Clover Health Hit By Rising Covid-19 Costs In Fourth Quarter

Clover sells private Medicare Advantage plans to seniors age 65 and older. GETTY 
Clover Health was the latest health insurance company to see medical costs spike in the fourth quarter, through a combination of Covid-19 related hospital admissions and testing alongside members resuming healthcare services that had been put off during the pandemic. 
“While Covid-19 has negatively impacted aspects of our financial results in the fourth quarter, we entered 2021 with strong momentum, and we are excited by the opportunities ahead of us,” Clover’s executive leadership wrote in a letter to shareholders on Monday. The note failed to mention the two ongoing federal investigations into the Nashville, Tennessee-based company’s business practices from the Department of Justice and Securities and Exchange Commission.
Clover Health, which reported its first earnings since going public through a special purpose acquisition company led by former Facebook executive and “SPAC king” Chamath Palihapitiya in January, sells private Medicare Advantage plans to seniors age 65 and older. The company posted a net loss of $91.6 million on $672.9 million of revenue in 2020. The vast majority of the loss—more than $81 million—was recorded in the fourth quarter. It was a better performance than 2019, when Clover posted a net loss of $363.7 million on $462.3 million in revenue. 
Medicare Advantage is a growing market of around 24.1 million seniors out of the 62 million people eligible for Medicare. UnitedHealth Group holds 26% of the market share, followed by Humana at 18%, according to a Kaiser Family Foundation analysis. Both UnitedHealth and Humana reported lower profits in the fourth quarter on account of Covid-19-related costs and the resumption of elective healthcare. UnitedHealth Group said it expects to add 900,000 new Medicare Advantage members in 2021 on its fourth quarter earnings call.
Clover said it ended the year with more than 58,000 members and expects to add up to 12,000 members in 2021, a 21 percent increase over 2020. “We are gearing up to put our foot on the accelerator,” Clover CEO Vivek Garipalli said on the earnings call.
One way Clover expects to dramatically increase its head count is through a new “direct contracting model.” This program, administered through the Centers for Medicare and Medicaid Services (CMS), targets the 40 million seniors in what’s known as fee-for-service or traditional Medicare. The idea is to allow private sector companies to participate in new risk-sharing arrangements with an aim of being able to deliver high quality care and better outcomes at a lower cost than the traditional system. “We believe Clover is perfectly positioned to be the pioneer of the new program,” Garipalli said. 
To date, 51 companies have been authorized by CMS to adopt a direct contracting model. Clover is not yet one of those, but it expects approval in April. “We are looking forward to the official kickoff of our direct contracting initiative on April 1, after we sign our participation agreement with CMS,” said CFO Joe Wagner.  “We intend to provide further updates at the end of the first and second quarters.” 
Clover estimates it could gain access to up to 200,000 Medicare enrollees through its contracts with physician groups. The company projects $30 to $50 million in revenue from direct contracting in 2021, with total revenues in the range of $820 to $850 million. It projects net losses ranging from $170 to $210 million. 
Source; Forbes