When about two months ago, on June 12, I published my Oscar Health Investment Case, I didn’t expect that the report would gain so much traction and that Oscar would become one of the most popular and talked-about retail stocks.
Since publishing the report, the stock has gone on a huge rollercoaster!
Within the first two weeks, the stock had jumped close to 50%, as retail traders piled into what many, including me, saw as a potentially incredibly undervalued stock.
However, the party finished almost as quickly as it started, with the stock now down 35% from that point, trading for the same near $14 stock price as when I published the report.
So, what happened?
The first catalyst was Trump’s One Big Beautiful Bill.
The second catalyst was Oscar reducing the Q2 and full-year 2025 guidance.
Let’s take a deeper look into the situation!
1. One Big Beautiful Bill
2. Updated Guidance
3. Q2 2025 Update
4. Valuation
5. Conclusion
1. One Big Beautiful Bill
On July 4, 2025, Donald Trump signed into law a massive and sweeping tax bill called the One Big Beautiful Bill Act. (BBB)
In my Oscar report, I identified the risk of Obamacare cuts as the most existential risk to the company.
“What does matter is that Oscar is heavily exposed to any changes in the law!
Depending on how severe the cuts are, Oscar could even go bankrupt!
The BBB did many things that will cost the US taxpayer many trillions and will significantly increase the US deficit in the next decade.
I am not going to look at the whole bill, but let’s look at how it affects Oscar:
Medicaid and Medicare cuts
Expiration of enhanced ACA subsidies
End of Auto-enrolment
Stricter income employment requirements
Higher burdens on immigrants
Additional integrity rules
Oscar doesn’t offer Medicaid and Medicare services, so it won’t be directly affected. Medicaid is a government program providing healthcare services to the poor, while Medicare provides healthcare services to the elderly. It is estimated that the BBB will lead to 10-12M poor, sick, and old people losing healthcare.
However, cuts to these programs could have adverse indirect effects. More poorer, older, and sicker patients will move to the ACA marketplace, leading to higher costs across the health insurance industry. Also, without government subsidies, many of these patients will default on their hospital bills. Increasing losses in the broader health care industry.
Another crucial change is the expiration of the enhanced ACA tax credit subsidies. During the pandemic, the Biden administration passed the American Rescue Plan and the Inflation Reduction Act, which enabled more people to access healthcare during the pandemic. The provisions were set to expire by December 31, 2025, but there was some hope that they would be extended if Democrats remained in power.
As we all know, Trump destroyed Harris in the election, so it was obvious that these provisions would not get extended, but the BBB confirmed it. The Congressional Budget Office (CBO) estimates that 4.2M people could lose health insurance because of this, directly reducing the total addressable market for Oscar.
The BBB also ended automatic reenrollment. Now, people need to re-enroll each year to join the ACA. This creates an additional administrative burden for people as they need to prove eligibility and submit paperwork.
This change is in addition to stricter income and employment requirements. Subsidy recipients must provide proof regarding household income, residence, household composition, and more. Additionally, people must remain employed and provide extra evidence of that.
These additional requirements sound reasonable in theory, but they create an additional administrative burden both for the people and the state regulators. This will likely lead to people losing health insurance who miss deadlines, especially in the first year, if they are not properly informed of the changes in the process.
Furthermore, the BBB limits immigrant access to healthcare benefits. Previously, refugees, asylum seekers, and certain other migrants were eligible for ACA subsidies. This bill eliminates that, and according to some estimates, more than 1M legal migrants could lose access to ACA subsidies.
Overall, the Congressional Budget Office (CBO) estimates that in the next decade, up to 8.2M people could lose ACA subsidized health insurance!
It is hard to quantify how these changes will affect Oscar, but let’s try doing that anyway.
Per CBO, in 2024, there were 21.4M people who were enrolled in the ACA marketplace, with Oscar serving around 2M of those. However, the company is only operational in 18 states, in which there are 10M ACA subsidy recipients.
That means that while Oscar had a 20% market share in the regions where it is active, the company had an overall US ACA market share of just 9.3%.
This means that as Oscar expands to more states, it will likely still be a significant market share gainer, despite the overall market shrinking!
That makes it difficult to estimate the net effect on the company, because as they gain millions of new members in new states, they will lose millions in existing ones. The net result is hard to quantify, especially as many uncertainties remain in regard to how BBB changes will actually be implemented. It can go either way, being much worse than CBO estimates, or not as bad.
This uncertainty is weighing down on the stock.
2. Updated Guidance
In addition to the issues stemming from the BBB, the broader US health insurance industry and the ACA marketplace are suffering from cost issues.
The stock of UnitedHealthcare Group has fallen close to 60% in part because of these issues. Other insurers, such as Centene, are down 66%, and Elevance are down 47%.
These issues are also affecting Oscar, causing the company to issue a revised guidance, going from profitability to losses!
As we can see in the graph above, analysts expected that Oscar would earn around $293M in operating profit in 2025.
After the cut, the company now expects to lose between $300 and $200M in 2025!
This is quite a large swing of over $500M.
Such a drastic change is entirely due to higher medical costs, as Oscar guided that the medical loss ratio will increase from 81.7% in 2024 to 86-87% in 2025.
Meanwhile, the SG&A ratio will continue to improve, falling from 19.1% in 2024 to around 17.1-17.6% in 2025.
The main drivers of higher-than-expected medical losses include:
Medical cost inflation
Higher utilization
Sicker patients
Sicker risk pool
Somewhat high and persistent inflation in the healthcare industry is affecting the health insurance industry. The consensus opinion was that inflation would reduce, but that wasn’t the case, leading insurance companies to underprice their plans.
Additionally, insured patients are using more services than were expected. This higher utilization means that insurance companies modeled fewer procedures than were actually done, leading to increased losses.
Most crucially, many of these patients were much sicker than expected. This means that patients were requiring more severe procedures and medicines, which further increase the costs.
Sicker patients in the risk pool reduce profits for the entire ACA marketplace.
Some analysts believe that these issues are largely caused by Covid pushing health care demand forward. During the pandemic, many patients didn’t seek medical care as they were afraid to go to hospitals and clinics out of fear of getting Covid. Additionally, government resources were diverted to fighting the pandemic.
Now that Covid is a few years behind us, many of these patients are seeking help, but their conditions have deteriorated.
To counter these issues, Oscar will increase prices!
Price increases will depend on the region and could be quite significant, around 10-15%, and even more in some cases.
2026 is looking like it could be a tough year for Oscar and people depending on the ACA subsidies.
3. Q2 2025 Results
Oscar recently released a guide for Q2 and 2025, so these results were not surprising.
Revenue increased by 28.8% to $2.86B.
Net income collapsed by 504% to a loss of $228M, compared to a profit of $56.2M in the prior year.
As already mentioned, this performance was caused by huge increases in medical costs, with medical loss ratio increasing from 79% to 91.1%!
Additionally, we saw SG&A fall to 18.7% from 19.6%. It is nice to see that despite medical cost challenges, the company continues its focus on lowering administrative overhead through technology and automation.
Members grew by 28.3% Y/Y to 2M.
Most importantly, the company expects to return to profitability in 2026!
4. Valuation
Despite issues that the company faces, it could still be a quite attractive investment.
Let’s say that Oscar reaches around 4M members and grows their revenue per member with a reasonable 3% CAGR.
We get to revenues of $25.35B, 176% above the 2024 level!
The company previously had a goal of reaching a 5% operating margin by 2027. They haven’t yet changed this guidance, but considering current market dynamics, it is increasingly unlikely they can achieve that.
So, let’s push that out to 2030, and we get to $1.27B in operating income.
If we model taxes at 21%, we get to a net income of $1B.
Assuming a 5% per year dilution and an exit multiple of 20, we get to a market cap of $20B and a share price of $59.72.
That is an upside of 326.6%, a CAGR of 27.4%
Considering Oscar’s 2027 ACA TAM is 16M, and their expansion into individual corporate plans (ICHRA), getting to 4M members by 2030 seems rather easy.
Furthermore, it is entirely plausible that they have much more than 4M.
Without changing other assumptions,
with 5M members, the stock could increase by 450%,
6M members means +560%
7M members means +770%.
Even with the overall ACA marketplace shrinking, Oscar, as a technology-first health insurance provider, could be a massive winner in the industry, especially if the ICHRA individual health care plans become a bigger part of the healthcare industry.
5. Conclusion
While there are certainly some challenges ahead for this aspiring healthcare insurance disruptor, I find the victory dance that some bears have been doing lately premature.
While it is true that there are many unscrupulous stock pumpers promoting “shitcos” on Fintwit, I don’t believe Oscar to be one of those!
Oscar is a real company, with competent management, a great offering, taking a disruptive approach towards challenging the status quo of the fat, stale, and overly bureaucratic US health insurance industry.
I don’t think that there is a “coordinated and organized effort to pump the stock” as some have claimed. There are plenty of loud and overly negative, always haters who, as soon as any company becomes popular or gets attention, proclaim grand conspiracies or seek fraud.
Oscar is just an incredibly fast-growing company that has a lot of potential for huge gains. In our fast and social media-driven world, that is all that is needed for a stock to gain a cult following.
As the valuation model showed, a reasonable execution could make Oscar a massive multi-bagger!
The current turmoil created by Trump’s Big Beautiful Bill will certainly be challenging, but Oscar could use this chaos to their advantage. Recently, Oscar CEO, Mark Bertolini, said, “Never let a good crisis go to waste.”
Per CBO, over 10M people could lose health insurance due to Medicare and Medicaid cuts. Millions of these people will likely move to the ACA marketplace as a result, and Oscar could be the one to pick these people up.
Furthermore, an additional 8.2M from the ACA marketplace could lose their insurance, many of whom could move to the ICHRA individual insurance plans.
Additionally, millions of ACA marketplace policyholders will see their bills rise. This is yet another opportunity for Oscar to gain market share, as they switch providers in search of lower bills.
Ultimately, strategic execution and financial performance will determine whether Oscar’s cult following is proven warranted or not.
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