Policy cliff will lead to adverse selection & volume hit: If enhanced ACA (Affordable Care Act) subsidies lapse on December 31, 2025, the average enrollee’s net premium will spike; the CBO (Congressional Budget Office) and KFF (Kaiser Family Foundation) expect enrollment to drop by ~17% in 2026 and continue to decline thereafter. That’s a direct headwind to Oscar’s ACA insurance exchange-heavy mix, pressuring both membership and MLR (Medical Loss Ratio) via a sicker member base due to healthier people leaving. KFF
Already wobbling fundamentals: Q2 showed 91.1% MLR and a $228M net loss; management revised 2025 MLR to 86–87% and operating loss to $300 to $200 million in net loss, pushing profitability out to 2026. If the policy cliff hits, 2026 profitability is at real risk. OSCR
2026 rate shock: Preliminary 2026 filings show double-digit hikes. New York insurers are requesting set averages in the teens with some carriers far higher. Colorado insurers are requesting ~28% on average. Sticker shock intensifies churn risk if ACA subsidies aren’t extended. DFS NY Colorado Newsline The Colorado Sun
Policy: Using Oscar’s 2025 base of $12.0 to $12.2B revenue, 86–87% MLR, state 2026 rate asks, and an exchange-heavy mix, I back-solved a rough policy estimate from the current price.
By anchoring two regimes:
Expire (no ACA extension): The stock value clusters around low-teens using comparable company valuation multiples and EV/Sales (Enterprise Value to Sales Ratio), given a negative 10 to 25% net membership hit and high 80s to low 90s MLR.
Extend (full or temporary): OSCR’s value clusters in the high teens to low 20s with flat or slightly up membership and mid 80s MLR.
Set P= p*Extend + (1-p)*Expire where P= today’s market price of $15.46, p= the probability subsidies are extended, Extend = estimated stock price if subsidies are extended ($17 to $22) from the estimate in the extend regime, and Expire = estimated stock price if subsidies expire ($10 to $13) from the estimate in the expire regime. Solving for p gives about a 30 to 35% probability of an extension and 65 to 70% of no extension or only a token renewal. That aligns with the “at-best limited extension” tenor in recent Hill reporting. Axios
Additionally, a bipartisan extension has never happened before for the enhanced APTC. In a split or GOP-controlled Congress without reconciliation available, betting on bipartisan crossover for a high-cost ACA benefit is historically close to zero. Even with midterm pressure, history shows Republicans are more willing to take short-term political heat than to permanently expand ACA subsidies.
Membership: Oscar reported ~2.02M total members as of Q2. 2.02M from IFP (Individual/Family Plans) and SG (Small Group) plus ~10k from the Cigna+Oscar partnership. OSCR
At the price of $15.46 with ~30 to 35% extension odds and 2026 gross rates in the mid-teens to high-teens, the blended implied 2026 membership works out to roughly ~1.8M down 9% to 12% from Q2, not a catastrophe however, not flat either.
Taking into account the possible membership changes in each scenario and weighting them by the market’s implied odds, Oscar’s total membership in 2026 would average out to ~1.8M, an ~11% drop from today’s 2.02M.
MLR & SG&A:
The market seems to be underwriting FY26 MLR in the high 80s. That’s worse than management’s FY25 guide of 86 to 87% but better than Q2’s 91.1%. This means investors expect some normalization, but not a full return to mid-80s across the book. OSCR OSCR
Analysts expect only a small change in margins about 0.2 to 0.5 points lower than FY25, despite cost-cutting measures because they are dealing with shaky membership numbers.
In 2025, ~92% of marketplace enrollees receive subsidies. When enhanced credits lapse, net premiums jump, and gross rates are filed higher to reflect morbidity and policy changes; KFF and state dockets are already picking this up for 2026. Oscar’s ~2.0M members almost entirely in IFP/small-group sits squarely in that blast radius.Health System Tracker OSCR