Oscar Health: A Post-2025 Rebound Driven by Premium Hikes, Improved Medical Loss Ratios, and a Resilient Healthcare Tech Platform

The healthcare insurance sector has faced relentless headwinds in 2025, from rising medical inflation to ACA Marketplace volatility. Yet, for value investors, Oscar Health (OSCR) emerges as a compelling case study in resilience. Despite a $228.4 million net loss in Q2 2025—a sharp reversal from a $56.2 million profit in the same period in 2024—the company’s strategic recalibration positions it for a 2026 rebound. This analysis argues that Oscar’s combination of premium hikes, a path to normalized medical loss ratios (MLRs), and a tech-driven operational model creates a durable value-investment opportunity amid sector-wide turbulence.

Medical Loss Ratios and the Path to Normalization

Oscar’s Q2 2025 MLR surged to 91.1%, a 12-point jump from 79.0% in Q2 2024, driven by elevated market morbidity and a $316 million increase in risk adjustment payables [1]. While alarming, this spike reflects broader industry pressures rather than operational failure. The Affordable Care Act (ACA) Marketplace saw a median premium increase of 7% in 2025, with insurers grappling with post-pandemic healthcare utilization and the rising cost of specialty drugs like GLP-1 medications [2]. Oscar’s reaffirmed 2025 guidance—targeting an MLR of 86–87%—suggests management expects stabilization as risk adjustment accruals normalize and morbidity trends moderate [3].

Critically, Oscar’s MLR challenges are not insurmountable. The company’s 2026 profitability thesis hinges on rate adjustments to offset rising medical costs. With ACA Marketplace insurers projecting an 18% median premium hike for 2026 [4], Oscar’s ability to pass through these increases to members could restore underwriting margins. For instance, its recent expansion of Individual Coverage Health Reimbursement Arrangements (ICHRA) offers a diversified revenue stream, reducing reliance on volatile ACA subsidies [5].

Operational Efficiency and Tech-Driven Cost Discipline

Oscar’s SG&A expense ratio improved to 18.7% in Q2 2025, down from 19.6% in Q2 2024, reflecting disciplined cost management [1]. The company has implemented workforce reductions and AI-driven automation to cut fixed costs, achieving its lowest SG&A ratio in history at 15.8% [6]. These measures are pivotal in mitigating the drag from higher MLRs. For example, AI-powered tools for care guides and virtual urgent care reduce administrative overhead while enhancing member satisfaction [3].

Moreover, Oscar’s +Oscar platform—a digital ecosystem connecting members to third-party healthcare solutions—has become a differentiator. By integrating telehealth, prescription management, and wellness programs, the platform drives engagement and reduces avoidable hospitalizations, indirectly lowering medical costs [1]. This tech-centric approach aligns with industry trends: insurers that leverage digital tools to improve care coordination typically see a 5–10% reduction in medical expenses [7].

Valuation Metrics and Analyst Sentiment

Oscar’s stock valuation appears undervalued relative to peers. With a price-to-sales (P/S) ratio of 0.5x—well below the industry average of 1.1x—the company trades at a discount despite 29% YoY revenue growth to $2.9 billion in Q2 2025 [6]. Analysts, however, remain cautious. The consensus price target of $11.14 (as of September 2025) implies a 42.65% decline from the current $19.43 stock price, reflecting concerns over ACA uncertainties and regulatory risks [6]. Yet, this pessimism overlooks Oscar’s structural advantages.

For instance, its price-to-book ratio of 4.09 suggests the market is valuing its assets conservatively [8]. Given Oscar’s track record of operational efficiency (e.g., 28% membership growth in Q2 2025) and its 2026 profitability guidance, a re-rating could occur if the company meets its revised MLR and SG&A targets. Furthermore, its expansion into 165 new counties in 2024—bringing its total footprint to 446 counties—positions it to capture underserved markets, a key driver of long-term revenue [9].

Risks and Mitigants

The primary risks include ACA policy shifts and the expiration of enhanced premium tax credits, which could make coverage less affordable for members [4]. However, Oscar’s ICHRA strategy and partnerships (e.g., with Hy-Vee Inc.) provide alternative growth avenues. Additionally, its focus on high-margin, condition-specific plans (e.g., Diabetes Care, Breathe Easy for COPD) enhances member retention and reduces churn [9].

Conclusion: A 2026 Rebound in Sight

Oscar Health’s Q2 2025 results underscore the challenges of operating in a high-cost healthcare environment. Yet, its strategic focus on premium hikes, MLR normalization, and tech-driven efficiency creates a clear path to 2026 profitability. For value investors, the current discount to intrinsic value—coupled with a resilient platform and diversified growth initiatives—makes Oscar a compelling long-term bet. As CEO Mark Bertolini noted, the market is “positioning for long-term growth” [3], and with disciplined execution, Oscar could emerge as a sector leader in the post-2025 landscape.

Source:
[1] Oscar Health Announces Financial Results for Second Quarter 2025 and Reaffirms Updated 2025 Guidance [https://ir.hioscar.com/news-events-presentations/news-press-releases/news-details/2025/Oscar-Health-Announces-Financial-Results-for-Second-Quarter-2025-and-Reaffirms-Updated-2025-Guidance/default.aspx]
[2] How much and why ACA Marketplace premiums are going up in 2025 [https://www.healthsystemtracker.org/brief/how-much-and-why-aca-marketplace-premiums-are-going-up-in-2025/]
[3] Oscar Health Q2 2025 Earnings Call Transcript [https://fortune.com/company/oscar-health/earnings/q2-2025/]
[4] How much and why ACA Marketplace premiums are going up in 2026 [https://www.healthsystemtracker.org/brief/how-much-and-why-aca-marketplace-premiums-are-going-up-in-2026/]
[5] Oscar Health, Inc. (OSCR): A Bull Case Theory [https://finance.yahoo.com/news/oscar-health-inc-oscr-bull-163252008.html]
[6] Oscar Health (NYSE:OSCR) Stock Valuation, Peer ... [https://simplywall.st/stocks/us/insurance/nyse-oscr/oscar-health/valuation]
[7] Navigating the Post ACA Landscape [https://www.academia.edu/37928813/Navigating_the_Post_ACA_Landscape]
[8] Oscar Health Price to Book Ratio 2020-2025 | OSCR [https://macrotrends.net/stocks/charts/OSCR/oscar-health/price-book]
[9] Oscar Health, Inc. Announces 2024 Market Expansion ... [https://www.hioscar.com/press/oscar-health-announces-2024-market-expansion-plans]