The Medicare Advantage industry at large may be cutting benefits and increasing premiums to account for higher-than-anticipated medical expenses, but Alignment Healthcare CEO John Kao said the company plans to take the opposite tack.
The insurance company plans to capitalize on rival carriers cutting supplemental benefits and capture market share by enhancing benefits in 2024 despite reporting a rise in Medicare Advantage members’ medical costs this year, Kao said during the company’s second-quarter earnings call Thursday.
“We know a lot of our competitors are lowering, or at best, maintaining benefits; that’s been a common thing we’ve heard,” Kao said. “We’re yet again taking a bit of contrarian view in terms of increasing benefits in a lot of markets.”
Alignment Healthcare’s net loss more than doubled during the second quarter to $28.5 million, or 15 cents per share, fueled by an increase in medical expenses among its members. The company’s revenue grew 26.2% to $462.4 million, driven by premium growth. Alignment raised its membership expectation for the year by 500 to a range of 113,500 to 115,500.
The insurer’s medical expenses were up because of new membership growth, Chief Financial Officer Thomas Freeman said during the call. Alignment counted 112,200 Medicare Advantage members during the quarter, up 17% from the year-ago period. The company also manages 7,600 Medicare enrollees through the Accountable Care Organization Realizing Equity, Access and Community Health program.
New enrollees often come with higher initial expenses as the company works to catalog their health conditions and connect them to services, Freeman said. Alignment anticipates its medical expense ratio will fall in the back half of the year, Freeman said.
“There’s always pluses and minuses in any given year,” Freeman said. “Big picture, we feel good about overall trend and the pluses and minuses in utilization.”
Medicare Advantage outpatient utilization remains roughly in-line with the prior year, bucking the trend reported among most large insurers, Freeman said. Emergency room utilization remains below pre-pandemic levels as more enrollees visit lower-cost urgent care centers, and the company has not experienced a rise in dental services, he said.
Alignment does not intend to offer Medicare Advantage plans in new states next year, but will expand in the states where it currently sells products, Kao said. The insurer also aspires to invest more in its sales and marketing representatives in Florida and Texas to help capture sign-ups in those states, he said.
The company intends to hire more internal call center service providers as a way to boost member experience and improve its star ratings, Kao said. The insurer also plans to invest in its care management technology, he said.
Alignment has been reviewing its supplemental benefit vendors’ performance and switched some service providers as a way to improve retention, he said.
“There was so much emphasis and focus on supplemental benefits being incorporated in the ‘23 benefits that a lot of the vendors were stressed and, frankly, that caused some abrasion for us as a plan,” Kao said. “So we’ve really focused on that and done a really good job replacing some of them.”
The Medicare Advantage insurer reported its earnings after its shares closed at $5.78 on the Nasdaq Stock Exchange Thursday.
