This Could Be the Most Compelling Value Play Before 2026's Economic Shift

Healthcare has been a painful industry to invest in this year. Rising claims usage and overall medical costs have sent expenses soaring for insurers such as UnitedHealth Group, whose stock is now down 35% so far this year. Few health insurers -- if any -- have been spared from this armageddon.

That does not mean that these businesses are doomed for the dustbin of history. Far from it. Enter Oscar Health (NYSE: OSCR), an upstart health insurer focused on the individual paying market. The company is facing rising costs along with other competitors this year, but it has a great long-term tailwind and is set to once again generate a profit in 2026.

Here's why Oscar Health may be the ultimate value stock to buy for 2026's economic shift, even though it is not profitable today.

Recovering from ending healthcare subsidies

To get context on why Oscar Health stock is down 25% over the last 12 months, we need to understand its health insurance business model. Oscar Health builds plans for the Affordable Care Act (ACA) marketplace, the self-pay insurance market for individuals who do not get insurance provided for them by their work.

Using its technology-forward advantage focused on improving the health insurance experience for customers, Oscar Health has been able to grow its market share of individual payers rapidly over the last decade. It had 2.1 million health insurance customers as of the third quarter of 2025.

Along with other health insurers, Oscar's medical loss ratio is rising because of unexpected increased usage of services by members. This led Oscar Health to post a quarterly operating loss of around $129 million last quarter.

While the company plans to turn around these losses in 2026 by repricing plans at higher rates, it is also facing another headwind that is going to affect its business more than the competition: Subsidies. Extended subsidies for individuals during the COVID-19 pandemic are set to expire this year. This will lower the number of people who pay for individual insurance, and likely lead to fewer customers for Oscar Health next year, even if it keeps gaining market share in the states where it operates.

Image source: Getty Images.

An advantaged business, long-term tailwinds

2025 has been a double whammy of bearishness for Oscar Health, with the increased expenses on claims and the news overhang around the ending of healthcare subsidies.

However, both of these headwinds should go away in 2026. Oscar Health is planning to increase the prices on its health insurance policies by 28% next year. While this may not make its customers happy, it should help get the company back on the road to profitability. Healthcare subsidies may end (although a deal is still up in the air), which may add more pricing pressure to customers, but it will simply be a one-time reset to the system.

Investors should be able to get past these short-term headwinds and look at the long-term tailwinds helping Oscar Health steal market share in individual health insurance. Its easy-to-use platform is reducing its costs and making health insurance a much better customer experience, while the overall health insurance industry is moving from employer-based to individual payers, if ever so slowly.

There is a reason that Oscar Health went from 200,000 customers in 2019 to 2.1 million over the last 12 months. These advantages will not disappear, regardless of what happens to healthcare subsidies in the United States next year.

Why Oscar Health is a compelling value play

When looking at Oscar Health stock, it looks like investors are pricing in detrimental results to continue in 2026. I think they should look at the upside of what could happen to Oscar Health stock if the business is profitable next year.

Oscar Health is getting increasing leverage over its fixed cost base (expenses not included in the medical loss ratio). Even if its number of customers declines in 2026, price increases on plans should help it at least maintain its $12 billion in premium revenue in 2026.

The company is only going to generate a slim profit margin on this revenue, given how the health insurance market is operated. But that is all it needs versus a current market cap of $4.43 billion to make Oscar Health a value stock.

A simple 5% net income margin would lead Oscar Health to have a price-to-earnings ratio (P/E) below 8 next year. That is dirt cheap, and makes Oscar Health an underrated value play.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.