Tech-Focused MA Startups Chase Tailwinds in New Markets
Reprinted with AIS Health permission from the September 3, 2020, issue of RADAR on Medicare Advantage.
In advance of the 2021 Medicare Annual Election Period (AEP) that starts on Oct. 15, venture-backed Medicare Advantage firms like Alignment Healthcare and Clover Health are unveiling their plans for expansion while new startup insurers are declaring their intentions. Although the collective membership of startups is a drop in the bucket compared to the five major insurers that dominate two-thirds of the MA market, one expert says their focus on technology positions them for enrollment success during the COVID-19 pandemic, as long as they can follow through on the clinical side.
Given the increasing share of Medicare beneficiaries who select MA over fee-for-service Medicare, the maturity of the program, and the aging baby boomer population, “organizations are comfortable with both the costs and the revenue streams associated with [MA] and are building infrastructures from the ground up to be able to be successful,” observes Jason Montrie, president of Pareto Intelligence, a Convey Health Solutions company. “And I think we’re seeing there’s a lot of available capital. [Startups] are looking in new markets…where they think they can be successful, they can acquire new investors, and they can grow in a market that has a lot of tailwinds.”
Alignment Healthcare, Bright Health, Clover Health, Devoted Health and Oscar Health collectively have raised $3.9 billion in private funding, estimates the blog Healthcare Pizza. Combined with the other factors Montrie mentions, the “opportunity of technology-first MA startup plans to better reduce administrative fees (‘Administrative Loss Ratio’ or ‘ALR’) and control medical spend (‘Medical Loss Ratio’ or ‘MLR’) seems too good to pass up,” writes Andy Mychkovsky, who authors the blog devoted to health care startups.
“There’s a lot of energy and excitement around, how can organizations serve the customer better and do so in a modern way and disrupt the market?” says Montrie. “And the thesis around a lot of these organizations is, how can they build a purpose-filled platform for a segment of the population that they feel is either underserved by the current market participants or there’s a current unmet need that can be served? And so, we see a lot of organizations leading with technology” and building the IT infrastructure from the ground up rather than redesigning a legacy system, giving them an edge over established MAOs, he observes.
Clover Plots Major Geographic Expansion
After a wildly successful 2020 AEP, Clover Health says it plans to triple its geographic footprint, pending CMS approval, by increasing its MA service area to 108 counties in eight states. Sixty-nine of the new counties are in Clover’s existing markets of Arizona, Georgia, New Jersey, Pennsylvania, South Carolina, Tennessee and Texas, while five are in Mississippi — a new market for the company. The MA-focused health care technology organization currently serves 57,000 members in 34 counties across seven states.
The expansion brings Clover’s MA offerings to a potential 5 million Medicare eligibles, estimates the company. President and Chief Technology Officer Andrew Toy tells AIS Health that Clover believes its combination of low out-of-pocket costs and an open provider network has been a significant driver of past growth and will contribute to future growth.
“We’re incredibly proud of the ways we’ve been able to embrace our DNA as a technology company to support our members during Covid-19,” he adds in an email to AIS Health. During the first two weeks of the pandemic, the firm rolled out functionality to support the use of telehealth for its providers and supplied them with lists of their most at-risk patients so that they could proactively reach out to them. “Our ability to quickly ramp up telehealth capabilities and integrate them into our Clover Assistant platform has allowed us to stay almost at parity with the number of primary care visits taking place pre-pandemic, where other insurers have seen a 40-80% drop in visits,” he adds. The Clover Assistant app assists primary care providers at the point of care by using machine learning to prioritize care recommendations and deliver evidence-based protocols.
Meanwhile, Clover has identified a significant percentage of members who don’t have the technology to engage in a video visit, so it is “looking at creative ways to make sure this population is properly managing their health,” adds Toy.
Oscar, Providers Prepare Florida Launch
Following its 2019 entry into the MA market with plans in Houston and New York, Oscar Health recently unveiled plans to launch a co-branded MA plan with two providers in Broward County, Fla. This is the not the insurer’s first foray into the “payvidor” space; it launched a joint venture with Cleveland Clinic in 2018 to offer co-branded products both on and off the Ohio health insurance exchange. Oscar’s membership in MA remains small, with just under 1,800 members, while it has upwards of 410,000 members in the individual market.
Ananth Lalithakumar, vice president and general manager for Medicare Advantage products, says the 2020 expansion into MA tested a thesis that it could increase adoption of its health care technology tools among seniors, and that Oscar is “incredibly excited” to team up with Holy Cross Health and Memorial Healthcare System in Broward to offer the Oscar + Holy Cross + Memorial Health Medicare Advantage plan. He tells AIS Health that the value-based partnership is built on an aligned view of the “quadruple aim” (i.e., improved member experience, lower cost, higher quality, better empowerment of physicians) and will leverage Oscar’s established technology platform with “trusted providers in the community who seniors are used to seeing.”
When considering a new market, Oscar looks at the usual business model variables, such as whether the market is strong, competitive and/or growing, what the MA benchmark rates are there and whether the company can see a path forward for “delivering better experiences and also becoming profitable in a short time frame,” explains Lalithakumar. But it also considers whether a provider system there can align with its goals of engaging members through technology tools and service support, and Oscar believes it found that with Holy Cross and Memorial, he adds.
Lalithakumar notes that Oscar has an industry-leading net promoter score of 36 in the Affordable Care Act market and believes it can “take many of those same ingredients” that worked there to engage members and apply them in MA. “What we’ve seen in the adoption of our tech solutions doesn’t necessarily vary by age,” he says. “The millennials tend to use our solutions in the same range as the 55-plus population, and the early indicators based on the 1,800 members we have in MA reflect the same thing.
“The pandemic accelerated the need for technology-enabled, visually enabled virtual solutions and we’ve done a great program to roll out and engage our members through this pandemic in New York and Houston, two of the markets that were hit [hardest] by the pandemic,” he continues. “And we’ve seen increased use of our tech tools and virtual platform, and we believe that the thesis holds stronger on why Oscar would be able to serve the Medicare population.” Lalithakumar adds that Oscar is still “having a lot of conversations” around additional MA expansions but cannot comment on them at this time.
Alignment Healthcare, which was founded in 2013 with a sole focus on MA and had a strong 2020 AEP and Open Enrollment Period (OEP) with the addition of about 14,000 members in California, recently unveiled its intention to enter several new markets across California, Nevada and North Carolina. Pending regulatory approval, the product expansion would enable Alignment to reach more than 5.9 million Medicare-eligible beneficiaries, according to an Aug. 6 press release.
The insurer said it plans to introduce several new products, “most notably a signature virtual health plan to provide seniors a safe, convenient and personalized virtual care option,” and at press time unveiled a new plan option in San Diego County featuring Scripps Health. Alignment currently serves about 65,000 MA members in California, a 34.9% increase from last year, according to AIS’s Directory of Health Plans. In a June interview with AIS Health, Alignment attributed that success in large part to geographic expansion and new co-branded offerings with Sutter Health, as well as an “on-demand personalized concierge” feature and its data-driven approach to closing care gaps.
“It’s a really powerful combination when done well because I think time and time again studies and choosing patterns have shown that provider brand can and often does trump payer brand,” says Montrie of payer-provider pacts like Alignment’s with Sutter. “So for your ability to attract customers, being able to leverage in many communities what is one of the largest employers and a well-respected entity is a really powerful way to have a new market entrant with not a lot of brand equity enter a marketplace and to do so in a way that consumers trust.”
The steps beyond member acquisition, however, are where new entrants’ capabilities will really be tested, suggests Montrie. “How do you integrate the clinical capabilities and capacity of the delivery system and the providers with your plan offering and do so in a way that can maximize the benefits to the member? [How do you] take the best care of that member [in a way] that ultimately results in better star ratings and risk adjustment capabilities?” he asks.
There are other challenges as well. “It’s not easy to build an entire infrastructure for a health care system and an insurance organization in a very highly regulated market,” adds Montrie. “You can go in with a lot of great ideas and notions that you’re going to disrupt the entire category, but understanding and making sure that you’re doing so in a way that is respectful and taking into account the regulatory environment is a real challenge.”
Clover, for one, made headlines last year when the tech startup laid off about a quarter of its workforce with the intent of acquiring more health care experts. The company, which launched its first MA plans in New Jersey in 2015, was fined for a marketing violation the following year and made a few other reported missteps that led to some restructuring. But after a major service area expansion in 2020, Clover picked up more than 14,000 members during the 2020 AEP and OEP.
When asked how the restructuring has strengthened the organization, Toy responds: “We believe our performance over the past year speaks for itself. Last year we were the fastest-growing Medicare Advantage [plan with] over fifty thousand members, and our unit economics and maturity as a company has continued to improve. However, what’s most important is that, through the Clover Assistant, we’re raising the quality of care delivered to our members so they can be as healthy as possible.”
By Lauren Flynn Kelly