Clover Health Struggles to Contain Medical Costs for MA Members

  • Of the newly public startup insurers that reported third-quarter 2021 earnings, all four posted higher (worse) medical loss ratios (MLRs) compared with the prior-year quarter — a direct result of higher COVID-related costs. The two insurers with a focus on Medicare Advantage, however, demonstrated wildly different experiences, with Clover Health Investments Corp.’s MLR clocking in at 102.5%, while Alignment Healthcare, Inc.’s 85.7% MLR was more in line with those of the larger, established insurers.

    Reporting quarterly earnings for the third time since going public in January, Clover recorded an MA MLR of 102.5%, an improvement over the 111.0% it recorded in the second quarter of 2021 but worse than the 86.7% it posted in the comparable 2020 quarter. That was using the generally accepted accounting principles (GAAP) measure that is required in financial statements. As was the case for many insurers, the year-over-year increase was largely due to COVID-related costs and increased utilization from deferred outpatient care. Meanwhile, Clover attributed its sequential improvement to “operational efficiencies, a decline in direct COVID costs, and seasonal trends.”

    On a “normalized” basis (i.e., non-GAAP, without COVID), MLR for the quarter would have been 94.8%, compared with 96.3% in the second quarter and 96.4% for the third quarter of 2020, estimated the company. Clover also posted a net loss of $34.5 million for the quarter, compared with net income of nearly $12.8 million in the year-ago quarter.

    Although Clover’s total revenues of $427 million beat the Wall Street consensus estimate of $413 million and its MLR showed sequential improvement, the high “absolute percentage” still gave Citi analyst Ralph Giacobbe pause. “We have updated our model lowering our revenue estimates as we take a more conservative view of direct contracting enrollment, and raise our MLR to reflect initial guidance,” Giacobbe wrote on Nov. 9.

    Reflecting a year-over-year increase of 153%, Clover’s overall revenue consisted of $204 million in MA premiums and $223 million in Direct Contracting revenue, referring to its participation as a Direct Contracting Entity serving the CMS Innovation Center’s Global and Professional Direct Contracting Model, effective April 1. Clover said it served 61,818 Direct Contracting lives and 67,281 MA enrollees for a total of 129,100 lives as of Sept. 30. While Direct Contracting enrollment is expected to remain relatively flat for 2021, the company said it expects those lives to “grow significantly” in 2022. Clover previously had to adjust its expectations for how many aligned beneficiaries it would serve through the model. The company reported a Direct Contracting margin of 102.4%, down from 111.8% in the second quarter, and said it expects the model’s financial performance to “improve as a result of a full ramp-up in a number of areas.”

    Meanwhile, Orange, Calif.-based Alignment Healthcare on Nov. 4 recorded a net loss of $45.8 million, compared with net income of $10.8 million in the prior-year quarter. Overall revenue, meanwhile, climbed 18% to $293.5 million, including health plan premium revenue growth of 14% to $278.8 million. Alignment reported serving 86,000 MA members — an increase of 29% from the prior year — as of Sept. 30.

    Contact Giacobbe at

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  • Lauren Flynn Kelly

    Lauren has been covering health business issues, including drug benefits and specialty pharmacy, for more than a decade. She served as editor of Drug Benefit News (the predecessor to Radar on Drug Benefits) from 2004 to 2005 and again from 2011 to 2016, and now manages Radar on Medicare Advantage. Lauren graduated from Vassar College with a B.A. in English.

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