by Leslie Small
Three startup health insurers that became public companies this
year — Oscar Health, Inc., Clover Health Investments, Corp. and Alignment
Healthcare, Inc. — recently unveiled their first-quarter 2021 financial
results, with all posting substantial net losses.
Oscar Health, which filed its initial public offering in March, reported an $87 million loss for the first quarter of
2021, compared with a $97 million loss in the first quarter of 2020. But its
total revenues grew substantially to $369.4 million in the first quarter of
2021, and its quarterly medical loss ratio (MLR) was 74.4%.
Clover Health saw its stock price tumble following its second earnings report
since going public in January via merger with a special purpose
acquisition company. The MA-focused insurer posted a net loss of $48.4 million in the first quarter
of 2021, compared with a loss of $28.2 million during the first quarter of 2020.
It also saw its consolidated MLR worsen, going from 89.4% as of March 31, 2020,
to 107.6% for the most recent quarter.
Alignment Healthcare, an MA-focused startup that went public in late March, posted a net loss of $57 million for the first quarter of
2021, compared with a net loss of $10 million in the prior-year quarter. The
company's revenues increased year over year, from $224.6 million to $267.1
million. It also recorded an MLR of 91.5%.
Ari Gottlieb, a principal with the health care consulting firm A2 Strategy
Group, says the first-quarter results of Oscar, Clover and Alignment all hew to
the pattern that those companies have set so far, both before and after going
public.
"The plans like the Alignments of the world that have generally run decent
health plan businesses, in the quarter still generally ran a decent health plan
business," Gottlieb tells AIS Health, a division of MMIT. "And then
you have…the Oscars and the Clovers of the world, who have historically not run
great businesses, who substantially lagged the rest of the industry in terms of
the major public for-profits."
Yet Stefan Kahandaliyanage, an analyst at Moody's Investors Service, points out
that the losses generated by the three health insurance startups — what he
terms "cash burn" — are typical of young companies that are relying
on investor funding to scale. "That's the thesis of investing into firms
that generate losses up front, because they're growing," Kahandaliyanage
tells AIS Health.
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