Takeaway: This webcast originally aired on February 10, 2021. Replay and transcript are available below.

Dear Investors,

In this special feature webcast, Hedgeye Health Policy analyst Emily Evans delves into the Clover Health (CLOV) debate with Healthcare analyst Tom Tobin

Watch as they team up to dissect the narrative-ridden company that has been "pumped" beyond what the numbers say. This is a unique opportunity to see a stock from the policy and fundamental angles.

Below we have transcribed key excerpts from their conversation. You can watch the entire hour-long interview below.

. . .


What is Clover Health (CLOV)? Well, it's basically an insurance company in New Jersey.

They’re in a regulated space of a heavily regulated market.

Through Q1, it only had about 64,000 members.

A lot of their members are in New Jersey, and so is the vast majority their growth. Even with 2021 data, what we have with $CLOV is a local state-based insurance plan.

They have some growth in Georgia, but it’s marginal at best. They have about 2,800 members there at the moment, which is driven largely by the Walmart relationship.

To great fanfare, Walmart announced they were launching Walmart Insurance Services late last year. Now based on the press releases from Clover, they say this partnership is a huge opportunity.

But really, this is a bake-off.

Walmart has engaged with a variety of health insurance companies to run plans for them, as they explore which health insurer does better than others. Humana, Anthem, Simply Health, Clover, and more, are all involved.

When it comes to enrollment growth, Clover is mostly just growing with the population – they really have no secret sauce. They’re middling along, so to speak.

Their market share gains are modest.

The company talks about how they’re getting 50% of new eligible enrollees, and I really couldn’t find that in the data. The way they define their markets is vague; they don’t say if it’s at the county level, multiple counties, etc. So I couldn’t see where they pulled that number from.

This is what you’d expect from a local insurance plan, not from a disruptor or a company “out to change the world”. And you’re not likely to change the world with an insurance company.

Frankly, Clover is not very good at what they do either.

The amount of money they pay out for benefits, versus the amount they take in for premiums, is at a shortfall. The parent had to inject about $20million just to meet the state commissioner’s required solvency requirements.

Not only is this not a profitable company, it’s not even one that can meet the solvency and capital requirements form the state it operates in.

There’s no real evidence they’re capturing a higher acuity or doses that have gone unnoticed from the annual payments via the federal government.

Their premium income is actually lower than their benefit expense… so that’s an underwriting loss. There aren’t good expense controls. Another interesting feature is their unpaid claims over 120 days, which have been increasing throughout 2020.

The vast majority of Medicare Advantage plans are 4-5 stars. Clover Health? 3.5 stars... for years.

This isn’t a great performance, in categories the company has said they’re great at… it’s supposedly their “secret sauce”. Not to mention, their surveyed customer satisfaction is subpar as well.

Humana or Anthem, well they’d probably have to fire someone, if they didn’t meet that 4-star threshold.

Clover just cannot capture providers in their open network, meaning they cant capture clients, meaning they can’t capture government bonuses for high-star companies.

Clover is pitched as a technology company. This platform is not particularly innovative. It’s pitched to doctors as a way to increase reimbursement, while it’s pitched to investors as a world-changer.

Those two aren’t the same thing.

Remember – the physician’s are paid to use the Clover system, which primarily explains why Clover is so prevalent in Fort Lee and Jersey City, where doctors are operating on very thin margins. So, I’m sure they’re happy to improve their reimbursement. That motivation will decrease.

So what is the Clover system? Who knows.

The idea that Clover Health is going to be a transformative technological answer to Medicare Advantage, let alone health insurance more broadly, is proven out to be false here.