This Medicare Advantage insurer is nearing $1B in revenue — CEO John Kao explains how

Orange County, Calif.-based Alignment Healthcare, which entered the California payer market in 2014, has recorded 42 percent compounded annual growth each year since launching in 2013.

The health plan, which only offers Medicare Advantage, Part D and supplemental policies, covers about 60,000 members across three states. In its five years since going to market, Alignment has partnered with healthcare companies like Humana and Sacramento, Calif.-based Sutter Health, and is advised by former CMS administrators Mark McClellan, MD, PhD, and Andy Slavitt.

On Aug. 20, Alignment said it plans to double the footprint of the territories it covers and the number of plans it will offer during the 2020 enrollment period, expanding to 16 counties with 22 health maintenance organization and preferred provider organization products.

John Kao, the CEO of Alignment, said the health plan is going to exceed $800 million in revenue and will approach $1 billion in revenue heading into the 2020 enrollment period. The reason? Medicare Advantage, Part D and supplemental plan success, he told Becker's in an interview.

Here, Mr. Kao discusses the key characteristics of Alignment's plans, its provider partnerships and what he thinks about "Medicare for All."

Editor's note: Responses have been lightly edited for clarity and length.

Question: Can you talk about Alignment's recent expansions?

John Kao: We spent the last several years building the technology infrastructure to support that growth. We're spending a lot of time with our broker partners. We're also partnering with Sutter, in particular with their physician leadership and their executive suite, and working with all their providers. The platform itself has been designed to scale. All the infrastructure and back office services we have, the chronic disease management capabilities — how we actually interface with provider PCP organizations — all of that has been what we've been working on for the past several years.

Q: Who are some of your biggest provider partners?

JK: Oakland, Calif.-based medical group Brown and Toland and Sutter Health are two. We announced a co-branded Medicare Advantage product with Sutter. We're going to be offering that in eight markets, and have 11 total markets with them for 2020. We partner with physicians, both independent physicians, as well as physicians that are a part of large systems.

Q: What is a key part of your growth?

JK: The headline really is the way CMS is thinking about supplemental benefits now — it's converging traditional health coverage and benefits, or "sick care" if you will, with supplemental benefits that begin to get into retail. Things like groceries, transportation, over-the-counter drugs, and things that address social determinants for individuals. There's this full push toward focusing on the consumer and the consumer experience. That's how we're growing so well.

Q: How are you diving into this consumer market and differentiating yourself?

JK: We introduced a black card for seniors in 2019, which we're expanding in 2020. That black card is what we call an on-demand concierge card that gives Medicare Advantage beneficiaries black-card-like service. They call one number and we can take care of everything. That's one part of it. The other part of it is the black card acts as a debit card. Our members can go to any drug store, whether it be CVS or Walgreens or Rite Aid, and use the card and get, depending on the product they bought, $50, $75 or $100 in over-the-counter drugs. This coming year, the card will have grocery benefits where they get a certain amount a month to buy groceries.

Q: Where do you think Medicare Advantage is heading?

JK: Just the raw demographics — there's 55 million seniors in the country right now. That number is going to be growing to 90 million over the next 20 years. Relatably, the number of people with chronic conditions is also going to be going up. The need for chronic disease management programs is going to accelerate. You have to be able to care for people with chronic conditions to make all of this work.

Q: What are your thoughts on 'Medicare for All'?

JK: There's always going to be alternatives. I don't personally believe Medicare for All is going to be financially viable. Our advisers and our folks on the Hill say they don't think that's actually going to get done. We think variance of Medicare Advantage can potentially get done. But the architecture is in place, and I think it works. The reason it is growing is because it's working.

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