Alignment Healthcare Targets 300K Members with Growth Strategy

Executives from Alignment Healthcare (NASDAQ: ALHC) presented a comprehensive plan for growth and profitability during a recent healthcare services event hosted by JPMorgan. The company is focusing on a care-management approach tailored to its Medicare Advantage offerings, which they claim is yielding superior medical cost performance while expanding their member base.

Strategic Growth and Membership Expansion

During the event, CEO John Kao highlighted that Alignment Healthcare has achieved over 275,000 members and is projected to reach nearly 300,000 by the end of 2024. This translates to an anticipated $4 billion in premium revenue. Kao described the company’s growth trajectory as approximately 30% annually over the last decade, effectively doubling its membership every two to two and a half years. Notably, he reported a remarkable 58% membership growth for 2024 while mentioning that the company’s medical benefit ratio (MBR) has only slightly increased. Data from the third quarter of 2025 even indicated a decline in the MBR, despite ongoing growth.

Kao elaborated on the company’s focus on stratifying members based on their healthcare needs. He explained that a small percentage of members typically account for the majority of medical costs, often referred to as the “80/20” principle. By analyzing various data sources, including lab results and hospital admissions, Alignment identifies members who require more intensive care and then categorizes them into specific cohorts.

Innovative Care Management Approach

To effectively manage these higher-acuity members, Alignment has established an in-house clinical team known as “Care Anywhere.” This team comprises doctors, nurses, social workers, and care coordinators, and it provides in-home services to seniors at no cost to them. Kao stated that this service costs the company approximately 3% of its premiums and employs around 450 people. By maintaining in-house operations, Alignment aims to ensure quality control while also reinvesting any cost savings into enhanced benefits for members.

Kao emphasized that the company prioritizes collaboration with healthcare providers rather than imposing financial pressures on them. This model, he noted, is well-received by providers as it not only improves member experiences but also outcomes without incurring additional costs for the providers.

In terms of performance metrics, Kao revealed that all Alignment members are now enrolled in plans rated four stars or higher, including three five-star plans. He outlined the company’s ongoing investments in technology, processes, and personnel, which are essential for scaling operations. Recent upgrades include systems like Athena for electronic health records and Workday for human resources.

Geographic Growth and Future Plans

During a question-and-answer session, Kao noted that the company exceeded its annual growth target of 20% in California but opted for a selective contracting approach to ensure sustainable growth. He pointed out that Alignment experienced even more rapid growth outside of California, with an impressive 84% increase in membership in those regions. Currently, approximately 20% of the company’s membership is located outside California, a significant increase from previous years.

Kao added that 80% of the company’s new growth stems from “switchers,” or members transitioning from other plans, and highlighted improvements in retention rates despite a challenging market environment. He further mentioned that Alignment’s operational metrics, such as gross profit per member and utilization rates, are more favorable outside of California due to a lower reliance on intermediaries.

Looking ahead, Kao expressed intentions to expand into new markets starting in 2027, leveraging cash flow from operations. He described recent performance as a successful proof of concept for this expansion strategy.

Jim Head, the company’s Chief Financial Officer, reaffirmed the 2025 financial guidance, addressing three key factors impacting performance: adjustments from Version 28 risk changes, growth since 2024, and implications from the Inflation Reduction Act regarding Part D. Head reported that Alignment broke even in 2024 and anticipated adjusted EBITDA in the mid-to-high 90s for 2025, implying a margin in the mid-twos.

Head characterized the company’s financial trends as stable, expressing confidence in performance as they progressed through the first three quarters. He noted that the third phase of Version 28 and the influx of new members would be critical for 2026, while reiterating the company’s commitment to continue investing in technology and personnel rather than solely focusing on immediate margin improvements.

Kao concluded by indicating that the Centers for Medicare & Medicaid Services (CMS) has a favorable view of the Medicare Advantage program, emphasizing the importance of executing it correctly. He framed Alignment Healthcare as an “insurgent” in the market, capable of demonstrating a viable business model aligned with CMS objectives.