Skip to main content
Sister Publication Links
  • ESG: THE NEW IMPERATIVE
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • Current News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Transformation
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Digital Health
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
  • Op-Ed
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Awards
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Diversity in Healthcare
    • Women in Healthcare
    • - Luminaries
    • - Top 25 Diversity Leaders
    • - Leaders to Watch
    • - Luminaries
    • - Top 25 Women Leaders
    • - Women to Watch
  • Events
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Transformation Summit
    • Women Leaders in Healthcare Conference
    • Social Determinants of Health Symposium
    • Leadership Symposium
    • Health Care Hall of Fame Gala
    • Top 25 Women Leaders Gala
    • Best Places to Work Awards Gala
    • Top 25 Diversity Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Supply Chain Revenue Cycle
    • - Hospital at Home
    • - Workplace of the Future
    • - Strategic Marketing
    • - Virtual Health
  • Listen
    • Podcast - Next Up
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Insurance
January 24, 2022 05:00 AM

How startup insurers captured Medicare Advantage marketshare

Nona Tepper
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    finance_arrows_cash_UP_i.png
    MH Illustration/Getty Images

    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.

    Alignment, Bright Health Group and other insurers with a heavy California presence all suffered from competitor SCAN Health Plan's aggressive benefit design during the annual enrollment period, said Ari Gottlieb, a principal at A2 Strategy Group. The not-for-profit player increased its Medicare Advantage membership 16.8% month-over-month to 258,028 enrollees and expanded this year outside California to Arizona and Nevada. "SCAN has been a consistent performer that has been a steady presence in the market," Gottlieb said. "They have new leadership that clearly has broad aspirations and ambitions, and has shown a willingness to get aggressive to actually execute on those."

    Clover Health, likewise, grew its membership 18% during the period to 80,238 members. More than 90% of Clover's new members came from enrollees switching from UnitedHealth Group, Humana and CVS, according to the Bank of America report. The Medicare Advantage-focused insurer's enrollment growth is "somewhat validating its benefit design (although it has yet to do this profitably)," the report said. The majority of the company's enrollees are now concentrated in Georgia and New Jersey, both states with high rates of COVID-19 that translated into larger-than-expected medical costs, said President Andrew Toy.

    "For us, it just comes down to, 'how much capital do we need to push through potential waves of COVID?'" Toy said. "Until it either becomes endemic, and then the government will adjust the program, or, hopefully knock on wood, that the vaccines get us into a good place after this wave."

    The company has focused on a wide-network strategy, and argues that its AI-powered technology platform ensures quality patient care at any provider it visits. The company pays physicians an average of $200 per visit to use its tech, and more than 60,000 providers are part of its network.

    He said one reason insurers may have struggled to capture new members this year is because the price of listing on online brokerage sites like eHealth has increased.

    "The price for leads and growth in that sector has increased quite a lot," Toy said. "For any plan that's been heavily reliant on those channels, I think that resulted in that challenging year this year."

    But the company's growth is likely due to aggressive benefits designs, Gottlieb said. He noted that small insurers such as Clever Care were also able to achieve exceptional growth during the annual enrollment period, but wondered about the sustainability of their business. During the first three quarters of 2021, Clever Care, a Medicare Advantage plan intended specifically for Asian-Americans, lost $12 million on less than 2,000 members, according to filings from the California Department of Managed Health Care. Gottlieb wondered if Clever Care and other plans would suffer the fate of Bright Health Group earlier this year–when Cigna swooped in to bail out the cash poor startup with $550 million. At the time, analysts said Cigna's investment in Bright signaled that the legacy insurer did not view the startup as a competitor.

    "Health insurance is a vast consumer of capital, and you need to be able to support that," Gottlieb said. "If the capital markets are effectively closed for you, what do you do and how do you scale back thinking about the future? More rational behavior may, in some ways, benefit the larger players, which have the capital and time to wait it out."

    CLARIFICATION AND CORRECTIONS: This story has been updated to clarify a comment that Devoted Health's growth is driven by providers' word of mouth. It has also corrects an inaccuracy introduced by a source regarding Devoted Health's partnerships.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    covid legal_i_i.png
    Oscar Health hit with shareholder proposed class-action
    Oscar Health sign
    Oscar Health leaves two states amid regulatory, commercial challenges
    Sponsored Content
    Daily Finance Newsletter: Sign up to receive daily news and data that has a direct impact on the business and financing of healthcare.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Digital Health
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Op-Ed
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Nominate/Eligibility
      • 100 Most Influential People
      • 50 Most Influential Clinical Executives
      • Best Places to Work in Healthcare
      • Excellence in Governance
      • Health Care Hall of Fame
      • Healthcare Marketing Impact Awards
      • Top 25 Emerging Leaders
      • Top 25 Innovators
      • Diversity in Healthcare
        • - Luminaries
        • - Top 25 Diversity Leaders
        • - Leaders to Watch
      • Women in Healthcare
        • - Luminaries
        • - Top 25 Women Leaders
        • - Women to Watch
    • Events
      • Conferences
        • Transformation Summit
        • Women Leaders in Healthcare Conference
        • Social Determinants of Health Symposium
        • Leadership Symposium
      • Galas
        • Health Care Hall of Fame Gala
        • Top 25 Women Leaders Gala
        • Best Places to Work Awards Gala
        • Top 25 Diversity Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Supply Chain Revenue Cycle
        • - Hospital at Home
        • - Workplace of the Future
        • - Strategic Marketing
        • - Virtual Health
      • Webinars
    • Listen
      • Podcast - Next Up
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing