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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 1st Quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Today, we ask you to limit to 1 question and 1 follow-up. Thank you. I will now turn the conference over to Chris Potochar, Vice President of Treasury and Investor Relations.

Good morning, everyone. Thank you for joining us for our first 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 31st, 2025, 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 March 31st, 2026, to be filed with the SEC. Such forward-looking statements are based on 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 first 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 first quarter 2026 results with year-over-year improvement across all core metrics. Oscar reported revenue of $4.6 billion, an increase of 53% year-over-year. Our SG&A ratio improved 60 basis points year-over-year to 15.2%, driven by disciplined expense management, top-line growth, and the growing impact of AI across our operations and member services. MLR improved 490 basis points year-over-year to 70.5%, with utilization largely in line with expectations. We delivered $704 million in earnings from operations, an increase of nearly two and a half times over the same period last year. Oscar is the largest carrier fully dedicated to the individual market.

Our tech-first approach, ability to efficiently scale the business, and deliver measurable value to our members positions us for continued expansion. We are reaffirming our full year guidance and remain on track to deliver meaningful profitability in 2026. Before diving into our business highlights, I will share our early view on trends in the individual market. The individual market is resilient at 23 million lives and is a fundamental pillar of American healthcare. Consumers now expect to shop for coverage like they do for everyday products, comparing options, prices, and value. The individual market has the opportunity to deliver that level of choice and transparency. We are working with federal and state policy makers to advance policies that strengthen transparency while increasing product choice and innovation with consistent quality across plans.

While early in the year, initial reports show market dynamics are in line to favorable to our expectations, Wakely's new report shows market contraction is tracking in line to favorable to our 20%-30% estimate. We took a cautious approach to risk adjustment in the first quarter. Our reserves are built on market morbidity assumptions consistent with our pricing. We look forward to further clarity with the first 2026 Wakely report in Q2. The healthcare landscape is undergoing a major structural shift. The small group market is contracting and consumers are rejecting the legacy model. Oscar is shaping the individual market to meet the needs of the modern workforce, including entrepreneurs, gig workers, part-time employees, and early retirees. Now I will review our business highlights. Oscar ended the first quarter with 3.2 million members, an increase of 56% year-over-year.

Our innovative and affordable plan designs and superior member experience are fueling strong growth and retention. Our record membership underscores the strength of Oscar's strategic plan and positions us for sustained growth and meaningful profitability. Oscar is rapidly evolving our technology and deploying AI use cases at ever-increasing speed to drive growth, lower costs, and help members make smart choices. We recently launched several new transparency tools, including a real-time drug pricing feature that predicts when costs may cause a member to abandon a prescription. The tool instantly cross-references deductible status, local supply, and pricing, and guides members to lower-cost pharmacies or equally efficacious alternatives in the network. We are also scaling new bilingual voice agents to support care navigation and improve speed to care. ICHRA is gaining traction as employees demand choice and flexibility and employers seek predictable healthcare costs.

Oscar recently brought the industry together to launch ICHRAx to meet the rising demand. ICHRAx will be a plug-and-play data exchange connecting carriers, benefit brokers, and ICHRA platforms to create a more consistent employee experience. States like Mississippi and Illinois are taking steps to incentivize ICHRA adoption by giving tax credits to businesses. Oscar is now working with other state legislatures and business groups to advance similar ICHRA policies that support local economies and reduce the friction of traditional employer coverage. Building on this momentum, we recently launched the Lucie Health Marketplace. Lucie is a carrier-agnostic shopping platform for consumers, brokers, and employers built on one of 11 CMS-approved systems. Lucie brings together a wide selection of ACA plans with leading ancillary and supplemental products like Aflac. We are combining our technology capabilities with individual networks in nearly every zip code nationwide.

This broad coverage network allows consumers and brokers to shop, bundle, and build their own personalized coverage in a few clicks. We will continue to add more AI solutions and health services on the Lucie platform to bring more people into the individual market. Lucie represents a key step in our long-term strategy to build a consumer-driven healthcare market. In summary, Oscar Health is off to a strong start in 2026. Our innovative technology products focused on user experience and disciplined execution are delivering clear results. No one understands the individual market better than us. Our strong results in the first quarter are ahead of plan, and we are well-positioned to meet or exceed our current guidance. We expect to significantly expand margins and achieve meaningful profitability in 2026. Oscar is unlocking even greater possibilities in the individual market.

The entire U.S. economy is modernized except healthcare. It is the only major market where consumers are stripped of their purchasing power and have zero visibility into cost or quality. Our team is arming consumers with technology that puts them in control. Today, it's about choosing the medical coverage that fits your needs. Tomorrow, it's about making all of healthcare shoppable. Oscar is shaping the new consumer health economy to lower costs and make healthcare work like every modern market. Thank you to the Oscar team for making our vision of consumer-driven healthcare a reality. I look forward to sharing more details on our long-term strategic plan at Oscar Health's Investor Day on September 16. I will now turn the call over to Scott. Scott?

Thank you, Mark, good morning, everyone. This morning we reported strong first quarter results and reaffirmed our full year 2026 outlook. Net income in the first quarter was approximately $679 million or $2.07 per diluted share, the highest in the company's history. Our first quarter results position us well to meet or exceed our current full year 2026 guidance. Let me now turn to details on the first quarter performance. We ended the quarter with approximately 3.2 million members, a 56% increase year-over-year. Membership growth was driven by above-market growth during open enrollment and solid retention. We started the second quarter with approximately 3 million paid members in line with our expectations. Payment rates are consistent year-over-year and modestly favorable to our plan despite the sunset of the enhanced premium tax credits.

Looking ahead, we continue to expect gradual churn throughout the balance of the year, consistent with pre-ARPA-H levels. Total revenue increased 53% year-over-year to $4.6 billion in the first quarter, driven by higher membership and rate increases, partially offset by a higher risk adjustment payable accrual. The first quarter medical loss ratio was 70.5%, a 490 basis point improvement year-over-year. The significant improvement was primarily driven by our disciplined pricing strategy, claims and risk adjustment seasonality from new member and metal mix, and favorable prior period reserve development. The first quarter MLR was impacted by $68 million of favorable development, primarily related to claims runout from the prior year. That compares to $31 million of unfavorable development in the prior year period. Overall, utilization is largely in line with the morbidity of our book.

I want to spend a moment on risk adjustment. Medical claims were seasonally low in the first quarter, and as a result, we recorded a higher risk adjustment accrual. It is early in the year, but we are encouraged by the data we are seeing on overall market contraction and market morbidity. Our claims experience, coupled with third-party data on both new and renewing members, points to market morbidity tracking in line to favorable to our pricing expectations. We continue to expect risk adjustment as a percentage of direct premiums to be approximately 20% in 2026 as new members engage with their benefits and members meet their annual deductibles.

Switching to administrative costs, the first quarter SG&A expense ratio of 15.2% is the lowest in the company's history. The approximately 60 basis point year-over-year improvement was driven by fixed cost leverage and disciplined expense management, including an increasing impact from technology and AI initiatives, partially offset by higher risk adjustment as a percentage of premium. Across all of our key performance metrics, we are seeing significant year-over-year improvement. We reported earnings from operations of $704 million in the first quarter, a $407 million year-over-year improvement. Operating margin was 15.2%, a 540 basis point increase year-over-year. Net income was approximately $679 million, a $404 million increase year-over-year.

Adjusted EBITDA was $727 million in the quarter, an increase of approximately $398 million year-over-year. Turning to the balance sheet, our capital position remains very strong. We ended the first quarter with approximately $8.1 billion of cash and investments, including $279 million of cash and investments at the parent. As of March 31, 2026, our insurance subsidiaries had approximately $1.7 billion of capital in surplus, including $809 million of excess capital, which was driven by our strong operating performance. Based on first quarter results, we are reaffirming all of our full year guidance metrics. Total revenues are still expected to be in the range of $18.7 billion-$19 billion in 2026.

MLR remains in the range of 82.4% to 83.4%, with MLR lowest in the first quarter and highest in the fourth quarter. On administrative expenses, our SG&A expense ratio guidance is unchanged at 15.8% to 16.3%. Earnings from operations are still expected to be in the range of $250 million-$450 million. As a reminder, we expect adjusted EBITDA to be roughly $115 million higher than earnings from operations. In closing, we're off to a strong start to the year with first quarter results that exceeded our expectations. Record membership and strong financial performance reflect the actions we took last year to position the business for growth and meaningful profitability. We're well-positioned to meet or exceed our full year guidance.

With that, I will turn the call over to the operator for the Q&A portion of our call.

At this time, I would like to remind everyone, in order to ask a question, press star then the number 1 on your telephone keypad.

Your first question in the line.

Jessica Tassan, please go ahead.

Hi, guys. Thanks very much for taking the question. I guess my first one is just can you describe the first quarter behavior of the 200,000 or so members who fell off between 1Q and April 1? I'm curious if they were pulling utilization forward into the grace period or if they just kind of didn't utilize. Were they not aware they had coverage? Can you just describe the accounting for any expenses incurred by that population in your first quarter results? Thank you.

Good morning, Jess. I would say that, for members who churned off, nothing unusual about any of the utilization patterns that we experienced in the first quarter. Those members, you know, in general, the biggest portion of the drop-off, you know, really are people that never made a payment. You know, we would not expect to see a significant amount of utilization for people that aren't using. You know, if a member goes into a delinquent status, we no longer pay claims. You know, you have to pay in advance in order to be covered. Once you go into delinquency, we wouldn't expect to cover any claims that might be incurred.

Really, you know, pulling up on that, everything that we saw in terms of member transition, you know, going from 3.4 to 3.2, and then starting the second quarter with 3 million members proceeded exactly as we expected.

Got it. Just to clarify for that population, you'd only reflect January expenses in the 1Q MLR. Just my follow-up is, do you all agree with the Wakely assessment that market morbidity is up 2.9%-6.5% in 2026? Can you just describe where you think maybe Oscar's membership morbidity is trending year-over-year or in 2026? Thank you.

On Wakely, look, I think it's a positive development that this new report is out. You know, what that report is really trying to do is to take early information and look at the morbidity of who was retained in the marketplace, who were the new members that came in, and what might the risk scores look like for the people who left. That's the process that Wakely used to come to build that. I would say that, you know, it's very early in the year to draw conclusions about market morbidity, we really are encouraged about the data that we saw in that report. I would describe it as in line to favorable with our expectations.

You know, when I look at our claims experience, kind of what we're seeing through that report and other reports, you know, really does point to market morbidity that could be a tailwind for us this year. You know, I would say that when I look at the risk adjustment accruals and other accruals that we booked, we have yet to take into account any of the potential favorability that is, you know, that we're seeing in some of these reports, and we build our accruals based on our pricing expectations, so we may have some tailwinds there as well.

Your next question comes from the line of John Ransom with Raymond James. Please go ahead.

Hey, good morning, everybody. Just wanna ask a question about SG&A. Your revenue was suppressed by almost 400 basis points by your risk adjustment versus the 20% guide, but your GA was $15.2. Why would G&A go up if presumably you're gonna get a revenue lift for the rest of the year with a lower risk adjustment hit to revenue?

Yeah. Well.

I'm sorry.

Morning, I appreciate the question. Look, I think that we saw obviously strong revenue growth, revenue growing at 53% based on the headline numbers, higher than that, as you said, if you normalize for the risk adjustment. SG&A grew at 46% in terms of SG&A dollars. We are clearly seeing leverage coming through. I would say the first quarter SG&A ratio is likely to be the lowest for us during the course of the year. There's a little bit of just a dynamic as we grow membership and, you know, have some open positions at the beginning of the year. There's a natural kind of flow as we normalize the business for the higher membership, we'll see that kind of growth throughout the quarter.

I would think that from here we'll probably see, you know, membership or SG&A ratio moving sideways to slightly up, and the fourth quarter tends to be a little bit higher as we start to pick up expenses associated with OE efforts. You know, I continue to think that there's a lot of opportunity to continue to drive performance and improvements in SG&A, even at the low levels that we achieved in Q1.

I would add, John, that 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.

Just my second question. Your old guide, I think you hinted at this, but just to nail you down, the membership in 2Q, I think you talked about $3 million. Is that still a good number to start with in April?

That's what we started at.

just in case we need to.

That was our number April 1.

$3 million. Okay. Thank you.

Yep.

Your next question comes from the line of Andrew Mulk with Barclays. Please go ahead.

Hi, good morning. The risk adjustment transfer as a percentage of premium is tracking around 24%, but you continue to expect the full year to be 20%. Can you help us understand what's driving that higher now and why you're expecting that to moderate throughout the year?

Medical claims were in the first quarter seasonally low and were also favorable to our expectations. Given those low level of claims, we have a natural offset, which is when your claims content is suppressed, then your risk adjustment ends up being higher. It's just, it's a little bit of a trade-off there. We do have a higher portion of new members in Bronze plans this year. That's driving some of the seasonality that we're seeing in claims. We expect that we'll get to that 20% during the course of the year as those new members and, you know, use their benefits and as members with higher deductible plans, like in Bronze, start to hit those deductibles.

Over the course of the year, I would expect claims to normalize, and that's how we'll see the company get to the 20% that we are projecting for risk adjustment.

Got it. Maybe just a follow-up to that point. Like, given the combination of higher bronze mix and silver buy downs, you know, what are you experiencing with the bronze mix behavior at this point, and how does that compare to historical behavior? Thanks.

Look, I think the as we've said, you know, the metal mix, we try to make sure that all of our metals have, you know, targeted profitability and that we're not, you know, having one perform at a really high level and others that, you know, are drags for us. At this point, and, you know, we're talking about 15% of claims that have.

15.4. Sorry.

15.4, Mark always reminds me. You know, we're early days, everything we're seeing, whether it's through utilization, authorizations, actual claims, you know, suggests that the risk of the membership that we have is in line to favorable with what we would have expected. We're not seeing any patterns that cause us to believe that there's anything here that is unexpected.

Your next question comes from the line of Scott Fidel with Goldman Sachs. Please go ahead.

Hi, this is Sam on for Scott. We're just wondering, what are the key swing factors remaining that could materially shift your view on 2026 EBITDA in the second quarter and then going into the second half of 2026? Thank you.

It's largely the Wakely numbers and risk adjustment. Given if you look at the year-over-year differences between our risk adjustment at this point last year, which was 11%, Scott, and we're now at 24.5, we've begun to accommodate for what we believe to be the risk associated with morbidity, and we put that into our numbers and still generated these returns. So, from our point of view, that's the number that we wait for, obviously claims will develop more fully by the end of the second quarter. We'll have a pretty good pinpoint spot on it.

Your next question comes from the line of Jonathan Yong with UBS. Please go ahead.

Thanks for taking a question. Just going back to the risk adjustment again. I guess, would you say the risk adjustment was just more a function of the claims data that you're kind of seeing so far? Just to be sure there's no sweep or cleanup, related to 2025 accruals within that. Then I guess alongside that, did the Wakely data influence how you came to the 24% about? Thanks.

Yeah. Maybe take those two things separately. The 24% risk adjustment level is explicitly being, you know, driven by our claims experience. As I mentioned, our risk adjustment reserves are still based on the market morbidity assumptions that we went into pricing with and that we set our guidance with. We have not made any adjustments for some of the favorability that we see in the Wakely market morbidity report. Again, that could be a tailwind to us, but we're waiting to see more signals before we lean into that.

On PPD, we did see some in the last Wakely report that we got for 2025, we did see a couple states that had adverse development there that totaled up to about $85 million, so we reflected that in the quarter. We did have some other states that had some positive developments. We chose not to recognize those and wait for the final report. We feel like we balanced the risk in that department. We also had favorable claims run out to a pretty significant degree of $150 million. Net-net, our PPD was favorable, $68 million in the quarter. When I look at the combination of those factors, I'm always happy to have favorable prior period development. It's a gift in the quarter.

I think there's also, you know, kind of a longer tailwind that comes with that because we did use those, kind of risk levels and reserve levels in building our pricing for 2026. Those tailwinds, you know, we think will transition beneficially over the year.

One note I'd make, Jonathan, on that is that the Wakely report we received doesn't include experience. It really just includes some of the same demographics and things we've looked at in prior years on our own basis. It was nice to have some outside verification of the way we view the marketplace from a morbidity standpoint. It's not really all that tight the way we would see in a regular report on claims. It doesn't include claims.

Okay, great. Well, actually, let me go back to the first quarter. Did flu or weather play any factor into kind of the beat? Was there any emerging trends that you're just kind of keeping an eye on at this point? Thanks.

I mean, flu was sort of okay. We had a worse flu quarter than we had in the fourth quarter. I haven't talked about flu in a first quarter call in, like, a decade. Flu was okay. The weather was fine. We didn't see anything abnormal in our results. You know, we looked at claims submissions and lags and the whole routine with our team and, you know, the experience has been better than we anticipated, we have not booked all of that.

Jonathan, I just, to add to Kyle on there, I think the most insightful thing about utilization patterns is the lack of interesting utilization patterns.

Your next question comes from the line of Michael Ha with Baird. Please go ahead.

Good morning. This is Olivia Miles on for Michael Ha. Thank you for taking the question. Do you expect that the outlook on risk adjustment provided in the upcoming June Wakely report should likely remain stable through the rest of the year? Are there any other puts and takes, particularly with the increased members in bronze plans, that could cause industry-wide volatility in risk adjustment in the second half to materialize differently than in historical years?

I think that we sit here at this point in the year with more data than what we've had in any of the preceding years. I think the new Wakely report is certainly, as Mark talked about, it gives you some level of information. Obviously, we'll all wait to see how claims performance actually develops. That'll be the most important factor that will ultimately tell us what's going on with market morbidity. You know, when we look at all of the metrics that we have at this early point in the year and we calibrate those against external data points, I'm pleased with where we are versus market morbidity. I think almost all the signals are pointing towards favorable market morbidity development versus where we entered the year.

We'll have to wait and see there, and as we all know, you know, each sequential report that you get from Wakely improves your confidence and visibility into where the full year is going to settle. We think Q2 will be an important first report because it'll be really the first time we'll see from a claims perspective what is market morbidity looking like. Again, we see, you know, primarily favorable signals when we think about market morbidity.

Great. Thank you. Congratulations on the recent announcement of the Lucie Health Marketplace. Looking to dive a little bit more into the financial impact of this model, both in 2026 and in future years, can you please provide some details on if revenue or an EBIT contribution from Lucie is contemplated in 2026 guide, how you're expecting to grow and scale this platform over the next few years, and any visibility into the revenue basis or long-term targets for this new product? Thank you.

Olivia, we'll go into great depth as much as we can in September, but I'll give you some sort of the headlines. As we talk to employers around the country, including increasingly larger employers who are interested in ICHRA as a solution, what we have found is that they're very concerned about the network. While an individual buying, and this is why we've invited all of our competitors to the platform, when an individual is buying, they want to select their network. Given we're not in every market, nor are our competitors, it's an opportunity for us to share each other's networks by allowing the employee to select from different plans. Why does that matter? You're converting a whole employer. To the economics of it all. In converting to an overall employer, you're gonna have to meet other benefit solutions.

We have companies like Allstate Health on our platform, Aflac and Guardian, others joining us so that they can provide other tools that which by the way, they have been providing to ACA members who have had money that they wanted to buy, you know, catastrophic illness policies or whatever, critical illness policies. The more important part is, and this is where the economics matter, and we'll dimension this more in September, is that the margin from a dollar standpoint is higher than any insured member would bring us inside the ACA for all the employees, and it's unregulated from the standpoint of having to put up any risk capital. It's another margin opportunity for us to grow the bottom line and the top line of the organization over time.

We're excited about that model. We're just putting it all together. Having everybody on the platform so that we can share each other's networks, our response to employers, large employers is when they say, "Well, we have a big PPO," our response is, "We have the biggest PPO at neural network rates. You ought to be going to us because you can't get the rates we get when you put all of our combined purchasing power together.

I'd just add that any of the costs, revenues of standing up that business are included in our guidance. You know, for this year, we would expect that to be a modest effect. As Mark talked about, we're excited about the prospects of building a fast-growing, high-margin business.

Your next question comes from the line of Raj Kumar with Stephens. Please go ahead.

Hi. Good morning. Maybe just on effectuated enrollment, maybe any, kind of market level color, if any markets are doing better than worse kind of than your internal expectations or even kind of the Wakely expectations?

You know, looking at the landscape of our competitors who've reported our own performance results, I would say that effectuation rates have been, you know, pretty much as expected to modestly favorable. I think that they also line up in the same way against what Wakely had assumed. You know, to me, what we've seen so far through this year has been that whether it's Oscar or competitors, you know, our expectations of how members would, you know, ultimately roll out of the ACA have been pretty much spot on. Again, I think that that is a positive sign if we're seeing stability in our ability to estimate what's happening in the market, that generally portends well for the rest of the year.

Got it. Then as I think about kind of this year and some of the market dynamics, you know, large competitor exits this year, maybe just kind of any color on those dynamics in terms of that membership and, you know, how that's trending from an RA standpoint. Then as we think about maybe 2027, there's another competitor with modest portfolio of members exiting the market. How does that kind of bake into your expectations as you go into the pricing cycle for next year?

Yeah, I'd like to explain that by the distribution model, because I think it's hard for us to know exactly where all our members came from. We did pick up some auto-assign members from a large competitor that left the marketplace. What we did, and I'll remind you, when we did our investor day 2 years ago, we said we assume that there'd never be any enhanced subsidy extension. That's how we built our plan. We started building our response to that. That allowed us to prepare products that would ameliorate the cost increase to our members. We built tools that allow brokers to start customizing what they needed to do for their members to retain them. Because for the broker community, it's about maximizing capacity and their ability to sell and retain.

We gave them these products, and we gave them lists of our members and said, "Here are the people that are most affected, and here are the product recommendations that we would offer." What happened is that a lot of our competitors got stuck in the middle between whether or not there were going to be enhanced subsidies or not. They didn't necessarily make the plays that we made on product. When the brokers couldn't see those opportunities, they turned around, and they brought those members to us from our competitors because we gave them a solution. It allowed them to be very productive. When you look at our growth curve, which you obviously don't see, but we see every day on our enrollment, it was almost a straight line up over the first three, four weeks when enrollment opened because our brokers were ready.

They'd already talked to their clients using some of our technology, and we were able to get them signed up and moving forward.

Your next question comes from the line of Craig Jones with Bank of America. Please go ahead.

Great. Thank you. I think your member mix, when you think about, like, the bronze members, I think it went from a little below average in 2025 to now a little above average in 2026 versus the market. With that mix shift towards bronze versus average, how does that impact your risk adjustment payable year-over-year? Thank you.

You know, our book is we've got bronze is our largest category. silver is a close second. gold's, you know, a follower, also a significant portion of the book. A relatively balanced book. I think when you look at risk adjustment, the entire way that risk adjustment formula actually is intending to make it neutral across metal levels. There are some coefficients that sit in that formula that basically say the claims that you're getting and the condition value for a bronze plan, you get a bit more risk or offset because in that plan you're getting lower premiums, you're expecting lower claims. When you do have claims, you get a bit higher risk or benefit from those claims.

You know, the inverse is true for metals that have higher amounts of benefits built into them. In general, I would say risk adjustment really isn't driven entirely by metal mix. What's important is, for us it is the number 1, you know, the products that we build, we tend to attract healthier members. It's the markets we're in. We tend to be in more urban areas versus rural, so those tend to skew, you know, healthier on average. You know, I do think that you see healthier members in bronze than in silver, for example.

You know, we think that across all those metals, we have an opportunity to see strong margin performance and, you know, would expect that risk adjustment is more driven by overall levels of utilization across all of those than any one metal in particular.

I would add that, you know, even given our prior period development in this quarter, what we see in our population we cover is that we've been at or below expectations relative to utilizational costs. If you go to last year, were it not for that risk adjustment change, we would have hit our numbers. Because of the change in the morbidity in the market, we have that offset to revenue, which drives up the MLR. The MLR was driven up by the change in the market morbidity, not by under our underlying utilization. We're seeing that same trend in the first quarter of this year.

Got it. Thank you.

Your next question comes from the line of Justin Lake with Wolfe Research. Please go ahead.

Morning, this is Dylan on for Justin. Quick question about growth in historically smaller states like Arizona, North Carolina, New Jersey. Just curious on the trends you're seeing there and any early reads on economics in those states. Thank you very much.

Poorly. Not enough claims, quite frankly, to have any real big differentiation.

I'd just add on membership side, you know, we're excited about the growth that we've seen in some of these smaller and newer markets for us. You know, we have a playbook where we kind of go into new markets, make sure that we understand the local environment in a really grounded way before we really start to, you know, look for growth at an accelerated level. You know, we're seeing, you know, primarily strong results in those new markets. As Mark said, it's still early in the year, so it's too early for us to get ahead of ourselves.

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.