Alignment, a Medicare startup with more members than Clover, is going public. Its S-1 reveals how it's narrowing losses while transforming care for the sickest patients.

  • Alignment Healthcare, one of the biggest Medicare Advantage upstarts, has filed to go public.
  • The health insurer wants to transform healthcare for older people through technology and coordinated care.
  • We combed its S-1 to find out more about its business and strategy. 
  • Visit the Business section of Insider for more stories.

Health insurer Alignment Healthcare, one of the biggest startups selling coverage in the competitive health-plan market for seniors, has filed to go public amid a wave of digital-health initial public offerings.

Private equity-backed Alignment filed for an IPO on Wednesday, the same day insurer Oscar Health made its lackluster stock-market debut. Alignment’s rival Clover Health also went public in January in a $3.7 billion SPAC deal.

Alignment, which was founded in 2013 by CEO John Kao, wants to use technology to transform health care for people in Medicare Advantage, the private alternative to the traditional Medicare program for people 65 and older.

The cornerstone of its business model is its technology platform, called Alignment’s Virtual Application. The platform gathers and analyzes data from more than 200 sources, such as medical claims and hospital admissions, to personalize members’ care and improve their health outcomes, according to its S-1 form filed with the Securities and Exchange Commission.

Alignment also has its own internal teams of doctors and other clinicians to care for its sickest or chronically ill members that drive the majority of its medical claims, the S-1 shows.

Competition is fierce in Medicare Advantage as thousands of people become eligible every day, but investors and private-equity firms are betting Alignment can make its mark.

The insurer raised $135 million in funding from investors in March 2020. In total, it’s raised $375 million since its inception.

At 81,500 members as of February, Alignment serves more people in Medicare Advantage plans than a number of other hot insurance startups. Clover had about 66,000 members as of February, its CEO Vivek Garipalli said during the company’s fourth-quarter earnings call on Monday.

We combed Alignment’s S-1 form for more details about its business and strategy.

Alignment is quickly growing its membership and revenue 

Alignment operates health plans in 22 counties in California, North Carolina, and Nevada. It ended 2020 with 68,323 members, up 39% from 49,313 members in 2019. That figure has since grown to 81,500.

CEO Kao told Insider in January that the company’s membership growth was driven by its expansion into eight new counties in 2020, five new counties this year, and its investment into its health plans.

Alignment’s revenue jumped in 2020. It collected revenue of $959.2 million last year, an increase of 27% over 2019.

The insurer has never made a profit, but its losses are narrowing. Its net loss was $22.9 million in 2020, compared with $44.7 million the year before.

Meanwhile, Oscar, which is in its second year of selling Medicare Advantage plans, posted a net loss of $406.8 million in 2020, compared with $261.2 million the year before. Oscar mostly sells plans on the Affordable Care Act’s individual marketplace. It serves about 3,200 people in Medicare Advantage, according to federal data.

Clover’s net loss narrowed to $91.6 million in 2020, from $363.7 million in 2019.

Alignment employed 775 people as of the end of 2020, according to its S-1.

The powerful people and firms backing Alignment

Alignment’s biggest shareholders are private-equity firms General Atlantic, Warburg Pincus, and investment management firm Fidelity Investments.

General Atlantic pumped $125 million into Alignment during its first round of funding in 2014, when the company began building out its technology platform. It received another $115 million in funding from Warburg Pincus in 2017.

In 2020, Alignment received an additional $135 million from Fidelity Management & Research Company, T Rowe Price Investment Management, and Durable Capital Partners.

Former government healthcare officials have sat on Alignment’s board of directors.

Dr. Mark McClellan, former administrator of the Centers for Medicare and Medicaid Services and former commissioner of the US Food and Drug Administration, currently sits on the board, according to the company’s S-1.

Andy Slavitt, another former CMS administrator and current Biden administration COVID-19 advisor, formerly served on Alignment’s board. Slavitt is still involved: he provided consulting services to the company in 2020, according to the S-1.

Alignment laid out how it cares for its sickest members

Most of Alignment’s members get care from its network of local doctors in their communities. But Alignment has another program for its most vulnerable, costly members, according to its S-1.

Alignment uses its technology platform to pinpoint chronically ill members with conditions like chronic heart failure or COPD. In 2019, just 9% of its members fell into the chronically ill category, but they accounted for more than 65% of its medical claims.

Alignment cares for those people and patients at risk of becoming chronically ill through a program called “Care Anywhere,” which it launched in 2017.

The program is staffed by doctors, advanced practice clinicians, case managers, social workers, and behavioral health coaches that Alignment employs.

Those clinicians coordinate care for their patients where they want to receive care, which is typically in their homes, or through video or by telephone, according to the S-1. The care teams also address social needs, like access to meals or transportation. The program currently serves 4,000 high-risk members.

“Unlike many managed care plans, we have built these services in-house to provide valuable, high-quality care to members for free, which complements the care provided by our provider partners for their most challenging and resource-intensive patients,” Alignment said in the filing.

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