Oscar Health's Rosy 2026 Forecast Confronts Stubborn Underwriting and Policy Headwinds

What happened

Oscar Health reported 27% year-over-year revenue growth to $11.7 billion in 2025 but remained unprofitable, missing analyst estimates for both EPS and revenue in the fourth quarter. For 2026, management projects over 60% revenue growth to $18.85 billion at the midpoint, a return to profitability, and membership surging to around 3 million, supported by AI-driven cost reductions. However, the DeepValue report highlights that Oscar's 2025 underwriting deteriorated sharply, with a Q3 medical loss ratio of 88.5% and a $130 million increase in net risk-adjustment accruals due to higher market morbidity. Critical external risks persist, including the potential expiration of enhanced ACA subsidies—which could spike enrollee premiums by 114%—and ongoing volatility in risk-adjustment transfers that management cannot fully control. Thus, while the guidance paints an optimistic picture, the fundamentals remain vulnerable to policy shifts and unproven pricing actions, overshadowing near-term growth promises.

Implication

Oscar's bullish guidance hinges on favorable policy outcomes and effective repricing, but the DeepValue report assigns a 35% probability to a bear case where subsidy expiration drives adverse selection and sustains high medical loss ratios. The company's reliance on untested pricing adjustments to counter cost pressures is questionable, given past surprises like the $130 million risk-adjustment accrual increase in 2025. With the stock trading as a high-beta proxy for ACA policy, volatility will likely persist until clarity emerges on subsidies and early 2026 underwriting results. Investors should closely monitor FY2025 disclosures and initial 2026 MLR trends to assess whether management's projections are achievable. Given the WAIT rating and elevated risks, position sizing should be limited until concrete evidence confirms a sustainable earnings recovery.

Thesis delta

The Seeking Alpha article's optimistic 2026 guidance does not alter the core thesis from the DeepValue report, which emphasizes underwriting stability over member growth as the key driver of returns. Instead, it reinforces the disconnect between management's forward-looking projections and the documented volatility in risk-adjustment and policy dependencies outlined in SEC filings. Therefore, the investment call remains a WAIT, requiring evidence from 2026 operational data before any shift in stance.