Oscar Health plans to halt sales on the Covered California health insurance exchange at the end of year as new CEO Mark Bertolini reevaluates the company's position, executives told investors Tuesday.
The insurtech decided to exit California after consistently recording a 100% medical loss ratio there, Chief Financial Officer Sid Sankaran said during an earnings call.
“While California is an important [Affordable Care Act] state, we’ll take a pause while we do the work to reenter the market on a more sustainable basis,” he said. Ending marketplace sales in the Golden State will have a modest impact on profits, he said.
CEO Mark Bertolini, the former Aetna chief who succeeded co-founder Mario Schlosser last month, is reviewing Oscar Health's portfolio, and the decision to leave California is part of that process, he said.
Oscar Health narrowed its net loss 48.7% to $39.6 million, or 18 cents per share, during the first quarter. Revenue grew 51% to $1.4 billion, driven by single-digit premium increases, improved risk code capture and renegotiated contracts with reinsurers and with its pharmacy benefit manager, Sankaran said.
Membership declined 5% to 1 million after the company all but ended its Medicare Advantage business and limited exchange sign-ups in Florida, its largest market, last year. Membership in Cigna+Oscar small business plans grew 85.2% during the quarter to more than 67,000, largely offsetting losses in other insurance lines.
The company had $260 million in non-regulated cash at the parent company level, and $765 million in its state-based subsidiaries, or $230 million in excess of regulatory requirements, Sankaran said.
Oscar Health expects membership to increase by “low twenties, high teens” percentagewise next year despite exiting California's exchange, Bertolini said. The company plans to expand into new exchange markets and is considering offering health reimbursement arrangement plans for small employers next year, he said. Oscar Health may also return to Medicare Advantage, he said.
"I see opportunities to form interesting partnerships with like-minded provider groups in this space,” Bertolini said.
Oscar Health nabbed its second customer for the +Oscar member engagement technology service, Bertolini said. He did not name the client but described it as a large, multispecialty physician group that serves Medicare Advantage, Medicaid and exchange enrollees.
Oscar Health paused its full-service technology deals last year after running into implementation problems with its first and only customer, Health First Shared Services, a Rockledge, Florida-based nonprofit integrated system. Health First's contract with Oscar Health will end this year.