Alignment Healthcare (ALHC) Baird's 2024 Global Healthcare Conference summary

Utilization and cost management

• Utilization has remained within expectations year-to-date, with MBR up 150 basis points despite 50% membership growth, outperforming industry peers who saw higher MBR increases with less or negative growth.

• Effective cost management and member engagement have supported strong positioning, with visibility and control over utilization pressures through a robust care delivery model.

• Gross profit and EBITDA guidance remain on track, with significant membership growth and only moderate MBR increase.

• Cohort maturation is expected to drive a 300 basis point MLR improvement as new members transition to year two, providing a tailwind for 2025.

• Unified data architecture enables real-time actionable insights, supporting efficient cost structure and operational control.

Star Ratings, regulatory changes, and industry outlook

• CMS changes to Star Ratings and risk adjustment aim to reinforce high-value care and reduce financial engineering, which aligns with the company's population health focus.

• Investments in member experience and retention are expected to improve Star Ratings, positioning strongly for 2025 and 2026.

• The introduction of the Health Equity Index in 2028 is seen as a tailwind, with strong performance among low-income and dual-eligible members.

• Industry-wide, many plans are reducing benefits and facing increased switching due to lower Star Ratings, while the company expects to maintain a competitive edge.

• The future of Medicare Advantage is seen as population health-driven, rewarding those who deliver quality outcomes.

Margin strategy, benefits, and competitive positioning

• 2025 bids are more margin-focused, leveraging tailwinds from Stars and V28 to maintain competitiveness even with some benefit reductions.

• Consistency in benefit offerings and broker relationships has built a strong brand, expected to support a successful AEP.

• Benchmark rates are up 5% company-wide and 5.5% in California for 2025, outpacing expected unit cost increases and supporting benefit stability and MBR improvement.

• The company is confident in achieving consolidated MBR improvement and EBITDA expansion in 2025.

• Cost structure advantages stem from unified data and operational discipline, enabling scale and efficiency comparable to much larger peers.