At the intersection of tech and health insurance

Brian Withers (CLOV): People aged 65 and up are the fastest-growing population group in the United States today. In 2010, this cohort made up only 13% of the population. By 2018, it had jumped to 16.1%. It’s estimated that 10,000 people join this large group of seniors every day and more than 68% have two or more chronic conditions. It’s not surprising that this market for medicare advantage plans to serve this group is a massive $270 billion and expected to grow at 14% per year.

What if you could design medicare advantage plans using technology and machine learning to enable caregivers to make better, more informed decisions resulting in lower costs for patients? That would be a winning formula, and that’s exactly what Clover is betting on.

It uses its leverage as a medicare advantage provider to collect large amounts of data about its patient’s care and provides access to the information to physicians in the network through its Clover Assistant application. This data portal can be tremendously helpful to treating physicians as patients may not always remember all of their medications or what care plan a previous specialist recommended for them. As its membership grows, the data and the information should only get better making it a sustainable model to improve health care outcomes and costs for patients.

Clover has only had one quarter as a public company, but investors have access to the last two fiscal years of results and its estimate for the coming year.

Metrics

FY 2019

FY 2020

FY 2021 Estimate

2019 to 2020 change

2020 to 2021 change

Revenue

$462 million

$673 million

$835 million

14%

24%

Members 

42,592

58,056

69,000

+36%

+19%

MCR*

98.6%

88.7%

100%

(9.9%)

+11.3%

Data source: Company shareholder letter. MCR=medical cost ratio or the total net medical claim expenses incurred divided by premiums earned (lower is better).

Revenue and member growth have been solid and its medical cost ratios have been kept at manageable levels. But investors should be excited about the massive growth runway for this upstart. Even though the company collected almost $700 million in premiums this past year, it only offers plans in 108 of the 3,000 counties across the U.S.

With a greater than 50% acceptance rate of its Clover Assistant app with independent physicians, this model looks like it has a chance to work. If you are excited about a company that’s looking to change healthcare for the better in the U.S., you might consider Clover for your portfolio. Especially with the stock down over 35% from its high earlier in the year, even with the recent surge in its share price.