Heightened Medical Costs Cloud Startup Payers' Second Quarter

by Leslie Small

In the second quarter of 2021, all four newly public startup insurers — Alignment Healthcare, Inc., Bright Health Group, Inc., Clover Health Investments Corp. and Oscar Health, Inc. — posted net losses and saw their medical loss ratios (MLRs) increase. However, the four firms' revenues and membership went up compared with the prior-year period.

Clover Health:

• Clover said its second-quarter revenue increased nearly 140% year-over-year, "due primarily to the launch of Direct Contracting," a CMS model in which organizations share risk and receive capitated payments for serving fee-for-service Medicare beneficiaries.
• Unlike the other three newly public startups, Clover's stock rose following its earnings report on Aug. 11. "I think the reason Clover's stock went up is because they actually posted substantial revenue growth," observes Ari Gottlieb, a principal at A2 Strategy Group. But "they actually picked up fewer members in direct contracting than they originally expected, and their guidance for the year was actually light," he notes.

Bright Health:

• Bright Health saw its stock drop 22% after releasing its own earnings report on Aug. 3.
• Citi analyst Ralph Giacobbe, in an Aug. 4 note to investors, wrote that "Bright Health reported a mixed first quarter as a publicly traded company with enrollment above our expectation, but cost running higher. The company attributed the higher cost to COVID, and while [management] suggested core non-COVID trends inline with expectations, the 'adjusted' MLR stat never goes over well."

Oscar Health:

• Oscar experienced its own post-earnings stock sellout, and Gottlieb theorizes that early investors and company employees may have been taking advantage of the fact that the initial public offering lockup period — during which they were prohibited from selling their shares — recently ended.
• Still, "overall the quarter was solid as many core elements such as revenues, exchange membership and SG&A [selling, general and administrative expenses] are tracking ahead," Bank of America analysts wrote on Aug. 13.

Alignment Healthcare:

• Alignment Healthcare's performance was "the simplest story in the startup health plans that have gone public, in that they had a pretty good quarter," Gottlieb says.
• The company said its health plan membership at the end of the quarter was approximately 84,700, up 32% year over year, and its total revenue of $309 million represented a 26% year-over-year increase.

From Health Plan Weekly