Alignment Health is one of the highest-quality Medicare Advantage plans in the nation, a distinction attributed to a company-wide commitment to exceptional care and performance tracking.
Becker's sat down with CEO John Kao to discuss the company's high star rating for 2025, how it advertises to seniors, and wider trends affecting the MA market.
Question: Alignment is one of only seven Medicare Advantage plans in the country to retain a 5-star rating for 2025 — what's behind that?
John Kao: The key to our success boils down to two factors. First, there’s an enterprise-wide, cultural commitment to serving our seniors. This isn't just a departmental function; it's a company-wide culture where everyone — from the clinical team to member services, the pharmacy, and executives — is conscious of and dedicated to customer service. About 10 years ago, we implemented this culture because we thought, "Wouldn't it be great if we could actually fulfill CMS’s goal of true value creation for beneficiaries?"
The second factor is understanding the 44 measures and nine categories and tracking the numerators and denominators for each measure daily. We have an enterprise-wide commitment to know every measure — not as a sample or partial approach, but ensuring each member is cared for as CMS intends.
There's often an assumption that this level of commitment is a departmental or administrative function. This cultural commitment is where we differentiate ourselves. Not every company has a CEO that is deeply engaged with the data, monitoring star ratings measure by measure, and ensuring we're genuinely taking care of our members.
Q: What are your thoughts on several insurers challenging the 2025 star ratings in court?
JK: I am sensitive to this issue, and we're managing through it. The potential for one phone call to impact billions of dollars just seems problematic from a policy point of view. But you've got to look into the specifics of each of the lawsuits. I think one has some pretty good legs to stand on, and others don't.
Q: Alignment's medical expenses in the third quarter reached $613 million, compared to $397 million during the same period last year. What is your strategy for maintaining financial health while delivering high-quality care to members?
JK: The relative medical cost numbers are tied to our relative membership. We added almost 60% new members, which explains why the actual dollar amount of medical expenses went up. What’s remarkable is our ability to not only add members but also to serve them. It’s been an absolute pleasure to watch. It’s a great example of how you can grow when you have the right business model.
Q: Alignment ended the third quarter with more than 182,000 members, a nearly 58% increase year over year. Why do you think that is?
JK: I really think it's this emphasis on quality — quality access, quality service, quality products — and a philosophy of servant leadership through serving seniors like they're your mom or dad. I genuinely believe our employees live that every single day. It's not just a tagline; it's real.
If you talk to some of our nurses or our concierge experts, you’ll see it's all about service delivery. And there's a grassroots dynamic at play. We haven't invested much in branding or marketing — it's all been invested in the seniors.
Q: Do you have any predictions for how the MA market will evolve over the next few years?
JK: Star ratings are going to tighten up, and I believe it's the right move. The third-year phase-in of V28, combined with Star ratings, will continue to put pressure on revenue and reimbursement in Medicare Advantage. I expect many plans will be focused on margin preservation.
From our perspective, this creates a huge opportunity. The sector is hitting an inflection point where what worked in the past 10 years won't work in the next decade. The next 10 years will be about providing high-quality service, achieving strong clinical outcomes, and managing costs. If you can deliver high-quality care at a low cost, you're positioned to succeed.
My prediction is that those who stick with the old model — relying on risk transference, global capitation, and shifting risk to delivery systems — will struggle. There isn't enough money in the premium chain to support two risk-taking entities within one supply chain. I think the whole sector will be forced, as CMS intends, to provide real value for seniors.