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CEO Bertolini: 2024 is the year Oscar will be profitable

Oscar Health (OSCR) remains unprofitable, but less so, as the insurance startup reported strong earnings after the bell Wednesday. The company's stock jumped more than 30% on the news, trading above $17 per share at market open Thursday.

The stock is still trading lower than its IPO in 2021 at $36 per share, but is up 312% in the past year — in large part due to the onboarding of new CEO Mark Bertolini, who lead Aetna before it was acquired by CVS (CVS).

Oscar reported its loss decreased by $417 million year over year and signaled expectations to be profitable for the first time this year. Revenues from premiums increased 47% to $5.7 billion for 2023.

The company signaled more discipline and focus in the 20 states it operates in, Bertolini said.

"We continued to see strong retention, which we believe was driven by our superior member experience," Bertolini said on the company's quarterly report call Wednesday.

"Our disciplined pricing in 2024 is allowing us to grow our membership well above the market, while driving margin expansion," he added, noting that Florida, Georgia, and Ohio are among the strongest contributors to Oscar's growth.

The company is in the Affordable Care Act marketplace, offers Medicare Advantage plans, and also has a partnership with Cigna (CI) for small business plans called Cigna + Oscar. The latter is potentially in trouble, Bertolini signaled Wednesday, as the company looks for more efficiencies and ways to save money.

Courtesy of Oscar Health
A bus stop with an ad for Oscar. (Oscar Health)

Cigna + Oscar

Cigna and Oscar launched the dual-branded product for small businesses in January 2020.

"It's not making money, from an underwriting standpoint," Bertolini told Yahoo Finance in an interview following quarterly reporting. Cigna holds the pharmacy benefits manger (PBM) contract for the plan, and Oscar oversees the administrative details.

"And it's not growing because we're trying to price it up. I don't think the cost structure is right, and the owner economics are all over the place," he said. "So there's no way to bring all the costs in line. So we're in conversations with them," Bertolini said.

"My bet is that that relationship is in trouble," he added.

It's why the company is putting its focus in the individual market, as well as Individual Coverage Health Reimbursement Arrangements, or ICHRA, Bertolini said. These arrangements allow businesses to add seasonal and part-time workers to benefits plans who would otherwise be too expensive for employers to cover.

Oscar reported 67,500 members on the Cigna + Oscar plan, compared to more than 967,000 members in the company's individual market for full-year 2023.

Cigna decline to comment to Yahoo Finance.

Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.

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