Oscar Health's Loss Ratio Fell to 79.2 Percent. It Booked Only a Sliver of the Risk-Adjustment Upside Behind It

Oscar Health's medical loss ratio fell to 79.2% in the second quarter of 2026 from 91.1% a year earlier, effectuated membership rose 46% to 2.96 million, and net income swung to $362 million from a $228.4 million loss (Oscar Health, August 2026).

Underneath the print sits an accrual judgment: Oscar's actuaries saw favorable 2026 morbidity data and booked only part of it.

Key Takeaways

• Two risk-adjustment reports arrived in the same quarter and got opposite treatment. The final 2025 CMS reconciliation, roughly $160 million favorable, was fully recognized. The first 2026 report was not.
• The 2026 read rests on four months of claims. Management recognized "only a small portion" of the favorability, without quantifying how much was held back.
• Oscar is a net payer, not a recipient. It carried a $4.85 billion net risk-adjustment payable at June 30, 2026, so favorable morbidity means the bill it owes the market shrinks.
• The same policy ran in reverse two quarters earlier, adding roughly $275 million to the payable in Q4 2025 on a finding that members looked healthier than the market.
• Churn is now expected at roughly double the prior assumption, from 1% to 2% up to "closer to twice that amount," which the CFO attributed to CMS eligibility verification.

Two Reports, Two Treatments

CFO Scott Blackley drew the line explicitly. "In the second quarter, we received the final 2025 CMS risk adjustment report, which was approximately $160 million favorable to our first quarter accruals and fully recognized in the quarter," he said, before turning to the newer data: "We also received the first risk adjustment report for 2026, covering claims through April, which showed market morbidity tracking quite favorable to both our pricing and first quarter accruals. With only 4 months of claims in the data, we recognized only a small portion of that favorability" (earnings call transcript, August 2026).

One number had a settlement behind it and went into results in full. The other was preliminary and went in at a discount management chose not to quantify. The $164 million of favorable prior-period reserve development in the quarter is mostly the first of those, tied to business already earned rather than to the current accident year.

Four months of paid claims is a thin base for a full-year morbidity assumption on a book with meaningful claims lag and a utilization pattern that shifts through the year. Holding most of the signal back is not conservatism for its own sake; it is treating a low-credibility estimate as one.

A Net Payer Managing a Payable

Under the HHS-HCC methodology, CMS scores each plan's population using diagnosis codes mapped to Hierarchical Condition Categories, compares that score to the statewide average by metal level and rating area, and moves money from lower-risk plans to higher-risk plans. The transfer is zero-sum inside the market, not federally funded (CMS).

The timing is the constraint. CMS publishes no interim summary on a benefit year until the following spring: the benefit year 2024 interim report landed in March 2025, with final reconciliation later. An insurer setting mid-year reserves has no official number. What large ACA carriers use instead is a modeled proxy, with Wakely benchmarking an issuer's own EDGE server submissions against a market-wide sample, the same process behind Centene's risk-adjustment swing.

Oscar's position inside that transfer runs opposite to most. Its population skews younger and more digitally engaged than the market average, which leaves it with a lower risk score than the benchmark and money owed into the pool. It carried a net risk-adjustment payable of $4.85 billion at June 30, 2026, split $2.37 billion for the current benefit year and $2.47 billion for prior years still reconciling (Form 8-K, August 2026). Favorable morbidity does not produce a check; it shrinks the bill.

The same mechanic ran the other way two quarters earlier. Oscar raised its payable accrual by roughly $275 million in the fourth quarter of 2025 after concluding its members looked healthier than the broader market, a charge against earnings that helped push full-year 2025 MLR to 87.4% from 81.7% in 2024 and produced a $443 million net loss (FierceHealthcare, February 2026). One standard, applied in both directions.

The reported 79.2% is also not the statutory ratio. The ACA's 80% individual-market floor runs on a three-year rolling average and nets taxes and fees differently from a GAAP income statement (CMS).

The Book Behind the Four Months Is Not a Stable One

The population that generated the April read is growing fast inside a market doing the opposite, which is the hardest case for extrapolating a partial-year signal.

Oscar added 46% membership while national Marketplace enrollment fell by roughly 3 million people between 2025 and 2026, the first decline in seven years, with about 27% of the drop concentrated just above the 400% federal poverty line cliff and average annual premiums for subsidized enrollees rising 114%, from $888 to $1,904 (KFF, 2026). Oscar priced a weighted-average increase near 28% for 2026 on the assumption that morbidity would deteriorate as the enhanced credits lapsed (Seeking Alpha, 2025).

A carrier gaining share that fast in a contracting market is either winning healthier shoppers on price or absorbing members other issuers are shedding, and the risk-adjustment data is what eventually reveals which. Either way the book is weighted toward new enrollees whose diagnosis coding and claims are still developing, including growth in ICHRA-funded plans with limited multi-year history at Oscar's scale. That is the population an interim read characterizes least well.

Churn compounds it. "I would expect that churn, we previously thought it was 1% to 2%. It's probably going to be closer to twice that amount," Blackley told analysts, attributing the increase to CMS eligibility-verification activity rather than dissatisfaction with coverage.

Oscar's own guidance carries the same caution into the outlook. First-half earnings from operations of $1.1 billion sit above the raised full-year top end of $700 million, which implies an operating loss across the third and fourth quarters, and full-year MLR is guided to 81.5% to 82.5% against a 79.2% first-half print. That is deductible leverage doing what it does every year: member cost-sharing absorbs more of each claim in January, and less of it once out-of-pocket maximums are met in the fall.