OSCAR HEALTH, INC. – 10-Q – Management’s Discussion and Analysis of Financial Condition and Results of Operations. – InsuranceNewsNet

You should read the following discussion and analysis of our financial condition
and results of operations together with our consolidated financial statements
and related notes included elsewhere in this Quarterly Report on Form 10-Q, as
well as our audited consolidated financial statements and related notes as
disclosed in our Annual Report on Form 10-K. This discussion contains
forward-looking statements based upon current plans, expectations and beliefs
involving 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 in Part II, Item 1A "Risk Factors" of this
Quarterly Report on Form 10-Q.

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. We have also partnered with Cigna through the Cigna + Oscar
("C+O") partnership, which unites Oscar's highly-differentiated member
experience with Cigna's broad provider networks, to exclusively serve the Small
Group employer market. Through +Oscar, we leverage our technology platform to
sell services to providers and payers to directly enable their shift to
value-based care and help our clients drive improved efficiency, growth and
superior engagement with their members and patients.

Recent Developments, Trends and Other Factors Impacting Performance

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. Reinsurance recoveries are recorded as a reduction
to claims incurred, net.

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.

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. For the
three months ended March 31, 2022 and 2021, approximately 29% and 43%,
respectively, of our premiums were ceded under quota share reinsurance
agreements accounted for under reinsurance accounting. For the three months
ended March 31, 2022, approximately 19% of our premiums covered under quota
share reinsurance arrangements were accounted for under deposit accounting.

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, the
reinsurer is paid to cover claims related losses over a $750,000 attachment
point.

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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.

Seasonality

Our business is generally affected by the seasonal patterns of our member
enrollment and medical expenses, health plan mix shift and, to a lesser extent,
marketing spend in advance of an Open Enrollment Period or Annual Election
Period. Direct policy premiums earned are historically highest in the first
quarter, primarily due to the annual enrollment cycles and the enrollment of our
members. Medical expenses are sensitive to the mix shift of the five "metal"
health plan categories offered on the ACA, which differ based on the size of the
monthly premium and the level of sharing of medical costs between us and our
members. Medical expenses are historically highest towards the second half of
the year due to a number of factors discussed below.

Members

Our membership is measured as of a particular point in time and is concentrated
in the Individual market. Membership typically declines throughout the year due
to individuals disenrolling before they become effectuated members and the
removal of members for non-payment or in accordance with our fraud, waste and
abuse, and other operating policies. For Individual and Medicare Advantage
products, the majority of our member growth occurs in connection with the annual
Open Enrollment Period and Annual Election Period. Individual plan membership is
historically at its highest at the beginning of the year, while Medicare
Advantage plan membership typically increases throughout the year. For Small
Group products, a large portion of membership is acquired between December 1 and
January 1, with the remaining members acquired throughout the balance of the
year.

Claims Incurred

Our medical expenses are impacted by seasonal effects of medical costs such as
the utilization of deductibles and out-of-pocket maximums over the course of the
policy year, which generally shifts more costs to us in the second half of the
year as we pay a higher proportion of claims. Our medical costs can also vary
according to the number of days and holidays in a given period. In 2022, due to
the mix shift to members with higher-premium/lower-deductible Silver plans, the
medical claims pattern has shifted, resulting in steadier medical costs
throughout the year rather than increasing medical costs as the year progresses.

Impact of COVID-19

The COVID-19 pandemic, including its effect on the macroeconomic environment,
and the response of our local, state, and federal governments to contain and
manage the virus, continues to have an impact on our business. In addition,
continued COVID-19 care, testing and vaccine administration, and the risk of new
COVID-19 variants (which may be more contagious or severe, or less responsive to
treatment or vaccines) may also result in increased future medical costs and
drive changes in the way members utilize healthcare. Furthermore, the public
health emergency extension for COVID-19 expires in July 2022 with Medicaid
redeterminations expected to begin in August 2022. We will continue to monitor
announcements related to the public health emergency and redeterminations and
the potential impact on our membership and underwriting margin.

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

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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 vaccination rates stall, 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.

Overall measures to contain the COVID-19 outbreak may remain in place for a
significant period of time, as certain geographic regions have experienced a
resurgence of COVID-19 infections and new variants of COVID-19 that appear to be
more transmissible have emerged. Although the number of people who have been
vaccinated has been increasing, the duration and severity of this pandemic is
unknown and the extent of the business disruption and financial impact depends
on factors beyond our knowledge and control.

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

                                                 Three Months Ended
                                        March 31, 2022       March 31, 2021
                                                 (in thousands)
Premiums before ceded reinsurance      $     1,315,064      $       610,099
Reinsurance premiums ceded                    (359,663)            (241,562)
Premiums earned                        $       955,401      $       368,537
Total revenue                          $       972,765      $       369,388
Total operating expenses               $     1,041,294      $       433,429
Net loss                               $       (77,320)     $       (88,881)

                  Key Operating and Non-GAAP Financial Metrics

                                         As of March 31,
Membership by Offering               2022                  2021
Individual and Small Group       1,032,768               535,001
Medicare Advantage                   4,607                 3,628
Cigna + Oscar (1)                   36,220                 3,591
Total                            1,073,595               542,220

(1) Represents total membership for our co-branded partnership with Cigna.

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                                                                            Three Months Ended
                                                                  March 31, 2022          March 31, 2021
Direct and Assumed Policy Premiums (in thousands)                $    1,681,211          $      823,225
Medical Loss Ratio                                                         77.4  %                 74.4  %
InsuranceCo Administrative Expense Ratio                                   19.8  %                 19.8  %
InsuranceCo Combined Ratio                                                 97.2  %                 94.2  %
Adjusted Administrative Expense Ratio                                      23.8  %                 26.0  %
Adjusted EBITDA(1) (in thousands)                                $      

(37,040) $ (27,768)

(1) Adjusted EBITDA is a non-GAAP measure. See "Adjusted EBITDA" below for a
reconciliation to net loss, the most directly comparable 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 98% to 1,073,595 as of March 31, 2022, from 542,220 as of
March 31, 2021. The increase in membership is driven largely by growth in the
Individual market, as well as increases due to serving new C+O members. Our
growth also reflects strong retention and growth in core Individual markets
during open enrollment, including in Florida, Texas and Georgia, despite having
the lowest cost plan in only 8% of our markets.

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
arrangements 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 for the
three months ended March 31, 2022 as compared to the three months ended March
31, 2021, driven primarily by higher membership and mix shift to higher premium
Silver plans.

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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.

                                                                           

Three Months Ended

                                                                 March 31, 

2022 March 31, 2021

                                                                             (in thousands)
Direct claims incurred before ceded reinsurance (1)             $    1,010,035          $      457,219
Assumed reinsurance claims                                              24,242                   1,777
Excess of loss ceded claims (2)                                        (11,433)                 (4,736)
State reinsurance (3)                                                  (11,329)                 (2,343)
Net claims before ceded quota share reinsurance (A)             $    

1,011,515 $ 451,917

Premiums before ceded reinsurance (4)                           $    

1,315,064 $ 610,099

Excess of loss reinsurance premiums (5)                                 (8,128)                 (2,935)
Net premiums before ceded quota share reinsurance (B)           $    1,306,936          $      607,164
Medical Loss Ratio (A divided by B)                                       77.4  %                 74.4  %


(1)See Note 4 - Reinsurance to our consolidated financial statements included
elsewhere in this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q for an explanation of
premiums before ceded reinsurance.

(5)Represents excess of loss insurance premiums paid.

MLR increased for the three months ended March 31, 2022 as compared to the three
months ended March 31, 2021. The increase was primarily driven by a mix shift
towards Silver plans and change in prior period development, which was partially
offset by favorable net impact of COVID-19.

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 impact of the Company's quota share arrangements is
excluded from the numerator and denominator in the calculation below. Below is a
calculation of our InsuranceCo Administrative Expense Ratio for the periods
indicated.

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                                                                            Three Months Ended
                                                                  March 31, 2022          March 31, 2021
                                                                              (in thousands)
Other insurance costs                                            $      165,402          $       79,837
Impact of quota share reinsurance (1)                                    36,479                  19,306

Stock-based compensation expense                                        (13,078)                 (9,695)

Federal and state assessment of health insurance subsidiaries            70,211                  30,598

Health insurance subsidiary adjusted administrative expenses (A) $ 259,014 $ 120,046

Premiums before quota share reinsurance (2)                      $    

1,315,064 $ 610,099

Excess of loss reinsurance premiums                                      (8,128)                 (2,935)
Net premiums before quota share reinsurance (B)                  $    1,306,936          $      607,164
Insurance Co Administrative Expense Ratio (A divided by B)                 19.8  %                 19.8  %


(1)Includes ceding commissions received from reinsurers, net of the impact of
deposit accounting of $(1,832) for the three months ended March 31, 2022.
(2)See Note 3 - Revenue Recognition to our consolidated financial statements
included elsewhere in this Quarterly Report on Form 10-Q for an explanation of
premiums before ceded reinsurance.

The InsuranceCo Administrative Expense Ratio remained flat for the three months
ended March 31, 2022 as compared to the three months ended March 31, 2021, as
higher distribution expenses were offset by operating leverage and variable cost
efficiencies.

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 current
overall performance of our insurance business for activities that can be
compared to peers. The InsuranceCo Combined Ratio increased for the three months
ended March 31, 2022 as compared to the three months ended March 31, 2021. The
increase was attributable to the same factors that drove our 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 (or "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 (or "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. We believe Adjusted
Administrative Expenses is a useful measure of our administrative expenses, as
it excludes 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.

                                                                                  Three Months Ended
                                                                       

March 31, 2022 March 31, 2021

                                                                                    (in thousands)
Total Operating Expenses                                               $    1,041,294          $      433,429
Claims incurred, net                                                         (734,566)               (268,048)
Premium deficiency reserve release                                              3,205                   9,543
Impact of quota share reinsurance (1)                                          36,479                  19,306

Total Administrative Expenses                                          $      346,412          $      194,230
Stock-based compensation expense/warrant expense                              (27,690)                (31,971)
Depreciation and amortization                                                  (3,799)                 (3,403)
Other non-recurring items (2)                                                       -                    (898)
Adjusted Administrative Expenses (A)                                   $      314,923          $      157,958
Total Revenue                                                          $      972,765          $      369,388
Reinsurance premiums ceded                                                    359,663                 241,562
Excess of loss reinsurance premiums                                            (8,128)                 (2,935)

Adjusted Total Revenue (B)                                             $    1,324,300          $      608,015
Adjusted Administrative Expense Ratio (A divided by B)                           23.8  %                 26.0  %


(1)Includes ceding commissions received from reinsurers, net of the impact of
deposit accounting of $(1,832) for the three months ended March 31, 2022.
(2)Represents approximately $0.9 million of non-recurring expenses incurred in
connection with the Company's initial public offering ("IPO") during the three
months ended March 31, 2021.

The Adjusted Administrative Expense Ratio improved for the three months ended
March 31, 2022 as compared to the three months ended March 31, 2021, primarily
due to better operating leverage and scale efficiencies from our full stack
technology platform.


Adjusted EBITDA

Adjusted EBITDA is defined as net loss for the Company and its consolidated
subsidiaries before interest expense, income tax (benefit) expense, 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 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.

                                                          Three Months Ended
                                                 March 31, 2022       March 31, 2021
                                                            (in thousands)
Net loss                                        $       (77,320)     $       (88,881)
Interest expense                                          4,221                3,697
Other expenses                                            3,053                    -
Income tax expense                                        1,517                  965
Depreciation and amortization                             3,799                3,403
Stock-based compensation/warrant expense(1)              27,690               31,972
Other non-recurring items(2)                                  -               21,076
Adjusted EBITDA                                 $       (37,040)     $       (27,768)

(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 the Company's Term Loan (refer to Note 10 - Long-Term Debt) and
approximately $0.9 million of non-recurring expenses incurred in connection with
the IPO.

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 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 (Loss) and Other Revenue

Investment income 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, 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 without consideration of investment income.

Income Tax Provision

Income tax provision 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

Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021

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


                                                           Three Months Ended March 31,
                                                 2022            2021         $ Change       % Change
                                                                  (in thousands)
Revenue
Premiums before ceded reinsurance            $ 1,315,064      $ 610,099      $ 704,965          116  %
Reinsurance premiums ceded                      (359,663)      (241,562)      (118,101)          49  %
Premiums earned                                  955,401        368,537        586,864          159  %
Administrative services revenue                   18,493            341         18,152         *NM
Investment income (loss) and other revenue        (1,129)           510         (1,639)        (321) %
Total revenue                                    972,765        369,388        603,377          163  %
Operating Expenses
Claims incurred, net                             734,566        268,048        466,518          174  %
Other insurance costs                            165,402         79,837         85,565          107  %
General and administrative expenses               74,664         64,572         10,092           16  %
Federal and state assessments                     69,867         30,515     

39,352 129 %

Premium deficiency reserve release                (3,205)        (9,543)         6,338          (66) %
Total operating expenses                       1,041,294        433,429        607,865          140  %
Loss from operations                             (68,529)       (64,041)        (4,488)           7  %
Interest expense                                   4,221          3,697            524         14%
Other expenses                                     3,053              -          3,053         *NM
Loss on extinguishment of debt                         -         20,178        (20,178)        *NM
Loss before income taxes                         (75,803)       (87,916)        12,113          (14) %
Income tax provision                               1,517            965            552           57  %
Net loss                                     $   (77,320)     $ (88,881)     $  11,561          (13) %


*NM - not meaningful

Premiums Before Ceded Reinsurance

Premiums before ceded reinsurance increased $705.0 million, or 116%, to $1.3
billion for the three months ended March 31, 2022, from $610.1 million for the
three months ended March 31, 2021, which 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. Oscar's growth also reflects strong
retention and growth in core markets during open enrollment, including in
Florida, Texas and Georgia, despite having the lowest cost plan in only 5% of
its markets.

Reinsurance Premiums Ceded

Reinsurance premiums ceded increased $118.1 million, or 49%, to $359.7 million
for the three months ended March 31, 2022, from $241.6 million for the three
months ended March 31, 2021. The increase is driven by the growth in premiums
before ceded reinsurance discussed above.

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Administrative Services Revenue

Administrative services revenue increased $18.2 million to $18.5 million for the
three months ended March 31, 2022, from $0.3 million for the three months ended
March 31, 2021. This increase was driven by the launch of our newest +Oscar
client, in January 2022, Health First Health Plans, which is utilizing our
technology and services to support their Individual and Medicare Advantage
members.

Investment Income (Loss) and Other Revenue

Other revenue decreased to $1.1 million loss for the three months ended March
31, 2022, from $0.5 million income for the three months ended March 31, 2021,
primarily due to changes in market condition and interest rates.

Claims Incurred, Net

Claims incurred, net, increased $466.5 million, or 174%, to $734.6 million for
the three months ended March 31, 2022, from $268.0 million for the three months
ended March 31, 2021. The increase was primarily volume-driven due to the growth
in membership, as well as lower utilization in 2021 due to the COVID-19
pandemic, partially offset by favorable prior period development.

Other Insurance Costs

Other insurance costs increased $85.6 million, or 107%, to $165.4 million for
the three months ended March 31, 2022, from $79.8 million for the three months
March 31, 2021. The increase was primarily attributable to higher broker
commissions and user exchange fees, which were driven by the increase in
membership.

General and Administrative Expenses

General and administrative expenses increased $10.1 million, or 16%, to $74.7
million for the three months ended March 31, 2022, from $64.6 million for the
three months ended March 31, 2021. The increase was primarily attributable to
higher employee-related costs.

Federal and State Assessments

Federal and state assessments increased $39.4 million, or 129%, to $69.9 million
for the three months ended March 31, 2022, from $30.5 million for the three
months ended March 31, 2021, which was primarily due to higher user exchange
fees and premium taxes as a result of membership growth.

Premium Deficiency Reserve Release

Premium deficiency reserve release decreased $6.3 million for the three months
ended March 31, 2022, from $9.5 million for the three months ended March 31,
2021, due to the lower premium deficiency reserve established at the end of 2021
as compared to the reserve established at the end of 2020.

Income Tax Provision

Our effective tax rate for the three months ended March 31, 2022 and March 31,
2021 was approximately (2.00)% and (1.12)%, 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 March 31, 2022 and
December 31, 2021, total cash and cash equivalents and investments held by our
health insurance subsidiaries was $2.7 billion and $1.8 billion, respectively,
of which $17.5 million and $17.0 million,

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respectively, was on deposit with regulators as required for statutory licensing
purposes and are classified as restricted deposits on the balance sheet.

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
$688.7 million and $474.8 million at March 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 Holdco to maintain minimum levels. The
health insurance subsidiaries may be subject to additional capital and surplus
requirements in the future, which may require us to incur additional
indebtedness, sell capital stock, or access other sources of funding in order to
fund such requirements. Any such funding may not be available on favorable
terms, or at all. Our health insurance subsidiaries also utilize quota share
reinsurance arrangements to reduce our minimum capital and surplus requirements,
which enables us to efficiently deploy capital to fund our growth. During the
three months ended March 31, 2022 and the year ended December 31, 2021, Holdco
made $216.0 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 $450.7 million and $147.9 million of
additional capital as of March 31, 2022 and December 31, 2021, respectively,
which Holdco 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, see Part I, Item 1A "Risk
Factors-Risks Related to Our Business-If state regulators do not approve
payments of dividends and distributions by our subsidiaries to us, we may not
have sufficient funds to implement our business strategy," in our Annual Report
on Form 10-K

The majority of the assets held by Holdco are in the form of cash and cash
equivalents and investments. As of March 31, 2022 and December 31, 2021, total
cash and cash equivalents and investments held by Holdco was $735.3 million and
$738.6 million, respectively, of which $9.7 million and $11.0 million was
restricted for 2022 and 2021, respectively. 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, in 2022, we expect to make a payment through our
health insurance subsidiaries of greater than $700 million into the risk
adjustment program for the 2021 policy year. Therefore, their timing can
influence cash flows from operating activities in any given period which would
have a negative impact on our operating cash flows.

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. See Note 10 -
Long-Term Debt for additional information.

Revolving Credit Facility

On February 21, 2021, we entered into a senior secured credit agreement (the
"Revolving Credit Facility"), with Wells Fargo Bank, National Association as
administrative agent, and certain other lenders for a revolving loan credit
facility, or 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), a wholly owned
subsidiary 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

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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 March 31, 2022, there were no outstanding borrowings under the Revolving
Credit Facility.

Term Loan Facility

On October 30, 2020, we entered into the term loan credit agreement with HPS
Investment Partners, LLC, as administrative agent, and certain other lenders for
the term loan facility("Term Loan Facility") in the aggregate principal amount
of $150 million. In connection with the IPO, we repaid in full outstanding
borrowings, including fees and expenses, under our Term Loan Facility, including
a prepayment premium equal to 6.50% of the principal amount of the Term Loan
Facility plus accrued and unpaid interest through the six-month anniversary of
the closing date of the Term Loan Facility. For additional information regarding
the Term Loan Facility, see Note 10 - Long-Term Debt of our consolidated
financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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% ("Adjusted 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)
the Adjusted 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 maintain specified levels of direct policy premiums and liquidity
and require compliance with a maximum combined ratio.

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 which 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 where the loss position of those
investments exceeds certain levels.

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.
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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.

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

                                                                    Three Months Ended March 31,
                                                            2022                2021               Change
                                                                           (in thousands)
Net cash provided by operating activities               $ 562,849          $   317,691          $  245,158
Net cash provided by (used in) investing activities       102,811              (34,280)            137,091
Net cash provided by financing activities                 298,775            1,211,550            (912,775)
Net increase in cash and cash equivalents and
restricted cash equivalents                             $ 964,435          

$ 1,494,961 $ (530,526)

Operating Activities

Net cash provided by operating activities increased $245.2 million to $562.8
million for the three months ended March 31, 2022, compared to $317.7 million
provided by operating activities for the three months ended March 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 provided by investing activities increased to $102.8 million for the
three months ended March 31, 2022, compared to $34.3 million net cash used in
investing activities for the three months ended March 31, 2021, an increase of
$137.1 million. The increase was primarily due to the sale and maturity of
securities within our investment portfolio.

Financing Activities

Net cash provided by financing activities decreased $912.8 million to $298.8
million for the three months ended March 31, 2022, compared to $1.2 billion for
the three months ended March 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.