Alignment Healthcare (NASDAQ:ALHC) executives said the company’s strategy of focusing on high-quality care at a lower cost—rather than relying on aggressive coding practices or other forms of “financial engineering”—has helped it navigate recent industry volatility while still delivering growth and improving profitability.
In a discussion featuring CEO John Kao and new CFO Jim Head, management emphasized a “care model that can scale,” daily operational oversight enabled by its technology platform, and a disciplined approach to membership growth that prioritizes durability and margin over chasing volume.
Strategy: “Do MA the way it was designed to be done”
Kao said Alignment intentionally did not pursue a strategy that combined high quality, low cost, and high risk adjustment factor (RAF). Instead, he said the focus has been on clinical outcomes and bending the cost curve, which he believes positions the company to perform in both rising and falling rate environments.
Growth update: 31% year-over-year, driven by retention
Management said the company delivered 31% year-over-year growth, attributing much of it to retention improvements. Kao cited a disenrollment rate “down to 6%,” and said “people like our product” and service delivery. He also said “switchers” represented about 83% of growth, consistent with prior years.
Kao said the company made a deliberate decision not to “grow at all cost,” including passing on opportunities it viewed as non-durable or not accretive. He referenced United’s exit from certain products and provider groups and said some displaced provider groups sought alternative payers with rate expectations Alignment was not willing to meet.
Looking ahead, Kao said the company’s stated public expectation is to grow “at least by 20%,” while adding that he views the 2027 opportunity set as “very, very good.” He suggested larger competitors may remain margin-focused in 2027, while some smaller and private or not-for-profit organizations that were aggressive in 2026 could face “indigestion” heading into 2027.
Medical cost management, V28, and MLR progression
Asked about early-year payment visibility and RAF consistency, Kao said there were no notable surprises and that the company’s 2026 guidance reflected good January and February visibility. He said bids were “spot on” relative to expectations, and that while predicting costs for “newbies” can be challenging, the company has been “very accurate” on loyal members.
Head addressed expectations for medical loss ratio (MLR) patterns, saying Alignment’s new-member MLRs are typically in the “high 80s, low 90s,” and tend to improve into the mid-80s or lower as cohorts mature. He said that dynamic “really hasn’t changed,” but noted the company has had to absorb “all three phases of V28” and its RAF adjustments. He added that, for 2026, management also faced a cohort with a more intense mix than in prior years, which was intentional and has acted as a “governor” on how quickly MLR can decline, though he said embedded value remains intact over time.
Care model: engagement, technology, and daily operational control
Kao said member engagement in the company’s Care Anywhere program is running at about 65%. The program targets roughly 10% of members who account for an estimated 75% to 80% of healthcare spend, using stratification based on lab data, pharmacy data, encounters, hospitalization history, claims, authorizations, and other data sources. Kao said engagement requires proactive outreach, and that members often initially doubt the program because “no health plan does this.” He said the company aims to move engagement closer to 75%–80% over time through operational maturation, including training, workforce management, and tools for nurse practitioners.
On the company’s AVA and broader data infrastructure, Kao said Alignment uses a “unified data architecture” with predefined definitions and metrics to reduce latency compared with legacy payers, where reconciliation across claims, eligibility, and provider systems can take 30–45 days. He said the result is more actionable data, allowing leadership to review metrics every morning and quickly address anomalies in utilization or costs through “boots on the ground” intervention.
Market expansion outside California and provider alignment
Kao said he is excited about all non-California markets, citing membership and Star Ratings as proof points. He cited membership levels of more than 22,000 in Nevada, 10,000 in Texas, 10,000 in Arizona, and more than 15,000 in North Carolina. He also cited Star Ratings of five stars in North Carolina, two five-star plans in Nevada, 4.5 stars in Texas, and four stars in Arizona.
He said the care model is “portable” outside California, as reflected by admissions per thousand comparable to California results. He added that competitive benefits and a market backdrop of legacy players stepping back on benefits has improved broker receptivity. Kao also said the company expects it may be easier to achieve desired margin and growth outside California because it does not rely as much on intermediaries, noting that in those markets Alignment is effectively building and managing networks directly.
On provider relationships, Kao said the company seeks alignment financially, operationally, and clinically. He said Alignment typically pays hospitals and specialists at 100% of Medicare fee-for-service, with select specialties participating in value-based agreements. For primary care physicians, he described a preference for a guaranteed monthly payment coupled with an incentive structure—emphasizing the company is not asking providers to take downside risk, but rather to participate in surplus through alignment.
In California, Kao discussed the role of independent physician associations (IPAs) and said the company has selectively “de-delegated” certain utilization management responsibilities—particularly around inpatient admissions—where it believed it could perform better. He said the result has been improved MLRs for Alignment and increased surpluses for IPAs, and characterized feedback from IPAs as positive.
Policy outlook and capital structure updates
On the upcoming CMS rate-setting process, Kao said he did not have more information than the audience but noted the historical pattern of an “uptick” from Advance Notice to final rate notice. He said the administration appears focused on program integrity and balancing affordability, funding needs, and political considerations. He also referenced analyst commentary suggesting potential “double dip” effects tied to certain adjustments and said he has heard expectations ranging around 2%–3% net, while acknowledging uncertainty and variability across plans.
Head also discussed the company’s newly announced revolving credit facility. He said it is undrawn and may not be used, but represents an initial step in maturing the company’s capital structure following a transition to profitability in 2025. Head said the revolver provides low-cost access to liquidity if needed and helps establish banking relationships, while the company’s leverage ratio declines over time, including in relation to its $330 million convertible.
About Alignment Healthcare (NASDAQ:ALHC)
Alignment Healthcare, Inc (NASDAQ: ALHC) is a health care company specializing in value-based care for Medicare Advantage beneficiaries. The company leverages an integrated care model that combines in-home clinical services, telehealth capabilities and digital health tools to manage chronic conditions, improve outcomes and enhance patient experience.
At the core of Alignment Healthcare’s approach is a proprietary technology platform that aggregates real-time clinical and claims data to support preventive care, risk stratification and personalized care plans.
