Oscar Health Faces Headwinds as CMS Proposes Tighter Medicare Advantage Rules

NEW YORK – The Biden administration's latest proposal for Medicare Advantage payments is setting the stage for a tougher operating environment for health insurers. The Centers for Medicare & Medicaid Services (CMS) announced a preliminary payment rate increase for 2025 that is notably lower than what many analysts projected, alongside new rules aimed at curbing what it sees as excessive risk-coding practices.

For Oscar Health, a company that has staked its growth on technology and virtual care within the Medicare Advantage (MA) market, the changes strike at the core of its business model. The proposal directly impacts how plans are reimbursed and how they use patient data to document health status—a process known as risk adjustment that is critical for revenue.

"This isn't just a minor rate adjustment; it's a signal that the era of宽松 risk coding is over," said Michael Torres, a healthcare policy analyst at Bernstein Research. "Plans that built their strategy on aggressive data capture and coding for higher reimbursements will need to pivot. For Oscar, which leverages its tech platform for precisely this, the margin pressure could be significant."

The news comes amid broader concerns over rising medical costs, which are already pressuring insurer profits. The combination creates a perfect storm for MA-focused insurers, forcing them to scrutinize plan benefits, provider networks, and their operational efficiency.

Analysts suggest Oscar Health may need to recalibrate its virtual care offerings and back-end coding workflows if the rules are finalized as proposed. The company's ability to maintain membership growth and hit profitability targets will be closely watched in its upcoming earnings guidance.

Investor Takeaway: The CMS proposal, open for comment until early April, adds a layer of regulatory uncertainty for Oscar Health and its peers. Investors should monitor the company's response regarding its 2025 MA plan designs, cost trend management, and any potential revisions to its technology investment roadmap.

Community Voices

We asked a few investors for their take on the news:

• David Chen, Portfolio Manager at Hartford Funds: "This is a manageable hurdle for a tech-fluent insurer like Oscar. Their platform gives them agility to adapt coding and care management faster than legacy players. The long-term thesis on efficiency through technology remains intact."
• Rebecca Shaw, Retired Nurse & Individual Investor: "As someone on a Medicare Advantage plan, I'm glad CMS is looking closely at coding. It should be about patient care, not maximizing payments. If this leads to more sustainable plans and fairer premiums, it's a good move."
• Marcus Johnson, Financial Blogger at 'The Street Critique': "Here we go again. The government giveth, and the government taketh away. Oscar sold investors on a data-driven goldmine in MA, and now the rules are changing mid-game. This exposes the fundamental regulatory risk that's been glaringly ignored. The stock's recent run-up looks fragile."
• Priya Mehta, Healthcare VC Associate: "Short-term pain for long-term gain. This forces innovation in care delivery efficiency, not just payment optimization. Oscar's integrated tech stack is better positioned for that shift than insurers relying on third-party vendors."

This analysis is based on publicly available CMS documents and historical company filings. It is for informational purposes only and does not constitute financial advice. Always conduct your own research or consult with a qualified financial advisor before making investment decisions.