Baird Downgrades Oscar Health to Neutral Due to Uncertainty in Healthcare Exchange Market

Baird downgraded Oscar Health to Neutral from Outperform with a price target of $14, citing uncertainty in the healthcare exchange end market. The firm is cautious about Oscar's risk adjustment revenue projection, which has become increasingly complex. Baird's downgrade is a result of Oscar's recent pre-announced Q2 and 2025 outlook revision.

Investment research firm Baird has downgraded Oscar Health Inc. (NYSE: OSCR) from Outperform to Neutral, slashing its price target to $14.00 from $28.00. The downgrade follows Oscar Health’s pre-announced second-quarter results and revised 2025 guidance, with Baird expressing increasing caution about the company’s prospects for 2026.

The downgrade is primarily driven by broader issues in the Affordable Care Act (ACA) Exchange Marketplace rather than company-specific operational problems. Baird cited the zero-sum nature of ACA risk adjustment and the complexity of projecting risk adjustment revenue as key challenges. The firm noted that the Exchange Marketplace is experiencing "material/unexpected risk pool deterioration" this year and likely will again next year heading into 2026. Potential drivers for the 2025 risk pool deterioration may include program integrity measures or Medicaid redeterminations.

Oscar Health has faced several challenges recently. The company has raised its full-year revenue forecast to between $12 billion and $12.2 billion, surpassing the average analyst estimate of $11.32 billion. However, it has also announced a $500 million EBIT cut, leading Jefferies to lower its price target to $8.00 while maintaining an Underperform rating. Piper Sandler also downgraded Oscar Health from Overweight to Neutral, reducing the price target to $14.00 due to concerns in the ACA market.

Oscar Health pre-announced its second-quarter 2025 results, leading to a reduced guidance for the full year, primarily due to higher acuity in the individual ACA Marketplace. Jefferies has expressed concerns about Oscar Health’s risk adjustment accruals, lowering its price target to $9.00. These developments indicate ongoing challenges for Oscar Health amid its adjusted financial outlook.

The company expects a loss from operations of approximately $230 million and a net loss of approximately $228 million for the second quarter of 2025. The preannouncement is driven by a review of 2025 Marketplace data from Wakely, an independent actuarial firm, that analyzes paid claims submissions through April 30, 2025 for most Marketplace insurance carriers.

Oscar Health is revising its full year 2025 outlook. For 2025, the Company now anticipates Total Revenue of $12.0 billion to $12.2 billion, a Medical Loss Ratio of 86.0% to 87.0%, a SG&A Expense Ratio of 17.1% to 17.6%, and a Loss from Operations of ($300 million) to ($200 million). The Company expects an Adjusted EBITDA loss of approximately $120 million less than the Loss from Operations.

References:
[1] https://www.investing.com/news/analyst-ratings/oscar-health-stock-downgraded-by-baird-on-aca-exchange-concerns-93CH-4152645
[2] https://ir.hioscar.com/news-events-presentations/news-press-releases/news-details/2025/Oscar-Health-Announces-Preliminary-Financial-Results-for-Second-Quarter-2025-and-Revises-2025-Guidance/default.aspx