|
Startup insurers that have gone
public in recent years continued to lose money in the third quarter of 2022,
although Oscar Health, Inc., and Clover Health Investments Corp. varied in
their performance on individual financial metrics. Perhaps the most notable
part of the companies’ earnings conference calls, however, was executives’
discussion about decisions to pare down certain books of business amid
profitability and execution struggles.
Clover to downsize direct
contracting business
- Clover Health
executives revealed during their Nov. 7 conference call that the firm
plans to scale back its participation as a Direct Contracting Entity
(DCE) in CMS’s Global and Professional Direct Contracting model, which will
transition into the revamped ACO Realizing Equity, Access, and
Community Health (REACH) Model in January 2023.
- “We have
decided to significantly decrease the total number of participating
physicians,” said Clover President Andrew Toy. “We believe this will
reduce total attributed lives and revenue managed by our ACO by up to
two-thirds. We still expect this business line to have a scale of
approximately $1 billion of annual revenue, and importantly, we very
much believe these adjustments will result in a sustainable business
line with an MCR [medical care ratio] below 100%.”
- To Ari
Gottlieb, principal of the consulting firm A2 Strategy Group, the news
was a positive development for Clover. Gottlieb points out that
Clover’s medical loss ratio (MLR), while still “too high,” dipped well
below 100, and notes that the firm “announced a pretty significant
pruning of their DCE business,” which hadn’t been performing well. “So
maybe we give them some credit,” he concludes.
Oscar reports challenging
quarter
- “The worst performance
in the quarter was Oscar,” Gottlieb suggests, noting that the company
“badly missed” the Wall Street consensus earnings/loss estimate.
- Gottlieb tells
AIS Health that in his opinion, Oscar executives provided “confusing
reasons” for the miss. For example, during Oscar’s Nov. 9 earnings call
Chief Financial Officer Scott Blackley pointed to “higher than expected
distribution costs” that were associated with new exchange members who
signed up during the COVID-19 special enrollment period.
- But Gottlieb
says the insurer’s explanation, which pointed to updated guidance from
CMS that prohibited changing broker compensation midyear, defies logic.
“CMS changed that rule in May. So it doesn’t make sense that Oscar would
have just found out about the regulation shift and had to adjust its
full-year guidance, he says.
- During the
earnings call, CEO Mario Schlosser confirmed that the company has
stopped offering Medicare Advantage plans in New York and Texas. Oscar
also said earlier this year that it will discontinue selling individual
market plans in Arkansas and Colorado.
|
No comments:
Post a Comment