Alignment Healthcare is lowering its guidance for the year as it faces significant headwinds to finish out 2026.
The company said in an earnings report released late Thursday that it now expects to bring in $100 million in earnings before interest, taxes, depreciation and amortization, or EBITDA, as well as $5.2 billion in revenue. Total membership is set to be at least 305,000, according to the report.
Alignment reported an $8 million loss in the third quarter, compared to a $3.8 million profit one year ago. Profits were $39.9 million through three quarters, up from $10.3 million across the first nine months of 2025.
Revenue in the third quarter was $1.4 billion, compared to $663.7 million in the prior-year quarter. Revenues through the first nine months of 2026 were $3.9 billion, up from $2.9 billion through three quarters in 2025.
CEO John Kao told investors on the company's earnings call Friday morning that some headwinds Alignment is facing include cost spikes in certain service lines, like catastrophic care and skilled nursing, as well as volatility in claims processing.
Last year, Alignment kicked off an effort to migrate to a comprehensive claims system with the goal of accelerating payment speed, growing automated adjudication rates and enhancing payment integrity. Through that process, once the dust settled on the shift, Alignment found "a notable increase in aggressive provider appeal and disputes in our paid claims data" that also drove up costs, Kao said.
Kao said that the insurer has spent the last several months building out its payment integrity capabilities, as well as deploying additional resources to support clinical best practices to mitigate the variation in outcomes for members.
He said that these investments have driven improvements, particularly in September and into October, but the company is still taking a cautious approach to the end of the year.
"Despite our progress, we are taking a prudent approach to the increased trend seen in Q3 and assume that higher costs in the third quarter will continue to weigh on our results for the remainder of the year," Kao said. "I want to emphasize that the guidance we have provided today is a guidance that we are confident in delivering."
Kao also addressed Alignment's performance in the latest round of star ratings scores. Based on federal data, 25% of its members are in plans with at least four stars in 2027, down from 100% in 2026. That four-star threshold is the key to securing quality bonus payments in Medicare Advantage.
He said that six of the company's seven contracts were above four stars, but a 3.5 score on the remaining plan, a core HMO offering in California, dragged down its overall performance.
Kao said that the team is "focused on really getting to the root issues in Stars." Alignment has also sued the Centers for Medicare & Medicaid Services over the 2027 calculations.
"That's something that we're going to be underscoring yet again," he said. "This is something that everybody in the company has to focus on ... and we'll get this fixed."