the lapse that we expected in the quarter is related to CMS eligibility and data issues that we now expect to happen in the second half of the year. I would expect that churn, we previously thought it was 1% to 2%. It's probably going to be closer to twice that amount. That's really a timing move and doesn't impact revenue. You can see that we reaffirmed our full year guidance on revenue. I would characterize that again more as just a delay in those members being unenrolled versus anything more fundamental in terms of the ongoing churn that we would expect in the business.

Your next question comes from the line of Michael Hogg with Baird. Please go ahead.

Thank you. Another, firstly, clarification to MLR. Scott, you mentioned first quarter MLR ex-PPD was, I think, a little over 82 percent. For this quarter, if I exclude the favorable PPD and prior to your risk adjustment true-up, I'm getting something around, like, 85.2 percent. Roughly correct. I know you mentioned utilization was moderately favorable. I just wanted to confirm 85.2 is what you're thinking about as underlying MLR, and if there's anything to note even on monthly cadence, was the favorability pretty consistent throughout the quarter, any moderation of trend?

Yeah, as I mentioned, my math says that if you exclude the Thank you for joining us. year-to-date, that's $232 million. So, you know, those are the numbers that you should be excluding if you're looking to try to, you know, adjust our second quarter or six-month MLRs.

Okay. Thank you. And multi-parter on risk adjustment. So, if I exclude the prior year true-up, I'm getting current year risk adjustment transfers about, I think, 17.9% of premiums. a lot better than the 20% expectation. So first question, is the implied transfer payable percentage in your updated guide for back half still 20%? I mean, I guess per full year, what does it imply for back half? And Mark, you mentioned the June weekly. Could I actually see this upside to your updated guide? Curious if you could elaborate more on that. What does that layer of possible conservatism look like within the guide? How much confidence do you have in the durability of it through year-end? And also, what types of, I guess, scenarios in the back half of the year do you think could even pose a threat to fully your expectations when it comes to risk adjustment? Is it membership attrition running hotter or something else?

All right, thank you. Yeah, so on risk adjustment, I would recommend that you look at the first half as the best lens in terms of what's going on with risk adjustment. In the first half, risk adjustment was 20%, which continues to be our expectation for the full year. There was modest favorability, as you talked about, in Q2 related to the final CMS report that's embedded in the quarter, but overall, again, Every quarter, we're doing kind of a year-to-date true-up and what our expectation is around risk adjustment. And so the fact that we were at 20 for the six months and we continue to expect 20 for the full year, I think, shows that things are progressing as we expected.

Your next question comes from the line of Dave Windley with Jefferies. Please go ahead.

Hi. Thanks for taking my question. Mark, the company invested a lot in working with your sales channel to navigate members between products for 2026. In your earlier answer, you talked about 27 being relatively stable. I'm wondering if you also think your tier mix will be relatively stable, or do you see more of that navigation? And then I think a product like HelloMeno is new to 26. Do you have any plans of similar sort for 27? Thanks.

Yes, we do have new products rolling out. We continue to innovate and buy market. So we expect that there will be more opportunity to move people into better plan designs that work for them and to demonstrate more of our capability of developing these kinds of products. Along with the tools like the radiology tool I talked about and our talking points, which goes alongside the pharmacy tool we talked about in the last quarter, we have more of those coming along so that it assists people. And our whole idea is can we reduce friction at every opportunity when we invest in the platform, thereby reducing barriers for people to get the care they need when they need it. So yes, we have more navigation to do. It's not as significant as the level we did last year with the enhanced premium tax credits. It's more about delivering on new products in certain markets.

Your next question comes from the line of Kevin Fishbeck with Bank of America. Please go ahead.

Great, thanks. Just want to try to help bridge the increase in guidance. Obviously, with Q1, you didn't change guidance, but you had 164 of PPD this quarter, 68 of PPD in Q1, and then 160 of 25 risk adjustment this year. So those things all seemed incremental to your original guidance. So like $392 million, but you raised the income guidance by $250 million. So can you help kind of bridge the delta between those numbers?

Yeah. So first of all, the 2025 risk adjustment of $160 million is the largest part of the total Q2 favorable prior period development of $164 million. So the RAs is a subset of the $164 million. As I talked about, there's $232 million of total favorable prior period development through the six months. And we raised guidance by $250 million. We think that the core business is running really well. When we got the first 26-weekly report, I would say that that was, again, it's quite favorable to our expectations. We know that that report is based on early stage claims, and there will be some evolution there in terms of how that evolves. And so we're not banking on all that favorability coming through. That's not part of our guide. But I would just say we feel like there's more tailwinds than headwinds in our outlook, and we're well positioned to have a strong rest of the year.

Okay, great. And then I guess one of your competitors talked about the IDR process being A headwind to them, and obviously that can be a bigger issue the more narrow the networks are. So just love to hear kind of your thoughts about how the IDR process is working relative to your expectations.

Thanks. Yeah, I mean, I think IDR is part of the business. I think we support the ultimate goal, which is to protect members from cost surprises. Those are all good things. But for us, I would say that IDR is not a trend driver.

Your next question comes from the line of Justin Lake with Wolf Research. Please go ahead.

Thanks. Good morning. Mark, Scott, you guys have both mentioned CMS program integrity efforts and the impact on second half enrollment a few times during the call, and I wanted to follow up here. I talked to one of your peers who indicated that in June, CMS sent out a list of 1 million members that they believe might be unauthorized due to a lack of social security numbers and zero claims. And also heard that about 80% of these members are in Florida and Texas, which I know are two big states of the company. So I know you expect some impact here in the second half. So curious if you could share with us how many of these million members were Oscar members? What percentage do you think you can hold on to or save? and what financial impact do you expect the potential loss of the rest of these members might have on your results given lower utilization of these folks?

Yeah, appreciate the question. I would just say we continue to see CMS focusing on eligibility verification. And, you know, that, excuse me, that is a topic that they have been, you know, really focused on throughout the year. In my comments, I talked about the fact that we expected to see some disenrollments in the second half that we had thought would start happening in really Q2. So that is something that we continue to anticipate. With respect to the financial implications, we don't recognize revenue for members that we anticipate are going to be disenrolled. We set up the payments that we receive from CMS as a liability on the balance sheet. and all of the impacts of what's going on across the industry with payment integrities is baked into our full year guidance. Got it.

Is there any way you could share how big that assumption is relative to what CMS sent you here in terms of the enrollment that they expect might not be correct?

Well, I would put it this way. We're reviewing the file that we received and there are a number of cases where we know that people were authorized appropriately. There are a number of cases where we've actually had contact with people. So their list was based on a set of assumptions that they went through on the file. The actual result will depend on our ability to go through those files and we are going through them actively and the appropriate accommodations for what we might think being lapsed members are in our guidance that we've shared with you.

Yeah, and I think we've got good visibility into that, so I don't think this is an area that we see as a risk to the rest of the year.

There are no further questions at this time. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.