The medical loss rate of Insurtechs is at a level, if they are the patient’s body temperature, they will be diagnosed with fever.
As of the third quarter on September 30, the newly listed insurtech companies Oscar Health, Clover Health, and Bright Health Group all had medical loss rates close to triple digits, and only Alignment Healthcare effectively managed the medical expenditures of its members.
Insurance companies must spend at least 85% of the insurance premiums on patient care, and the rest can be used for management expenses and profits. This means that every insurance company strives to achieve MLR as close as possible to 85%.
The failure of Oscar, Clover, and Bright Health to manage member health care expenditures shows that they have a fundamental misunderstanding of the insurance industry or a flawed business model because they face the same macroeconomics as other insurance companies that have better control of costs Trends, said Ari Gottlieb, head of Chicago. A2 Strategic Group Consulting Company.
“Fundamentally, the core business model is that they enter new markets, they underestimate their business, which is a commodity business, they underestimate it to win membership to show the growth of Wall Street, and then it falls apart in a year,” Gottlieb Said.
He added: “Their pricing is too low, and as the plan’s deductible is higher, the utilization rate has risen over the course of the year.”
The following is a breakdown of the financial performance of each insurtech company, in descending order of how much the company spends on patients’ medical expenses compared with the premiums collected.
1. Bright Health Group’s MLR reached 103%, Due to the increase in claims related to COVID-19 and failure to accurately measure the risk of new registrants acquired during the special registration period. Bright Health in MinneapolisCompanies that provide individuals, small groups, and Medicare Advantage plans generated $1 billion in revenue during the quarter, an increase of 206.3% from $727 million in the same period last year. The company’s revenue growth was mainly attributable to premiums collected from new members. The number of new members increased nearly four times year-on-year to 890,899. At the same time, the insurtech company’s net loss increased by 400.7% year-on-year to US$296.7 million. Bright Health was founded in 2016 by former UnitedHealth Group executives.
2. Clover Health’s MLR is 102.5%. Clover in Nashville, TennesseeCompanies operating the Medicare Advantage program generated $427.2 million in revenue during the quarter, an increase of 153% from the $169 million reported in the same period last year. The company’s income is almost evenly generated through Medicare Advantage premiums and Direct Contracting, a federal plan where insurance companies manage the risks of traditional Medicare participants that will expire at the end of the year. At the same time, Clover’s net loss widened to 34.5 million U.S. dollars, while net income reported in the third quarter of 2020 was 12.8 million U.S. dollars. Clover Health went public earlier this year in a $3.7 billion special purpose acquisition company transaction, which was provided by serial investors and social media celebrity Chamath Palihapitiya.
3. Oscar Health’s MLR is 99.7%. Oscar based in New YorkRevenue from providing individuals, small groups and Medicare Advantage plans was US$443.9 million, an increase of 336.4% from US$101.7 million in the same period last year. Most of the company’s revenue can come from the premiums of new individuals and small group members-its total number of registered people increased by 41.4% year-on-year to 594,284. As the number of members increases, medical expenses also increase. Oscar’s net loss widened to US$212.7 million, higher than the US$79.1 million reported in the same period in 2020. Oscar was co-founded by Josh Kushner in 2012, with the goal of achieving profitability in 2023.
4. Alignment Healthcare’s MLR is 85.7%. Alignment in Orange, CaliforniaProvide Medicare Advantage plan, revenue increased by 18% year-on-year to 293.5 million US dollars. The number of members of the company also increased by 86,000, an increase of 29% over the same period in 2020. The increase in tests and treatments related to COVID-19 resulted in a net loss of US$45.8 million in the third quarter, while net income reported for the same period was US$10.8 million. same time last year. Alignment was founded in 2013 by former insurance and technology director John Kao.
“I don’t think Alignment is interesting, I think it’s a compliment,” Gottlieb said. “These people know how to make a health plan and will continue to implement it.”
