Everyone, with us today we have Clover Health and Clay Thornton, the newly appointed CFO, moved from the interim role. Happy to have you here with us. I guess let's just start with you reported third quarter earnings. Let's provide a recap for everyone who may not be as familiar with Clover.
Yeah, absolutely. I view the third quarter really as a continuation of the momentum of the first two. On a year-to-date basis, we've now delivered $97 million of adjusted EBITDA, $62 million of net income. We're doing this while driving membership growth at roughly 50%. I think that's really important that we're finding a way this year to expand earnings while growing at a market-leading rate, and that really kind of just continued through the third quarter strong momentum, now setting us up for a really exciting 2027.
Yep. No, that's great. I guess let's start with talking about medical trend. Where is medical trend right now within your book of business, and is it easing relative to your expectations, and any areas to watch for from your perspective?
Relative to our expectations at the beginning of the year, we're certainly trending favorable to that. There's a couple areas that I would point to, one being inpatient, where utilization has been trending very favorable throughout the year across each of our cohorts, particularly our new member cohort that's trending at a utilization rate lower than last year's year one cohort. That's very encouraging for us. Second piece is on Part D. We've seen Part D trends come in lighter than we expected at the beginning of the year.
That's largely been concentrated in the non-low-income population, which certainly had very high trends in 2025, the first year of the IRA impact on MA. Those trends have eased a little bit in 2026 relative to our expectations at the beginning of the year. On the flip side, though, with lower inpatient utilization can come higher utilization in the outpatient setting. We are seeing that in categories like outpatient surgery, observation visits, ER stays. That's playing out a little bit in the outpatient.
Okay, great. The company talked about significant growth for next year, 2027. I'm curious if you foresee this more as a gaining share from those exiting the market or more of that your general product is more competitive and you're taking share, and any way to frame the benefit that you're seeing this year from that dynamic?
It's definitely both. For the past two years, we've really prided ourselves on our product positioning and our competitive advantage there. That's continuing again into 2027. There are some new dynamics playing out in 2027, though. Most notably, there's a large plan exit in our core market of New Jersey. We have a plan exit that has membership in the range of about 40,000 MA members that'll be looking for a new home in 2027. That's a bit of a unique dynamic inside of this AEP, but our competitive positioning remains a significant strength, Jonathan. Every year, we kind of look at our benefits relative to the competition and try to size that difference. We're really at the same level, if not a little bit ahead in 2027 relative to where we were in 2026.
When you think about your pricing for 2027, you previously said that you're not that much different from your large national peers. I'm curious if in that construct you also assumed a higher level of enrollment growth, or how did you kind of think about that within your trend assumptions?
Yeah. First, I want to clarify what we mean when we say pricing. Pricing meaning what trends were we assuming within our bids. When we are assuming trends in our bids, we are looking at normal unit cost, normal utilization metrics, and how we expect those to play out, but we are applying those trends across each cohort individually. With Clover, who has been growing incredibly fast over the past two years and expecting another strong year of growth in 2027, it is important to look at those cohorts kind of independent of each other and apply those trend assumptions uniformly to the different cohorts. When you aggregate all of that up, Jonathan, what often happens is our aggregated trend assumption might be a little lighter than some of the national peers because we are bringing in new members.
We have a higher membership weighting in that first, second, third year cohort than others do, and those cohorts generally run lower on a medical cost. In the aggregate, you will likely see a lower trend, but at the individual kind of factor level, we are generally making similar assumptions.
Okay, great. For switchers that come into your book, are they operating at better margins compared to a typical year one member, or does their utilization pattern look a bit hotter than the typical member?
When you think about new members, we always bucket in three different categories. Did they come to Clover from another Medicare Advantage plan? Did they age into Medicare, or did they come to us from Medicare fee-for-service? The members that are switching from another Medicare Advantage plan always run significantly better MLRs than the other two buckets. We always look at those separately. Coming out of the 2026 AEP, about 85% of our new members were in fact switchers from other Medicare Advantage plans. Heading into 2027, with the disruption that I mentioned with the plan exit, we would expect that percentage to be the same or possibly even actually a little bit higher in 2027 AEP.
We have really good data from the last several years to understand when we enroll new members from other plans, how do they perform within Clover in the first year, and then what happens in the second year? When a new member joins us, we are able to tell where they came from, who their previous plan was. As we are anticipating this growth in 2027, we're spending a lot of time focused on which plans are these members going to come from? What was our historical experience when those members joined our plan? What does that mean for 2027 overall? We have got really good data there and feel good about where that is headed for .
Okay, great. When you think about your overall book of business, where do you think you could broadly be doing better from a cost management standpoint on trend? Is there any specific areas to kind of call out?
Yeah, I'd say there is two areas. The first relates to continuing to double down on Clover Assistant. Driving more coverage in Clover Assistant is going to drive more impact on the medical savings. We released a number of clinical white papers that show the impact of Clover Assistant on medical cost management, particularly in the lens of clinical impact. As we drive more coverage in Clover Assistant, we will expect to see more impact on the clinical side. The second piece, I would say, is around provider payment integrity and continuing to focus there to drive more efficiency and provider payment integrity operations.
As rev cycle operations continue to pick up and provider billing intensity picks up in the market, we need to make sure that our operations are set up in a way that we can meet that increasing billing intensity with stricter, more informed clinical review of those claims.
Okay, great. D-SNPs and, I guess, now C-SNPs have been a focus point for the larger national plans recently, and less so for Clover. What is your perspective on this, and does C-SNP or D-SNP make sense for Clover at any time, and any reasons of why or why not?
I'll split those two out separately. When you think about D-SNPs, so Dual Eligible SNP plans, the market had been moving more into a fully integrated stance in recent years. Certain states are what is called FIDE states, so they are Fully Integrated Dual Eligible states. In those states, you must be the Medicaid MCO in order to be the Medicare MCO for D-SNP. In the near term, we do not have any plans to become a Medicaid MCO, so it did not really make sense for us to pursue D-SNP in those fully integrated states. New Jersey being one of those, by the way. On the C-SNP front, we have not entered that market yet, but we have spent a lot of time looking at it, and I think it certainly could be an interesting product type for us to enter in the future. Couple reasons.
First, to enroll in a C-SNP, you definitionally must have a chronic disease, and Clover Assistant is built around early identification, detection, and management of chronic disease. So, those two really do work pretty hand-in-hand together. As we look at different types of products for 2028 and beyond, C-SNP is certainly something we are looking at.
Okay. That is interesting. The company has good growth, largely focused in New Jersey and small pockets where you decide to participate. But when we have seen plans go into outside of their primary state, there is a propensity to run into some issues adjusting to another state or just having some growing pains. How do you perceive this in going beyond New Jersey in a big way? What is the company's approach when thinking about a new state and potentially trying to grow big there?
Yep. We are spending a lot of time focused on this right now, and it starts with really understanding at an incredibly granular level why you have been successful in the markets that you have been successful, and how can you replicate those factors in new markets. If you think about the state of New Jersey, what has made us so effective inside of the state of New Jersey? It all starts with Clover Assistant coverage and the amount of members within the state that are being seen by clinicians using Clover Assistant. There are really two main prongs through which we deploy Clover Assistant.
One is through our in-network physicians, and then two is our employed clinicians through Clover Care Services. The Clover Care Services model can certainly travel to any state, and we have actually done that in Georgia, and we have seen a lot of success doing that. The network engagement itself is a little bit more interesting and requires a lot more thought in terms of what the market dynamics are in a given geography and whether they support high Clover Assistant coverage. There are a lot of analytics that go into that that may inform us that, say, market X is more beneficial for an entry versus market Y.
The other piece that we are really excited about is through Counterpart Health and the engagement that they have had with primary care groups, but as well as other MA plans, is giving us sort of some boots-on-the-ground access to understand where can we engage clinicians to scale coverage and how effective is our technology in markets where we do not operate MA plans today. That market intel will kind of drive decisions on where it may make sense to enter in the future, because you are not going to see us show up in South Florida anytime soon, Jonathan.
It is a heavily capitated market that is very different than the business model we operate. We operate in a way that allows kind of traditional non-value-based players to drive value-based level results. In doing that, we spend a lot of time focused on markets where we think we can bring that capability to bear. If we are to enter a new market, we are going to try to replicate the things that have given us success in our current market.
Okay, great. I guess going to the AEP, can you talk about what you are seeing so far in AEP? This year was a lot more switchers than is typical. Are you seeing the same dynamic for 2027? What are members focused on? Retention, things like that.
Yeah, similar to what we talked about earlier, the plan exit is certainly playing a big factor in AEP. We have daily information coming in on how new sales are progressing, and we're seeing that plan exit certainly play a role. The second piece is just the general competitive landscape. We've seen, for really the third year in a row, a retreat from $0 PPO by the national MCOs. That's playing out in our market. So, on the PPO book of business itself, our market advantage from a product standpoint has grown as competitors have tried to shift back into the traditional playbook of HMO, HMO growth, HMO driving value-based contracting, things like that. We're seeing a continued retreat from PPO, and that's playing a big role in the strong growth we're seeing so far.
Yeah, great. Clover secured a five-star rating in the largest contract. Star ratings, as we all kind of know, have been pretty volatile in recent years. Is Clover giving any consideration to potentially diversifying the contracts, particularly when entering new states? Is there any reason not to, given the concentration risk, and any thought towards doing that?
We don't see any reason to diversify H contracts today within our existing markets. So, we've built a really strong engine within our existing markets that we think is now showing up in our Star ratings performance, so there's no reason for us to disrupt that today. If we enter new markets or enter new products, like the C-SNP conversation that we had earlier, that could dictate a diversification into new H contracts. So, if we're entering territory where we have less familiarity with how those members may impact the Star rating, we may want to diversify our risk a little bit and make that move on a different H contract so that we can ensure we sustain the performance that we know we have today in our existing H contracts and our existing markets.
Yeah. On the five-star contract, you can market all year. I'm curious how you're thinking this will make a difference in growth versus what you may have been thinking previously.
Yeah, I think the important thing to remember there, yes, you can market year-round, but you can also enroll members year-round. There is an annual special election period that is afforded to Medicare Advantage members if they want to enroll in a five-star plan. Where that would really take effect, most notably, would be kind of in the April to December timeframe. We are seeing the five-star rating have sort of a sentinel effect inside of AEP, where it is serving as a signal to members, and we are seeing incremental enrollments into the plan through what we call direct channels, so cms.gov or Clover's own website. We are seeing those enrollments pick up this year, and I think the five-star rating is playing a role in that.
As you kind of transition out of the Annual Enrollment period into the OEP period, which runs January through March, members still have a one-time choice to change plans, so we do not really see much impact there. It is really in that April to December timeframe where we would actually have this opened-up special election period, which could drive incremental growth inside of the year. We are not going to speak too much about what we think that may be until we really kind of get out of the AEP, we issue guidance for 2027, because a lot of what we decide to do inside of that SEP period will be dictated by where AEP ultimately shakes out and where we want membership to land.
Yeah, that makes sense. You recently made a switch to Optum Rx from Caremark. I guess, can you talk about the reasoning for that transition, and does this provide potentially better economics for the plan?
Yep. We have taken a much more active role in management of Part D, both from the cost side as well as the Star side. It really started in 2025 when the IRA took effect and Part D became a much bigger piece of the overall MLR equation. We started to take a more active role in managing that cost. With that, we kind of looked across the whole spectrum of how you manage Part D and ended up running an RFP for PBMs that we completed in advance of our 2027 bids. Ultimately, what we were looking for was the best partner who was going to work with us to manage both cost and Stars performance within the Part D side. At the end of the RFP process, Optum was the clear partner for us to move forward with into 2027.
Okay, that makes sense. Kind of along the drug side, there are changes to some pharmacy measures coming in Stars. As you think about the transition to Optum, but also considering the measurement period for Stars, do you expect to have a bit more focus on ensuring those measures are performing adequately given the potential changes that are coming?
I wouldn't say a bit more. I would say the same. Starting in 2025, we started to take a much more active role in managing those things in-house and working a lot closer with our PBM to do so. You're seeing that play out both in the medication adherence Stars rating that were released recently, as well as some of the favorability that we've seen in Part D trends this year. I would say it's the same focus because we're spending a lot of time focused on that today, Jonathan, and we'll continue to do that into 2027.
Okay. I know the company's positioned to do well regardless of whatever the Stars outcome may be, but it does make a pretty big difference in profit and competitiveness. What are the lever differentials that you can pull to ensure success while remaining competitive if there was a Stars headwind?
Number one, it always comes back to our technology. Clover Assistant coverage, Clover Assistant performance drives cohort maturation. Heading into 2027, we'll have two large cohorts progressing through our cohort maturation curve, and that's going to create a significant tailwind to earnings expansion in 2027. If you kind of fast-forward into 2028, we could be headed toward a year where we have three large cohorts maturing at the same time, assuming another year of strong growth in 2027. Our model really comes down to that cohort maturation powered by Clover Assistant, and that's the number one lever to offset any pressure that may come. The last piece I'll say on the Stars front, we're incredibly pleased to be paid on 4.5- stars in 2027. We'll also have the same payment economics trending into 2028.
So, what that really allows us to do is it allows us to maintain the competitive plan designs that we have that drive growth, but probably more importantly, drive retention, because retention is incredibly critical to our cohort maturation story. So, as long as we are able to maintain high retention because we are able to maintain competitive plan designs, that cohort maturation story is going to drive earnings and ultimately offset any other headwinds.
Okay. Peers large and small have suggested that without the Stars benefit, it is difficult to be a sustainable growth-oriented plan in MA. Where do you think the differences are that they might see this as a difficult task versus yourself?
I think that is true on a relative basis. So, on a relative basis, if payer X has a quality bonus payment and payer Y does not, you have effectively created a roughly 5% pricing disadvantage. In a world where no payer has that advantage, it all becomes relative, and it all becomes part of how are you pricing your plan relative to your competition. So if everyone is kind of created equal on that quality bonus payment, things will just normalize through plan design over time, and I do not think it is required to be a growing plan within the space so long as there is not differentiation there.
Okay.
Yeah.
Then, the large plans always talk about kind of this 2%-4%, 3%-5% type of margin for the MA business. From your lens, where do you kind of see it ultimately landing? A similar zone, especially given the technology backdrop?
We haven't set a long-term margin target yet, and frankly, I don't think it makes sense to do that right now while we're in this period of growth. We grew significantly last year. We're growing significantly this year. We've got another strong year of growth coming in 2027. So, we have a dynamic within our book of business that's quite different than what the others have, where their growth rates on a percentage basis just simply aren't the same as ours. Until such time that our growth rate kind of stabilizes and is very consistent on a year-to-year basis, it doesn't make sense for us to set a long-term margin target at this time. But we feel like I said, with cohort maturation, as we continue to churn more cohorts, large cohorts through the early part of that curve, we'll have substantial margin expansion from that.
Yep. Okay. Turning to Clover Assistant, you've obviously talked about it being one of the major components that makes the company successful, and I see it working well in areas where you've been for a while, like New Jersey. But in newer geographies, it does seem like that there would be a larger ramp or at least some time before you're at a point where it pays dividends, I guess. How do you perceive this, and would this be somewhat of a constraint in growth ex-New Jersey?
This gets back to what we discussed a little bit earlier and understanding the two components of how we deploy Clover Assistant. We deploy it, one, through our in-network physicians, but two, through our Clover Care Services team, which is our set of employed clinicians. That model can travel to any market and can scale with membership in any market. So we feel really comfortable that we can bring that model to a market and drive Clover Assistant coverage through our employed clinicians. The network physicians are where you really need a little bit more density in a given geography to get that engagement, because what we're asking physicians to do when they engage with Clover Assistant is, we are asking them to change their workflow.
We're asking them to change their workflow for Clover patients, and we've seen providers very willing to do that when the scale exists to do it. So we generally look at this and we say, "Well, what percentage of this provider's patient panel is a Clover MA member?" If we make up a higher percentage of a provider's patient panel, they're much more inclined to change their workflow to leverage the Clover Assistant technology during a visit. So, I think where your question's going really is, well, if you enter a new market and you have very limited patient panel density, is it going to be hard to scale? I think in the near term, the answer to that question is yes, on the surface.
But this is where I think we're getting a lot of really good insight from Counterpart Health and the new markets that they've gone into with other health plan partners, where we're being able to see how quickly can that Clover Assistant coverage scale, and what are the reasons that different providers in different markets are engaging with the technology? So using that kind of anecdotal information that's less quantifiable on a spreadsheet gives us a lot of insight into which markets we could go into, build the density quickly, and then drive Clover Assistant coverage through those network physicians.
Okay, interesting. When you think about further investments into CA, what other areas of improvement do you foresee a need for, and any updated statistics broadly on CA?
Yeah, I think there's a lot of exciting things going on within Clover Assistant. It's been built and it's been optimized as a point-of-care tool for clinicians. So, we've seen incredible results happen when primary care clinicians are using it at the point of care, when our own employed clinicians are using the technology at the point of care. What we're starting to look at now is extending that reach beyond the room itself and beyond the visit. So, if during a visit, a provider surfaces a next best action for the patient, say it's a referral to a specialist or to fill a medication, we want to make sure that the Clover Assistant technology and kind of what surrounds it can follow that next best action through to fruition to make sure that it actually occurs.
Okay. On risk adjustment, there has been talk about potential changes to risk adjustment looking ahead, and we obviously don't know where it's heading at this point, but when you look back at the impact V28 had on the industry and your own business, do you kind of think a change to risk adjustment would be problematic at this time or something that the company could work through better than kind of how everything shaped out with V28?
I think V28 is actually a fantastic case study in how Clover, and Clover Assistant in particular, is able to react to changes like this. If you just look at the period of time in which V28 impacted the industry, it was phased in over three years. It was phased in a third in 2024, a third in 2025, a third in 2026. What happened in the industry during that time period is payers largely reacted to that change through plan design. They exited unprofitable markets, they increased cost sharing, they reduced supplemental benefits. At that same period of time, Clover was able to improve benefits and grow while expanding margins. So, during that 2024 to 2026 time period, we've effectively doubled our membership, we've increased earnings, and improved our plan.
We've been able to do that in large part due to the effect that we were nimble enough to be able to react to V28. If you think about where the Clover Assistant technology comes into play there, about 2/3 of our members in any given year are seeing a clinician that's using the Clover Assistant technology. So, when changes like this occur in the industry, we're able to react, we're able to tune our technology and tune the platform that clinicians are using when they see our patients to react in a very fast manner. Others don't have that same reach where 2/3 of their members are seeing clinicians that are using their technology.
Okay, interesting. Turning to Counterpart Health, it has been a little bit quieter in recent quarters on that front, but can you provide some color on how it's been and the trajectory of the business or pipeline so far? Any stats, et cetera?
Yep. We've been saying for a few quarters now that the near-term goal of Counterpart was to manage as many third-party lives on the Counterpart platform as Clover Assistant does within our own Medicare Advantage plan. That is a near-term goal, and we're progressing very well toward that goal. So, happy with the progress that we're seeing on Counterpart. The focus there is much more on engagement right now, so scaling lives under management, proving that the technology works in new markets with other payers, other providers. As we do those two things, the economics will come later. So, we're pleased with how Counterpart's progressing so far, and we're tracking well toward the goals that we set out at the beginning of the year.
Okay. You are selling the product to health plans. Just given the prevalence of AI, has this made the selling process more difficult, as I think more plans may be looking to perform these functions on their own and bring it back in-house or just do it internally altogether?
No, I wouldn't say that. I think what we have that others don't have is results. Because the Clover Assistant technology, branded Counterpart Assistant for third parties, was incubated within our own Medicare Advantage plan, we have several years of data that prove out the results of the technology. We've been number one in the country for HEDIS for the third year in a row for PPO plans, so other payers really react to that in a meaningful way. Then, of course, we have our cohort maturation data that's powered by Clover Assistant. So, where another payer may be trying to incubate technology in-house or other vendors are coming, there's very few out there that can actually put real data behind the platform that they're offering. We have real data that's publicly visible, verifiable, that payers understand, and that's been really helpful in driving those conversations.
Okay. Just keeping on with AI. You've done a lot of cost cutting on your end. Is AI providing further opportunities on the administrative side to reduce costs? Similarly, what about development on CA with the use of AI?
Yeah, I think there's probably a few areas that I would point to as it relates to SG&A efficiency. First is, we still carry a fairly sizable fixed cost base within our business today. We're roughly 160,000 MA lives today, so relative to a lot of our competitors, you would say we're subscale. As we continue to grow membership and grow revenue, we expect to spread our fixed costs across a much larger base into 2027, 2028, and beyond. So, I know that's a little bit- Aside from the question you asked, but there's significant opportunity on that front. On the AI front specifically, there's a lot of low-hanging fruit within health plan operations. The majority of our systems and systems within the industry were built in a pre-AI world.
So, there is opportunity to iterate on those and drive down costs within a lot of the functions where there is repeatable tasks done by human labor that are easy to document and easy to repeat. As we kind of think through those areas within member service operations, certain provider payment integrity functions, claims adjudication, there are all these different areas of opportunity to drive efficiency within health plan operations.
Okay. Given the strong growth you have had this year, I was curious how you think about capital needs that you will need to put up in February, any sizing you can provide or anything to consider there?
Not going to provide any sizing there. I will just reiterate what I had said on earnings last week, which is, we feel like our balance sheet is in a really strong position. We have north of $500 million in total cash, investments, and securities with no debt. We have delivered north of $200 million in operating cash flow inside of 2026. So, we feel like our balance sheet is strong today, and we are well-positioned to fund regulatory capital needs, continue to grow membership, and actually invest in the business further.
Okay. If you have another strong year of growth, how do you think about the balance between easing on growth versus ensuring the balance sheet and cohort economics are progressing as expected?
Yeah. Within that frame, we keep a very close eye on what growth is going to do to our overall margins or our overall cash flow generation and what our regulatory capital needs are. Coming out of AEP, we will take a fresh look at where our membership sits, what that means to cash flow for 2027, and then ultimately what that will mean for regulatory capital needs. That will kind of dictate what level of investment we choose to make in the remainder of 2027, Jonathan. That investment could take the form of continued investment in Clover Assistant, AI-driven health plan capabilities, or it could mean more growth. That could be an investment that we choose to make inside of 2027.
Okay. Then kind of as you think about 2027 from this juncture, where do you think the biggest risks and opportunities outside of utilization are in achieving your goals?
For 2027, the thing that we look at most closely right now is Clover Assistant coverage. I mentioned this on earnings last week. It is really the number one leading indicator that we use for cohort maturation, and we are currently tracking ahead of where we were at the same point in time last year. So, that gives us a really good signal that inside of 2026, we are doing what we need to cover our members with Clover Assistant visits, such that when we get to 2027, they are set up for success. The piece that I would call out for 2027 specifically is scaling our clinical operations. When you bring on a significantly large new member cohort, it is important for us to scale our clinical operations in a way that allows Clover Assistant coverage to scale with it.
Remains to be seen where membership actually shakes out for this AEP, but what gives us a lot of confidence there is, this is our third go-round. We grew significantly from 2024 - 2025. We grew significantly from 2025 -20 26. We are seeing strong growth again from 2026 -20 27. So, we have now built the engine for how to manage growth from year to year, how to staff up our clinical operations in a way that meets these members where they are and allows us to manage costs.
Okay, great. With that, we will end it there. Thanks, Clay, for joining us, and enjoy the rest of the conference.
Thanks, Jonathan.