Q4 2023 Oscar Health Inc Earnings Call
Participants
Chris Pitcher; VP of Treasury and IR; Oscar Health Inc
Mark Bertolini; CEO; Oscar Health Inc
Scott Blackley; CFO; Oscar Health Inc
Adam Ron; Analyst; BofA Securities
Joshua Raskin; Analyst; Nephron Research LLC
Nathan Rich; Analyst; Goldman Sachs Group Inc
Stephen Baxter; Analyst; Wells Fargo Securities LLC
Presentation
Operator
Good evening. My name is Bob, and I'll be your conference operator today. At this time, I would like to welcome everyone to Oscar Health Fourth Quarter and Full Year 2023 earnings conference call. At this time, all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question during this time, please press the star followed by the number one on your telephone keypad. If you'd like to withdraw your question, please press the star followed by the one once again.
Thank you. I will now turn the conference over to Chris Pitcher, Vice President of Treasury and Investor Relations.
Chris Pitcher
Good evening, everyone. Thank you for joining us for our fourth quarter and full year 2023 earnings call. Mark Bertolini, Oscar's Chief Executive Officer, and Scott Blackley, Oscar's Chief Financial Officer, will host this evening's call. This call can also be accessed through our Investor Relations website at ir dot Hi, Oscar.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 dot Hi, Oscar.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, and 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 quarterly report on Form 10 Q for the quarterly period ended September 30, 2023, filed with the SEC and other filings with the SEC, including our annual report on Form 10-K for the period ended December 31, 2023, to be filed 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 the fourth quarter and full year 2023 earnings press release available on the company's Investor Relations website at ir dot.
Hi, Oscar.com. With that, I would like to turn the call over to our CEO, Mark Bertolini.
Mark Bertolini
Thank you, Chris.
Good evening, everyone.
When I joined, Oscar, I highlighted three priorities for the business. One, achieve insurance company adjusted EBITDA profitability in 2023 to achieve total company adjusted EBITDA profitability for 2020 for three, continue to enhance the value of our technology to the plus Oscar business and bring more of our capabilities to market. We have made major progress toward achieving these priorities. We closed out 2023 with another strong quarter, driving financial performance for the full year and achieving the first of our priorities. The insurance company generated $169 million of adjusted EBITDA profitability in 2023, a milestone Oscar committed to in early 2022, our medical loss ratio improved 370 basis points year over year to 81.6% below the low end of our guidance range for the full year. Overall claims trends were favorable relative to our expectations. Utilization trends by category remained consistent throughout the year, with inpatient performance in line outpatient and pharmacy slightly above and professional well below total company adjusted EBITDA improved by $417 million versus the prior year to a loss of $45 million. Our strong momentum positions us well to achieve the second priority I mentioned total company adjusted EBITDA profitability in 2020 for our business is well positioned for sustainable, long-term growth and margin expansion. We exceeded our 2024 open enrollment expectations, we expect to serve over 1.3 million members. We continued to see strong retention, which we believe is driven by our superior member experience. Our disciplined pricing and for 2024 is allowing us to grow our membership well above the market while driving margin expansion. We expect another year of MLR improvement given our pricing strategy and total cost of care initiatives, including significant PBM savings and enhanced payment integrity efforts. We also anticipate continued operational cost improvements, including vendor savings from our enhanced scale and the benefit of operating leverage as we return to growth.
Finally, our technology is making the healthcare experience more seamless for over 1 million Oscar members, 500,000 client lives. We now serve through plus Oscar from the providers who care for them overall, 2023 was an exceptional year for Oscar. We are delivering on our commitments and are on a solid path deliver sustained growth with improved margins.
Now I will turn to our business highlights this past open enrollment marked Oscar's 11th year as a prominent player in the ACA market. We expanded into 165 new counties that are now privileged to serve over 1.3 million members across 20 states. Our above-market growth was driven by strong retention and new members in both existing and expansion markets. Consumers choose us for our affordable and innovative plan designs, and they stay with us for our superior member experience. Our NPS continues to be an industry-leading 60. We continue to grow in key states for Oscar, including Florida, Georgia and Ohio. We also outperformed our expectations in new service areas, including Cincinnati, West Central Tennessee, Topeka and Iowa. We believe our superior member experiences meeting members' needs and continue to demonstrate we can launch succeed in new markets outside of major metropolitan areas. We introduced new products to meet the needs of our fast-growing and diverse member population, including expanding our chronic illness plans, diabetes care and breathe easy to new markets. We also launched an enhanced Spanish first experience to deliver culturally authentic experience to our growing Spanish-speaking member base. Consumers expect a level of convenience and accessibility and healthcare comparable to the best consumer companies in the U.S. Oscar makes us experience possible through our full stack technology. Since inception, Bhaskar has been focused on building our technological infrastructure and end to end experience. We believe this stack offers greater control over the member experience, engagement and affordability. Our platform has fueled major strides in our operational efficiency. We launched powerful capabilities to digitalize our more interactions with providers and members and automate a growing number of clinical and administrative workflows.
We have a high-powered features.
As an example, we leveraged automation to support members more effectively and efficiently during open enrollment. We enhanced our member services IVR and launched a high-powered secure messaging feature. Self-service features like these make it faster and easier for members to get the answers they need and allow our care team to support more complex member needs. While membership increase this open enrollment call volume remained steady, call abandonment rates decreased and member satisfaction increase. We are making our superior member experience and innovative technology available to others in the health care system, enabling a higher quality experience for consumers and driving better engagement, outcomes and business performance for clients. We are pleased with the traction of Campaign Builder Plus Oscar's engagement and automation platform Campaign Builder and now serves approximately 500,000 client lives. In addition to the 1.3 million members enrolled in Oscar health insurance Campaign Builder clients saw impressive results in the second half of 2023 one payer clients, our retention rate of over 96% for Medicare Advantage members engaged with the retention program. Our diabetes care gap program for another client resulted in over 40% of the eligible population, completing a preventative diabetes screening within 90 days of engaging with the campaign. We are encouraged with these proof points and committed to bringing more capabilities to market power more of the health care system.
As we've shared on prior calls, AI continues to be a part of our overall strategy to ensure and technology can deliver a superior member experience, improve health outcomes, MI provider needs and lower costs. We continue to build our use cases, including integrating Openet IGBT technology into Campaign Builder. We believe our AI-powered tools can be easily incorporated into client workflows to support their strategic business objectives and patient needs. Our outperformance in 2023 sets a solid foundation for us to deliver on our target for total company adjusted EBITDA profitability in 2024, our strategic priorities include one wanting a great company with market-leading, sustainable, scalable operations, too, continually investing in our superior member experience, three, harnessing our technology to power others and for continuing to innovate market offerings to extend beyond the ACA.
Our strategic priorities also include the long-term growth opportunity we see in the individual market and the potential we see to serve a broader set of customers, including employers and employees. The ACA is the fastest-growing segment of health insurance with over 21 million people enrolled in individual insurance plans on exchanges for 2024, Oscar is well positioned to capitalize and innovate on the strong market growth as well as leading the industry in trends driving the future of health care. After was purpose built with a focus on accessibility, affordability and a superior member experience member experiences in our DNA. We believe we are best positioned to win in an increasingly digital and consumer centric marketplace. We look forward to sharing more on our long-term strategic plan at our next Investor Day in June in New York.
With that, I will turn the call over to Scott.
Scott Blackley
Thank you, Mark.
And good evening, everyone.
We delivered strong financial results in each quarter of 2023, with most core metrics exceeding our expectations. For the full year, we delivered on our commitment for insurance company adjusted EBITDA profitability in 2023 and have a clear line of sight into achieving total company adjusted EBITDA profitability this year.
I will touch on a few fourth quarter highlights before shifting to our full year performance, we had a strong close to 2023. Our fourth quarter medical loss ratio significantly improved by 520 basis points to 86.4%. And our fourth quarter total company adjusted EBITDA loss was $112 million, a $78 million year-over-year improvement. We ended the year with approximately 1 million members. Membership increased 5% quarter over quarter, driven by higher retention due to lower lapse rates and increased special enrollment additions.
Turning to the full year direct and assumed policy premiums were approximately $6.6 billion, a 3% decrease year over year and modestly above the high end of our guidance range. This was driven by lower membership, partially offset by rate increases. The full year medical loss ratio was 81.6%, a 370 basis point year-over-year improvement from below the low end of our guidance range. Overall, utilization trends were modestly favorable relative to our expectations for the full year, and we delivered medical soft cost savings through our total cost of care initiatives. As Mark mentioned, utilization trends within specific service categories remained consistent throughout the year. On risk adjustment, our risk transfer as a percentage of direct and assumed policy premiums for 2023 was lower year over year at approximately 14% due to our member profiles having shifted closer to the overall ACA population. The December Wakely report resulted in only modest updates to our risk transfer estimates.
Switching to administrative costs, the 2023 insurance company administrative expense ratio improved 270 basis points year over year to 17.9%, driven by distribution optimization and lower risk transfer per member as a percent of premiums compared to the prior year. Partially offsetting these positive developments was a $29 million provision for credit losses on risk sharing receivables, which mainly impacted the fourth quarter. This relates to a small number of provider risk deals, which have since been terminated the 2023 insurance company combined ratio significantly improved by approximately 640 basis points year over year to 99.5%, driven by both an improved MLR and administrative cost efficiencies. In 2023, we achieved insurance company adjusted EBITDA of $169 million, representing a $450 million year-over-year improvement. And that was above the high end of our guidance range. Our adjusted administrative expense ratio improved 350 basis points year over year to 21% for the full year in line with our expectations. The lower adjusted administrative expense ratio was driven by the same factors that impacted the insurance company administrative ratio as well as higher net investment income. We have made significant progress on improving our profitability. Our full year total company adjusted EBITDA was a loss of $45 billion, a substantial $417 million year over year improvement and better than the high end of our guidance range over the past two years. Adjusted EBITDA as a percentage of premiums before ceded reinsurance has improved by approximately 15 points.
Shifting to the balance sheet, our capital position remains very strong. We ended the year with $2.9 billion of cash and investments, including $234 million of cash and investments at the parent. As of December 31st, 2023, our insurance subsidiaries had approximately $800 million of capital and surplus, including $248 million of excess capital, driven by our strong operating performance. As a reminder, the higher capital requirements for new carriers in Florida, our largest state expired for us at the start of this year. As of January first, 2024, we expect a lower capital ratio requirement to generate an additional $140 million of excess capital in our insurance subsidiaries. Given the excess capital in our insurance subsidiaries, funding of our 2024 growth capital requirements will have minimal impact on parent cash with respect to quota share reinsurance. In 2024, we expect to increase our ceding percentage from around 45% of premiums before ceded reinsurance to the low 50% range.
Before I turn to the 2024 outlook, I want to discuss a new financial reporting structure that we will roll out beginning with our first quarter 2024 results in order to increase transparency and improve comparability. We will be revising our presentation of the income statement to more closely align with our peers and our discussion of financial results and guidance will focus on the performance of the total company. For 2024, we will provide guidance for total revenue, medical loss ratio, SG&A expense ratio and total company adjusted EBITDA in today's earnings release, we included supplemental information on the 2024 financial outlook, including full year 2023 results for these measures, as well as details on the components of the metrics and calculations.
Turning now to the 2024 full year guidance, we expect to build on the strong momentum in 2023 and achieve total company adjusted EBITDA profitability in 2024, we expect total revenues in the range of $8.3 billion to $8.4 billion based on strong retention above market growth during the 2024 open-enrollment period in SCP. member additions throughout the year as Medicaid redeterminations continue on Medicaid redeterminations, our 2024 guidance contemplates strong SEP additions and assumes higher acuity and partial year risk adjustment dynamics for these members. We are pleased with our strong open enrollment growth and expected to result in overall a healthier membership profile. We expect our medical loss ratio to be in the range of 80.2% to 81.2%, representing a 90 basis point improvement year over year at the midpoint for 2024, we price for medical cost trends and expect MLR improvements to be driven by our total cost of care initiatives, including PBM savings. We expect our quarterly MLR seasonality to be similar to 2023. Although with a steeper slope for 2024, we expect a higher risk transfer as a percentage of premiums as compared to 2023 based on our updated membership mix as the new policy year business matures, our overall per-member claims levels may change with corresponding impacts on our estimate for risk transfer, such changes impact the numerator and denominator of our MLR, but we would not expect them to have an impact on our per-member underwriting economics. We expect our SG&A expense ratio to be in the range of 20.5% to 21%, representing a 350 basis point year-over-year improvement at the midpoint. This ratio includes stock-based compensation expense, which in 2023 was approximately $160 million and included a one-time charge of $46 million related to accelerated stock-based compensation expense recognized as a result of the cancellation of the founders awards. We expect our SG&A expense ratio to be fairly consistent in the first three quarters with a modest uptick in the fourth quarter. We expect total company adjusted EBITDA to be in the range of $125 million to $175 million, representing an almost $200 million year-over-year improvement at the midpoint In closing, 2023 was a pivotal year for Oscar. We delivered on our commitments for insurance company, adjusted EBITDA profitability, and we are well positioned to return to growth and achieve total company adjusted EBITDA profitability this year.
And with that, let me turn the call back over to Mark for closing remarks.
Mark Bertolini
Thank you, Scott. I would like to close by looking back at the financial metrics we shared with analysts in connection with Oscar's initial public offering in 2021, we said we expected to achieve the following in 2023, nearly 1 million members, $5.7 billion in direct and assumed policy premiums and 83% MLR for the total company. Adjusted EBITDA loss of $222 million today, Oscar has far exceeded these metrics. We are a prominent player in the fastest growing segment of health insurance. We demonstrated the power of our superior member experience and technology by exceeding our projections for open enrollment. We achieved insurance company profitability and outperformed our expectation for total company adjusted EBITDA in 2023. We are returning to growth and have a clear line of sight into delivering on our target for total company adjusted EBITDA profitability in 2024, we have done what we said we would do phosphorus delivering on its commitments. I would like to thank the Oscar team. We are powered by our people, their hard work and dedication make all of this possible. With that, I would like to turn the call over to the operator for the Q&A portion of our call.
Question and Answer Session
Operator
At this time, I would like to remind our teleconference participants in order to ask a question, please press star followed by the number one on your telephone keypad. We kindly request that analysts limit their questions to one and if time permits, you may hold for a second question, and we'll pause for just a moment compile the Q&A roster. Our first question comes from the line of Adam Rumley of Bank of America. Please go ahead.
Adam Ron
Hey, guys, congrats on the strong results and thinking about, you know, the adjusted EBITDA trajectory from here, you're on track to do something like 2% half from a margin perspective in 2024. And I think in the past, you've talked about total company maybe on a pretax basis being closer to 5%. And so the difference between those two things is still in a roughly 3 to 500 basis points of margin improvement. And this year was sort of outsized from a revenue growth perspective. And so what do you see as like the major levers in terms of being able to close that gap between the two percentage of EBITDA and 5% pretax margin, given you probably shouldn't expect to kind of like 40% revenue growth here from here and maybe some of the, you know, lower hanging fruit around PBM contract renegotiation aren't as readily available. And so just thinking about what the major levers are from here would be helpful.
Mark Bertolini
Thanks, Adam.
Mark Bertolini here from both start with big categories. First, we have a fixed costs to grow to a much larger size. So fixed cost leverage will be pretty robust. No matter how much we grow, although we anticipate and continue to anticipate that 20% growth year over year is achievable and secondly, we have in our variable operating expense, been able to leverage large language models on the back end of the system and just for an extra day to bid on our on call volumes, we actually handled the call volumes we had this year with 200 less people answering the phones. So we continue to see big operating opportunities on the variable cost side, we are in the midst of looking at provider contracts, particularly hospital contracts. And we now have a matrix of contracts that we need to get to optimal level from the standpoint of both terms and rates. And so we have a list based on and on renewals and market size, we're going to begin those conversations with our provider partners not just because we have more market share, but because we have better relationships with them in the way we deal with them day-in and day-out on utilization management than our reimbursement and paying claims?
Scott, anything that?
Scott Blackley
Yes, Adam, I think that we certainly think there is room to run in terms of continuing to drive MLR performance through disciplined pricing. And we see continued opportunity to drive total cost of care down on allowing us to both grow and to take margin.
Mark talked about admin efficiency. I think there's also plenty of room for us to continue to drive favorable performance there.
And then I think that just broader speaking, we really believe that this market is going to continue to attract individualized consumers and that's where we really shine on building innovative plans. And if we can continue to see that development in the market, we think that we have a terrific opportunity to continue to grow the Company. Obviously, fixed cost leverage is going to be our friend. So we think we've got all the bones in place to get to that over time.
Adam Ron
Sam, if I could just sneak one more in maybe more shorter term on both CVS and Cigna have been seeing somewhat varied performance from these changes as opposed to you spent $10 million on CVS in particular, has been complaining about the special enrollment charges are having less of an opportunity or risk code members who joined the middle of the year, and that's something that and Oscar has struggled with in the past, but doesn't appear to be impacting results this year. And so if you could just square that commentary of like are you seeing outsized pressure from the midyear enrollment dynamic? And does that argue that core MLR results are higher than what's been reported? And does that is that how we should contemplate 2025 MLR improvement from here. Just wanted to understand the very performance versus some of your competitors things.
Scott Blackley
And look, I think that we've been experienced SEP for years. We certainly understand the dynamics of how duration factors impact those members. We build that into our price assumptions this year, we've seen SEP members that have performed more or less consistent with our historical experience with them. So nothing for us that that has caused us any challenges in terms of onboarding those members.
With respect to 2024, we assumed that we would be growing the SCP. membership would come in into the second half of the year, and we've built that into our guidance for MLR. It's an area that's challenging, certainly on but we've got we've got experience there. We've got, you know, I think a reasonable expectation of how those members going to perform based on what we've seen and through the end of the year and into this year, and they have a morbidity and profile that is kind of what we're expecting. So there's always some risk with growth and with new members but we think that we've set we've built those risks into the guidance that we gave you today.
Adam Ron
Great. Thanks.
Operator
Thank you. Our next question comes from the line of Josh Raskin from Nephron Research. Please go ahead.
Joshua Raskin
Hi, thanks and good evening. Do you think the stability of the exchanges and certainly the growth that we're seeing in the markets attracting sort of these new larger competitors, are you seeing overall rational behavior from them and how lasting you think the competition is?
Mark Bertolini
I would say that rational behavior was not necessarily in place last year and I would in 2023, and we'll open enrollment for 2023 in large part because some people have not priced accordingly to how the market works.
I mean, as you well know, and part of what we found even when I was with that in the markets, is that the minimum loss ratios that were put in place for pricing don't allow you to underprice and then price up business after you get share because you have to give back rebates. And so this going into with a mindset that we will grow with disciplined pricing is an important piece. And we saw some of that this year for 2020 for open enrollment, where people took their prices up plus the business in your Georgia is one of those markets. And when we look at our rates in those markets, we are where everybody else is now pretty much with increases that are in the 8% to 9% range. So we are and we felt that we have we go into this with open eyes and deep understanding of this market over time. And we believe that we have priced accordingly and we've been disciplined about it stable and rational pricing.
Joshua Raskin
And then just secondly, the midpoint of EBITDA guidance of $150 million at the holdco level, what does that mean for cash flow from operations? And can you just help us with the moving parts on at the parent cash balance for 2024. And you know, I am sort of thinking about the Florida capital that's not needed sort of versus the growth. I'm just trying to figure out what we should think about cash flow from operations? And then what does that mean for PowerCash?
Scott Blackley
Yes.
So Josh, I think that the importance of the adjusted EBITDA metric for total company is the doubt would with the growth, we'll be getting additional cash prior to paying the risk transfer estimates. And we would anticipate that the total company will be cash flow positive will be building capital in our insurance subsidiaries. And in terms of those subsidiaries, what we would be looking to do going forward is prioritizing one funding the growth that we hope to continue to have to distributing capital to the parent to offset parent expenses and three that they will be absorbing more of the holding company costs over time. So we feel like we've got a good situation with capital and cash and would expect to be cash flow positive next year or excuse me in 2024.
Joshua Raskin
Thank you.
Operator
Thank you. Our next question comes from the line of Nathan Rich from Goldman Sachs. Please go ahead.
Nathan Rich
Great.
Good afternoon and congrats on the strong quarter. I maybe wanted to start by asking that you could maybe break down the composition of the membership growth a little bit more between markets, maybe you entered for 2024 versus growth in existing markets and you also talked about a healthier membership base. Could you maybe just expand on what you're seeing there?
Scott Blackley
Yes.
Why don't I start and then Mark can maybe talk about some of the on the membership growth. But overall, when we look at the demographics and kind of the morbidity of the group that we're seeing, I would characterize it as number one. It's younger than So we certainly, with this growth have seen younger members coming in more than at a little more than a year beyond our in terms of the total population, number two, I would I would characterize it is we've seen a shift of more of our membership in 2024 towards brands, excuse me, from bronze to silver. And so that that is another dynamic that we've seen. Overall, I would say that our membership being healthier is representative of the fact that we think we're going to have a higher risk transfer this year. So the dynamics of that membership younger, healthier and until the plants are probably the things I would I would kind of point out, Mark, you want to cover the state-by-state.
Mark Bertolini
Sure UM, strong retention was the biggest part of our growth. I would say that and also provide stabilization in risk adjustment as we go forward into this year. That was obviously helpful for us last year. And we did grow new members in existing markets, Georgia, Florida, Ohio, Tennessee, Iowa and Missouri. But we also outperformed expectations in new markets where we did some service area expansion, Cincinnati on Tennessee, and some of the rural markets in Iowa and Georgia.
Nathan Rich
Great.
And maybe just a quick follow-up. I think in the past, the Company has talked about a target MLR in the low 80% range. You've pretty much got it to that level for 2024. So I guess as we think beyond this year, do you think there's still kind of improvement in MLR that can be had or will more of the margin expansion, I guess, come from leveraging your growth that you might see.
Mark Bertolini
We definitely have room in the MLR.
Scott Blackley
I'm going to put a finer point on that. Remember, our PBM contract has year over year step improvements that are built into that contract. So without doing anything, our pharmacy costs would be lower in 2025. So a lot of the things that you're seeing in the run rate that's benefiting 24 we would anticipate have incremental improvements into 25 and we would expect to continue to we drive down the costs of care.
Nathan Rich
Great.
Thanks very much.
Operator
As a reminder, if you'd like to ask a question, please press the star followed by the one on your telephone. Our next question comes from the line of Steven Baxter from Wells Fargo. Please go ahead.
Stephen Baxter
Hi, thanks. I just wanted to follow up on the PBM discussion. I know in the past you've talked about the savings being spread out over 2024 and 2025. So it could be here. Some of that's still in front of you. Can you give us a sense of maybe what inning we're in in the PBM savings exit in 2024.
And then just a second on kind of the profile of membership you're looking for in 2024. Just wondering, it sounds like now that you've gotten to insurance company profitability. I would think that growth that you're seeing from inside the open enrollment period would seemingly come on it, incremental profitable margins, but perhaps you're taking a more conservative stance I start out. So would love some insight into how you're thinking about the profitability of the growth? And then just last one, you know, exiting this year, where do you think you'll be on some of the payment integrity efforts that you've talked about in the past?
Thanks.
Scott Blackley
I mean, I tried to remember all those. So if we miss one and I'm not being cute, Charlie, please come back on.
So you know, when I think about where we might be going from a overall starting with kind of the M, the R. I think there's opportunities there around the PBM where the PBM actually goes out till 2026. And so we have a contract where each year we will see benefits and this was the 1st year was the largest step change, but there's continued to be meaningful improvements in that contract over the remaining term. So that is that's something that we can put in the bank, and we're pleased with our partnership there with our provider.
Mark Bertolini
And I would add that we also have the opportunity for volume. More volume gets us more discounts than we initially anticipated. And then thirdly, there's an opportunity to work on the MAC list on quarter after quarter on the on the on the payment integrity issues, we'll see full year effect on what we've done for last year this year, but we have more to go this year. So we'll continue to improve upon those, particularly as we apply AI models to the back of the business and go after on things that we now pay vendors for and then adding on last but not least, we still have a lot of provider relationships that we can affect in markets that were vintage markets where the Company started had no volume and was able to move on those medical costs. So we have room on medical cost across the board.
Scott Blackley
And then Steve, probably the last piece on your question on member economics, I would say that we would anticipate that all of the growth that we're seeing in open enrollment is contribution margin positive. So at this point, growth is great for the bottom line. And we also expect to see continued enrollment through the special enrollment period. And while those members come at a we've talked about this in the past with about a 10% higher MLR and there are other durational impacts that we talked about that in the 1st year and then they look exactly like the rest of OE. if we can retain those people. So it is it is certainly the case that depending on when you get those members in the year, the economics can be challenging in the 1st year, but we've built that into the plan. So that's are those are already built into our guidance, and we are excited to have the opportunity to add more members through special enrollment period in addition to the success that we've already had in open enrollment.
Stephen Baxter
Thanks for all the color.
Operator
Thank you.
Our next question comes from the line of Adam rand of Bank of America. Please go ahead.
Adam Ron
Hey, thanks for squeezing me back. And I just have one more question. I get a lot of questions on the Affordable Care Act subsidy and then there are some government estimates out there. You know, if the subsidies were to go away what would happen to the market size? And so just wondering on if you have any comments on what you'd expect it to do to the market and maybe relative to like what you're the mix of members looks like relative to who is using a PTC. And so first on that, and second, you mentioned before you look at G&A as fixed versus variable, like maybe this would be a helpful framework for us of, you know, if we're able to think about how much of the G&A is fixed versus variable, how that would flow into earnings.
And then finally, I said if the subsidies were to go away, which obviously nobody can predict, is it fair to say that margin would degrade? Or is there a reason to believe there's there are some levers you could pull to kind of offset that?
Mark Bertolini
Correct?
Well, the last part of your question, Adam, we believe that we have an opportunity to provide services at a different price point that could help folks when and when and if the enhanced subsidies go away, um, but going up to the more general level, I will say we have some interesting looks at our data this open enrollment. And in this open enrollment, 63% of new ACA consumers are from red states and 76% during the open enrollment in the year over year in the ACR market growth is in red states. So I kind of find it hard that the political dynamic that was going on six, eight years ago is going to be the same relative to the Republican Party ongoing after a group of people that largely are going to be their own constituents. We'll see we have a planning version on our strategic plan of having it go away and all the things that we would need to do with product in order to make things affordable folks in the group, we worry about most of the people in the 100% to 200% federal poverty level that have zero premium plans and would potentially be paying somewhere around 60 or 70 bucks a month. That's the place where we think the impact is that we're planning against that defined solutions for it relative to fixed versus variable?
Scott, I'll let you decide.
Scott Blackley
Yes, like I'm on fixed versus variable. I think that's information that we will look forward to sharing more about with you when we have our Investor Day in June.
Adam Ron
Awesome.
Thank you.
Operator
Thank you. Ladies and gentlemen, as we have no further questions at this time, we will conclude today's conference call. We thank you for participating, and you may now disconnect.
