Jonathan Yong

Jonathan Yong asked about the current 'hangup' in Alignment Healthcare's provider engagement and negotiations for a new state entry, and whether such discussions would typically be completed by this stage. He also sought clarification on John Kao's seemingly mixed comments regarding the 2027 rate update, where he noted industry disappointment but also suggested Alignment could perform well, while acknowledging rates might run below trend.

Answer

Founder and CEO John Kao explained that the 'hangup' is a deliberate vigilance to ensure full provider durability and engagement, emphasizing that lessons learned from past new market entries drive a focus on economic, clinical, and operational alignment with physicians and MSOs. Regarding the 2027 rate update, Mr. Kao clarified that the 0.9% net advance rate is indeed disappointing to the industry, potentially leading to benefit rationalization. However, he reiterated that Alignment's high-quality, low-cost model allows it to succeed in any rate environment, as it is not dependent on external medical management and reinvests margins into benefits and practitioner support.

Jonathan Yong inquired about the current challenges in provider engagement and negotiations for Alignment Healthcare's entry into a new state, and sought clarification on the company's stance regarding the 2027 rate update, specifically the discrepancy between industry concerns and Alignment's confidence.

Answer

CEO John Kao explained that the 'hang-up' in new state negotiations is ensuring full provider durability and engagement, with a focus on economic, clinical, and operational alignment with physicians. He clarified that while the 0.9% net advance rate was disappointing to the industry, Alignment Healthcare's high-quality, low-cost model positions it to succeed in any rate environment, even if rates are below utilization trends.

Jonathan Yong of UBS asked about the cost trend assumptions used in Alignment's 2026 bids and whether they are seeing more providers outside of California looking to reduce their risk assumption.

Answer

CEO John Kao declined to comment on specific 2026 bid assumptions for competitive reasons. Thematically, he noted that margin pressure from V28 is creating tension between health plans and global capitation providers, making Alignment's integrated care management model a strategic advantage. He sees this as a paradigm shift where providers are more willing to partner directly with Alignment to manage risk, rather than taking on full global capitation.

Jonathan Yong from UBS asked about any observable behavioral changes in the Part D business due to the Inflation Reduction Act and the company's visibility for the remainder of the year. He also inquired about Alignment's perspective on potential future limits on the use of prior authorization by CMS.

Answer

CFO Robert Freeman noted a slight uptick in utilization among the non-low-income subsidy population, consistent with expectations, and stated that real-time claims data provides good visibility for the full year. He also explained that Alignment's philosophy is 'more care, not less care,' and its prior authorization and denial rates are already well below national averages, making potential CMS limits a non-issue and a possible competitive tailwind.

Jonathan Yong with UBS asked about the projected 150 basis point year-over-year decline in gross profit margin for 2026, despite improving cohort economics and a four-star payment year, seeking clarification on the drivers. He also inquired about the potential impact of the 2027 flat rate update and risk model changes on Clover Health, specifically whether the effective growth rate keeps pace with cost trends.

Answer

Peter Kuipers, CFO, explained that the gross profit margin decline is primarily due to volume leverage from the significant 53% growth in new members during the Annual Enrollment Period (AEP), noting that new cohorts are initially dilutive but improve profitability in their second year. Andrew Toy, CEO, added that the company is pleased with this outcome, considering the substantial new member growth. Regarding the 2027 rate update, Andrew Toy, CEO, stated that the trend is considered reasonable, despite industry expectations for higher rates. He supported increased data linking between claims and clinical data for risk adjustment but highlighted a potential oversight by CMS regarding data sharing for new members switching from other MA plans.

Jonathan Yong with UBS inquired about the projected step down in gross profit margin for 2026, despite improving cohort economics and a four-star payment year, and later asked about the potential impact of the 2027 flat rate update and risk model changes on Clover Health's cost trends.

Answer

CFO Peter Kuipers and CEO Andrew Toy explained that the gross profit margin step down is primarily due to volume leverage from significant new member growth (53% in AEP), which is dilutive in the first year but expected to improve in subsequent years. Regarding the 2027 rate update, CEO Andrew Toy stated the preliminary trend is reasonable and Clover is not relying on higher rates. He supported increased data linking for risk adjustment but noted a CMS oversight regarding data sharing for members switching plans.

Jonathan Yong from UBS asked about the higher-than-expected Medical Care Ratio (MCR/BER), inquiring about the level of conservatism in the updated guidance and the timing of when these cost pressures emerged, particularly in relation to the 2026 bid submissions.

Answer

CFO Peter Kuipers explained the increased BER guidance is primarily due to elevated utilization in Part D, driven by IRA changes, and supplemental benefits like dental. CEO Andrew Toy added that as this is the first year of the IRA, the industry is still establishing a baseline, and these higher costs were factored into 2026 bids, a trend supported by the higher Part D direct subsidy rate for 2026.

Jonathan Yong asked about the timeline for Counterpart Health to contribute to revenue and for details on the drivers of higher SG&A expenses, particularly concerning AEP growth and its implications for 2026.

Answer

CEO Andrew Toy explained that for Counterpart Health, the immediate focus is on expanding lives under management, with financial contributions expected later. CFO Peter Kuipers addressed SG&A, stating that while growth-related costs are significant, the company is achieving operating leverage, with SG&A as a percentage of revenue guided to improve by 200 basis points in 2025. He added that the rate of SG&A increase should moderate into 2026.

Jonathan Yong expressed surprise at eHealth's downshifting growth profile, given its successful navigation of prior dynamic environments, and asked for the reasoning behind this change. He also inquired about potential disruptions to members or payer partners as a result of this pullback.

Answer

Derrick Duke (CEO, eHealth) assured that there are no anticipated adverse outcomes for members or carrier partners. He explained that the pullback is a strategic decision for eHealth to address its own margins, mirroring difficult choices made by carrier partners. He emphasized that while past navigation was successful, it wasn't easy, and the current move expands investment in branded channels, which is a calculated step towards a lifetime advisory model and higher attachment rates for ancillary products. He also noted that potential benefit reductions by carriers could create opportunities for eHealth to offer additional products.

Jonathan Yong from UBS asked if eHealth's 2026 outlook assumes continued commission suppression from payers or if the company's pullback is a proactive measure in response to payers' margin focus. He also questioned the rationale behind downshifting growth given eHealth's past navigation of dynamic environments and potential adverse impacts on members or payer partners.

Answer

Derrick Duke, Chief Executive Officer, stated that while 2026 is expected to be disruptive, there's no indication of worsening commission suppression. He emphasized that eHealth's pullback is a calculated move to improve its own margins by expanding investment in higher-quality, branded channels, which support a lifetime advisory model. Mr. Duke assured that no adverse outcomes are expected for members or carrier partners, highlighting the strategy's alignment with filling benefit gaps and increasing ancillary product attachment rates.

Asked about the impact of the recent Department of Justice litigation on discussions with carriers regarding their marketing strategies, and whether eHealth is providing other ancillary services to carriers to help drive retention.

Answer

The executive responded that it is too soon to know the litigation's impact on carrier discussions, but noted that the sponsorship programs in question are not industry-wide and are limited to a handful of carriers. Regarding ancillary services for retention, they are still in their infancy, limited to a few carriers, and are not a significant component of revenue, though they are theoretically believed to be helpful.

Jonathan Yong from UBS asked if the Amplify platform requires changes beyond scale, questioned the dynamics of the current Open Enrollment Period (OEP), and inquired if the temporary resource shift away from the E&I segment alters the long-term strategy for that business.

Answer

CEO Fran Soistman reiterated that Amplify's strategy is sound and growth will come from adding carrier partners, while CFO John Dolan noted scale will improve margins. Soistman confirmed a more active OEP, driven by members discovering benefit changes. Executive Kate Sidorovich added that retention initiatives are performing well. On E&I, Soistman affirmed they are still 'very bullish' on the segment, particularly with future ICRA opportunities, and will continue investing to improve its platform.

Questioned the strategy for the Amplify platform, inquired about customer switching behavior during the current OEP, and asked about the long-term commitment to the E&I business after a recent resource shift.

Answer

The company remains committed to the Amplify platform's original strategy, aiming to grow it by adding more carrier partners. They are observing higher-than-usual OEP activity, which they attribute to members discovering benefit changes, and are addressing this with enhanced retention efforts. The company remains bullish on the long-term potential of its E&I business, particularly with ICRA opportunities, and will continue to invest in it.

Jonathan Yong asked about the shift in Oscar Health's metal mix, noting significant increases in Bronze and Gold plans and a decrease in Silver. He inquired about Oscar's historical experience with Bronze plans and how the company views the current mix. He also questioned the impact of the 400,000 expected member roll-off on new membership and the accuracy of third-party data given market changes.

Answer

R. Scott Blackley, Oscar Health Chief Financial Officer, stated that historical metal mix assumptions are no longer applicable due to the transition, but Bronze has consistently been a high-performing product for Oscar. He expects all plans to contribute strongly to profitability, with Bronze and Gold plans acting more similarly to Silver. Mark Bertolini, Oscar Health Chief Executive Officer, confirmed the 400,000 passive roll-off and explained Oscar's strategy of engaging 11,000 new brokers and using proprietary tools to help members transition plans, driving significant early growth. R. Scott Blackley added that third-party clinical data provides a strong basis for predicting new member performance and targeting engagement, with no concerning characteristics observed in new market entrants.

Jonathan Yong asked about Oscar Health's changing metal mix, specifically the significant increase in Bronze and Gold plans and decrease in Silver, and how the company characterizes its historical experience with Bronze plans. He also inquired about the new membership, particularly those coming from new markets, and the accuracy of third-party data in predicting their performance given market changes.

Answer

R. Scott Blackley, Oscar Health Chief Financial Officer, noted that historical metal mix proxies might be irrelevant due to the transition, but Bronze has historically been a high-performing product for Oscar, and all plans are expected to generate strong profitability. Mark Bertolini, Oscar Health Chief Executive Officer, explained that Oscar enrolled 11,000 new brokers and used its Campaign Builder software to help them transition members to appropriate plans, leading to significant new membership. R. Scott Blackley added that third-party clinical data provides a good basis for predicting new members' performance and engaging them for care management.

Jonathan Yong of UBS asked if there is a membership growth level in 2026 that would be considered too high, potentially leading to adverse selection. He also requested details on the $60 million G&A reduction and its necessity for achieving 2026 profitability.

Answer

CEO Mark Bertolini stated that Oscar has been very careful with its 2026 pricing strategy by metal level and product type to avoid adverse risk. CFO Scott Blackley detailed that the $60 million in savings comes from a reduction in force and lower vendor/hiring costs, framing it as a key lever to "solidify" the company's return to profitability next year.

Jonathan Yong asked if the 1.8 million member forecast assumes any attrition throughout the year and how the lower starting member count impacts the SG&A ratio's trajectory.

Answer

CFO Scott Blackley stated that membership is expected to be roughly flat for the year, as typical lapse is built into the forecast and expected to be offset by new member growth. He noted that SG&A guidance already reflects continued improvement and investments for growth. CEO Mark Bertolini confirmed the operating leverage calculation is based on the 1.8 million member figure and highlighted that ongoing AI initiatives are helping to drive SG&A down faster than previously projected.