Prepared remarks
Good morning. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to Oscar Health's Second Quarter 2026 Earnings Conference Call. I will now turn the call over to Chris Potochar, Vice President of Treasury and Investor Relations.
Good morning, everyone. Thank you for joining us for our second quarter 2026 earnings call. Mark Bertolini, Oscar Health's Chief Executive Officer; and Scott Blackley, Oscar Health's Chief Financial Officer, will host this morning's call. This call can also be accessed through our Investor Relations website at ir.hioscar.com. Full details of our results and additional management commentary are available in our earnings release, which can be found on our Investor Relations website at ir.hioscar.com. Any remarks that Oscar makes about the future constitute forward-looking statements within the meaning of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in our Annual Report on Form 10-K for the period ended December 31, 2025, and the quarterly report on Form 10-Q for the period ended March 31, 2026, each as filed with the Securities and Exchange Commission and other filings with the SEC, including our quarterly report on Form 10-Q for the period ended June 30, 2026, to be filed with the SEC.
Such forward-looking statements are based on our current expectations as of today. Oscar anticipates that subsequent events and developments may cause estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. The call will also refer to certain non-GAAP measures. A reconciliation of these measures to the most directly comparable GAAP measures can be found in the second quarter earnings press release available on the company's Investor Relations website at ir.hioscar.com. We have not provided a quantitative reconciliation of estimated full year 2026 adjusted EBITDA as described on this call to GAAP net income because Oscar is unable without making unreasonable efforts to calculate certain reconciling items with confidence. With that, I will turn the call over to our CEO, Mark Bertolini.
Good morning. Thank you, Chris, and thank you all for joining us. Today, Oscar Health announced strong second quarter 2026 results with significant year-over-year improvement across all core metrics. Oscar delivered record profitability for the first half of 2026, generating $1.1 billion in earnings from operations and $1 billion in net income. In the second quarter, revenue grew 70% year-over-year to $4.9 billion. MLR improved 12 points to 79.2% year-over-year with utilization moderately favorable to our expectations. Our SG&A expense ratio improved 450 basis points to a record low of 14.2%, reflecting disciplined expense management, technology-driven efficiencies and continuing operating leverage. Earnings from operations increased by $619 million year-over-year to $389 million. Our performance demonstrates superior execution against the fundamentals of our strategy. Disciplined pricing, differentiated consumer products and a scalable technology platform work together to fuel individual market growth.
We are raising our full year 2026 outlook based on the strength of our operating performance and our model built for long-term profitable growth. Now I will share our view on trends in the individual market, then I'll dive into our business highlights. The individual market is vital to our nation's economy and was built for the labor market now taking shape. The market is expanding coverage for people outside of traditional employer plans, including a growing number of entrepreneurs, gig workers, part-time employees and early retirees. Over the past decade, the market drove down the uninsured rate and prevented billions in uncompensated care. Over the next decade, its role will only grow as people move between full-time jobs, contract work and retirement at twice the rate of prior generations. AI will accelerate that shift. Our nation's leaders should promote policies that put the next generation of American workers in charge of choosing their health care.
Oscar is leading the charge with portable coverage and experiences that meet the expectations of the people powering our economy. The future of American Healthcare depends on a durable individual market, and 2026 trends reinforce our conviction in its long-term strength. Total ACA membership stands at 19.2 million, down 12% year-over-year, tracking favorable to our pricing assumptions and reflecting continued consumer demand. Wakely's first claim-based report of 2026 market morbidity is also favorable to our expectations, suggesting potential upside to our outlook. We expect further market contraction and remain cautious with only 4 months of morbidity data, but we expect both trends to remain favorable to our pricing assumptions. Looking ahead to 2027, we anticipate a rational pricing environment with rates that reflect the effects of CMS' program integrity efforts. Now I will review our business highlights.
Oscar ended the second quarter with 2.96 million members, up 46% year-over-year. Membership reflects above-market open enrollment growth and solid retention. Our consumer products designed around clinical, lifestyle and cultural needs are driving higher member satisfaction, and we continue to launch features that help members find high-value care and manage costs. We are also building momentum in ICHRA with steady growth in demand from small businesses in the health care and professional services industries. Our technology continues to differentiate the member experience. This quarter, we piloted a radiology program with our Oswell Agent. Oswell uses our members' claims history and clinical interactions to initiate their next step for care. It confirms coverage, guides members to high-quality providers based on cost, location and availability and shows estimated savings from switching facilities.
One in four members choose Oswell's recommended site of care and save $75 on average per appointment. We will expand this capability to additional procedures using care standards from leading centers of excellence. AI is powering operations across benefits, billing, claims, clinical care and member support. Our claims platform delivers 98.7% first pass accuracy and processes most claims in under 48 hours. We are also deploying AI in medical economics programs to identify cost signals early and act before they become trends. Pharmacy is a clear example. Our models analyze pharmacy activity alongside utilization, provider, broker and member data to flag outliers. Root cause analysis identifies the drivers so our teams respond with precision. We expect these capabilities to generate tens of millions of dollars in annual savings. Oscar's technology is transforming the economics of the business.
The team is embedding intelligence into all core workflows across our platform, making it smarter and more efficient with every deployment. As membership grows, we can serve more members without adding headcount at the same rate. That scale fuels operating leverage, expands margins and bends the medical cost trend for us and for our members. In summary, Oscar delivered a strong second quarter and record profitability in the first half of 2026. The fundamentals of the business are strong. Our performance is favorable to plan, and our improved 2026 outlook reflects that momentum. We are entering the second half of the year from a position of strength with the technology, scale and operating discipline to deliver profitable growth. The ACA is the only health care market where private insurers compete directly for the consumer. Our job is to give consumers real choices, real price transparency and reward what they value.
When that happens, the competitive market does what it does best. It drives out inefficiency, accelerates innovation and lowers costs. Oscar is defining that future. We are replacing one-size-fits-all coverage with solutions that make health care as easy to use as any other consumer product. Our results reflect the team's focused execution across our products, platform and strategy. We will outline how we translate that performance into durable growth and long-term value at our Investor Day on September 16. I will now turn the call over to Scott. Scott?
Thank you, Mark, and good morning, everyone. This morning, we reported strong second quarter results, and we are raising our full year 2026 outlook to reflect our operating performance. Through the first half of the year, we delivered record profitability of approximately $1 billion of net income or $3.16 per diluted share. The fundamentals of the business are strong, and our results are favorable to our plan. Let me now turn to details on second quarter performance. We ended the second quarter with 2.96 million effectuated members, an increase of 46% year-over-year, driven by above-market growth during open enrollment and solid retention. Total revenue was $4.9 billion, an increase of 70% year-over-year, driven by higher membership and rate increases, partially offset by higher risk adjustment payable accrual. The second quarter medical loss ratio was 79.2%, an improvement of nearly 12 points year-over-year.
Recall that in the prior year period, we recorded the entire first half impact of the 2025 risk adjustment true-up in the second quarter. The year-over-year MLR improvement was driven by our disciplined pricing strategy and a strong current year performance compared to the market reset experienced a year ago. We also benefited from favorable prior period reserve development in the quarter. Now I'll spend a moment on risk adjustment. In the second quarter, we received the final 2025 CMS risk adjustment report, which was approximately $160 million favorable to our first quarter accruals and fully recognized in the quarter. We also received the first risk adjustment report for 2026, covering claims through April, which showed market morbidity tracking quite favorable to both our pricing and first quarter accruals. With only 4 months of claims in the data, we recognized only a small portion of that favorability, which we believe is appropriate at this stage in the year.
Through the first 6 months of the year, risk adjustment as a percentage of direct premiums was approximately 20%, consistent with our expectations for the full year. Overall year-to-date utilization was moderately favorable to our expectations. By category, inpatient, professional and pharmacy utilization were favorable, while outpatient was elevated through the first 6 months of the year. On administrative expenses, we delivered another record low SG&A expense ratio. The second quarter SG&A expense ratio was 14.2%, a 450 basis point year-over-year improvement and the lowest in the company's history. The improvement was primarily driven by disciplined expense management, including an increasing impact from technology and AI initiatives, fixed cost leverage and lower risk adjustment as a percentage of premium. We reported earnings from operations of $389 million in the second quarter, a $619 million year-over-year improvement.
Operating margin was 8%, a 16-point improvement year-over-year. Net income was $362 million, a $590 million increase year-over-year. Adjusted EBITDA was $415 million in the quarter, an increase of $615 million year-over-year. Through the first 6 months of 2026, our results reflect disciplined execution and strong year-over-year improvement across all key metrics. Shifting to the balance sheet. Our capital position remains very strong. We ended the second quarter with approximately $10.2 billion of cash and investments, including $462 million of cash and investments at the parent. As of June 30, 2026, our insurance subsidiaries had approximately $1.9 billion of capital and surplus, including $994 million of excess capital, which was driven by our strong operating performance. Let me now turn to updates on our 2026 full year guidance. Based on our first half performance, we are raising our full year earnings from operations guidance to a range of $500 million to $700 million, an increase of $250 million from our prior outlook.
We continue to expect total revenues of $18.7 billion to $19 billion. We now expect full year MLR in the range of 81.5% to 82.5%, an improvement of 90 basis points at the midpoint from our prior outlook. On administrative expenses, we now expect our SG&A expense ratio to be in the range of 15.6% to 16.1%, an improvement of 20 basis points at the midpoint. We continue to expect adjusted EBITDA to run roughly $115 million above earnings from operations. Our improved outlook reflects our strong first half performance, including favorable prior period development and market morbidity trends and an expectation of increasing membership churn in the back half of the year as CMS program integrity processes continue. As I mentioned, the market morbidity data that we received for claims through April was quite favorable to our expectations. Given this early stage in the year, we have not taken full credit for that favorability in our outlook.
If the favorability holds as claims develop, that could present a tailwind to our full year outlook. In closing, our disciplined execution drove strong operating results and record profitability through the first half of the year. We are confident in our improved 2026 outlook and are on track to deliver our strongest performance to-date. With that, let's turn the call over to the operator for the Q&A portion of our call.
Questions and answers
And your first question comes from Andrew Mok with Barclays.
On utilization trends, you noted inpatient and professional and pharmacy was favorable, but outpatient was elevated. Can you elaborate a bit on what you saw there, particularly on the outpatient side and how you're thinking about the pace of utilization for the balance of the year?
Yes. Andrew, in outpatient, I would say that there are a handful of areas that we're paying attention to. Honestly, none of them is particularly outsized. And what I think is most important there is that we're seeing stability in these trends. And so while outpatient is a bit elevated, as you mentioned, we're seeing the other categories running favorable. And at this point, the trends are stable. And so the utilization looks very reasonable and is favorable to what we would expect at this point in the year. Great. And I appreciate all the comments that AI is accelerating the shift to untraditional employment. I would love to hear what you're observing in the market driving that commentary and how that impacts your view of intermediate-term growth. A couple of things on AI. First, we don't see the massive unemployment that a lot of other CEOs have painted a very dark picture of. We see a transition to different kinds of job groups.
Those are in the gig economy, in part-time work, in multiple part-time jobs, and in early retirees. In that economy, employer-based insurance doesn't necessarily work well. There are a lot of people who don't have coverage as a result. We are now working with some very large groups around part-time employees and people who work in multiple places with multiple part-time jobs. As that market evolves, we see it as a huge opportunity for ICHRA in expanding the total TAM of the marketplace. In small group and middle-market, there's 115 million lives alone that we think will have some impact on employment and will grow these other jobs in our economy. As far as AI goes, internally, our investment is not something that we do separately. Every business owner has a platform. That platform has engineers, product management, AI and business people evaluating how we can advance every one of our platforms every day to reduce friction for our members and for the providers we work with.
We fund those projects with expected returns and expected investments. I note that in the press you hear of billions of dollars being spent by our competitors. I would just make the point that we have one platform, we have one data set. As a result, we start with a huge advantage in being able to use AI at scale without having to make the investments in platform integration and data rationalization that many of our competitors must undertake. That is why we are so far ahead in deploying AI at scale in the organization.
Your next question comes from the line of Jessica Tassan with Piper Sandler.
So first question is just can you clarify that the 2025 reconciliation accounts for about 80 basis points of the 90 basis point MLR revision at the midpoint? And then do you mind helping us kind of understand what you're seeing? You helped a bit with utilization for this year, but how do we get comfortable that you all have visibility into utilization despite the potentially current effect of higher deductibles? How do we get comfortable essentially with the reiterated or slightly raised core MLR guide?
Yes, Jess. Starting off with MLR and the impacts from prior period development, I would say that MLR excluding prior period development in the first quarter was a little bit over 82%. MLR is impacted by two components of prior year development. One piece impacts risk adjustment, which we talked about when we received the final CMS report, and that was roughly $160 million. There is also favorable development around claims. When you look at all those things, I consider those core parts of the business, and they give us confidence that the reserves we are booking and our pricing are headed in the right direction. Everything there looks appropriate and stable. Turning to your question on utilization and our confidence in the back half: at this point in the year we have had enough time to have a pretty good sense of the risk of the membership that we have. It is consistent with our expectations.
As I mentioned with utilization, we are seeing trends that are stable; we are not seeing anything that looks to be running away from us. So when I step back and look at all of the components of our operations and our business, I am pleased with the stability and with the clarity and visibility we have into our current book. The weekly report we received in the first quarter confirms a lot of what we thought would shape up for this year in terms of the reduction in membership that we had planned for. That reduction looks like it is coming in a bit lighter, which results in morbidity in the marketplace that is likely to be less than what we priced for and could present a tailwind to our full year outlook.
I would add one more thing, Jess. In our management process and the way we operate the business and our operating plans, we create targets for affordability and reducing the actual trend we put into pricing. We measure the results of our programs that we're developing, including some of the things we talked about with AI today, that go against those targets. We're constantly measuring the opportunity and what we call flares where we see hotspots in utilization, making sure we go after those immediately, acting quickly with precision and moving that utilization back to where we expect it to be.
Your next question comes from the line of Parker Snure with Raymond James.
Just curious on how you guys are thinking about the 2027 rate cycle. We're seeing some of the preliminary rate filings beginning to roll through. But just generally, how are you thinking about positioning of your rates within the market and baking in conservatism for all things that could happen?
Parker, thanks for the question. We believe the market so far has been rational. We price by market, so we look at opportunities by market, and comparing the overall rate filings is probably not a good way of measuring it. Just take a look at what happened in '26 based on our overall rate filings versus our competitors. We've done quite well in spite of what people thought was underpricing. I would suggest so far it's been rational. We still have another bite at the apple as we go forward. As we look at what could happen with the NBPP or the stay, which we probably don't think will be released at all this year, in the event it does, we have an opportunity to change product and pricing should we need to do that. So we have more time. We're on it every day. We already have plans in place on how to do changes if we need to make them. We're pretty confident that we're in a good place. And if I can just get a follow-up.
I know it's early, but how are you thinking about the overall ACA market enrollment in 2027 at this point in time? Do you think it's relatively flat or do you see some more declines? We think that based on what's already in place through regulation because we are reacting to a few program integrity efforts through CMS that are coming through in regulation and review, absent any dramatic changes to the NBPP, which again, we don't think will happen, a lot of the program integrity efforts have been built into the marketplace. We think we're through all the enhanced premium tax credit impacts from 2026. So we think the market has opportunity. Obviously, we're not resting on our laurels and we're looking at things like ICHRA and other markets to grow our total available market, but we believe there's still opportunity for the market to remain stable or grow and for us to take share.
Your next question comes from the line of Stephen Baxter with Wells Fargo.
I wanted to follow up on utilization. It looks like medical expense was up 17% quarter-over-quarter, and I think probably 20% on a PMPM basis. Could you give us some color on what's driving that? It seems like a much sharper increase than what you might normally expect. Obviously, there's a lot of unusual dynamics this year. And then how should we think about either the upward sloping of MLR or maybe medical cost expense PMPM as we move through the balance of the year? And then I have a follow-up.
Thanks, Steve. In utilization, we're really seeing and translating that into MLR and PMPMs. We're seeing the seasonal pattern of the membership that we have this year. As we've talked about, we saw some transition in our book from Silver into higher deductible Bronze plans. We also have more Gold membership. I do think that the seasonality that we're expecting is emerging. I would expect that that's going to continue to pick up into the second half as members burn through their deductibles. So MLR from the first 6 months, I would expect it to continue to trend higher quarterly and the seasonal patterns will look pretty similar to what we've seen historically. Got it. And then just to follow up on that. You have a lot of new members this year and a lot of new members in new products. Can you speak at all to the performance of new members and some of the new products that you rolled out this year, like the new Bronze and the new Gold that you're speaking to?
When I look across the book, we're really pretty pleased with the performance overall of the new products; membership is behaving pretty consistently with our expectations. The risk in the book looks very much like what we would have expected. We're not seeing any deviations in any particular metal. It's an interesting situation where Bronze now has a lot of members that moved out of Silver and moved into Bronze. Gold has members that moved out of Silver and now into Gold. You can't really look at these metals the same way historically. We are refactoring how these metals are going to perform, and against those adjusted expectations, things are performing consistent or favorable to our plan.
Your next question comes from the line of Scott Fidel with Goldman Sachs.
First question, can you decompress the SG&A performance? It was quite strong in the quarter. Maybe walk us through that. Were there any timing dynamics in terms of expenses that may play out in other quarters? And then also maybe just talk about as you look towards the rest of this year, how you're thinking about investment spending that may be in SG&A as well? And then a follow-up on metal mix: with the shift to more Bronze, how does that affect the risk adjustment accruals that you're making? How was seasonality playing out so far this year in terms of differences in utilization by metal?
So SG&A: we've made tremendous progress. In the quarter and in the first six months, I wouldn't call out any single driver. There are higher taxes this year, exchange fees that we're experiencing, and we're basically offsetting that by efficiencies in our variable costs that are really being driven by a lot of the AI and other technology innovations we've been putting into place. I would characterize our SG&A as being that what you've seen in the first six months is a good indication for the rest of the year. I do think we'll see the fourth quarter be the highest SG&A ratio on a percentage basis. That's typically our pattern and reflects investments in future growth and getting ready for '27 enrollment. From here, pretty stable third quarter and then an increase in the fourth quarter. On metals, against our refactored expectations, recognizing that many members that were historically Silver are now in different metals, performance is coming in in line to favorable with our expectation and the risk is slightly favorable.
Regarding risk adjustment, in general, we're a risk adjustment payer because our members skew younger and healthier and tend to be more urban than the overall market, particularly as we grow. Risk adjustment is driven by morbidity, not plan design. The risk adjustment formula is intended to neutralize the impacts of different benefit designs by metal, though it's not a perfect science. We're getting what we would expect in terms of claims activity and the risk adjustment benefits from that. At this point in the year, six months in, we have visibility and things are running as we would have expected.
Your next question comes from the line of Raj Kumar with Stephens Inc.
Focusing on ICHRA and yesterday's announcement with a partnership that you are undergoing with ICHRAx. Curious on what type of capabilities that offers to your current platform? And how should we think about the pace going into 2027 for that offering? And a follow-up on short-term investments that increased quite a bit quarter-over-quarter—any color on that given cash was pretty steady quarter-over-quarter would be helpful.
ICHRAx is an EDE that we built off an ACA-approved, CMS-approved Electronic Data Exchange that we purchased last year. We mentioned it in our calls last year. That EDE has a lower cost structure than current ACA alternatives and agreements to have all of our competitors as part of that platform. We now have the rails upon which to run ICHRA, which has not been the case in the past. How do we convert members from a defined benefit to a defined contribution, how does the employer step aside and allow these people to sign up? Because network is always an issue for employers — they need wide area networks at higher cost — those employers want to know how we can get member coverage. We tell them that we have all of our competitors on the platform and members can select whatever competitor they want that has the network they need. Suddenly, we have the largest PPO network in the nation at narrow network rates.
That allows employers to stand down on the issue of network coverage. Couple that with benefit selection tools that we're using with brokers to get people into the right plan design, it allows savings as high as 26% of the employers' cost versus what the employee would need to pay by following this option. The EDE, ICHRAx, invites all of our competitors to the table; they've all joined. We all get access to those members as they convert. The real opportunity is on the front end of the conversion with the employer where they spend sizable sums to convert from defined benefit to defined contribution; that revenue is not regulated like insurance revenue, doesn't require reserves, and has higher margins. That will allow for competition in that market. ICHRAx is then connected to Lucie where we are now starting to have partners like Allstate Health and Aflac and many retailers who want access to our members.
Mark Cuban is talking to us about coming on board. Other organizations want to join to offer retail opportunities to our members once they have to shop for out-of-pocket costs as members in the program. On the short-term investments, the investment is to get the platform ready. It is not a sizable number; it's a pretty easy-to-use and easy-to-change platform.
Your next question comes from the line of Jonathan Yong with UBS.
When you think about the pricing that's being put into next year from yourself and in the market, do you see yourselves getting incrementally better G&A leverage given your productivity efforts and the pricing that's going to go into the market, or should it be more muted relative to the improvement you're seeing this year? And on membership churn, you mentioned expectation of increasing churn in the back half — is that in line with the previous expectation of 1% to 2% per month or will it be more elevated than typical?
We set out long-term targets, including SG&A ratio, and we're basically getting there a year ahead of plan. I still think there's opportunity for more leverage: if we grow the top line faster than our cost structure, that's a positive for that ratio. Given everything we're doing with AI and focusing on running the most effective and efficient operation we can, I think there's more opportunity for improvement going forward. Regarding churn, we ended the second quarter with 2.96 million effectuated members, basically flat in the second quarter, which was significantly better than our expectations. Some lapse we expected in the quarter is related to CMS eligibility and data issues that we now expect to happen in the second half of the year. We previously thought churn was 1% to 2% per month; it's probably going to be closer to twice that amount in the back half. That's a timing move and doesn't impact revenue. We reaffirmed our full year guidance on revenue. I would characterize that as a delay in members being unenrolled rather than anything more fundamental in terms of ongoing churn in the business.
Your next question comes from Michael Ha with Baird.
A clarification on MLR: Scott, you mentioned first quarter MLR excluding prior period development was a little over 82%. For this quarter, if I exclude the favorable prior period development and the prior year risk adjustment true-up, I'm getting something around 85.2%. Is that roughly correct? I know you mentioned utilization was moderately favorable. Was the favorability pretty consistent throughout the quarter or any moderation of trend? Also, on risk adjustment: if I exclude the prior year true-up, I'm getting current year risk adjustment transfer at about 17.9% of premiums, better than the 20% expectation. Is the implied transfer payable percentage in your updated guide still 20% for the full year? What does it imply for the back half? You mentioned the Wakely could suggest upside to the guide. How should we think about that conservatism and the durability of it through year-end? What scenarios in the back half could pose a threat to full year expectations for risk adjustment — membership attrition running hotter or something else?
My math says if you exclude the favorable prior period development in the quarter, you get an MLR that's approximately 82%. We'll reconcile after the call if needed. We saw total favorable prior period development of $164 million in the second quarter and $232 million year-to-date. Those are the numbers to exclude if you're trying to adjust our second quarter or six-month MLRs. On risk adjustment, I recommend looking at the first half as the best lens. In the first half, risk adjustment was 20%, which continues to be our expectation for the full year. There was modest favorability in Q2 related to the final CMS report embedded in the quarter. Every quarter we do a year-to-date true-up and set expectations around risk adjustment. The fact that we were at 20% for six months and continue to expect 20% for the full year shows things are progressing as expected.
Your next question comes from the line of David Windley with Jefferies.
The company invested a lot in working with your sales channel to navigate members between products for 2026. You talked about '27 being relatively stable. Do you also think your tier mix will be relatively stable or do you see more navigation? And a product like HelloMeno is new to '26 — any plans for similar initiatives for '27?
We continue to innovate by market and expect more opportunities to move people into plan designs that work for them and to demonstrate our capability developing these products, along with tools like the radiology tool and pharmacy tools that assist people. Our whole idea is to reduce friction at every opportunity when we invest in the platform, reducing barriers for people to get care when they need it. We have more navigation to do, but it's not as significant as the level we did last year with the enhanced premium tax credits. It's more about delivering new products in certain markets.
Your next question comes from the line of Kevin Fischbeck with Bank of America.
Trying to bridge the increase in guidance: with Q1 you didn't change guidance, but you had $164 million of favorable prior period development this quarter, $68 million in Q1, and then $160 million of 2025 risk adjustment this year. Those things seem incremental to original guidance, totaling about $392 million, but you raised earnings from operations guidance by $250 million. Can you help bridge the delta between those numbers? Also, one of your competitors talked about the IDR process being a headwind to them. How is the IDR process working relative to your expectations?
The 2025 risk adjustment of $160 million is the largest part of the total Q2 favorable prior period development of $164 million. So the RA is a subset of the $164 million. There's $232 million of total favorable prior period development through six months. We raised guidance by $250 million because we believe the core business is running really well. The first '26 Wakely report was quite favorable, but it's based on early-stage claims and will evolve; we're not banking on all that favorability in our guide. We feel there are more tailwinds than headwinds in our outlook and we're well-positioned for a strong rest of the year.
On IDR, we support the ultimate goal of protecting members from cost surprises — that's a good thing. For us, IDR is part of the business and is not a trend driver.
Your next question comes from the line of Justin Lake with Wolfe Research.
You mentioned CMS program integrity and the impact on second half enrollment. I spoke to a peer who said CMS sent out a list of 1 million members they believe might be unauthorized due to lack of Social Security numbers and zero claims, and that about 80% of those members are in Florida and Texas. Curious how many of those million were Oscar members? What percentage do you think you can hold on to or save? What financial impact do you expect the potential loss of the rest of these members might have on your results given lower utilization of these folks? Is there any way to share how big that assumption is relative to what CMS sent you in terms of the enrollment they expect might not be correct?
We continue to see CMS focusing on eligibility verification; they've been focused on this throughout the year. We anticipated some disenrollments in the second half that we had thought would begin in Q2, so we continue to anticipate this. Financially, we don't recognize revenue for members we anticipate will be disenrolled. We set the payments received from CMS as a liability on the balance sheet. All the impacts across the industry with payment integrity are baked into our full year guidance.
Is there any way you could share how big that assumption is relative to what CMS sent you here in terms of the enrollment they expect might not be correct?
We're reviewing the file we received. There are cases where we know people were authorized appropriately and cases where we've had contact with people. Their list was based on a set of assumptions applied to the file. The actual result depends on our ability to go through those files, and we are actively doing that. Appropriate accommodations for anticipated lapsed members are included in the guidance we shared.
We've got good visibility into that, so I don't think this is an area we see as a risk for the rest of the year.
There are no further questions at this time. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.