Good afternoon. My name is Mike and I will be your conference operator today. At this time, I would like to welcome everyone to Oscar Health's First Quarter 2021 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn it over to Cornelia Miller, Vice President of Corp Dev and Investor Relations to begin the conference.

Thank you, Mike. And good afternoon everyone. Thank you for joining us for our inaugural earnings call, which will focus on our first quarter 2021 earnings results, recent developments in our business and our outlook for the full year 2021. Mario Schlosser, Oscar's Co-Founder and Chief Executive Officer; and Scott Blackley, Oscar's Chief Financial Officer will host this afternoon's call, which can also be accessed through our Investor Relations website at ir.hioscar.com. Full details of our results and additional management commentary are available in our earnings release, which can be found on our Investor Relations website at ir.hioscar.com. Any remarks that Oscar makes about the future constitute forward-looking statements within the meaning of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors including those discussed in our perspective dated March 2, 2021 File Pursuant to Rule 424(b) and our other filings with the SEC. Such forward-looking statements are based on current expectations as of today. Oscar anticipates that subsequent events and developments may cause estimates to change, while the Company may elect to update these forward-looking statements at some point in the future we specifically disclaim any obligation to do so. The call will also refer to certain non-GAAP measures. A reconciliation of these measures to the most directly comparable GAAP measures can be found in our first quarter 2021 press release, which is available on the company's investor website at ir.hioscar.com. With that I would like to turn the call over to our CEO, Mario Schlosser.

Thank you, Cornelia. I'd like to welcome all of you to our first earnings call. We are thrilled to share with you our strategic position, our first quarter results and our guidance for the full year 2021. I want to start by grounding everyone in our distinctive positioning in the healthcare industry. Since day one, we've set out to be a different kind of health insurer using data and the modern technology stack to make healthcare more affordable and easier to understand for the consumer. We build our own technology to provide a superior experience for members, but also to create a platform that would allow us to power more of the healthcare ecosystem around us. And we set out to create a unique brand that people value because it's a simple, transparent and relatable. We think of the business as: one, an insurance business that includes our risk-based individual, small employer and Medicare advantage product lines; and two, our +Oscar platform business, where we generate revenue by making our technology stack available to providers and third party payers and enable others to grow risk revenues. Over the past nine years, we have built an impressive business. We have delivered 73% year-over-year direct policy premium growth in 2020 and 44% year-over-year direct policy premium growth in the first quarter of 2021 while simultaneously achieving meaningful improvements in our medical loss ratio or MLR and our administrative expense ratio. We can tie those improvements directly to our technology investments and to our growing scale. This insurance business is strengthened by the growth in the individual markets and it's strengthened by our diversification across insurance product lines. Now our superior consumer experience and our performance is powered by +Oscar. The technology platform that enables the full suite of interactions with our members…

Thank you, Mario, and good afternoon, everyone. I'll begin by walking you through our Q1 financial results, and then I'll provide some guidance for 2021 full year financial metrics. Turning to Slide 3, of the earnings presentation, I'll start with a discussion of our membership. And in first quarter membership of 542,000, increased 29% year-over-year driven by growth in our individual Medicare advantage and Cigna+Oscar books of business. Membership growth exceeded our initial expectations as new consumers selected Oscar's innovative plans through the end of open enrollment and into the special enrollment period. Moving to Slide 4, first quarter direct and assumed policy premiums increased 44% year-over-year to $823 million driven by higher memberships as well as business mix shifts towards higher premium plans and modest rate increases. On mixed specifically, we saw a move from Bronze to Silver plans in our individual book, and we also saw a modest mix benefit from higher MA membership. You can see the block from direct policy premiums to premiums earned on the right side of Slide 5, which reflects the impact of risk adjustment and re-insurance on our revenues. Premiums earned of $369 million increased 332% year-over-year in the first quarter as we reduced our utilization of quota share reinsurance. I want to provide a brief update on quota share reinsurance. Under our quota share agreement, we seed a percent of our premiums to our re-insurance partners, which reduces our premiums earned and therefore our risk-based capital requirements. As you can see on Slide 6, historically, we've used a higher level of re-insurance for risk management and for optimizing capital. Given our recent IPO and improving profitability, we chose to decrease our utilization of quota share reinsurance for this year. Moving to Slide 7, our overall combined ratio the some of our…

Thank you, Scott. I would like to close with a reiteration of our strategic priorities. One, we are dedicated to growing our insurance business while at the same time managing costs. Over the years, we have created a platform that we're continue to let us push the most innovative and the most engaging products into the markets and continue to penetrate Medicare advantage and small markets and keep growing individual. Growth in all three of these product lines will be driven by increasing market share in the current counties and by future market expansion. Two, we are focused on expanding the reach of Class Oscar, platform by adding new arrangements with providers within the Bay of risk, particularly in Medicare advantage, individual and small group. Three, we are fully committed to becoming profitable as our businesses are reaching scale. This will be driven by our growth, capital deductions in medical costs, and meaningful improvements to our admin ratios. Given a progress to dates and plans for further improvements we expect our insurance company to be profitable in 2023, posting a combined ratio of less than 100%. And finally I would like to give a heartfelt thank you to the entire Oscar team. They work tirelessly. They work with unparalleled compassion. As we like to say with the genius and with grace at the same time to ensure members have access to the care, the needs as we all work towards that vision of making a healthier life, affordable and accessible for all. And with that, I will ask the operator to open up the line for questions?

[Operator Instructions] Your first question comes from Stephen Baxter from Wells Fargo.

Hi. Thanks. Good afternoon. Just when we look at your MLR guidance, just wanted to get a little bit of help how you're thinking about COVID through the balance of the year. So appreciate the comments about Q1, where you were relative to baseline. As we see COVID costs like we've been lower through the balance of the year, how should we think about what's your modeling inside that MLR for core utilization against the baseline level?

Yes. Hey, and thanks for your question. We really appreciate you’re joining us tonight, Steve. So as I talked about in our prepared remarks, the MLR this quarter was in line with our expectations with lower utilization this quarter offsetting higher COVID costs. As I also talked about COVID costs actually were highest in January and then trended down through the quarter. And so, when I look at our full year MLR, what we're anticipating is that we will continue to see a heightened level of COVID expenses that will work its way through the year, probably going to be in the range of 3% to 4% of MLR. And on the other side of that we expect to see that some of the deferred care from 2020 is going to start to come in as increased utilization in 2020. But then we also anticipate that we may see some of that – we may see some additional deferred care. So net-net we would expect kind of utilization levels to be around what I would call baseline levels on a kind of pre-COVID 2019 as a comparable. So with all of those things kind of going on, we expect COVID to be roughly flat year-over-year, which, as I said, we think is a pretty good performance given that we do anticipate that we're going to have some headwinds from COVID, MLR…

Got it. Thanks, makes sense. And then just wanted to ask about the special enrollment period members, and obviously it's early there, but Scott can you maybe talk a little bit about what you're seeing there in terms of utilization and how that compares to what you might see for your other new members this year or new members in a prior cycle? Thank you.

Yes. I think that with respect to the members coming in with SEP, so far we've seen and obviously these are early days, but we've not really seen any major differences in morbidity or what we're planning for the full year is that we're expecting guidance that we won't see a significant differential between the SEP members from our base population. Of course, there is some risks there. And I think that one of the reasons why our guiding range in MLR is a little bit broader than what that we might wanted to be is that we're trying to make sure that we've got some room for variation in the performance of those new members.

Steven, this is Mario. Great thought by the way. Thanks for joining here. One additional data points of observation is that it appears that there was a little bit more of a shift towards sort of like self-service among these new SEP members. We'd like to test on the websites with the people would rather talk to brokers – or just kind of do research themselves. And we're now I've seen something that's compared to open enrollment kind of 30% more members who end-up coming and choose to do their own research on the websites, kind of look at – and so on. And so it might be an indication, but it's a bit of a different segment of members are now buying.

Interesting. Okay. Thank you. I will get back in line if I have a question. Thanks a lot.

Thanks.

Your next question comes from Kevin Fischbeck from Bank of America.

All right. Great. Thanks. I guess a couple of questions. How are you viewing, I don't know it's very, very terminus but how is your share of the enrollment coming in the SEP versus your share of your enrollment overall? I guess, this is the first time we're seeing many people buying insurance with the higher subsidies. Just trying to get a sense of the – if your model is resonating as well now that price isn't as much of a factor or whether it's resonating more or less?

Yes. So, Kevin, I think what we do is we look at how much is the market up in SEP as – in terms of overall enrollments as compared to the same period last year. And then how much are we up in terms of overall enrollments as compared to the same period last year. And those numbers are about the same. And so essentially that market share gain that we've achieved in open enrolment is essentially appears to be continuing throughout special enrollments. I think what we are genuinely seeing in the marketplace is that there is, as we talked about, a bit more of safe zero dollar plans, in terms of shift towards higher premium plans, and then I think that genuinely makes us think that it's important that the model where you deliver a great member experience, where people love volume more than price. We showed that even pre to the extent of tax credits, right, as I think we talked about in the road show a bit, we were only the lowest price plant, it's about 10% of markets even in OE and gets obviously deliver the 44% revenue growth in OE. I expect to continue to – the year – the markets evolve towards situation where we're delivering that experience, more innovative features since the one will end up winning the day, and so we're preparing for that.

Okay. That's helpful. And I guess the commentary you know that [indiscernible] exchanges, but the commentary on how costs have trended through the quarter? Is that largely the thing in Medicare and in the small group? Or that will you highlight any differences there?

So I think that I wouldn't highlight any other differences.

Okay. And then you mentioned, you guys changed your view on reinsurance. Can you – what exactly – what exactly you were distributing that to? And then, I guess, how should we think about use of reinsurance down going forward in the out years? Was it a good percentage? Or should we expect this percentage to kind of slowly rise until you get to profitability?

Sure. Kevin, thanks for the question. And look with quota share we obviously leaned in to that. You saw that in our results in 2020 as a way to help capitalize the company's growth and to reduce our cost of capital. After we did the IPO, we now have the proceeds of that and we have the capital from that. So from my perspective deploying that cash into reducing our – going ahead and using that as capital and reducing our quota share actually is – was the best decision in terms of creating the best financial outcome. The consequence of reducing the re-insurance is that we're actually able to keep the fee that we otherwise would have paid on that quota share. So in our 2021 guidance, we do expect that quota shares as part of the favorability that we're seeing through the year. And in terms of going forward, the – we're not saying that we won't go back and use quota share, but I think in the near term we're comfortable having a lower percentage and I'd expect that we would dynamically manage that going forward.

Okay. That's helpful. This is beyond the keeping more of the economics on your premium – is there a benefit as far as the percentage fee that you're paying at the end of the day for quota share or is that relatively the same as the percentage of premiums?

I think that the structure of the arrangements that we are retaining is roughly similar before. So not a significant difference there, but just being, having a stronger view towards profitability it just gives me more confidence that we don't need to have quite as much quota share.

All right. Perfect. Thank you.

Your next question comes from John Anderson from Credit Suisse.

Hi, good afternoon guys. This is Carlos jumping in on behalf of Jailendra. And so my question for you guys is – can you provide more color on your Cigna partnership on small businesses and how many lags that you are getting from that partnership in 2021 and any outlook you can share in long-term for that? Thank you.

Yes. Hey, this is Scott. Look, I think that the – that the C+O partnership as Mario talked about in his comments; we're off to a really good start. We've rolled that out in a number of new states and markets five new states. And I would say this for that; it is included in our premiums that the guidance that I gave you, our expectations about the growth in that business is part of the drivers there. And we're not going to comment about the specific buckets of membership only to say that we're excited to have the partnership with Cigna, and we're looking forward to continuing to roll that out.

Okay. Thanks.

[Operator Instructions] Your next question comes from Joshua Raskin from Nephron Research.

Hi, thanks. Appreciate you guys taking the question. I've got two. The first one is just on the rebranding of the plus Oscar segment. I'm curious what the catalyst was for sort of that change in branding. And if we should read into their, going to be more disclosures around revenue and segment profitability at some point?

Yes. Joshua, it's great to have you on the call as well and thanks for joining. So plus Oscar we need two drivers. So one is essentially we have bids out five clients, I would say over the past couple of years there, and that has often been – those have often been relationships we have bult in our insurance business, where providers saw what we bring to the table, how we enable them to grab market share with team members and to help them shift more towards value-based care and risk-based revenue. So again, as we talked about in the roadshow as well, have been moving more and more towards really going on the offense there and saying we’re building the pipeline and we want to make sure that the market understands, the healthcare market understands that is an easy way of talking about this, hence the +Oscar branding. The second point is we have been organizing and a little bit differently. I'm Meghan Joyce, our COO and Executive Vice President of Platform oversees that business has continued to build the pipeline there. And we’re excited about more to come. And obviously heads down implementing and committing to grow the relationships and the arrangements we have already built. So many of these Health First, Montefiore, ACHM, these all MA plans are – have just started growing. And that's exciting to us. Now in terms of reporting Scott you can…

Yes, Josh, thanks for joining us. And I'll just say that on the reporting side, I do think that that at some point the company is going to look to, as well as businesses grow and become more meaningful. We're going to start to want to do more, to help you and others understand them. Certainly, as we've stood up +Oscar we’re going to start, increasingly looking at the results of both of those businesses separately. And as we do that that will start to trickle its way into our financial reporting as well.

Yes, I think that will be helpful. We see the $850,000 of other income, but I'm not sure that's really representative of what you're doing. So, I think that would be helpful? And then just my second question on the 3,600 lives, I understand you don't want to talk too specifically about Cigna, but maybe just help us relative to expectations and as you think about the year small groups are little less dependent on that one renewal date. So, would it be reasonable to expect, more meaningful growth as the year progresses?

Well, look, I think, that again, and I'm not trying to be stubborn by not telling you the membership numbers, but we're not trying to break the book apart at granular detail. With respect to C+O, we do expect that book to be growing. We do expect that it's going to continue to grow throughout the year and accelerate in certainly the second half. So, it's early days, so we don't want to get too far ahead of ourselves in terms of projecting where that book is going to be going. But we do think that we've got all the right tools into the market to see some acceleration in terms of the numbers of memberships from where we are today.

Maybe I'll sneak in one last one. Just PDR, $9.5 million, what line did that relate to?

On the PDR, when you say, what row line does that relate…

Was that in individual and small group or individual, is that small group, is that MA? I guess I'm just hearing it it's early in the year to see a PDR. So, I was just curious what that related to?

Yes, I think, it was really across all of the different product lines.

Okay.

Our next question comes from Ricky Goldwasser from Morgan Stanley.

Yes, hi, good evening, and congrats on the quarter. First question is on virtual primary care, clearly from the data points you provided on the call, it's having some meaningful impact on member's behavior. Can you may be share with us what percent of members are on the virtual care offering? And also what type of incentives do you offer members to get them to join?

Yes Ricky, so let me start with the last part of the question. By the way, thanks for being on the call as well and thank you for the congratulations. So, the intensives, I think, this is one where we have been ahead – really at the cutting edge, sort of like of incorporating virtual and the plan design. The way it works so that you pick as a member and a primary care physician in the Oscar Medical Group among the virtual primary care physicians in the group. Then the care that that doctor drives, whether its lab tests or prescription drugs, some radiology tests and so on as well, these usually get dynamically discounts it's and gets – and become free. So, the physician tells you – the Oscar medical physician tells you to get this lab test, and then that lab test cost share will get waived dynamically. That was a real feast, I would say, of using our claim system that we built internally and the dynamic and configuration benefits they are in connecting that with our electronic medical record system that these physicians operate on, that we also built internally. So that's working. It's working well. It’s growing now. In terms of who's using it, it's right now in a number of our states. And in the states that it's in, as I mentioned before, the Oscar Medical Group is actually in the top three of all physician groups that are seeing Oscar patients, which is really nice statistic, we think. It's ramping throughout the year. It's ramping actually pretty linearly still. So let me keep you posted there, we'll get back to you in the next couple of quarters as to how people are using it. And we haven't published that yet and to put that out there yet, but we will consider doing that for the next earnings call.

Thank you. And then my next question is sort of on the tech stack offering. I know you've probably said that you looked to do a couple of deals a year. What does the pipeline look like and how are these conversations with health plans going?

So let me ground you on the offering again. So, +Oscar, that's what we call it now, right, is our technology platform, a service platform. What we've designed it to do really is from starting with ourselves is help healthcare clients grow risk-based revenues and do that with a really great member experience. I think I mentioned at near term we think that is the growth that will be fueled by arrangement for providers looking to be at risk, either through provider sponsored health plans. We're actually delegated from payors and particularly in Medicaid advantage individual and small group, we think what this does in the kind of three areas we typically talk about there as we can drive an efficient plan infrastructure there, we've seen in some provider-sponsored health plans about a 10% to 50% reduction on a PMPM basis for admin overhead. So that's kind of number one. The second thing we think we can do well is to provide some more effective medical cost management because of high member engagements. That, for example, means that if we remind people of what our in-network, out-network labs and things like that, so we can drive 15-point reduction in our network lab utilization. And the third thing is growth retention of membership in market share of the system or provider group in the given markets. The impact from virtual primary care or the impacts from our digital tools on member retention, which we talked about in the past, here applies to them, books of business paid by providers. So those are the kinds of the three big pinch points we have there. We have a pipeline; clients are going to be at all stages in the pipeline. We're going to call out throughout the year or throughout the time that passes when new arrangements happen there. And we're building an active pipeline. As I mentioned internally Meghan Joyce is leading that business for us. And I think it fits very well into what the sort of like sign of the times in U.S. healthcare. Post pandemic, you've got the shifts as we saw to what's virtual delivery of care, but you've also got the shift towards a more value-based care more risk-taking often starting obviously in government business, Medicare Advantage, but I think, making its way more and more into the commercial businesses as well. And then finally all that has to come with a great member experience because too often, I think, there's kind of focus just on provider-enablement, which we have also, we believe got the notion for, but it comes not necessarily with great tides individual member experience. And so, I think that's the part we are adding to this back there So that's where we are and we'll keep you posted.

Great. Thank you. And last question on this should we look to health versus we think about a pipeline as we incorporate in a model, should we look at health versus sort of kind of a typical size deal?

I think that's a tough one to answer. I think we will see deals that obviously that would be a pretty typical deal for a system of that size. I think that we are open to really different types of deals and arrangements. So I don't want to say that that's going to be typical. I think that that would be kind of a typical deal. If you think about the way that we would like to position the arrangement, the economics and what we're bringing to the table. And so, I think, that we'll just say that we're open for all kinds of different arrangements, as long as we're able to bring our full capabilities to the table.

Thank you.

Thanks Ricky.

That was our last question at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you very much to everybody on the call. And so we’re looking forward to still continue the conversation with you. Thank you.

Everyone else has left the call.