[GUEST ACCESS MODE: Data is scrambled or limited to provide examples. Make requests using your API key to unlock full data. Check https://lunarcrush.ai/auth for authentication information.]  Wall St Engine [@wallstengine](/creator/twitter/wallstengine) on x 71.9K followers Created: 2025-07-11 10:11:38 UTC Wells Fargo Downgrades $OSCR to Underweight from Equal Weight, Lowers PT to $XX from $XX Analyst comments: "Evidence of rising acuity continues to build. Exchange commentary from nearly all public plans in 1Q25 was concerning, with medical loss ratios (MLRs), acuity, and non-payment generally higher than expected. Our analysis of statutory filings for 1Q25 shows MLRs for non-public plans also pressured and potentially understated due to optimistic risk adjustment accruals. Elevance discussed further pressure in May. In July, Centene withdrew guidance primarily due to exchanges, and Molina Healthcare lowered guidance with higher exchange costs a driver. Centene disclosures indicate that guidance withdrawal was driven by an exchange revenue shortfall from worse-than-expected risk adjustment. The company’s first look at Wakely data showed lower-than-expected market growth and significantly higher morbidity than assumed, with mis-estimated market risk scores by ~700bps. We are skeptical that Centene would have assumed risk scores were down year-over-year, suggesting market risk scores are up meaningfully. Risk adjustment likely over-complicates things. In simple terms, any year-over-year change in risk adjustment position serves to bring each plan back to the change in market risk scores/acuity. Therefore, we are focused on whether plans in 2025 have priced for cost trend plus a meaningful increase in market acuity plus margin objectives. Put simply, pricing for most plans does not appear adequate to produce stable margins this year. For 2025, Oscar Health’s pricing was ~6% on average. The company described its approach as pricing for trend and allowing cost-of-care initiatives to support improving MLR. If we now assume ~6% pricing, ~5% cost trend, ~7% increase in market acuity, and ~2% benefit from cost-of-care initiatives, we would arrive at MLR up 400bps year-over-year versus guidance of down 50bps. This is our new estimate for 2025. We also lower margin estimates for 2026 and 2027 but by less than in 2025. We downgrade Oscar Health to Underweight from Equal Weight and lower our price target to $XX from $XX. With a very uncertain fundamental backdrop in 2025 and additional layers of complexity in 2026, we consider a wide range of potential scenarios for earnings. Our price target is based on ~9x our weighted average 2027 scenario EPS." Analyst: Stephen Baxter XXXXXXX engagements  **Related Topics** [oscr](/topic/oscr) [$wfc](/topic/$wfc) [stocks financial services](/topic/stocks-financial-services) [stocks banks](/topic/stocks-banks) [$oscr](/topic/$oscr) [Post Link](https://x.com/wallstengine/status/1943614149902356658)
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Wall St Engine @wallstengine on x 71.9K followers
Created: 2025-07-11 10:11:38 UTC
Wells Fargo Downgrades $OSCR to Underweight from Equal Weight, Lowers PT to $XX from $XX
Analyst comments: "Evidence of rising acuity continues to build. Exchange commentary from nearly all public plans in 1Q25 was concerning, with medical loss ratios (MLRs), acuity, and non-payment generally higher than expected. Our analysis of statutory filings for 1Q25 shows MLRs for non-public plans also pressured and potentially understated due to optimistic risk adjustment accruals. Elevance discussed further pressure in May. In July, Centene withdrew guidance primarily due to exchanges, and Molina Healthcare lowered guidance with higher exchange costs a driver.
Centene disclosures indicate that guidance withdrawal was driven by an exchange revenue shortfall from worse-than-expected risk adjustment. The company’s first look at Wakely data showed lower-than-expected market growth and significantly higher morbidity than assumed, with mis-estimated market risk scores by ~700bps. We are skeptical that Centene would have assumed risk scores were down year-over-year, suggesting market risk scores are up meaningfully.
Risk adjustment likely over-complicates things. In simple terms, any year-over-year change in risk adjustment position serves to bring each plan back to the change in market risk scores/acuity. Therefore, we are focused on whether plans in 2025 have priced for cost trend plus a meaningful increase in market acuity plus margin objectives. Put simply, pricing for most plans does not appear adequate to produce stable margins this year.
For 2025, Oscar Health’s pricing was ~6% on average. The company described its approach as pricing for trend and allowing cost-of-care initiatives to support improving MLR. If we now assume ~6% pricing, ~5% cost trend, ~7% increase in market acuity, and ~2% benefit from cost-of-care initiatives, we would arrive at MLR up 400bps year-over-year versus guidance of down 50bps. This is our new estimate for 2025. We also lower margin estimates for 2026 and 2027 but by less than in 2025.
We downgrade Oscar Health to Underweight from Equal Weight and lower our price target to $XX from $XX. With a very uncertain fundamental backdrop in 2025 and additional layers of complexity in 2026, we consider a wide range of potential scenarios for earnings. Our price target is based on ~9x our weighted average 2027 scenario EPS."
Analyst: Stephen Baxter
XXXXXXX engagements
Related Topics oscr $wfc stocks financial services stocks banks $oscr