The Medicare Advantage insurer had already faced skepticism after its second-quarter report. Tuesday’s comments reinforced that picture.
- Alignment CEO John Kao said, “CMS this year is very sensitive about anybody commenting around the Plan Preview 2. I cannot talk about it at all.”
- CFO Jim Head said outpatient care and extra drug benefits were tracking well, but institutional spending was not.
- Kao framed recent lumps as side effects of a company-wide systems overhaul, including a claims-system conversion.
Shares of Alignment Healthcare (ALHC) tumbled 22% on Tuesday after executives at a Baird conference declined to discuss next year’s quality bonus and said hospital bills stayed hotter than hoped into August.
The Medicare Advantage insurer had already faced skepticism after its second-quarter report. Tuesday’s comments reinforced that picture.
ALHC is now on track for its worst day ever, if losses hold. Shares of Clover Health Investments, which also sells Medicare Advantage plans, slipped 9%.
No Comment On Star Ratings
Medicare grades plans from 1 to 5 stars. Higher stars mean extra federal payments and an easier time signing up members. Those grades depend on dozens of quality scores. Each year the government also sets “cut points” — the exact lines a plan must clear on each measure to earn 3, 4, or 5 stars. Those lines can move.
By the conference, Alignment already knew its final cut points and its own scores, a look known as Plan Preview 2. Asked how the company felt about its position — and whether confidence had changed since the second quarter — CEO John Kao refused to answer.
“CMS this year is very sensitive about anybody commenting around the Plan Preview 2. I cannot talk about it at all,” he said. “This year is different than prior years, and we do not want to be the one poking the bear.” He added that results would be public in mid-October.
Alignment has previously said it thought it was “close” on Stars and was unhappy with a late Health Equity Index decision.
Hospital Costs Still Elevated
CFO Jim Head said outpatient care and extra drug benefits were tracking well, but institutional spending — hospital bills and nursing-home stays — was not.
“The headwind right now is in institutional costs. Okay? There’s a headwind here, and that’s real,” he said. Hospitals are sending more disputed bills dating back to 2025. Nursing-home stays are also running longer.
The pressure continued into July and August. “We did see a little bit in July and August. We are calling that out right now,” Head said. “It is not something we think is going to persist into 2027, but we have got to address it.”
Management is adding payment-review staff and extra clinical teams. Guidance was left unchanged.
Still In A Messy Overhaul
Kao framed recent lumps as side effects of a company-wide systems overhaul, including a claims-system conversion. New software often delays old hospital invoices and makes reserves harder to pin down. Head said a more than $6 million second-quarter reserve hit was “very much related to that.”
“Anything that I think people are pointing to now is, in my mind, noise resulting from those change management initiatives,” he said. “I would not confuse the integrity of the business model with the short-term noise.”
He said the company is “largely through” the claims work but has not finished other projects. Alignment is also spending another $10 million to $11 million in the second half. “We have not picked up all that low-hanging fruit yet, but we will.”
How Did ALHC Retail Traders React?
On Stocktwits, retail sentiment around ALHC stock rose from ‘neutral’ to ‘bullish’ over the past 24 hours, while message volume stayed ‘high.’
Meanwhile, sentiment around CLOV stock rose from ‘bullish’ to ‘extremely bullish’ over the past day.
ALHC stock has fallen 49% year-to-date.
For updates and corrections, email newsroom[at]stocktwits[dot]com.<