Alignment Healthcare predicts membership surge, targeting 1M enrollees

Alignment Healthcare CEO John Kao gave strategic insights into how the insurer is thinking about market expansion and star ratings during the Baird Global Healthcare Conference on Wednesday.

Kao repeatedly stressed the company is set up for success heading into 2025, and he laid out its plan for growth in 2026 and beyond.

“I don’t see any macro issue preventing us from really driving growth, even up to between half a million and a million lives over the next several years,” he said. To do that, Alignment will try to increase its market share in California from 5% to 20%.

Growth in California, or the “cash cow” as Kao put it, will give Alignment the necessary funds to expand elsewhere. He said the company will choose to bolster membership in existing regions before expanding elsewhere.

The California market is also being treated as a prototype, allowing Alignment to develop best practices that can be easily translated to other markets. How successful this plan proves will determine how much growth the company sees in 2026 and 2027.

Alignment currently has 175,100 members, up 56.1% year over year. It is expecting no more than 180,000 members by the end of the year. Hitting 1 million members would be a sign of major maturation for the insurer that is yet to reach profitability.

The Centers for Medicare & Medicaid Services recently released cut points for next year’s star ratings, influencing quality bonus payments for health plans. In 2024, Medicare Advantage (MA) quality bonus payments will reach $11.8 billion, reported KFF. Nearly three-quarters of MA enrollees are in plans that receive quality bonus payments. Half of the $11.8 billion will go toward UnitedHealth Group and Humana enrollees.

Most cut points “moved higher,” analysts at Leerink Partners found, as reported by Barron’s. Aggressive cut point increases put greater pressure on health plans to perform well or risk scoring worse than in star ratings than previous years.

Leerink said Alignment is one of the insurers facing the most risk due to these cut points, along with Humana, CVS and UnitedHealth Group. However, Elevance Health faces the least risk.

Alignment believes its investments in member experience are starting to pan out.

“We’ll find out what everyone’s star ratings are in early October, but I feel very, very well positioned,” Kao said.

Star ratings are changing for payment year 2028, where there will be a change in the reward factor and health equity index as the feds adjust how they prioritize different metrics. Measurement years are taking place this year and in 2025.

If a certain proportion of a plan’s membership is in the low-income subsidy population, dual population or disabled population, those plans qualify for additional reward factors, said Kao. He added that Alignment qualifies and already excels with this population of members that will serve as a competitive advantage, versus insurers that are now building out D-SNP and C-SNP products.

Kao also said Alignment's 2025 bid pricing strategy was more margin-focused and that he expects the company to perform well next year.

“Even if we took a step down in benefits, it’s still materially less of a step down than we think competitors are going to be forced to take because of the pressures they’re facing on star ratings and V28,” he explained.