There are too many differences between a “disruptive” technology company in Palo Alto and a Medicare Advantage insurance carrier in New Jersey to enumerate. If we were so inclined to state the obvious, at the top of the list would be the limited number of opportunities for customer acquisition.
The most important opportunity is the Annual Enrollment Period in October, November and December each year. Most plans acquire 70-75% of their new enrollment during AEP and it is reported by CMS at the beginning of January. Additional enrollment gains occur during the Special Enrollment Period which runs from Jan. 1 until March 31, but they are small by comparison. For the balance of the year, gains and losses are merely a function of who ages into the program and who dies.
The predictability of the enrollment patterns in Medicare Advantage made us confident that the $CLOV would never meet its stated target of 73.5k members in 2021. For the 2020 plan year, Clover acquired 76% of its 13,000 net new members during open enrollment. It picked up another couple of thousand in January and by February the year was mostly baked
The pattern persists for 2021. This morning CMS released February enrollment numbers which reflect all new members from the Annual Enrollment Period (Oct.- Dec.) plus those who enrolled in January 2021. Based on experience, the 65,637 $CLOV members reported today should represent about 90% of total net membership for the year.
We can expect, then, something on the order of 66,500 average monthly membership in 2021 for $CLOV, about 10% shy of the projected financial results published in its investor deck. The good news is that this weak showing in enrollment will be partially offset by a higher than anticipated federal capitated rate. The enrollment weighted monthly rate will be about $1,000 PMPM versus an anticipated $988.
The bad news is that Medicare Advantage enrollment overall is slowing. YoY quarterly growth peaked at 11.8% at the end of 2019 and is now decelerating modestly. Having missed the mark for 2021, $CLOV will have difficulty meeting the planned objective of profitability in 2023, barring some external event like an acquisition.
The worse news is that in a slowing environment $CLOV has fewer levers to pull, relative to its competitors, to retain and grow market share. $CLOV already offers zero premium plans in its markets. Drug rebates of $10-$11 million a quarter are not likely to improve dramatically given the prescription volumes associated with a small membership. The lack of regional market muscle outside of New Jersey and the company’s decision to operate an open network means it has little control over its benefit spend. That final point could have serious implications as COVID-related pent-up demand is released later in 2021.
At some point in the next several weeks, the company is going to have to acknowledge the enrollment reality. When that opportunity comes, some pointed questions about their much-celebrated Direct Contracting opportunity, something for which we can find little concrete evidence, are also in order.
Call with questions.
Emily Evans
Managing Director – Health Policy
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