Oscar Health (OSCR): A Tech-Driven Insurance Play with Asymmetric Upside

Oscar Health (OSCR) is emerging as a compelling investment opportunity, blending the scalability of technology with the resilience of a maturing health insurance model. Despite lingering political risks tied to the Affordable Care Act (ACA), the company's AI-driven operational efficiencies, improving margins, and bipartisan-adopted marketplace growth position it for a valuation re-rating. Let's dissect why OSCR's undervalued stock could deliver asymmetric returns as it scales profitability beyond 2025.

The Financial Foundation: Margin Expansion and AI's Silent Role

Oscar's recent financials reveal a company turning the corner toward profitability. In 2024, its Medical Loss Ratio (MLR) rose modestly to 81.7% from 81.6% in 2023, while the SG&A (Selling, General, and Administrative) expense ratio plummeted to 19.1% from 24.3%—a 520 basis point improvement. This SG&A reduction was driven by fixed cost leverage and variable cost efficiencies, such as optimized distribution and administrative spending.

While Oscar's earnings reports don't explicitly credit AI for these gains, its aggressive AI initiatives—such as automating 200 equivalent full-time roles in customer service and reducing hospital readmissions by nearly 10%—indirectly support operational efficiency. These tools lower long-term overhead risks, enabling OSCR to scale without proportionally increasing administrative costs.

Political Risks and Why They're Overblown

Critics argue that OSCR's reliance on ACA subsidies and the political volatility of healthcare policy pose existential threats. However, the ACA marketplace has now reached 24 million members (up 13% in 2024), creating a bipartisan reality: even conservative states are hesitant to destabilize a system that now serves millions.

Oscar's +Oscar platform, which now provides AI-driven tools to health systems and employers, further insulates it from ACA-specific risks. This B2B arm—offering claims processing, care coordination, and predictive analytics—is a revenue diversifier that can thrive regardless of subsidy policies.

The Untapped SMB Market Opportunity

Oscar's expansion into 165 additional counties across 18 states (including Texas, Florida, and Tennessee) highlights its focus on the small-group and individual markets. These segments are underserved by legacy insurers, and OSCR's tech-enabled underwriting and customer experience give it an edge.

The company's 2024 membership growth of 41% to 2 million effectuated members underscores its ability to attract customers in competitive markets. With 2025 guidance calling for an MLR of 80.7%-81.7% and an SG&A ratio of 17.6%-18.1%, the path to sustained profitability is clear—if it can maintain these trends.

Management Confidence: Insider Buying Signals

Insider buying often acts as a contrarian indicator of confidence. In 2025, OSCR ranked 2nd among stocks with “heavy insider buying”, with executives purchasing shares worth $500,000+ each over six months. This activity aligns with CEO Mark Bertolini's compensation structure, which ties his pay to employee performance and stock price milestones.

The Investment Case: Asymmetric Upside

OSCR trades at a P/S (Price-to-Sales) ratio of 0.3x, well below peers like Humana (0.8x) and UnitedHealth (1.0x), despite its faster revenue growth (56.5% YoY in 2024). The market discounts its risks—subsidy expiration, regulatory uncertainty—but underestimates its tech-driven margin potential.

With $4.9 billion in liquidity, OSCR can weather near-term headwinds while scaling its AI platform and SMB footprint. The $17.38 average price target (12.7% upside from current levels) suggests the market hasn't yet priced in its 2025 margin guidance or its B2B growth.

Risks to Consider

• Subsidy Expirations: The end of enhanced ACA subsidies in 2025 could pressure enrollment, though OSCR's focus on cost-efficient plans may mitigate this.
• MLR Volatility: Risk adjustment true-ups and utilization spikes could strain margins, though AI-driven care management aims to offset these risks.

Final Analysis: A Hidden Growth Engine

Oscar Health is a high-reward, high-conviction pick for investors willing to look past near-term political noise. Its AI-fueled operational improvements, bipartisan-entrenched marketplace growth, and undervalued stock create a compelling asymmetric opportunity.

Recommendation: Buy OSCR for a portfolio allocation of 2-5%, with a 12-18 month horizon. Monitor for margin expansion against 2025 targets and enrollment trends post-subsidy changes.

In a sector where innovation often lags, OSCR's tech-forward strategy and disciplined cost controls position it to lead—and its current valuation leaves plenty of room for upside.