Oscar Health (OSCR) Q3 2026 earnings review
Oscar Health raises its profit outlook, but membership shrinks
Oscar Health turned a third-quarter profit and raised its full-year targets even as eligibility checks trimmed its member roll. The health insurer for individuals and families grew revenue 72% from a year ago, helped by a $250 million boost from updated estimates of what it owes the federal risk-sharing pool. Chief executive Mark Bertolini lifted the full-year operating profit outlook to $850–950 million, which sits above what the company's own mid-year plan pointed to but still leaves a fourth-quarter loss by our math.
| Revenue | $5.14B +72% from a year ago (+64% without the $250M risk-pool update) |
|---|---|
| Medical loss ratio (claims as share of premiums) | 84.0% 88.5% a year ago |
| Effectuated members | 2.69M +27% from a year ago, down 271K from last quarter |
| Full-year operating profit outlook | Raised $200M middle of the range: $900M (implies a $371M Q4 loss) |
⚖️ Verdict: 🟢 Bullish
The story got better because third-party data on market sickness broke in Oscar's favor, cutting its federal risk-pool bill to 17% of direct premiums over the first nine months and pushing overhead costs down to 14% of revenue. One caution: without the $250 million risk-pool catch-up and $42 million in released medical reserves, the third quarter would have lost $114 million by our math, and enrolled membership fell by 271,000 from June.
The question now is whether the implied $371 million fourth-quarter operating loss reflects steep year-end medical claims on high-deductible plans or another round of conservative budgeting. If higher-deductible plans drive a late-year claims wave, fourth-quarter medical costs will jump above 90% of premiums; if the company held back more risk-pool savings, it will beat its raised target. Fourth-quarter results and 2027 open-enrollment numbers in February will settle it.
🐂 Bull Case
Favorable Risk Scores Turned Q3 Into a Profit
Under the Affordable Care Act (ACA), the federal health law, insurers with healthier members pay into a government pool called risk adjustment to compensate plans with sicker members. Because Oscar Health's members are younger and healthier than average, this pool is its largest cost outside medical claims. In the third quarter, the health insurer recorded a $250 million revenue boost from updated estimates for this pool.
The company said the gain came from "favorable development in the Company’s risk scores relative to the market and modestly favorable market morbidity relative to expectations". That lowered its risk-pool payments to 11.8% of direct premiums in the quarter, down from 15.4% in the second quarter by our math. Chief executive Mark Bertolini raised the full-year operating profit outlook by $200 million.
What to watch: risk-pool payments as a share of direct premiums for the full year, reported in the annual filing. A reading near the nine-month mark of 17.2% would confirm that 2026 premium increases stayed ahead of market sickness.
Overhead Costs Hit Another Record Low
Oscar has been using software and a larger customer base to shrink its selling, general and administrative (SG&A) expense ratio, which measures overhead and broker commissions as a share of revenue. In the third quarter, that ratio fell 3.5 percentage points from a year ago to 14.0%, beating the second quarter's 14.2% record.
The insurer attributed the drop to "lower risk adjustment as a percentage of premium, greater fixed cost leverage, and disciplined expense management". Because the $250 million risk-pool benefit enlarged the revenue base, it helped push the ratio down. Even so, Oscar lowered its full-year overhead outlook by 0.5 percentage points to 15.1–15.6%.
What to watch: the fourth-quarter overhead ratio, implied at 18.3% at the middle of the full-year outlook by our math. Holding below last year's 18.2% fourth-quarter rate during open-enrollment marketing would show the cost savings are structural.
🐻 Bear Case
One-Time Adjustments Drove the Entire Q3 Profit
"Oscar Health is on track to deliver the strongest year of financial performance in our history, and we are raising our earnings from operations outlook for a third time," chief executive Mark Bertolini said. Reported operating profit reached $178.0 million, up from a $129.3 million loss a year ago, as the medical loss ratio (MLR, the share of premiums spent on medical care) fell 4.5 percentage points to 84.0%.
- Risk-pool estimate update in Q3 revenue: $250 million positive
- Prior-period medical reserve release in Q3 claims: $42 million positive (vs $84 million a year ago)
- Operating result without both items: $114.0 million loss by our math
- Medical loss ratio without both items: 89.2% vs 84.0% reported by our math
The catch-up adjustments belong to the full year, because Oscar held back from booking favorable market data earlier in 2026. Still, stripping them out shows that third-quarter medical claims ran high enough to put the standalone quarter in the red. That leaves quarterly earnings heavily dependent on retrospective government pool estimates.
What to watch: fourth-quarter prior-period reserve development and risk-pool adjustments in the annual report. A quarter that earns a profit without catch-up adjustments would prove underlying margins have settled.
Enrolled Members Dropped by 271,000 in One Quarter
Effectuated members — customers who have enrolled in a plan and paid their premiums — remain 27.2% above last year at 2.69 million (27.5% excluding the discontinued Cigna small-group partnership). However, the customer count is shrinking within the year as federal eligibility checks remove members with unverified subsidies.
By our math, Oscar lost 271,117 members between June and September, a 9.1% drop in a single quarter. In the same quarter last year, the company added 89,756 members. Revenue still rose 5.3% from the second quarter because Oscar alreadywithholds revenue for members it expects to lose, booking their government subsidies as a liability instead.
What to watch: year-end effectuated membership and the 2027 open-enrollment tally in the fourth-quarter release. A further drop would shrink the starting customer base for 2027.
The Raised Plan Still Points to a Fourth-Quarter Loss
Health insurance claims rise late in the year because members finish paying their annual deductibles and insurance covers the rest of their care. Oscar's shift toward higher-deductible bronze plans this year concentrates even more of that expense into the final months.
Through nine months, the insurer has earned $1.27 billion in operating profit. Yet its raised full-year outlook calls for $850–950 million. By our math, that leaves a fourth-quarter operating loss of $321–421 million ($371 million at the middle of the range) and a medical loss ratio near 90.5%, alongside a 12.8% drop in revenue from the third quarter.
What to watch: fourth-quarter operating loss and medical loss ratio in February. Beating the implied $371 million loss would show management built extra caution into the fourth-quarter outlook.
Risks this quarter didn't answer
Bertolini said Oscar's pricing and technology "position us to grow market share and expand margin in 2027", but the earnings release gave no numbers on three standing risks or on its new marketplace.
- 2027 pricing and competition: no 2027 rate-filing figures or margin targets in the release to show whether industry repricing will squeeze margins after 2026's windfall.
- Federal policy and drug tariffs: the release's risk warnings again flag the expiration of enhanced ACA tax credits, stricter identity checks, and tariffs, without sizing their 2027 impact.
- Lucie Health Marketplace and employer stipends: other revenue fell to $6.3 million from $8.8 million a year ago, with no separate disclosure of marketplace members or fees.
👓 Other Themes
Diluted Share Count Rose 34% on Profitable Math
Oscar's basic share count rose 19.3% from a year ago to 309.3 million, largely from last November's exchange of convertible debt into stock. Because the insurer turned a profit this quarter compared with a loss a year ago, convertible notes and stock options also entered the diluted count, pushing diluted shares up 33.6% to 346.5 million.
💲 Other KPIs
Payables to the Centers for Medicare & Medicaid Services (CMS) — cash owed for the risk-adjustment pool and for premium subsidies on members expected to be disenrolled — rose 69.5% from $2.73 billion at year-end 2025. The liability fell 24.1% from $6.10 billion in the second quarter after Oscar paid $2.56 billion for prior policy years.
Operating cash inflow reached $3.51 billion for the first nine months, up from $423.0 million a year ago. Because first-half operating cash flow was $4.71 billion, the third quarter saw an implied outflow of $1.20 billion by our math as Oscar settled prior-year federal risk-pool bills. Larger cash balances lifted third-quarter investment income 71.0% to $91.0 million.
🔮 Guidance
Raised. The middle of the full-year range moved up $300 million to $19.15 billion, or 63.7% growth from 2025 by our math, after holding at $18.85 billion since February. By our math, that leaves $4.48 billion for the fourth quarter — up 59.8% from a year ago, but down 12.8% from the third quarter after the $250 million risk-pool boost and member losses.
Raised. Oscar lowered its full-year medical cost ratio range by 0.5 percentage points to a middle of 81.0%, following earlier cuts from 82.9% in February and 82.0% in the second quarter. With the nine-month ratio at 78.1%, the outlook implies a fourth-quarter medical loss ratio of about 90.5% by our math as members finish paying their deductibles.
Raised. The company improved its full-year overhead ratio target by 0.5 percentage points to a middle of 15.35%, after trimming it from 16.05% in February to 15.85% in the second quarter. Against a 14.4% ratio through nine months, the plan leaves an implied fourth-quarter overhead ratio of 18.3% by our math as open-enrollment marketing ramps up.
Raised. Operating profit rose to $900 million at the middle of the range, the third increase since February's $350 million target (+$250 million in Q2, +$100 million before Q3, +$200 million today). Because nine-month profit is already $1.27 billion, the plan implies a fourth-quarter operating loss of $371 million (-8.3% margin) by our math.
❓ Key Questions
How much of the 2026 risk-pool favorability remains unbooked?
Oscar booked a $250 million revenue benefit from updated risk-adjustment estimates in the third quarter, pulling its nine-month risk-pool transfer ratio down to 17.2% of direct premiums. Did that catch up with all external market data, or does the fourth-quarter outlook hold back more?
Why did the credit-loss provision reverse in the third quarter?
The nine-month cash flow statement shows an $11.9 million provision for credit losses and a $19.1 million balance-sheet allowance, down from a $48.2 million provision and $55.3 million allowance at mid-year. Were expected broker commission chargebacks from disenrolled members written off or reversed?
How many more retroactive disenrollments sit in the CMS payable?
Effectuated membership fell by 271,117 in the third quarter to 2.69 million, in line with the 250,000–300,000 retroactive removals estimated at mid-year. Has the eligibility cleanup finished, or does the $4.63 billion payable to CMS still reserve for further fourth-quarter removals?
What are the concrete 2027 targets after September's Investor Day?
Bertolini said the company is positioned to grow market share and expand margins in 2027, and the prior outlook column shows an interim $100 million profit raise between quarters. What multi-year margin target and 2027 membership assumptions now govern the plan?