halfdome

Something that seems to have not been spotted by FinX yet in the $OSCR bull case, 2 days ago Dr Oz at the CMS announced fees for carriers in the ACA market were reducing from 2.5% to 1.9% for Federal Marketplaces (FFE) and from 2.0% to 1.5% for State marketplaces (SBEs) for 2027? Why does this matter you might say, it's tiny! Here is why it does: 1) This is effectively a reversal back to 2025 pricing, CMS put the fees up for 2026 because they expected 30% reduction in market place size and needed to maintain income. So evidently, this bear case is now gone i.e. ACA shrinkage is minimal and we're hearing it indirectly from the horse's mouth 2) The fee is based on the gross premiums, that's before risk adjustment so disproportionally benefits Oscar who have a high risk adjustment of 20%. As an example a person paying $8.0k a year for coverage would appear on the revenue line for Oscar as $6.4k then incur a FFE CMS market place fee of $200 which is 3.125% and makes up that amount in the SG&A costs. This effect is now $152 so 2.375% falling into SG&A, this a 75 bps improvement on SG&A from the stroke of a pen or roughly one $ in twenty lower SG&A costs 3) "That's still immaterial" some will say, however a gold standard for ACA insurers is 5% margins, that means 15% more profit going from 5% margins to 5.75% margins and even more at the lower end when profits are only 2% or so of revenue 4) Oscar predominantly operate in the FFE markets, the SBEs are rates are down as well albeit marginally less, it will effectively have the same impact on the sub 10% of members Oscar hold in SBEs Mark B said this in the latest earnings call "taxes and fees are pretty much fixed for us based on the level of membership. It's 9%-10%. We're looking at the variable piece that we can manage versus that fixed piece, which we literally is sort of a tax for being in the game." so that 9% to 10% range, just dropped to 8% to 9% announcement in the link for the detail orientated folks cms.gov/newsroom/press-relea…