Ladies and gentlemen, thank you for standing by. Welcome to the Clover Health fourth q uarter 2020 earnings conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. As a reminder, today's program may be recorded. Now I'd like to introduce your host for today's program, Dylan Sullivan. Please go ahead.
Welcome to Clover Health's inaugural earnings call, where we will discuss Clover Health's fourth quarter and full year 2020 results, our 2021 financial outlook, and a comprehensive update on the business. Joining me today are Vivek Garipalli, Chief Executive Officer, Andrew Toy, President and CTO, and Joe Wagner, Chief Financial Officer. Before turning the call over to Vivek, I'd like to let you know that today's call is being broadcast to Clover Health's investor relations website. During today's presentation, we will make forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize, and actual results in financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected.
These risks include those set forth in the press release we issued earlier today, as well as those more fully described in our filings with the Securities and Exchange Commission. Forward-looking statements in this presentation are based on information available to us as of the date hereof, and we cannot, at this time, predict the full extent of the impact of COVID-19 pandemic and any resulting business or economic impact. We disclaim any obligation to update any forward-looking statements except as required by law. During the call, we'll make reference to our financial measures that do not conform to generally accepted accounting principles, including, but not limited to, adjusted EBITDA and normalized medical care ratio, or MCR. This information may be calculated differently than the non-GAAP data presented by other companies. Quantitative reconciliations of our non-GAAP financial information to the directly comparable GAAP financial information appears in today's earnings release.
With that, I'll turn the call over to Vivek. Vivek?
Thank you for joining us today. I'm honored to welcome you to our first earnings call as a public company. While we don't consider ourselves a traditional health plan, we are the first health insurer to have gone public in over 15 years. 2020 was a difficult year for healthcare as our industry rose to the numerous challenges posed by the pandemic. Nevertheless, it was also a transformative year for Clover. We scaled our offering and serviced more than 58,000 Medicare Advantage members by year-end and realized over $670 million in total revenue for the year. Additionally, despite COVID-related headwinds, we had another solid annual enrollment period this year. As of February 2021, we had more than 66,000 members, an increase of approximately 20% as compared to February 2020. We're proud of how we've scaled our technology platform.
As of the end of the year, approximately 32,400 members, or 56% of total membership, were managed by a primary care physician that was live on the Clover Assistant. This represents a 43% increase year-over-year, underpinned by our ability to expand coverage despite inherent impact new members have on the overall growth rate. In fact, 63% of returning members and 46% of new members were managed by a PCP that was live on the Clover Assistant. This proliferation of our technology has had a clear impact on our margin profile. Returning members that see a physician who was live on the Clover Assistant by year-end 2019 had a full year 2020 MCR of approximately 83% after normalizing for estimated one-time COVID related costs. As a reminder, this MCR is at three stars.
We built the Clover Assistant to reduce variability in physician care and to enhance the lives of our members. The traction we have seen to date demonstrates the value of our scalable platform and overarching go-to-market strategy. As we reflect back on 2020, we would be remiss not to consider the global impact of the COVID-19 pandemic, not only in healthcare, but in consumer behavior as the pandemic accelerated the digitization of everything around us. Our technology first business model enabled us to take action, including making prescriptive investments to make virtual care accessible for our members. More consistent and systematic use of technology across the patient journey has markedly improved the service we offer our members. The COVID-19 pandemic upended all precedent and historical trends. It created opportunities, but also infused uncertainty.
From a financial standpoint, on a full year basis for 2020, the deferral or elimination of certain healthcare services due to COVID-19 had a slight net benefit to our medical care ratio, offsetting testing and other treatment costs that were directly attributable to the pandemic. That benefit was most pronounced during the second and third quarters of the year. During the fourth quarter, similar to what other insurers experienced, that full year benefit was somewhat diminished as a result of higher levels of COVID-specific care and treatment for our population, combined with the increased utilization of services that had been deferred in previous quarters. Our full year normalized MCR for 2020 was 90.5%. Which represents an over 800 basis point improvement over full year 2019, resulting primarily from operational efficiency and the increase in the number of members managed by a PCP that uses the Clover Assistant.
While COVID-19 has negatively impacted aspects of our financial results in the fourth quarter, we entered 2021 with strong momentum, we are excited by the opportunities ahead of us. We are in the process of integrating new revenue streams, expanding our addressable market through the launch of our Direct Contracting entity, Clover Health Partners. We are confident in our ability to drive adoption of the Clover Assistant and scale our business through both vectors. Since this is our first earnings call as a public company, Andrew Toy, our President and CTO, will take a moment to provide a brief overview of Clover Health and our technology platform, the Clover Assistant. I'll come back and outline our growth initiatives before our CFO, Joe Wagner, details our financial results and future expectations. Afterwards, we will be happy to take your questions.
We have also posted a shareholder letter on our investor relations website, which I encourage everyone to read. With that, I'll turn the call over to Andrew.
Thanks, Vivek. It's no secret that healthcare is completely broken on many, many levels. This is the problem that we founded Clover to solve. The key that underpins Clover Health is the Clover Assistant, our proprietary software platform that's designed to make it extremely easy for any physician to leverage data to care for our members. In 2020, there was a demonstrable impact for patients visiting a CA-powered physician, with nearly one net new diagnosis and care plan confirmed per member via Clover Assistant technology. On that note, tomorrow at 10:00 A.M. Pacific Time, I'd like to invite you all to attend the first edition of Clover Assistant Online. This will be our first product and technology showcase for our platform. I'll be offering a deeper dive into the Clover Assistant.
I will also be joined by our clinician team for an educational session highlighting where we are with the Clover Assistant, key features we see working in production, feedback from physicians, and a peek into a few future features and upcoming launches. The stream will be available on our investor relations website, and a replay will be available on demand. We also have other resources, including video demos and physician testimonials, available on our investor relations website to help you better understand how our software creates a moat for Clover Health. As mentioned, the core goal of our strategy is to scalably reduce the variability of clinical decision-making through our technology platform, the Clover Assistant. As an example, take your 80-year-old mother or grandmother.
If she goes to see 10 different primary care physicians, she could come away with 10 different variants of diagnoses, treatment plans, medication regimens, and dosages. It's not that these are bad physicians, they're not. Physicians today often just lack access to prioritize actionable clinical data at the point of care, data that is not usually paired with personalized evidence-based protocols. They end up relying on historical practice patterns and intuition. The individual decisions that are made lead to a dispersion of outcomes and a high cost of care, and it ultimately hurts the patient. We knew that technology could solve this problem and raise the level of care for any and all physicians out there. We chose Medicare Advantage as the initial go-to-market strategy for the Clover Assistant because it allowed us to most effectively develop and scale our technology.
At the core of improving care is having a business model that firstly gives us access to breadth and depth of data. Secondly, is aligned with the consumer so that driving improved outcomes and reducing variability in care is economically good for the consumer and us. Thirdly, puts us in a position to be able to deploy technology on our own terms and not be subject to selling software to others or relying on third-party software that releases updates at a slower cadence. By the way, we believe approximately $1 billion of revenue is being created every week in the Medicare Advantage market. It can't be a winner-take-all or even a winner-take-most market, so we believe we have a massive opportunity despite large incumbents.
As we scale the Clover Assistant in this fast-growing market, reducing costs and improving outcomes, we believe we can viably offer attractive, obvious plans that draw more and more members. We can offer these plans across a myriad of markets because of our clinically focused technology platform that can scale at the speed of software. We call our plans obvious because we take the things that are most important to a consumer, Can I see my physician? And, What is this going to cost me? Offer plans that directly address these key questions. In practical terms, that means we offer wide network PPO plans at costs that are lower than HMOs. We also strive to ensure that the cost-sharing when seeing physicians out-of-network is the same as seeing physicians in-network.
We view this dynamic as a flywheel, which we believe is akin to the fastest-growing technology companies in the world. Consumers select our obvious plan, our platform aggregates and learns from more data, and the output improves each and every day, strengthening our value proposition each and every day. Given that our ability to offer wide network obvious plans is underpinned by software that can scale to any and all physicians, we believe we can efficiently and quickly scale our flywheel nationwide. Now I'll turn the call back over to Vivek.
Thanks, Andrew. Turning to our growth drivers. As we discussed throughout our transaction to date, we've relied predominantly on the strength of our MA plans to be distributed by brokers and other on-the-ground agents to drive awareness and enrollment, and we have made only lean investments in our broader sales and marketing efforts. For context, historically, about 80% of Clover's sales were from this ground game, with the remainder from online or inbound sales. Clover has grown rapidly by relying on direct in-person sales with very little marketing and very little brand spend. We all experienced how stay-at-home orders changed consumer behavior and reduced foot traffic nationwide. In a year where our primary sales motion was quelled by a pandemic and the capital we had available to deploy in marketing was relatively limited, we still grew membership by 20% as of February 2021 versus 2020.
We believe this is a testament to the strength of our offering and our ability to drive organic growth. We plan to make investments to drive further growth. Now that our transaction is closed, we now have more resources to further invest in near and long-term initiatives that will lay the foundation for future rapid growth, and importantly, expand the sales funnel outside of the ground game. We are gearing up to put our foot on the accelerator. As we think about growth for Clover Health, we are focused on three key growth levers. First, MA market penetration. We have demonstrated our ability to scale within our established markets and believe we'll continue to increase penetration in existing markets. Two, geographic expansion. We made investments in 2020 to launch 74 new MA counties in 2021. We currently offer MA plans in just 108 of the 3,000 U.S. counties.
We're just scratching the surface. We have been deliberately prudent in our strategy to build and expand our geographic footprint. We believe we can now accelerate our national expansion plans over the next few years. Three, Direct Contracting. We believe Clover is perfectly positioned to be the pioneer of the new program. Direct Contracting is a new government program that will expand Clover's addressable market to include the approximately 40 million beneficiaries in Original Medicare today. We plan to launch our Direct Contracting entity, Clover Health Partners, when the new program goes live in April of this year. The Clover Assistant will enable physicians to provide better outcomes for their Original Medicare patients and allow for clinical and economic alignment. Direct Contracting provides us with a faster and simpler way to grow the number of lives whose care is managed by a Clover Assistant-powered physician.
With Medicare Advantage, there are two steps to growing lives under Clover Assistant management. First is B2B, essentially attracting physicians to use the platform. Step two is B2C, where we market to consumers and work with brokers to attract eligibles to our plans. With Direct Contracting, we can get significant lives immediately assigned to us through claims alignment via business-to-business contracting with physician groups. B2C activity for voluntary alignment is further upside. The Clover Assistant enables alignment of priorities, lower costs, and improved outcomes for members, higher payment and data-driven decision-making at the point of care for physicians. The traction we've seen gives us conviction in our ability to be one of the largest players in Direct Contracting. With that, I'll turn the call over to Andrew.
We are bullish on our opportunity with Direct Contracting, and we have several other initiatives in place that support our mission to improve every life. Our philosophy at Clover is to support the development of business entities under the Clover Health Investments, Corp. umbrella that address the health needs of older adults. Two examples of this approach are Clover Therapeutics and Seek Medicare, both of which are subsidiaries of Clover Health that largely operate independently. We will share some updates on Clover Therapeutics in the near future, but as a reminder, it is a biopharmaceutical company that seeks to partner with patients, providers, payers, and other researchers to drive forward clinical research and drug development for the treatment of diseases of aging.
Clover Therapeutics integrates genetics with longitudinal clinical data in order to better understand the causes of aging-related conditions, find ways to improve the standard of care, and empower new therapies. Seek Medicare is another initiative that we are excited to talk about. It's a startup that was incubated within Clover but then set up as an entity that has raised nearly all of its capital from outside investors in order to make sure it could effectively pursue its goals. Seek's fundamental belief is that Medicare consumers are simply not well-informed, and that hurts their ability to get affordable, great healthcare. While Seek is a very young startup, it is purpose-built to deliver against that problem. We'll be sharing more about Seek in due course. Clover Health aims to transform healthcare for each and every one of us.
We believe our technology can improve the care of all primary care physicians anywhere in the country, and our aligned incentives equate to efficiency, improved outcomes, reduced patient costs, improved physician reimbursement, and returns for the government. With that, I'll turn the call over to our CFO, Joe Wagner.
Thanks, Andrew. Hi, everyone. Thanks for being here. Despite COVID-19 headwinds Clover faced in 2020, we performed well during the year, growing revenue to more than $670 million. I'll begin by recapping our 2020 financial performance, and will then discuss our latest thoughts on an outlook for 2021. Additional commentary and financial results can be found in our shareholder letter, which is posted on our investor relations website. From a membership perspective, we ended 2020 by serving over 58,000 members, which represented an increase of approximately 36% over the end of 2019. As Andrew mentioned earlier, we believe that growth was mostly a function of our plan designs, our strong ground game, and network of brokers. More recently, as of February 2021, we have 66,000 members overall, underpinned by tripling of membership outside of our New Jersey market.
We expect to continue to aggressively expand both inside and outside New Jersey as we view market expansion as a key to driving growth and proliferation of the Clover Assitant. For the full year 2020, our total revenue reached $672.9 million, which exceeded our initial top-line projections for the year. 2020 revenue increased 45.6% from total revenue of $462.3 million in 2019.
Due primarily to an increase in membership and to a lesser extent, the impact of the pause on sequestration. Total medical costs in 2020 were $590.5 million, resulting in a full year GAAP MCR of 88.7%, as compared to costs of $450.6 million and a GAAP MCR of 98.6% in 2019. The year-over-year improvement in our MCR was driven primarily by operational execution and, to a lesser extent, the net impact of COVID-19 on utilization that Vivek discussed. Our full year 2020 normalized MCR, adjusted to remove the estimated net COVID-19 impact as well as to remove any material prior period favorable restatements, was 90.5%. These MCRs were higher than our prior forecast but exceeded our pre-COVID-19 expectations in the budget that we established internally at the beginning of 2020.
Specifically, in the fourth quarter, our GAAP MCR was 109.3%, which was driven largely by a spike in COVID-related costs related to hospital admissions and, to a lesser degree, the cost of COVID testing. The direct cost of COVID added approximately 1,400 basis points to our fourth quarter MCR. Our non-COVID utilization was somewhat below baseline for the quarter, but this was offset by a return of services that were deferred from earlier in the year. After taking all these factors into consideration, our normalized MCR for the fourth quarter was 89.5%, which we believe is a reasonable estimation for the true run rate of our business. This activity was a different dynamic than we saw during the first wave of COVID earlier in 2020, when non-COVID utilization decreased dramatically for all types of services. Overall, COVID's impact on our nation's healthcare system varied significantly by geography.
We believe that the impact the pandemic has had on Clover's members reflects our specific markets and member demographics. For the full year 2020, normalized MCR for our returning members managed by PCPs who used the Clover Assistant was approximately 83%, compared to a 90% normalized MCR for returning members who were managed by a PCP who did not use the Clover Assistant. As a reminder, these MCRs are generated while providing our obvious plan designs, which have richer benefits and lower out-of-pocket costs than most of our competitors. These MCR profiles have upsides from continuous technology iteration and our current 3-star rating. We continue to focus on the importance of increasing our Clover Assistant coverage as a means of increasing our margin opportunity. Operating expenses in 2020, including an $8 million health insurer fee, were $191.7 million compared to $186.4 million in 2019.
A reduction in travel expenses was offset by increases in sales commissions, professional services, the health insurer fee, and salaries and benefits. 2020 operating costs supported the building of the infrastructure to improve healthcare outcomes and experiences for our members. Adjusted EBITDA loss for 2020 was -$74.4 million or 11.2% of total gross premiums, compared to an adjusted EBITDA loss of $175.5 million or 38.3% of total gross premiums in 2019. As of January 7th, 2021, immediately following the completion of our transaction, Clover had approximately 404.5 million shares outstanding. We expect basic and diluted weighted average shares outstanding to be approximately 405 million and 498 million, respectively, for the quarter ended March 31st, 2021, and 406 million and 499 million, respectively, for the full year 2021.
We expect that our earnings per share will align more closely with the basic EPS share count as we expect a net loss in our financial statements for 2021 as we continue to scale the business. Cash, cash equivalents and investments totaled $151.1 million as of December 31st, 2020. The merger, which closed subsequent to the fourth quarter, delivered approximately $670 million net of deal-related expenses to support growth and working capital. Days in Claims P ayable were 51.3 at December 31st, 2020. Given our relatively small size and the fact that we maintain margins against claims volatility, this metric could fluctuate between quarters as a result of claims payment volume and the speed in which providers submit claims. Turning to outlook.
As you will see from the following guidance, despite the ongoing COVID uncertainty, we expect to continue delivering solid revenue growth as we continue to expand our market share and enter the new Direct Contracting opportunity. We are looking forward to the official kickoff of our Direct Contracting initiative on April 1st, after we sign our participation agreement with CMS. As you will see, our range of guidance as it relates to Direct Contracting is still somewhat broad as CMS continues to provide additional details about the program. We intend to provide further updates at the end of the first and second quarters as we get more information about our attributed lives and benchmarks. For the full year 2021, Clover is providing the following guidance.
Medicare Advantage membership is expected to be in the range of 68,000-70,000 by December 31st, 2021, a growth rate of 17%-21% as compared to year-end 2020. As a reminder, Clover has historically grown its membership during the intra-year enrollment periods, such as OEP and SEP. For the Medicare Direct Contracting program, the company expects to have access to up to 200,000 Medicare beneficiaries through its contracts with participating providers. Note that we anticipate these lives will be attributed to our Direct Contracting entity on a quarterly basis throughout 2021. Total revenues are expected to be in the range of $820 million-$850 million, inclusive of a preliminary estimate of approximately $30 million-$50 million of revenue generated from Direct Contracting.
Note that GAAP revenue estimates for Direct Contracting are dependent on the finalization of all financial parameters of the program and the program going into effect in April, as well as the associated accounting guidance around those parameters. The company believes, therefore, that the estimated CMS benchmark expenditures, which I will discuss next, are a more appropriate measure of the size of the opportunity and its impact on the company's operations. Medicare benchmark expenditures under management for Direct Contracting are expected to be in the range of $800 million-$1.1 billion. The Medicare benchmark represents the level of estimated medical expenses for the beneficiary population being managed by our Direct Contracting entity. This range is dependent on the total lives that are ultimately attributed to our DCE through claims-based alignment and voluntary alignment.
Total Medicare spend under management, which includes revenues from the Medicare Advantage program plus the estimated CMS benchmark for Direct Contracting, is expected to be in the range of $1.6 billion-$1.9 billion. Normalized non-GAAP MCR for Medicare Advantage is expected to be in the range of 89%-91%. Our MCR for Direct Contracting is expected to be approximately 100% net of any savings targets guaranteed by CMS. Operating costs are expected to be between $265 million and $285 million and reflect the use of a portion of the proceeds from the merger to make investments in marketing, network expansion, and technology to support future growth. These estimates also include extraordinary or non-recurring costs of approximately $25 million that relate to startup operations of subsidiaries and other one-time legal costs. Net loss is expected to be between - $210 million to - $170 million.
Adjusted EBITDA loss is expected to be between - $190 million to - $150 million. Loss per basic share is expected to be in the range of - $0.52 to - $0.42. Now I'll turn the call back over to Vivek.
Thanks, Joe. We have a history of delivering for our members and physicians, we are just scratching the surface. As you evaluate our business, I want you to consider three things that we believe will make Clover successful in the months and years ahead. First, you need to believe that the Clover Assistant reduces variability, improving decision-making for physicians. Second, that Clover Assistant drives unique, moat-like incremental clinical and economic value. Finally, that consumers want plans that are of the lowest out-of-pocket cost with the most supplemental benefits and with the widest choice of primary care physicians and specialists. If you believe these three items, you have to believe we will be successful. We plan to continue to pioneer a fundamentally different approach, investing in technology and partnering closely with physicians to help them make critical decisions for their patients at the point of care.
We are making prescriptive efforts across our growth vectors and beyond that. The market itself is rapidly growing and evolving. We have a significant market opportunity in front of us and are committed to creating value for all stakeholders. Operator, we are ready for questions.
Certainly. Ladies and gentlemen, if you have a question at this time, please press star then one on your touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. We'd like to ask that you please limit yourself to one question and one follow-up. You may get back in the queue as time allows. Our first question comes on the line of Kevin Fischbeck from Bank of America. Your question please.
Great. Thanks. I guess, membership growth in 2021 obviously good on an absolute basis, but short of kind of what you guys were looking for at the end of last year in a year when generally, MA broadly grew well. Do you have any change to your kind of long-term views on the growth of the company? Just, maybe you think differently about your growth rates, or should we take those growth rates and apply them to this new kind of 2021 base?
Thanks, Kevin. This is Vivek. Great question. I'll just let Joe hit some of that.
Yep. Hey, Kevin. Thanks for the question. Yeah, I think if you look at our growth for 2021, we're happy with where we ended up, just given the backdrop of COVID. Again, as Vivek mentioned, from an investment standpoint, as you know, we're pretty clear and transparent that we have not historically invested a ton of money into marketing and into brand spend. I think that being said, we're happy with where we ended up from a year, in a year that was very unique and unlike anything that we've ever seen. We're not going to give specific guidance for out years, I would say, nothing that has happened over the course of the last few months changes the growth trajectory of the company, or I would say our longer-term targets.
If anything, it's crystallized, I think, some things that we think we need to do both in the short term and long term. We don't view this as indicative of any longer-term trends. I think we're looking at this very much as a short-term issue related to COVID, and that we don't view it necessarily as indicative of what the company plans to do longer term.
Okay, that's helpful.
Yeah.
I guess go ahead.
Just quickly, this is Andrew as well, just to add a few more sentences to that, Kevin. I think one thing is we have had a very centric growth focus on brokers in the past, and brokers tend to be less influenced by the marketing spend, as you know, because they go out and find their own leads. I think that COVID had more effect on that broker channel, and we do expect our strength in the broker channel to sort of resume in the post-COVID period after people are out and then foot traffic has returned to normal levels. In the intervening time, though, we are increasing our overall spend against brand marketing, direct marketing, all channels that we have traditionally actually invested a little less in, I think, compared to regular plans.
We will maintain that even as broker channel sort of returns, and I think we'll be strong across the board in growth areas, brand marketing, view markets, et cetera. That's from the use of funds that Vivek alluded to earlier.
Okay, that's helpful. I guess maybe just kind of asking the same question as far as Direct Contracting goes, because, in theory, MA membership, Direct Contracting membership are two separate numbers. I would imagine that the more MA membership you have, the more engaged the doctors you have, maybe the more doctors you have in-network, and then the easier it is to get Direct Contracting lives as you head into kind of 2022 and beyond. Does the lower MA membership number this year impact how many lives we should expect next year or in the future years to be able to sign up?
Kevin, is the question around correlation between MA and direct contract? I just want to make sure we understand the question.
Yeah, I just would think that, the more MA membership you have, it kind of implies the more physicians you might have in-network or the deeper relationship you have with those physicians that are in your network because you're sending more members to them, and then the easier it would be, therefore, to get them to then also align with you from a Direct Contracting perspective. I wasn't sure if, again, if the membership this year being below kind of what you thought it was going to be last year has any implications for how we should think about the ramp-up of Direct Contracting lives over the next couple of years.
Yeah. I'll just hit kind of, I think, the core part of that. We don't really see a correlation in the sense of a Direct Contracting when we think about fee for service, depending upon the market, represents anywhere from 60% to sometimes over 70% of the Medicare population. When Clover Assistant launches with a practice that only has Clover MA or, let's say, even if you take a plan in any market that has the most MA market share, even the plan with the most MA market share will not have as much market share as fee for service. We don't see a correlation a sense of higher MA enrollment necessarily correlating with what we call more practices on Direct Contracting.
At the same vein, we've proven out, and you'll see this kind of upcoming, there are states where we're launching Direct Contracting and where we don't have an MA plan yet. We think that's the clearest indicator of Clover Assistant being able to proliferate without any MA plan, and where we've built preferred networks through that. I'm sure there'll be data around and value in terms of launching Direct Contracting and then trailing behind that with an MA plan or vice versa. In terms of correlation between the two, I view the correlation more in terms of how we expend resources internally versus what we experience externally.
Okay, that's helpful. Thanks.
That's Joe or Andrew might have to do that. Sorry, go ahead, Andrew. Oh, you're still on mute, Andrew.
Sorry about that. Just as Vivek said, I think that what will be really powerful is we're anticipating that we will actually be able to front run the MA plans. Rather than having the MA plans drive us to DC, we are able to launch into markets that don't have MA and actually have doctors who will use Clover Assistant for the first time on entirely Direct Contracting based populations. We'll share on that in future reports, but we're seeing that possibility is definitely there, and I think that's really exciting, right? That means we can actually spread out first with the fee for service population, get Clover Assistant deployed with direct contract at fee for service only even, and then follow behind that with the naturally slower motion of bidding MA plans.
If it all works out, I think that's what you'll actually see us doing.
All right. Thank you, Andrew.
Thanks, Kevin, for the question. We'll jump to the next question.
Certainly. Our next question comes from the line of Gary Taylor from JPMorgan. Your question, please.
Hi, good afternoon. I have a three-part question on Direct Contracting and our model. If we get a few years out, it will constitute 80%-90% of your care under management. I just want to focus on a couple of things, but I just want to make sure I understand if these have changed or not. First enrollment, you're now saying up to 200K. Before you had just said 200K, I just want to make sure if that has changed, why. Second is on revenue. If we do nine months of 200K at $1,000 per member per month, that gets you to like $1.8 billion. You're only guiding for $900 million, which I guess implies you won't get the whole 200K in April. It'll kind of be ratable.
Then third, you had previously said break even on EBITDA for Direct Contracting, yet at 100% MLR, that won't be the case. So I'm just wondering if you've received your benchmarks yet or what's informing the view on the EBITDA?
Hey, Gary, it's Joe. Thanks for the questions. I can take those. Just to be clear, nothing has changed from a membership perspective, just in terms of what we think the opportunity is. I think we believe, and we've been modeling, I think for a while, that the 200,000 will be ratable. It's going to be a mix of claims alignment as well as voluntary alignment. The guidance that you see in terms of benchmark really reflects that ratable addition of members or addition of attributed lives throughout the year. It's likely that we'll start with a chunk of claims align members, and then we'll voluntarily align members throughout the remainder of 2021. I don't think that's theoretically changed from a perspective of being ratable throughout the year.
I think from a benchmark perspective, again, we have our internal estimates. We have not received a detailed benchmark yet from CMS, the benchmark calculation is really just using our estimates of lives coming in ratable over the course of 2021, multiplied by what we think is an estimated benchmark. Obviously, as we know more, we'll certainly share that with you, to be transparent with you, that's kind of where we are. Just in terms of breakeven, I think historically, we've guided to a breakeven at the gross margin line, not necessarily at the EBITDA line. We've been pretty clear that we're going to be conservative this year in how we guide and how we think about that program, because we're kind of factoring in the fact that it may take a few months just to get off the ground.
We're already seeing just some, I don't want to say noise from CMS, but we're seeing just some delays in some of the information being available. We're guiding to breakeven at the gross margin line conservatively. Then we've got operating costs on top of that. I think that's been pretty clear with or pretty consistent, at least with the guidance that we've shared in the past.
If I could just do one quick follow-up. I know you guys are big on benchmarking, when I look at your 1,400 basis points of direct COVID costs in the quarter, that is fairly comparable to Humana. It's a little higher than United with more commercial, right in there. MLR up 2,000 basis points year-over-year with an implied 600 basis points of deferred spend coming back is not comparable. The other large insurers did not nearly see that. They essentially saw an acceleration of deferred care, which almost completely offset the acceleration of COVID costs in the quarter. How do you look at that and benchmark that? Would you attribute it all to New Jersey, or what would you point us to?
Joe, do you want to hit that? Thanks, Gary.
Sure. Yep. Thanks, Gary. I think Gary, a few things there. We looked at and tracked that very closely in terms of what we saw in terms of from an MCR perspective for Q4. I think if you look at our geography and our relatively low number of members, right? We saw a very big drop-off in the second quarter, which I think was probably more pronounced in some of our peers, in terms of running an MLR in the second quarter that was in the very low 70s. We track very closely the return of that deferred care, even down to the auth level, meaning, tracking auths that were originally approved in Q2 and even the early quarter Q3, and then coming back in Q4.
I think for us, again, we can't opine on where others are, but I think for us, it is geographic specific. The fact that in 2020, we were highly concentrated in the New Jersey market. I think there are unique capacity issues in New Jersey, and the fact that practices, and we've heard this from our clinical staff, practices were doing what they could to get in as much elective volume that they could in 2020, even with the high COVID costs, to replace everything that wasn't happening in April and May. Again, we also have a concentration membership. We have about 30% of our membership that would be considered low income from a demographic standpoint. Again, we do a lot of benchmarking, you're right. We think in this case, it's geographic specific, and the fact that we've got a relatively small base of membership.
That's why as we look ahead, we're guiding to a normalized number that we hope will ultimately, once the vaccines are prevalent, that we'll ultimately get back to equaling GAAP. We looked at it pretty closely, and that's our conclusion from looking at what we saw in Q4.
Thank you.
Thank you. Our next question comes from the line of Ralph Giacobbe from Citi. Your question, please.
Great, thanks. Can you maybe talk about any headwinds around risk coding for 2021, given perhaps less visits from members last year due to COVID, and maybe how much that impacted the 2021 revenue?
Yep. Thanks, Ralph. Joe, do you want to take that?
Sure. Yeah. Thanks, Ralph. Yeah, we did see that, Ralph. I think similar to a lot of the other MA insurers, we did see that as a headwind. I think for us, it's somewhat mitigated by the fact that we do have the Clover Assistant, that we're able to keep coverage up and keep visits up in Clover Assistant from a telehealth perspective. I think that helped us. We're estimating for us, in terms of 2021 revenue, it's worth anywhere from 100 basis points - 150 basis points. That's our guess based on the work that we've done, based on the risk scores that we've seen. That's our best guess for 2021, and that is included in our guidance.
I'm sorry, 100, 150 basis points revenue impact from lack of risk coding.
Correct.
Got it. Okay. I do want to go back to Gary's question around sort of Direct Contracting and the 200,000 members. I understand the ratably discussion. Is there, can you give us a sense, like starting in April, what's the starting point? I mean, is it ratably where you start with 50,000 lives and then ramp that to 200? Like, can you give any sense of the starting point? Because again, the mismatch between 200,000 and the $800 million-$1.1 billion, I think I'm still struggling with.
Yeah. Gary, I can Or I'm sorry, Ralph, I can follow up on that one as well. I think we've previously given guidance out there as to a mix of claims-aligned and voluntarily- aligned. We don't have any information right now to say that that would change. I think, roughly half-ish, we would anticipate maybe, plus or minus of the 10% either way. I would say we would start the year, from a claims-aligned perspective, there may be some additional membership that comes on via claims-aligned later in the year, given some of the conversations that we're having with CMS. Again, I don't think we don't have any better information, frankly, than we've had previously, in terms of the ratableness of that. I think generally speaking, the guidance that we've given previously, we don't necessarily anticipate any material changes from that.
That's our best guess really, at this point.
Okay. If I could just squeeze one more in. MA enrollment, just going back to that, sort of the shortfall versus maybe what you initially targeted, you're saying it's just sort of COVID related? Maybe if you could just give a bit more on your commentary around investing more in direct conversion and telesales and how important that's going to be going forward. Thanks.
Yeah. Andrew, do you want to jump in on that and maybe a couple of the other questions as well?
Yeah, absolutely. Yeah, thanks, Ralph. Just to give a bit more detail. We have traditionally been very independent broker-centric. The way we do that is that we sort of go out there, we talk about the strength of our plans, we talk about how good they are for the end consumer, and that has made us strong with independent brokers, and we call that our ground game normally. As you know, those brokers go out, they generally have their own book of business, they do their own lead generation. There is marketing overlay. It's not zero on them, but it tends to be the brokers go out there, and that's why they get the commission for what they bring in. We've had some marketing investment on top of that, but we've been very good and strong.
I would say, it's one of our differentiators, how strong we are with that community, with independent brokers. That was affected. We definitely saw that was affected during the COVID period because there were fewer sites they could sell at. We saw lots of several brokers who traditionally produced a lot actually just not go out this season. Not that they retired, they just said, Hey, because of COVID, it's hard for me to run my book this season. There while we did a lot to try and get people to get out there, but it was COVID, so there's only so much you could do. We did see that slow down. We're still pretty happy with where we came in despite that and how much of our book is normally coming in by the brokers.
On top of that, going into this year, we do expect that ground game and that site-based recruiting to come right back after COVID as vaccinations roll out. There's no reason it wouldn't. Brokers will head back out into the market. We'll see that pick up again the way it always has. In addition, we're going to be investing in much more brand marketing, media, traditional Direct Contracting, a number of different things you'll see us put capital to work on to drive up our marketing spend outside of the broker channel. All of those basically convert into either our telesales or our online direct, as Joe said. Those will be converted by our own internal sales channel. We'll offset some of that marketing spend a bit with the reduction in commissions that normally comes with that.
You should expect us to see us boost into that this year as well. We're not saying we want to shift away from the broker channel. We really like that channel, and I think it'll keep working for us, even though it was reduced, understandably, during COVID. We will also be investing in more of that lead generation for the marketing direct channels as well. Hopefully that helps out on that statement.
Thanks, Andrew. It's a great question, Ralph. Just to kind of add some just additional color to Joe and Andrew's comments. MA is a really interesting market where, if you look across markets across the United States, sometimes in markets, even in our established markets, the plan designs with the lowest out-of-pocket costs and most flexibility don't immediately get to number one market share. So, when you actually look at Clover's plan designs in its established markets, for the most part, they truly are the lowest out-of-pocket costs and most flexible network, and particularly the in and out-of-network parity. Important to note, though, if you look at kind of marketing and sales spend over the last many years, we have spent really minimally relative to the growth we've had. It's almost like compared to plans that have grown at a much lower rate.
Now when we're at this standpoint where we have widening Clover Assistant coverage, we've seen that year-over-year, and some of what Andrew's referencing is, telemedicine with Clover Assistant has given us more confidence over time that we should be able to keep increasing our coverage rate of Clover Assistant. The other important thing to note is all of these MCRs are at 3.0 Stars, at 3 Stars. Clover Assistant features, as it relates to Stars, only really started getting built last year and are still being built now, and obviously some of the effects of that are muted due to COVID. We have a really large tailwind on Stars versus other organizations that are already at 4 Stars. That's something that when we think about ability to keep increasing the attractiveness of our plan designs-
That's something that's super exciting for us. When we just take off our MA hats or healthcare hats, generally speaking, in most consumer marketplaces, the product with the lowest cost and most value in terms of value proposition does end up with number one market share. MA is interesting where there's more stickiness, you have less shopping, you have more opaqueness in the shopping experience. In Clover's case, where we've historically spent very little money on branding and marketing around that. We view a bunch of tailwinds that we think are uniquely available to Clover, where we actually can get up to par on a per member basis on marketing and brand spend. Two, we're doing it behind plan designs that we think under any argument are the most attractive to consumers relative to other options.
Three, you just have an explosion of capital being poured into it. Seek is an example. There's plenty of other examples as well of more transparency on plan comparisons and shopping. Then taking it one step further, when we think about how does Clover drive value, we don't think about it necessarily in terms of just pure independent lines of business. When you think about incumbent payers, they look at health insurance as their commercial line of business, maybe their Medicaid line of business, maybe their Medicare Advantage line of business. From our perspective, we view it on a per practice or per physician basis.
If a practice is on the Clover system and maybe has started off with Clover MA, extending the Clover system into the fee for service population for us is expanding engagement of the Clover system and covering a larger and larger percentage of that physician's panel. That's something you'll hear us talking a lot more about in the coming months and years. What's really important about that is we view this as value to consumers and value to a physician. When you think about other large organizations, a lot of times those different lines of businesses are siloed, and the P&Ls are viewed individually, not through the thesis of how do we drive more and more value for this physician, for this practice, and across their entire patient panel.
We have some unique ways on how we think about synergies and driving value that is going to give us a long-term advantage on pricing as well.
Okay. Thanks for the color.
Thank you. This does conclude today's question and answer session. I'd now like to hand the program back to Vivek Garipalli, CEO, for any further remarks.
Thank you. We appreciate the time today on our first earnings call. Just to remind everyone again, we have our first product and technology showcase, Clover Assistant Online, tomorrow at 10:00 A.M. Pacific, 1:00 P.M. Eastern. Hopefully, you can join.
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.