ACA Uncertainties And Digital Efficiencies Will Shape Future Outcomes

Key Takeaways

• Higher claims costs and evolving policy risks threaten profitability and future membership growth, despite efforts to reprice plans and leverage digital adoption trends.
  
• Regulatory shifts and industry consolidation could inflate expenses and hinder Oscar's ability to realize anticipated technology-driven cost advantages and margin improvements.
  
• Digital innovation, strong revenue growth, risk-adjusted pricing, strategic expansion, and financial resilience position Oscar Health for sustained profitability and market leadership.

Catalysts

Operates as a healthcare technology company in the United States.

• Recent market-wide increases in morbidity within the individual ACA market highlight Oscar Health's vulnerability to dynamic risk pools-heightening uncertainty in claims costs and putting pressure on the company's ability to maintain or grow net margins and future earnings, even with planned repricing actions.
  
• Concerns over potential policy shifts-such as the expiration or non-renewal of enhanced premium tax credits-pose a risk to future membership growth and revenue, as lower subsidies could shrink Oscar's addressable market despite positive digital adoption trends.
  
• Increasing regulatory scrutiny and program integrity efforts (e.g., Medicaid redetermination, stricter eligibility enforcement) are driving out low-utilizing members and reshaping Oscar's customer mix toward higher-cost segments, which may elevate the company's medical loss ratio and reduce profitability in the longer term.
  
• Industry-wide acceleration toward value-based care and consolidation between payers, providers, and PBMs could exclude Oscar from favorable cost structures and preferred provider rates, limiting Oscar Health's ability to control costs and compressing operating margins.
  
• Heightened consumer privacy concerns and the tightening of data regulation threaten Oscar's ability to fully leverage its proprietary technology and data analytics platform for differentiated underwriting and medical management, potentially slowing cost-efficiency gains and dampening margin expansion expectations.

Oscar Health Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Oscar Health's revenue will grow by 4.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from -1.5% today to 2.0% in 3 years time.
• Analysts expect earnings to reach $245.4 million (and earnings per share of $1.12) by about September 2028, up from $-161.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.3x on those 2028 earnings, up from -32.1x today. This future PE is greater than the current PE for the US Insurance industry at 14.3x.
• Analysts expect the number of shares outstanding to grow by 4.57% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Oscar Health Future Earnings Per Share Growth

Risks

• Robust digital adoption and AI-driven efficiencies in healthcare are driving Oscar Health's operating cost reductions-such as a $60 million planned administrative cost cut in 2026-which can lead to improved net margins and set the stage for operating profitability.
  
• Oscar Health's strong year-over-year revenue growth (29% in Q2) and consistently rising membership (28% growth, topping 2 million members) demonstrate competitive strength and sustained market demand, supporting top-line revenue expansion.
  
• The normalization of higher market morbidity through aggressive repricing (double-digit rate increases for 2026 already refiled in nearly all markets) and productive regulator engagement increase confidence in future margin recovery and a return to positive earnings.
  
• Strategic expansion into ICHRA and acquisitions of digital enrollment/broker platforms position Oscar to diversify revenue streams, access broader customer segments (employers as well as individuals), and gain long-term share, supporting both revenue stability and growth.
  
• The company's substantial capital reserves ($5.4 billion in cash/investments, $579 million in excess capital at insurance subsidiaries), low leverage, and disciplined SG&A management provide ample liquidity and financial resilience, enhancing long-term earnings power and reducing solvency risk.

Valuation

• The analysts have a consensus price target of $11.143 for Oscar Health based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $14.0, and the most bearish reporting a price target of just $8.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $12.4 billion, earnings will come to $245.4 million, and it would be trading on a PE ratio of 16.3x, assuming you use a discount rate of 6.8%.
• Given the current share price of $20.05, the analyst price target of $11.14 is 79.9% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.