OSCAR HEALTH, INC. – 10-K – Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited consolidated financial
statements and the related notes included elsewhere in this filing. The
discussion contains forward-looking statements that involve known and unknown
risks and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those set forth under Part I, Item 1A."Risk Factors" of this Annual
Report on Form 10-K. The following discussion and analysis does not include
certain items related to the year ended December 31, 2020, including
year-to-year comparisons between the year ended December 31, 2021 and the year
ended December 31, 2020. For a comparison of our results of operations for the
fiscal years ended December 31, 2021 and December 31, 2020, see Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations of our Annual Report on Form 10-K for the year ended December 31,
2021, filed with the SEC on February 25, 2022.

Overview

Oscar is the first health insurance company built around a full stack technology
platform and a relentless focus on serving our members. We offer innovative and
consumer-oriented health plans in the Individual, Small Group and Medicare
Advantage markets. Our full stack technology platform has enabled arrangements
with other payors and providers in which health plans and products are powered
by our platform. As we continue to build and scale our technology, we may seek
out additional opportunities to monetize our +Oscar platform.

Recent Developments, Trends and Other Factors Impacting Performance

+Oscar Arrangements

On January 19, 2023, we entered into a termination and settlement agreement with
Health First Shared Services, Inc ("Health First") under which we agreed (i) to
terminate the administrative services agreement with Health First (the "HF
Agreement") and transition services from +Oscar to Health First effective
December 31, 2022, (ii) to provide run-off services through the end of 2023 and
(iii) to forgo an immaterial amount of services revenue in exchange for a
settlement and release on mutually agreeable terms.

Reinsurance

We believe our reinsurance agreements help us achieve important goals for our
business, including risk management, capital efficiency, and greater
predictability in our earnings in the event of unexpected significant
fluctuations in MLR. Specifically, reinsurance is a financial arrangement under
which the reinsurer agrees to cover a portion of our medical claims (ceded
claims) in return for a portion of the premium (premiums ceded). Our reinsurance
agreements are contracted under two different types of arrangements: quota share
reinsurance contracts and excess of loss ("XOL") reinsurance contracts.
Reinsurance agreements do not relieve us of our primary medical claims incurred
obligations.

Quota Share Reinsurance
We currently use quota share agreements to limit our risk and capital
requirements, which has enabled us to grow while optimizing our use of capital.
In quota share reinsurance, the reinsurer agrees to assume a specified
percentage of the ceding company's losses arising out of a defined class of
business in exchange for a corresponding percentage of premiums. Premiums for
quota share reinsurance are based on a percentage of premiums earned before
ceded reinsurance. Each quota share reinsurance agreement includes a ceding
commission payment from the reinsurer to Oscar to cover administrative costs. To
the extent ceded premiums exceed ceded claims and commissions, we typically
receive an experience refund.

Because reinsurers are entitled to a portion of our premiums under our quota
share reinsurance arrangements, changes in the amount of premiums ceded under
these arrangements affect our revenue. Furthermore, reductions in the amount of
premiums ceded under quota share reinsurance arrangements may result in an
increase to our minimum capital and surplus requirements, and an increase in
corresponding capital contributions by Holdco to our health insurance
subsidiaries.





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The Company currently has quota share reinsurance arrangements with more than
one counterparty with multiple state-level treaties. These arrangements are
accounted for under both reinsurance accounting and deposit accounting. Our
premiums ceded under quota share reinsurance agreements for the year ended
December 31, 2022, as compared to the year ended December 31, 2021, are as
follows:

                                                                             Year Ended December 31,
Summary of Quota Share Reinsurance Program                                   2022                 2021

Percentage of premiums ceded under reinsurance programs
(reinsurance accounting)

                                                          29  %               34  %
Percentage of premiums covered under reinsurance programs
(deposit accounting)                                                              18  %                -  %



XOL Reinsurance
We use XOL reinsurance to limit our exposure to large catastrophic risk from
individual claims. Under XOL reinsurance, the reinsurer agrees to assume all or
a portion of the ceding company's losses in excess of a specified amount. The
premium payable to the reinsurer is negotiated by the parties based on losses on
an individual member in a given calendar year and their assessment of the amount
of risk being ceded to the reinsurer. Under our XOL reinsurance contracts in
2022, the reinsurer is paid to cover claims related losses over a $750,000
attachment point, but the amount of the attachment point may change year over
year based on a variety of factors.

Risk Adjustment
The risk adjustment programs in the Individual, Small Group, and Medicare
Advantage markets we serve are administered federally by Centers for Medicare &
Medicaid Services ("CMS") and are designed to mitigate the potential impact of
adverse selection and provide stability for health insurers. Under this program,
each plan is assigned a risk score based upon demographic information and
current year claims information related to its members. The risk score is used
to adjust plan revenue to reflect the relative risk of the plan's enrolled
population. We reevaluate our risk transfer estimates as new information and
market data becomes available until we receive the final reporting from CMS in
later periods, up to twelve months in arrears.

Our risk transfer estimates are subject to a high degree of estimation and
variability, and are affected by the relative risk of our members, and in the
case of ACA, relative to that of other insurers. In the Individual and Small
Group lines, there is a higher degree of uncertainty associated with estimates
of risk transfers at the beginning of the policy year resulting from composition
of the risk score being based on concurrent claim data. Furthermore, there is
additional uncertainty for blocks of business that experience high growth
compounded by the lack of credible experience data on the newly enrolling
population. Actual risk adjustment calculations and transfers could materially
differ from our assumptions.

Impact of COVID-19
The COVID-19 pandemic continues to evolve and have an impact on our business.

To date, we have experienced and may continue to experience changes in the
utilization patterns of our members, as the pandemic continues to affect the
United States, and our members continue to change the way they utilize care. We
experienced depressed non-COVID-19 related medical costs as a result of the
pandemic and as vaccination rates have increased nationally, members began to
resume their utilization of healthcare including care that was deferred,
resulting in increased medical claims expenses. However, this trend may reverse
if COVID-19 variants continue to proliferate, or COVID-19 vaccines are not
effective against new strains or become less effective over time. We also
experienced, and may continue to experience, increased COVID-19 testing and
treatment costs. We monitor external trends closely as these dynamics result in
increased uncertainties around our expectations of both COVID-19 and
non-COVID-19 related medical costs. We cannot accurately estimate the future net
potential impact, positive or negative, to our medical claims expenses at this
time.

Although the Biden Administration announced that the public health emergency
("PHE") for COVID-19 will end on May 11, 2023, the duration, severity and full
extent of the impact of this pandemic is unknown and the extent of the business
disruption and financial impact depends on factors beyond our knowledge and
control.



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Regulatory Update
In August 2022, Congress enacted the Inflation Reduction Act, which extended the
APTCs under the American Rescue Plan Act for a three year period through the end
of 2025. Furthermore, in October 2022, the Treasury Department issued a final
rule to address the "family glitch" in the ACA, which relates to determining who
is eligible for premium subsidies. In December 2022, Congress passed the omnibus
spending bill which delinked the Medicaid continuous coverage from the PHE
declaration, and imposed a date of April 1, 2023, for states to begin the
Medicaid eligibility redetermination process. It is anticipated that the
extension of the APTCs, the "family glitch" fix, and Medicaid redeterminations
could lead to significant growth in the ACA marketplace.

As a result of the changing market dynamics following IFP market exits by
certain carriers, the Company proactively engaged its regulators regarding
options to manage its membership growth. Prior to Open Enrollment for 2023, the
Company requested that regulators limit its membership growth in Florida above a
certain threshold so that total membership across all markets would be within
its previously announced target range of 900,000 to 1,100,000 members at the
close of Open Enrollment, which the Company believed would enable it to
prudently manage its capital position. Due to strong Open Enrollment
performance, the threshold was met and the Company temporarily stopped accepting
new members in Florida in the fourth quarter of 2022; however, current members
were still able to re-enroll. For further information, see "Risk Factors - Risks
Most Material to Us - Our business, financial condition, and results of
operations may be harmed if we fail to execute our growth strategy and manage
our growth effectively."


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Financial Results Summary and Key Operating and Non-GAAP Financial Metrics

We regularly review a number of metrics, including the following key operating
and non-GAAP financial metrics, to evaluate our business, measure our
performance, identify trends in our business, prepare financial projections, and
make strategic decisions. We believe these operational and financial measures
are useful in evaluating our performance, in addition to our financial results
prepared in accordance with GAAP.

                      Financial Results Summary

                                           Year Ended December 31,
                                            2022             2021
                                              (in thousands)
Premiums before ceded reinsurance      $  5,334,520      $ 2,712,988
Reinsurance premiums ceded               (1,463,403)        (881,968)
Premiums earned                        $  3,871,117      $ 1,831,020
Total revenue                          $  3,963,638      $ 1,838,715
Total operating expenses               $  4,553,505      $ 2,383,196
Net loss                               $   (609,552)     $  (571,426)



                  Key Operating and Non-GAAP Financial Metrics


                                                          Year Ended December 31,
                                                           2022              2021

Members (as of December 31st)                           1,151,483           598,169

Direct and Assumed Policy Premiums (in thousands) $ 6,842,439 $ 3,436,626
Medical Loss Ratio

                                           85.3  %           88.9  %
InsuranceCo Administrative Expense Ratio                     20.6  %           21.8  %
InsuranceCo Combined Ratio                                  105.8  %          110.7  %
Adjusted Administrative Expense Ratio                        24.6  %           28.9  %
Adjusted EBITDA(1) (in thousands)                     $  (462,255)      $  

(429,826)

(1)Adjusted EBITDA is a non-GAAP measure. See "Adjusted EBITDA" below for a
reconciliation to net loss, the most directly comparable U.S. GAAP measure, and
for information regarding our use of Adjusted EBITDA.

Members

Members are defined as any individual covered by a health plan that we offer
directly or through a co-branded arrangement. We view the number of members
enrolled in our health plans as an important metric to help evaluate and
estimate revenue and market share. Additionally, the more members we enroll, the
more data we have, which allows us to improve the functionality of our platform.

Membership increased 93% to 1,151,483 as of December 31, 2022, from 598,169 as
of December 31, 2021. The increase is driven largely by strong retention and
growth in core Individual markets during open enrollment, including in Florida,
Georgia and Texas as well as growth in C+O products.
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Direct and Assumed Policy Premiums

Direct Policy Premiums are defined as the premiums collected from our members or
from the federal government during the period indicated, before risk adjustment
and reinsurance. These premiums include APTC, or premium subsidies, which are
available to individuals and families with certain annual incomes. Assumed
Policy Premiums are premiums we receive primarily as part of our reinsurance
arrangement under our C+O small group plan offering. We believe Direct and
Assumed Policy Premiums is an important metric to assess the growth of our
individual and small group plan offerings going forward. Management also views
Direct and Assumed Policy Premiums as a key operating metric because each of our
MLR, InsuranceCo Administrative Expense Ratio, InsuranceCo Combined Ratio and
Adjusted Administrative Expense Ratio are calculated on the basis of Direct and
Assumed Policy Premiums. Direct and Assumed Policy Premiums increased 99.1% to
$6.8 billion as of December 31, 2022 from $3.4 billion as of December 31, 2021,
driven primarily by higher membership, rate increases, and mix shift to higher
premium Silver plans.

Medical Loss Ratio

Medical loss ratio is calculated as set forth in the table below. Medical claims
are total medical expenses incurred by members in order to utilize health care
services less any member cost sharing. These services include inpatient,
outpatient, pharmacy, and physician costs. Medical claims also include risk
sharing arrangements with certain of our providers. The impact of the federal
risk adjustment program is included in the denominator of our MLR. We believe
MLR is an important metric to demonstrate the ratio of our costs to pay for
health care of our members to the premiums before ceded reinsurance. MLRs in our
existing products are subject to various federal and state minimum requirements.
Below is a calculation of our MLR for the periods indicated.

                                                            Year Ended December 31,
                                                             2022              2021
                                                                 (in thousands)

Direct claims incurred before ceded reinsurance (1) $ 4,428,000 $ 2,403,108
Assumed reinsurance claims

                                  143,147         

21,656

Excess of loss ceded claims (2)                             (18,632)        

(12,500)

State reinsurance (3)                                       (30,544)        

(14,655)

Net claims before ceded quota share reinsurance (A) $ 4,521,971 $ 2,397,609

Premiums before ceded reinsurance (4)                   $ 5,334,520       $ 

2,712,988

Excess of loss reinsurance premiums (5)                     (31,502)        

(16,266)

Net premiums before ceded quota share reinsurance (B) $ 5,303,018 $ 2,696,722
Medical Loss Ratio (A divided by B)

                            85.3  %      

88.9 %

(1)See Note 4 - Reinsurance to our consolidated financial statements included
elsewhere in this Annual Report on Form 10-K for a reconciliation of direct
claims incurred to claims incurred, net appearing on the face of our statement
of operations.
(2)Represents claims ceded to reinsurers pursuant to an excess of loss treaty,
for which such reinsurers are financially liable. We use excess of loss
reinsurance to limit the losses on individual claims of our members.
(3)Represents payments made by certain state-run reinsurance programs
established subject to CMS approval under Section 1332 of the ACA.
(4)See Note 3 - Revenue Recognition to our consolidated financial statements
included elsewhere in this Annual Report on Form 10-K for an explanation of
premiums before ceded reinsurance.
(5)Represents excess of loss insurance premiums paid.

MLR improved for the year ended December 31, 2022 as compared to the year ended
December 31, 2021. The improvement was primarily due to lower net COVID-19
related costs, pricing actions, and mix shifts in our member population and
medical management actions, partially offset by the impact of prior period
development.

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InsuranceCo Administrative Expense Ratio
InsuranceCo Administrative Expense Ratio is calculated as set forth in the table
below. The ratio reflects the costs associated with running our combined
insurance companies. We believe InsuranceCo Administrative Expense Ratio is
useful to evaluate our ability to manage our expenses as a percentage of
premiums before the impact of quota share reinsurance. Expenses necessary to run
the insurance company are included in other insurance costs and federal and
state assessments. These expenses include variable expenses paid to vendors and
distribution partners, premium taxes and healthcare exchange fees,
employee-related compensation, benefits, marketing costs, and other
administrative expenses. The numerator and denominator in the calculation below
reflect an adjustment to remove the impact of the Company's quota share
arrangements. Below is a calculation of our InsuranceCo Administrative Expense
Ratio for the periods indicated.

                                                                         Year Ended December 31,
                                                                        2022                 2021
                                                                             (in thousands)
Other insurance costs                                              $   706,439          $   410,363
Impact of quota share reinsurance(1)                                   154,741               82,246
Stock-based compensation expense                                       (51,495)             (42,295)

Federal and state assessment of health insurance subsidiaries 281,049

              138,369

Health insurance subsidiary adjusted administrative expenses (A) $ 1,090,734 $ 588,683

Premiums before ceded reinsurance (2)                              $ 5,334,520          $ 2,712,988
Excess of loss reinsurance premiums                                    (31,502)             (16,266)
Net premiums before ceded quota share reinsurance (B)              $ 5,303,018          $ 2,696,722
InsuranceCo Administrative Expense Ratio (A divided by B)                 20.6  %              21.8  %

(1)Includes ceding commissions received from reinsurers, net of the impact of
deposit accounting of $(7,205) for the year ended December 31, 2022.

(2)See Note 3 - Revenue Recognition to our consolidated financial statements
included elsewhere in this Annual Report on Form 10-K for an explanation of
premiums before ceded reinsurance.

The InsuranceCo Administrative Expense Ratio improved for the year ended
December 31, 2022 as compared to the year ended December 31, 2021, primarily due
to operating expense leverage and scale efficiencies, partially offset by higher
distribution expenses.

InsuranceCo Combined Ratio

InsuranceCo Combined Ratio is defined as the sum of MLR and InsuranceCo
Administrative Expense Ratio. We believe this ratio best represents the core
performance of the consolidated insurance business, prior to the impact of quota
share and net investment income.


                                                       Year Ended December 31,
                                                          2022                2021
Medical Loss Ratio                                               85.3  %      88.9  %
InsuranceCo Administrative Expense Ratio                         20.6  %      21.8  %
InsuranceCo Combined Ratio                                      105.8  %     110.7  %



The InsuranceCo Combined Ratio improved for the year ended December 31, 2022 as
compared to the year ended December 31, 2021, consistent with the improvement in
the MLR and InsuranceCo Administrative Expense Ratio.








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Adjusted Administrative Expense Ratio

The Adjusted Administrative Expense Ratio is an operating ratio that reflects
the Company's total administrative expenses ("Total Administrative Expenses"),
net of non-cash and non-recurring items (as adjusted, "Adjusted Administrative
Expenses"), as a percentage of total revenue, including quota share reinsurance
premiums ceded and excluding excess of loss reinsurance premiums ceded and
non-recurring items ("Adjusted Total Revenue"). Total Administrative Expenses
are calculated as Total Operating Expenses, excluding non-administrative
insurance-based expenses and the impact of quota share reinsurance. Adjusted
Administrative Expenses are Total Administrative Expenses, net of non-cash and
non-recurring expense items. Adjusted Administrative Expenses exclude
insurance-based expenses, non-cash expenses and non-recurring expenses. We
believe Adjusted Administrative Expense Ratio is useful to evaluate our ability
to manage our overall administrative expense base. This ratio also provides
further clarity into our overall path to profitability. Below is a calculation
of our Adjusted Administrative Expense Ratio for the periods indicated.


                                                                 Year Ended December 31,
                                                                  2022              2021
                                                                      (in thousands)
Total Operating Expenses                                     $ 4,553,505       $ 2,383,196
Claims incurred, net                                          (3,280,798)       (1,623,995)
Premium deficiency reserve release                                25,033    

55,325

Impact of quota share reinsurance (1)                            154,741    

82,246

Total Administrative Expenses                                $ 1,452,481       $   896,772
Stock-based compensation expense/warrant expense                (112,329)          (99,152)
Depreciation and amortization                                    (15,283)          (14,605)
Other non-recurring items (2)                                          -              (898)
Adjusted Administrative Expenses (A)                         $ 1,324,869       $   782,117
Total Revenue                                                $ 3,963,638       $ 1,838,715
Reinsurance premiums ceded                                     1,463,403           881,968
Excess of loss reinsurance premiums                              (31,502)   

(16,266)

Adjusted Total Revenue (B)                                   $ 5,395,539       $ 2,704,417
Adjusted Administrative Expense Ratio (A divided by B)              24.6  % 

28.9 %

(1)Includes ceding commissions received from reinsurers, net of the impact of
deposit accounting of $(7,205) for the year ended December 31, 2022. The Company
did not apply deposit accounting to its reinsurance contracts during the year
ended December 31, 2021.
(2)Represents approximately $0.9 million of non-recurring expenses incurred in
connection with the Company's initial public offering ("IPO") during the year
ended December 31, 2021.

The Adjusted Administrative Expense Ratio improved for the year ended December
31, 2022, as compared to the year ended December 31, 2021. The improvement was
due to operating expense leverage and scale efficiencies, partially offset by
distribution expenses.

Adjusted EBITDA

Adjusted EBITDA is defined as net loss for the Company and its consolidated
subsidiaries before interest expense, income tax expense (benefit), depreciation
and amortization as further adjusted for stock-based compensation, warrant
contract expense, changes in the fair value of warrant liabilities, and other
non-recurring items as described below. We present Adjusted EBITDA because we
consider it to be an important supplemental measure of our performance and
believe it is frequently used by securities analysts, investors, and other
interested parties in the evaluation of companies in our industry. Adjusted
EBITDA is a non-GAAP measure. Management believes that investors' understanding
of our performance is enhanced by including this non-GAAP financial measure as a
reasonable basis for comparing our ongoing results of operations.

We caution investors that amounts presented in accordance with our definition of
Adjusted EBITDA may not be comparable to similar measures disclosed by our
competitors, because not all companies and analysts calculate Adjusted EBITDA in
the same manner.

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Management uses Adjusted EBITDA:
•as a measurement of operating performance because it assists us in comparing
the operating performance of our business on a consistent basis, as it removes
the impact of items not directly resulting from our core operations;
•for planning purposes, including the preparation of our internal annual
operating budget and financial projections;
•to evaluate the performance and effectiveness of our operational strategies;
and
•to evaluate our capacity to expand our business.

By providing this non-GAAP financial measure, together with a reconciliation to
the most comparable U.S. GAAP measure, we believe we are enhancing investors'
understanding of our business and our results of operations, as well as
assisting investors in evaluating how well we are executing our strategic
initiatives. Adjusted EBITDA has limitations as an analytical tool, and should
not be considered in isolation, or as an alternative to, or a substitute for net
loss or other financial statement data presented in our consolidated financial
statements as indicators of financial performance.

                                                   Year Ended December 31,
                                                    2022              2021
                                                       (in thousands)
Net loss                                       $    (609,552)     $ (571,426)
Interest expense                                      22,623           4,720
Other expense (income)                                (2,415)          1,201
Income tax expense (benefit)                            (523)            846
Depreciation and amortization                         15,283          14,605
Stock-based compensation/warrant expense(1)          112,329          99,152
Other non-recurring items(2)                               -          21,076
Adjusted EBITDA                                $    (462,255)     $ (429,826)


(1)Represents (i) non-cash expenses related to equity-based compensation
programs, which vary from period to period depending on various factors
including the timing, number, and the valuation of awards, (ii) warrant contract
expense, and (iii) changes in the fair value of warrant liabilities.
(2)Represents debt extinguishment costs of $20.2 million incurred on the
prepayment of our Term Loan (refer to Note 15 - Long-Term Debt to our
consolidated financial statements included elsewhere in this Annual Report on
Form 10-K) and approximately $0.9 million of non-recurring expenses incurred in
connection with the IPO during the year ended December 31, 2021.

Components of our Results of Operations

Premiums Before Ceded Reinsurance

Premiums before ceded reinsurance primarily consist of premiums received, or to
be received, directly from our members or from CMS as part of the APTC program,
net of the impact of our risk adjustment payable. Premiums before ceded
reinsurance are generally impacted by the amount of risk sharing adjustments,
our ability to acquire new members and retain existing members, and average size
and premium rate of policies.

Reinsurance Premiums Ceded

Reinsurance premiums ceded represent the amount of premiums written that are
ceded to reinsurers either through quota share agreements that pass risk
transfer or XOL reinsurance. We enter into reinsurance agreements, in part, to
limit our exposure to potential losses as well as to provide additional capacity
for growth. Reinsurance premiums ceded are recognized over the reinsurance
contract period in proportion to the period of risk covered. The volume of our
reinsurance premiums ceded is impacted by the level of our premiums earned and
any decision we make to increase or decrease limits, retention levels, and
co-participations.

Administrative Services Revenue

Administrative services revenue includes income earned from administrative
services performed as part of the +Oscar platform.

Investment Income and Other Revenue

Investment income (loss) and other revenue primarily includes interest earned
and gains on our investment portfolio, along with sublease income.

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Claims Incurred, Net

Claims incurred, net primarily consists of both paid and unpaid medical expenses
incurred to provide medical services and products to our members. Medical claims
include fee-for-service claims, pharmacy benefits, capitation payments to
providers, provider disputed claims and various other medical-related costs.
Under fee-for-service claims arrangements with providers, we retain the
financial responsibility for medical care provided and incur costs based on
actual utilization of hospital and physician services. Medical claims are
recognized in the period health care services are provided. Unpaid medical
expenses include claims reported and in the process of being settled, but that
have not yet been paid, as well as health care costs incurred but not yet
reported to us, which are collectively referred to as benefits payable or claim
reserves. The development of the claim reserve estimate is based on actuarial
methodologies that consider underlying claim payment patterns, medical cost
inflation, historical developments, such as claim inventory levels and claim
receipt patterns, and other relevant factors. The methods for making such
estimates and for establishing the resulting liability are continuously reviewed
and any adjustments are reflected in the period determined. Claims incurred, net
also reflects the net impact of our ceded reinsurance claims.

Other Insurance Costs

Other insurance costs primarily include distribution costs, including broker
commissions, wages, benefits, marketing, rent, costs of software and hardware,
unallocated claims adjustment expenses, and administrative costs associated with
functions that are necessary to support our health insurance business. Such
functions include, but are not limited to, member concierge services, claims
processing, utilization management, and related health plan operations,
actuarial, compliance and portions of information systems, legal and finance.
This line item also includes ceding commissions we receive from our reinsurance
partners, net of the impact of deposit accounting.

General and Administrative Expenses

General and administrative expenses primarily include wages, benefits, costs of
software and hardware, and administrative costs for our corporate and technology
functions. Such functions include, but are not limited to executive management,
and portions of legal, finance and information systems, including product
management and development.

Federal and State Assessments

Federal and state assessments represent non-income tax charges from federal and
state governments, including but not limited to healthcare exchange user fees,
premium taxes, franchise taxes, and other state and local non-premium related
taxes.

Premium Deficiency Reserve Release

Premium deficiency reserve release is the year over year change in the premium
deficiency reserve liability. Premium deficiency reserve liabilities are
established when it is probable that expected future claims and maintenance
expenses will exceed future premium and reinsurance recoveries on existing
medical insurance contracts.

Interest Expense

Interest expense consists primarily of interest expense associated with our debt
arrangements, including amortization of debt issuance costs and discounts and
revolving credit facility fees.

Other Expenses (Income)

Other expenses (income) consists primarily of miscellaneous expenses or income
that are not core to our operations, including profit sharing arrangements with
our co-branded health plans and changes in the fair value of financial
instruments.

Income Tax Expense (Benefit)

Income tax expense (benefit) consists primarily of changes to our current and
deferred federal and state tax assets and liabilities. Income taxes are recorded
as deferred tax assets and deferred tax liabilities based on differences between
the book and tax bases of assets and liabilities. Our deferred tax assets and
liabilities are calculated by applying the current tax rates and laws to taxable
years in which such differences are expected to reverse.
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Results of Operations

Year Ended December 31, 2022 compared to Year Ended December 31, 2021

The following table sets forth our results of operations for the periods
indicated:


                                                         Year Ended December 31,
                                          2022             2021           $ Change        % Change
                                                             (in thousands)
Revenue
Premiums before ceded reinsurance     $ 5,334,520      $ 2,712,988      $ 2,621,532           97  %
Reinsurance premiums ceded             (1,463,403)        (881,968)        (581,435)          66  %
Premiums earned                         3,871,117        1,831,020        2,040,097          111  %
Administrative services revenue            61,047            5,394           55,653        1,032  %
Investment income and other revenue        31,474            2,301           29,173        1,268  %
Total revenue                           3,963,638        1,838,715        2,124,923          116  %
Operating Expenses:
Claims incurred, net                    3,280,798        1,623,995        1,656,803          102  %
Other insurance costs                     706,439          410,363          296,076           72  %

General and administrative expenses 309,783 265,078

  44,705           17  %
Federal and state assessments             281,518          139,085          

142,433 102 %

Premium deficiency reserve release (25,033) (55,325)

 30,292          (55) %

Total operating expenses                4,553,505        2,383,196        2,170,309           91  %
Loss from operations                     (589,867)        (544,481)         (45,386)           8  %
Interest expense                           22,623            4,720           17,903          379  %
Other expenses (income)                    (2,415)           1,201           (3,616)        *NM
Loss on extinguishment of debt                  -           20,178          (20,178)        *NM
Loss before income taxes                 (610,075)        (570,580)         (39,495)           7  %
Income tax expense (benefit)                 (523)             846           (1,369)        (162) %
Net loss                              $  (609,552)     $  (571,426)     $   (38,126)           7  %


*NM - not meaningful

Premiums Before Ceded Reinsurance

Premiums before ceded reinsurance increased by $2.6 billion, or 97%, to $5.3
billion for the year ended December 31, 2022, from $2.7 billion for the year
ended December 31, 2021. The increase was primarily due to higher membership
driven largely by growth in the Individual line of business, as well as
increases due to serving new C+O members and a mix shift towards higher premium
plans. Oscar's growth also reflects strong retention and growth in core markets
during open enrollment, including in Florida, Georgia and Texas, despite having
the lowest cost plan in only 8% of its markets.

Reinsurance Premiums Ceded

Reinsurance premiums ceded increased $581.4 million, or 66%, to $1.5 billion for
the year ended December 31, 2022, from $882.0 million for the year ended
December 31, 2021. The increase is driven by growth in premiums before ceded
reinsurance discussed above.

Administrative Services Revenue

Administrative services revenue increased $55.7 million, or 1,032%, to $61.0
million for the year ended December 31, 2022, from $5.4 million for the year
ended December 31, 2021. This increase was driven by the January 2022 launch of
our arrangement with Health First, which has since been terminated.

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Investment Income and Other Revenue

Investment income and other revenue increased to $31.5 million, or 1,268%, for
the year ended December 31, 2022, from $2.3 million for the year ended December
31, 2021, primarily due to changes in interest rates.

Claims Incurred, Net

Claims incurred, net, increased $1.7 billion, or 102%, to $3.3 billion for the
year ended December 31, 2022, from $1.6 billion for the year ended December 31,
2021, which was primarily volume-driven due to growth in membership.

Other Insurance Costs

Other insurance costs increased $296.1 million, or 72%, to $706.4 million for
the year ended December 31, 2022, from $410.4 million for the year ended
December 31, 2021. The increase was primarily attributable to higher broker
commissions and higher headcount, which were driven by the increase in
membership.

General and Administrative Expenses

General and administrative expenses increased $44.7 million, or 17%, to $309.8
million for the year ended December 31, 2022, from $265.1 million for the year
ended December 31, 2021. The increase was primarily attributable to higher
headcount and other employee-related costs related to servicing the +Oscar
business.

Federal and State Assessments

Federal and state assessments increased $142.4 million, or 102%, to $281.5
million for the year ended December 31, 2022, from $139.1 million for the year
ended December 31, 2021, which was primarily due to membership growth.

Premium Deficiency Reserve Release

Premium deficiency reserve release decreased $30.3 million, for the year ended
December 31, 2022, from $55.3 million for the year ended December 31, 2021. The
change was due to the lower premium deficiency reserve established at the end of
2021 as compared to the reserve established at the end of 2020 as well as the
lower premium deficiency reserve established at the end of 2022 as compared to
the reserve established at the end of 2021.

Income Tax (Benefit) Provision

Our effective tax rate for the year ended December 31, 2022 and December 31,
2021 was approximately 0.09% and (0.15)%, respectively.

Liquidity and Capital Resources

Overview

We maintain liquidity at two levels of our corporate structure, through our
health insurance subsidiaries and through Holdco, our consolidated subsidiaries
excluding our regulated insurance subsidiaries.

The majority of the assets held by our health insurance subsidiaries is in the
form of cash and cash equivalents and investments. As of December 31, 2022 and
December 31, 2021, total cash and cash equivalents and investments held by our
health insurance subsidiaries was $2.9 billion and $1.8 billion, respectively,
of which $17.7 million and $17.0 million, respectively, was on deposit with
regulators as required for statutory licensing purposes and are classified as
restricted deposits on the balance sheet.

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Our health insurance subsidiaries' states of domicile have statutory minimum
capital requirements that are intended to measure capital adequacy, taking into
account the risk characteristics of an insurer's investments and products. The
combined statutory capital and surplus of our health insurance subsidiaries was
$701.5 million and $474.8 million at December 31, 2022 and December 31, 2021,
respectively, which was in compliance with and in excess of the minimum capital
requirements for each period. The health insurance subsidiaries historically
have required capital contributions from Parent to maintain minimum levels. The
health insurance subsidiaries may be subject to additional capital and surplus
requirements in the future, as a result of factors such as increasing membership
and medical costs, which may require us to incur additional indebtedness, sell
capital stock, or access other sources of funding in order to fund such
requirements. During periods of increased volatility, such as the current
macroeconomic environment, adverse securities and credit markets, including due
to rising interest rates, may exert downward pressure on the availability of
liquidity and credit capacity for certain issuers, and any such funding may not
be available on favorable terms, or at all. For additional information on the
steps we've taken to balance growth and our capital position, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Recent
Developments, Trends and Other Factors Impacting Performance-Regulatory Update."

In the future, when our health insurance subsidiaries become profitable or if
their levels of reserves and capital become excessive, we may make requests for
dividends and distributions from our subsidiaries to fund our operations, which
may or may not be approved by our regulators. For additional information see
Risk Factors - Risk Related to our Business - If state regulators do not approve
payments of dividends and distributions by our health insurance subsidiaries to
us, we may not have sufficient funds to implement our business strategy.

Our health insurance subsidiaries also utilize quota share reinsurance
arrangements to reduce our minimum capital and surplus requirements, which are
designed to enable us to efficiently deploy capital to fund our growth. During
the year ended December 31, 2022 and 2021, Parent made $423.5 million and $540.9
million of capital contributions, respectively, to the health insurance
subsidiaries. We estimate that had we not had any quota share reinsurance
arrangements in place, the insurance subsidiaries would have been required to
hold approximately $446.8 million of additional capital as of December 31, 2022,
which Parent would have been required to fund. The actual amount of any required
capital contributions to our insurance subsidiaries may differ at any given time
depending on each insurance subsidiary's capital adequacy. For additional
information on our capital contributions and reinsurance arrangements, see "Risk
Factors - Risks Related to our Business - We utilize quota share reinsurance to
reduce our capital and surplus requirements and protect against downside risk on
medical claims. If regulators do not approve our reinsurance agreements for this
purpose, or if we cannot negotiate renewals of our quota share arrangements on
acceptable terms, or at all, enter into new agreements with reinsurers, or
otherwise obtain capital through debt or equity financings, our capital position
would be negatively impacted, and we could fall out of compliance with
applicable regulatory requirements" and "Risk Factors - Risks Most Material to
Us - Our business, financial condition, and results of operations may be harmed
if we fail to execute our growth strategy and manage our growth effectively."

Short-Term Cash Requirements
The majority of the assets held by Holdco are in the form of cash and cash
equivalents and investments. As of December 31, 2022 and December 31, 2021,
total cash and cash equivalents and investments held by Holdco was $342.0
million and $738.6 million, respectively, of which $9.8 million and $11.0
million was restricted for 2022 and 2021, respectively. Based on our current
forecast, we believe the cash, and cash equivalents and investments held by
Holdco, not including restricted cash, will be sufficient to fund our operating
requirements for at least the next twelve months.

Our cash flows used in operations may differ substantially from our net loss due
to non-cash charges or due to changes in balance sheet accounts. The timing of
our cash flows from operating activities can also vary among periods due to the
timing of payments made or received. Some of our payments and receipts,
including risk adjustment and subsequent reinsurance receipts, can be
significant. For example, during the third quarter of 2022, we made a payment
through our health insurance subsidiaries of $783.8 million into the risk
adjustment program for the 2021 policy year. Therefore, the timing of these
payments can influence cash flows from operating activities in any given period
which would have a negative impact on our operating cash flows.



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The Company's cash requirements within the next twelve months include subsidiary
capital infusions, Holdco expenses, and interest expenses. Payments into the
risk adjustment program are made annually in the third quarter. We expect the
cash required to meet these obligations to be primarily funded by cash available
for general corporate use, funds primarily generated through equity or debt
financing transactions, cash flows from current operations, and/or the
realization of current assets, such as accounts receivable.

Long-Term Cash Requirements
Our long-term cash requirements under our various contractual obligations and
commitments include:

•Operating leases. See Note 13 - Leases to our consolidated financial statements
included elsewhere in this Annual Report on Form 10-K for further detail of our
obligations and the timing of expected future payments.
•Interest payable. See Note 15 - Long-Term Debt to our consolidated financial
statements included elsewhere in this Annual Report on Form 10-K for further
detail of our obligations and the timing of future payments.
•Noncontrolling interests. See Note 2 - Summary of Significant Accounting
Policies to our consolidated financial statements included elsewhere in this
Annual Report on Form 10-K for further detail. We do not have any material
required redemptions in the next twelve months.

We expect the cash required to meet our long-term obligations to be primarily
generated through future cash flows from operations.

Convertible Senior Notes

On January 27, 2022, we entered into an investment agreement (the "Investment
Agreement") pursuant to which we agreed to issue and sell $305.0 million in
aggregate principal amount of 7.25% convertible senior notes due 2031 (the "2031
Notes") in a private placement to funds affiliated with or advised by Dragoneer
Investment Group, LLC, Thrive Capital, LionTree Investment Management, LLC and
Tenere Capital LLC . The transaction contemplated by the Investment Agreement
closed on February 3, 2022 (the "Closing Date"). In connection with the issuance
of the 2031 Notes, on February 3, 2022, we entered into an Indenture between us
and U.S. Bank National Association, as trustee. The 2031 Notes bear interest at
a rate of 7.25% per annum, payable in cash, semi-annually in arrears on June 30
and December 31 of each year, commencing on June 30, 2022. The Company may
determine in the future to repurchase portions of the outstanding 2031 Notes
from time to time in accordance with applicable SEC and other legal requirements
and in consideration of market and other conditions. See Note 15 - Long-Term
Debt to our consolidated financial statements included elsewhere in this Annual
Report on Form 10-K for additional information.

Revolving Credit Facility

On February 21, 2021, we entered into a senior secured credit agreement with
Wells Fargo Bank, National Association as administrative agent, and certain
other lenders for a revolving loan credit facility (the "Revolving Credit
Facility"), in the aggregate principal amount of $200 million. The Revolving
Credit Facility is guaranteed by Oscar Management Corporation (formerly Mulberry
Management Corporation) and Oscar Management Corporation of Florida, each wholly
owned subsidiaries of Oscar, and all of our future direct and indirect
subsidiaries (subject to certain permitted exceptions, including exceptions for
guarantees that would require material governmental consents or in respect of
joint venture) (the "Guarantors"). Our Revolving Credit Facility is secured by a
lien on substantially all of our and the Guarantors' assets (subject to certain
exceptions). Proceeds are to be used solely for general corporate purposes of
the Company. The Revolving Credit Facility is available until February 2024,
provided we are in compliance with all covenants.

The Revolving Credit Facility permits us to increase commitments under the
Revolving Credit Facility by an aggregate amount not to exceed $50 million. The
incurrence of any such incremental Revolving Credit Facility will be subject to
the following conditions measured at the time of incurrence of such commitments:
(i) no default or event of default, (ii) all representations and warranties must
be true and correct in all material respects immediately prior to, and after
giving effect to, the incurrence of such incremental Revolving Credit Facility
and (iii) and any such conditions as agreed between the Borrower and the lender
providing such incremental commitment.

As of December 31, 2022, there were no outstanding borrowings under the
Revolving Credit Facility.

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Interest Rate, Commitment Fees

The interest rate applicable to borrowings under our Revolving Credit Facility
is determined as follows, at our option: (a) a rate per annum equal to an
adjusted London Inter-bank Offered Rate ("LIBOR"), plus an applicable margin of
4.50% (LIBOR is calculated based on one-, three- or six-month LIBOR, or such
other period as agreed by all relevant Lenders, which is determined by reference
to ICE Benchmark Administration Limited, but not less than 1.00%), or (b) a rate
per annum equal to the Alternate Base Rate plus the applicable margin of 3.50%
(the "Alternate Base Rate" is equal to the highest of (i) the prime rate, (ii)
the federal funds effective rate plus 0.50%, and (iii) LIBOR based on a
one-month interest period, plus 1.00%). A commitment fee of 0.50% per annum is
payable under our Revolving Credit Facility on the actual daily unused portions
of the Revolving Credit Facility. The Revolving Credit Facility also contains
LIBOR replacement provisions in the event LIBOR becomes unavailable during the
term of this facility.

The Revolving Credit Facility requires us to comply with certain restrictive
covenants, including but not limited to covenants relating to limitations on
indebtedness, liens, investments, loans and advances, restricted payments and
restrictive agreements, mergers, consolidations, sale of assets and
acquisitions, sale and leaseback transactions and affiliate transactions.

In addition, the Revolving Credit Facility contains financial covenants that
require us to (i) maintain specified levels of direct policy premiums (as
defined in the Revolving Credit Facility) for each fiscal quarter, (ii) maintain
a minimum liquidity (as defined in the Revolving Credit Facility) of $150
million (or $200 million if the liquidity decreased by a specified amount over
the prior six month period) as of the last day of each quarter, and (iii) not
exceed a maximum combined ratio (as defined in the Revolving Credit Facility) of
108% for fiscal year 2022 and 102% for fiscal year 2023, in each case, as of the
last day of each quarter. As of December 31, 2022, we were in compliance with
all financial covenants under the Revolving Credit Facility.

Investments

We generally invest cash of our health insurance subsidiaries in U.S. treasury
and agency securities. We primarily invest cash of the Company in
investment-grade, marketable debt securities to improve our overall investment
return. These investments are purchased pursuant to board-approved investment
policies that reflect our obligations under our credit agreement and conform to
applicable state laws and regulations.

Our investment policies are designed to provide liquidity, preserve capital, and
maximize total return on invested assets, all in a manner consistent with state
requirements that prescribe the types of instruments in which our subsidiaries
may invest. These investment policies require that our investments have final
maturities of a maximum of three years from the settlement date. Professional
portfolio managers operating under documented guidelines manage our investments
and a portion of our cash equivalents. Our portfolio managers must obtain our
prior approval before selling investments in a loss position.

Our restricted investments are invested principally in cash and cash equivalents
and U.S. treasury securities; we have the ability to hold such restricted
investments until maturity. The Company maintains cash and cash equivalents and
investments on deposit or pledged to various state agencies as a condition for
licensure. We classify our restricted deposits as long-term given the
requirement to maintain such assets on deposit with regulators.

Summary of Cash Flows
Our cash flows used in operations may differ substantially from our net loss due
to non-cash charges or due to changes in balance sheet accounts.

The timing of our cash flows from operating activities can also vary among
periods due to the timing of payments made or received. Some of our payments and
receipts, including loss settlements and subsequent reinsurance receipts, can be
significant. Therefore, their timing can influence cash flows from operating
activities in any given period. The potential for a large claim under an
insurance or reinsurance contract means that our health insurance subsidiaries
may need to make substantial payments within relatively short periods of time,
which would have a negative impact on our operating cash flows.





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The following table shows summary cash flows information for the periods
indicated:

                                                                      Year Ended December 31,
                                                            2022               2021               Change
                                                                          (in thousands)
Net cash provided by (used in) operating activities     $ 380,349          $ (181,745)         $ 562,094
Net cash used in investing activities                    (226,519)           (774,515)           547,996
Net cash provided by financing activities                 301,110           1,238,712           (937,602)
Net increase in cash and cash equivalents and
restricted cash equivalents                             $ 454,940          

$ 282,452 $ 172,488

Operating Activities

Net cash provided by (used in) operating activities increased $562.1 million to
$380.3 million for the year ended December 31, 2022, compared to $181.7 million
used in operating activities for the year ended December 31, 2021, primarily due
to membership growth, which resulted in increased premiums and accounts
receivable and reinsurance recoverable under our quota share reinsurance
program. Our risk adjustment transfer payable also increased as a result of
membership growth and the health status of our members, who continue to have
lower than average risk scores compared to the health status of other
participants in ACA plans.

Investing Activities

Net cash used in investing activities decreased $548.0 million to $226.5 million
for the year ended December 31, 2022, compared to $774.5 million for the year
ended December 31, 2021. The decrease was primarily due to lower purchases of
investments in 2022 compared to 2021.

Financing Activities

Net cash provided by financing activities decreased $937.6 million to $301.1
million for the year ended December 31, 2022, compared to $1.2 billion for the
year ended December 31, 2021. The decrease was primarily due to net proceeds
received from the sale of common stock during our IPO in March 2021, slightly
offset by net proceeds received from the issuance of convertible notes in
February 2022.


Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that affect the
reported amounts of revenues, expenses, assets, and liabilities and disclosure
of contingent assets and liabilities in our financial statements. We regularly
assess these estimates; however, actual amounts could differ from those
estimates. The most significant items involving management's estimates include
estimates of benefits payable, reinsurance, premium deficiency reserve, risk
adjustment, stock-based compensation, and income taxes. The impact of changes in
estimates is recorded in the period in which they become known.

An accounting policy is considered to be critical if the nature of the estimates
or assumptions is material due to the levels of subjectivity and judgment
necessary to account for highly uncertain matters or the susceptibility of such
matters to change, and the effect of the estimates and assumptions on financial
condition, or operating performance. The accounting policies that reflect a
significant level of estimation and that are most likely to have a material
impact on our reported financial results are described below. Other significant
accounting policies such as reinsurance, premium deficiency reserve, risk
adjustment, stock-based compensation, and income taxes do not involve
significant levels of uncertainty and are disclosed in Item 8, Financial
Statements and Supplementary Data in this Annual Report on Form 10-K.

Benefits Payable
Benefits payable includes estimates of our obligations for health care services
that have been rendered on behalf of members, but for which claims have either
not yet been received or processed. Depending on the health care professional
and type of service, the typical billing lag for services can be up to 90 days
from the date of service. Approximately 90% of claims related to health care
services are known and settled within 90 days from the date of service and
substantially all within 12 months from the accepted claims submission.


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In each reporting period, our operating results include the effects of more
completely developed benefits payable estimates associated with previously
reported periods. If the revised estimate of prior period health care claims is
less than the previous estimate, we will decrease reported health care claims in
the current period (favorable development). If the revised estimate of prior
period health care claims is more than the previous estimate, we will increase
reported health care costs in the current period (unfavorable development).
Health care costs in the years ended December 31, 2022 and December 31, 2021
included unfavorable health care claim development related to prior years of
$1.3 million (net of reinsurance) and favorable development of $16.3 million
(net of reinsurance), respectively.

In developing our benefits payable estimates, we apply different estimation
methods depending on the month for which incurred claims are being estimated.
For example, in recent months, we estimate claim costs incurred by applying
assumed medical cost trends to the PMPM medical costs incurred in prior months
for which more complete claim data is available, supplemented by a review of
near-term completion factors. Additional consideration is also given to settled
claims that may reopen as a result of provider disputes.

Completion Factors
A completion factor is an actuarial estimate, based upon historical experience
and analysis of current trends, of the percentage of incurred claims during a
given period that have been adjudicated by us at the date of estimation.
Completion factors are the most significant factors we use in developing our
benefits payable estimates. For periods prior to the two most recent months,
completion factors include judgments related to claim submissions such as the
time from date of service to claim receipt, claim levels, and processing cycles,
as well as other factors. If actual claims submission rates from providers
(which can be influenced by a number of factors, including provider mix and
electronic versus manual submissions) or our claim processing patterns are
different than estimated, our reserve estimates may be significantly impacted.
For the most recent two months, the completion factors are informed primarily
from forecasted per member per month claims projections developed from our
historical experience and adjusted by emerging experience data in the preceding
months which may include adjustments for known changes in estimates of recent
hospital and drug utilization data, provider contracting changes, changes in
benefit levels, changes in member cost sharing, changes in medical management
processes, product mix, and workday seasonality.

The following table illustrates the sensitivity of the estimated potential
impact on our benefits payable estimates gross of reinsurance, for those periods
as of December 31, 2022 to an increase (decrease) in the underlying completion
factors:

Changes in Estimates     Increase (Decrease) in Benefits Payable (in thousands)
(1.00)%                 $                                                83,319
(0.75)%                                                                  62,332
(0.50)%                                                                  41,450
(0.25)%                                                                  20,673
0.25%                                                                   (20,570)
0.50%                                                                   (40,918)
0.75%                                                                   (60,487)
1.00%                                                                   (78,832)



Management believes the amount of benefits payable is reasonable and adequate to
cover our liability for unpaid claims as of December 31, 2022; however, actual
claim payments may differ from established estimates as discussed above.
Assuming a hypothetical 1% difference between our December 31, 2022 estimates of
benefits payable and actual benefits payable, excluding any potential offsetting
impact from premium rebates, net earnings for the year ended December 31, 2022
would have increased by approximately $83.3 million or decreased by
approximately $78.8 million.

For more detail related to our medical claims expenses, see Note 2 - Summary of
Significant Accounting Policies to our consolidated financial statements
included elsewhere in this Annual Report on Form 10-K.

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Risk Adjustment
The risk adjustment programs in the Individual, Small Group, and Medicare
Advantage markets we serve are designed to mitigate the potential impact of
adverse selection and provide stability for health insurers.

The Company estimates the receivable or payable under the risk adjustment
programs based on its estimated risk score compared to the state average risk
score. The Company may record a receivable or payable as an adjustment to
premium revenues to reflect the year-to-date impact of the risk adjustment based
on its best estimate. The Company refines its estimate as new information
becomes available.

Under the Individual and Small Group risk adjustment program, each plan is
assigned a risk score based upon demographic information and current year claims
information related to its members. Plans with lower than average risk scores
will generally pay into the pool, while plans with higher than average risk
scores will generally receive distributions.

In the Medicare Advantage risk adjustment program, each member is assigned a
risk score that reflects the member's predicted health costs compared to an
average member. Plans receive higher payments for members with higher risk
scores than members with lower risk scores.