Startup health insurers grew their Medicare Advantage membership during the annual enrollment period, with some capturing market share from larger competitors like UnitedHealth Group, Humana and Cigna.
Among the larger insurtechs, Devoted Health increased its membership the most, nearly doubling its beneficiary base to 63,046 from the start of December to beginning of January, according to federal data. The majority of the company's growth and members came from Florida and Texas, states where more than 80% of Devoted's members reside. Devoted is the last of the large insurtechs to remain private and, after raising a Series D round late last year, represents the most valuable of the health insurer upstarts with a valuation of $12.7 billion.
Devoted's valuation is realistic and will likely grow in the coming years as the company remains private, said Dr. Bob Kocher, former chief medical officer of the startup who now serves as a board member. He credited the company's enrollment growth to word of mouth by providers, including those that work at clinics VillageMD and ChenMed.
He said the members represented a mix of individuals who just aged into Medicare, and those switching from other plans, although he was unsure which plans they were coming from.
"We try hard to have our benefits be very stable year-over-year," Kocher said. "So we don't tweak our benefits in ways that we think will drive short-term enrollment because we want our members to stay in the plan for a long time. We didn't make changes to benefits or underprice."
The startup did not see prevalent underpricing of products in the market — an issue that Alignment Healthcare, Humana and Cigna all said attributed to their more modest growth.
While Alignment grew membership 4.3% month-over-month to 89,719 members, the company missed its year-over-year expectation of 20% growth. Most of the company's new members came from private, fragmented managed care plans, and "taking share from other subscale competitors is less of a validation that its model is truly differentiated to outcompete established and scale competitors," according to an analyst report from Bank of America. The report said that 40% of Alignment's membership gains came from large insurers, an increase from 34% in 2021. Of the crop of young health insurer startups that have popped up recently, Alignment has been the only one able to generate a profit, although high COVID costs translated to a net loss of $45.8 million during its last quarter.