"What? Over? Did you say 'over'? Nothing is over until we decide it is! Was it over when the Germans bombed Pearl Harbor? Hell no!...
Germans?
Forget it, He’s rolling."
- Animal House (1978)
For several years, I served in public office with a gentleman named Michael Craddock. Craddock, as he is known, and I could not be more different. He is high school educated, served a blue-collar part of town and speaks with the cadence of a southern preacher; the pitch of his voice rising and falling, the speed of delivery accelerating then retreating, driving his message with preternatural clarity. I, on the other hand, represented an area of town known as Belle Meade, which is exactly what is sounds like.
I admire Craddock for a few reasons not the least of which was his most insightful observation, “perception is the cruelest form of reality,” he would say. It should be no surprise that he was an early and enthusiastic adopter of social media, at one point managing several dozen accounts under various aliases.
Armed thus, Craddock could make the crowd appear where there was none. While I never knew him to rally his followers with claims the Germans were in Hawaii Dec. 7, 1941, he did manage to alter the future of a few real estate development projects and elect a long shot candidate to serve as Property Assessor.
Back to the Health Policy Grind…
CLOV is the most unlikely of meme stocks. It is a health insurance company in New Jersey with about 66,000 members that are over 65 and generally live in high poverty areas of the state. The regulated nature of the insurance industry means CLOV acquires most of its customers once a year. The company underperforms in nearly every metric by which a health insurer’s success is measured, the most important of which is cost control.
All those things are interesting to a health policy analyst. Fortunately, we have Keith McCullough to remind us none of it matters in #Quad2. The crowd has gathered, and the talking points distributed. All that is to be done is await perception to yield.
Yield it must.
The CPI print yesterday, while not as directly and immediately relevant to health insurance itself, continues to paint a picture of higher labor and goods costs that, in a regulated industry like health care, will require substantial cost management – something CLOV seems to think is not necessary.
Eschewing the usual provider network structure in favor of proliferating their Clover Assistant website among the physician community, CLOV spent about 107% of the premiums it took in on health care benefits in 1Q 2021. The company’s primary insurance subsidiary, from which it derives most of its revenue, has experienced underwriting losses in every quarter since 2016 except two: the peak pandemic months of 2Q 2020 and 3Q 2020 when many physicians’ offices were closed.
The future is no brighter than the past. Pick any data point you wish, personal consumption expenditures, wages, producer price index. They all point to more and more expensive care in the aftermath of COVID-19. Meanwhile the revenue CLOV receives from the federal government to pay the health care expenses of its members is revised only annually and on a lag.
For a large insurer like UNH, this different kind of squeeze is manageable due to their vast scale and influence. Last week the company announced that it would apply retrospective reviews of emergency room visits, suggesting claims denial of non-emergent care. They have since walked back their policy change but the fact that it was proposed means they are trying to manage benefit costs more aggressively than ever.
The foregoing analysis proves the original point which is, if you had asked me to pick a health care meme stock, the last place I would look would be the tired, boring and extremely complicated worth of health insurance in the federal Medicare program. It is about as relatable as the action at your grandmother’s duplicate bridge tournament.
I applaud r/WallStreetBets and their efforts to disintermediate Old Wall and its frequently self-serving analysis. I also cannot help wondering who is disintermediating whom. If you are a company looking for a long leash and softball questions, cultivating a following among people who have not yet learned the difference between Medicare and Medicaid can be useful.
It reminds me of a time when an unusual number of people took an interest in the race for Davidson Co., TN’s Property Assessor.
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Have a great day out there,
Emily Evans
Managing Director Health Policy
