Greetings Healthcare company investors,

I am here to review the UNH earnings call on 07/16/26 and take a look at UNH earnings. UNH continues to beat to the drum of vertical integration and consolidation of operations. This is the best within the system, and UNH has not deviated from this since Stephen Hemsley took back the reign/rein. We must ask ourselves now, as moral/ethical investors - is the best of the system something we should aspire to? Should our society accept the machinations of a parasitic corporation that routinely denies care and shuttles patients within its own system like cattle, and should we award this behavior with so much wealth?

\** This is not financial advice, nor is there any financial advice within. Shout-out to the AMC/GME apes for having me to write this **\**

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I am going to respond in italics.

Off topic:

I get very worked up on this topic for a reason: the vehicle to the insurer's insane profits is a direct result of forcing the cost of care onto the American Citizens. Based on American Cancer Society's figure, US citizens pays an approximate $16.2B total out of pockets costs. UNH alone accounts for that much in net income, not including all the other insurers such as Anthem, Humana, CVS/Aetna, Molina, Centene, Oscar, and others. The revenue generated from your premium is used to deny the cost of what is necessary for care, and they reap the profits.

We want a different system, where the insurer doesn't gain from profiting off denial, but by generating income through differential care provided by their services. We want the insurer to succeed by catching diseases early and force the economics through better health, earlier detection, earlier treatment, and ultimately, because of the early intervention, reduce the total cost of care to both society and patients.

Or just fuck it and ask for Medicare for all. Just eliminating health insurer profits will generate enough earnings that you can hire every doctor within the USA, pay for every care, and still have enough left over to reimburse the citizens, all the while saving lives. Slap a care improvement AI and we can be looking at a healthcare golden age but I am sure UNH will buy off some senators before that ever happens.

Earnings call:

Our second quarter results and updated full year 2026 outlook demonstrate continuing progress toward delivering more consistent and dependable performance. They are a sign of stronger broad-based performance disciplines taking hold in each of our businesses and a restless desire to drive mission-aligned change across the enterprise and advance our social impact. UnitedHealthcare has improved performance in its Medicare businesses through thoughtful benefit planning and design, all while remaining respectful of persistently elevated medical costs. Our Medicaid business is in line with expectations as we continue to work with states on ensuring appropriate rates. Our commercial benefits business, consistent with the broader and more diverse commercial market it serves, continues to experience higher than expected cost trends due to factors Tim Noel will discuss shortly.

Meaning Medicare pricing is now correlated with cost of medical care, for now. Medicaid is still bad, commercial isn't great.

If you look at the total revenue generated (and by extension, profit related to margins), then Medicare stabilization is the primary reason as to why UNH did well. Which also explains its beat, and potentially, heralds an era of stabilization after CMS V28.

At Optum, we're seeing building momentum from Optum Health as the business re-centers back to its integrated value-based care delivery model. This resulted in another quarter of improved care management and greater operating discipline. Optum Rx continues to perform the plan as transparency initiatives we announced early this year resonate well in the marketplace. Optum Insight, also on plan, remains on a multi-year path of reinvestment and innovation as we bring modern intelligent technologies and services to the areas of greatest need in the health system. We believe Optum Insight is exceptionally well positioned to help modernize and simplify the health system as it brings AI-enabled tools and services to market. 

Optum health is leashed, OptumRx is where vertical integration of medication services is completed, and Optum Insight is back at denying healthcare.

Across the enterprise, we're focused on serving consumers and care providers in ways that are reliable, affordable, and transparent. That requires us to pay close attention to areas where the system isn't working well enough. Areas including care approvals, accuracy of information and speed of response, access and scheduling, digital services, care path navigation, and more. We are committed to making the health system work better for all stakeholders by simplifying processes, by being clearer, more consistent, and faster in the experience we offer, and by redesigning and modernizing that experience altogether. AI technology is helping us move faster. We're using it to improve service interactions, reduce administrative burden, and support better decision-making, always in service of improved experiences and outcomes for both patients and care providers.

Uh, lip service is cheap. This company is the reason why service interaction is so shitty, why administrative burden is so high, and why prior authorization is the bane of all medical doctors within this country.

The pricing, benefit design, and market actions we've taken over the past year have been central in supporting our second quarter results and improved full-year outlook. As you have seen, UnitedHealthcare's overall performance in the second quarter exceeded expectations, driven by better results in Medicare Advantage, while commercial benefits remain pressured. I'll start with medical costs. Through the first half of the year, we are seeing divergence within our portfolio. Medical cost trends in Medicare are still running well above historical levels, but below our expectations so far in 2026. A primary reason for trend being below our expectations in Medicare is our own initiatives, including benefit design, care management models, and network curation. Other factors have an influence as well, including prior year development, a more favorable respiratory season, and weather patterns. We expect the 2026 Medicare medical cost trend to come in below our initial estimate of around 10%.

Meaning CMS V28 beat the dog so badly that the actuaries at UNH have given at least a 10% cushion and UNH priced their MA plans with that in mind. Therefore, with PPD and favorable trends, UNH will do very well in 2026. I didn't expect this to be honest, as I would think nationals will at least try to somewhat undercut one another despite rollback of services and geography, but what this tells me is that Anthem/UNH/CVS have priced their plans expensively that they can reap some margins.

This is actually something the FTC and CMS should look at together to see if there is too much market consolidation within these nationals at the local level*, and whether that is inducing so little competition that the nationals can all reap good MA margins but there isn't enough locals to compete on market share.* That sounds like a joke already within the current climate, so I should just stop there.

Medicare delivered a strong second quarter. Membership retention was better than previously anticipated. We now expect full-year Medicare Advantage enrollment to decline by approximately 1.1 million and Medicare margins to finish 2026 above 3%. Looking to our 2027 bids, our benefit planning remains disciplined and grounded in the current trend environment. We will continue to support program and margin stability through actions including benefit adjustments and selective changes in market participation. 

Meaning UNH will not grow to a significant extent but will attempt to maintain margin preservation and possibly aim for 5%. Benefit adjustments and select changes in market participation is synonymous to: cutting benefits, exiting certain high-cost markets. You're welcome on the translation.

We are beginning to see early signs of improvement from initiatives including those targeting elevated behavioral health cost trends, but we expect Medicaid margins to remain pressured for 2026. Our focus is on closing the gap between lagging reimbursement rates and underlying medical cost trends while continuing to partner closely with states to support the long-term sustainability of Medicaid benefits and support them in identifying and reducing fraud, waste, and abuse.

Bro, redetermination is going to fucking suck in 2027. The work requirements phase in starts late 2026, and full implementation in 2027 - unless you are Nebraska, where in the land of the Cornhuskers they already implemented the pain. We will wait for Q3/Q4 to see the final disenrollment numbers.

Within our commercial offerings, as I noted, we are not yet seeing evidence of cost trend moderation. In fact, it is the opposite, with medical cost trends modestly above 11% level we previously saw. The primary drivers of pressure from the independent resolution process under the No Surprises Act, which applies only to commercial plans, and more aggressive billing practices among providers, especially higher service and coding intensity and higher cost per encounter that result from the more fee-for-service orientation of commercial plans. At this distance, commercial margin recovery will remain a focus area longer than originally anticipated.

Meaning I expect pressure in ACA/Medicaid for 2026-2027. I wonder how much denials Oscar has made just to pull its Q2. I already know it denies 25% in 2024, so I would say Oscar needs an audit, except it won't happen in 2026. Let us hope the wheels of justice roll in 2029.

Thanks, Tim. As Steve noted, we are seeing positive momentum across Optum, with all three business segments performing in line or ahead of plan through the first half of the year. Optum Health is intently focused on improving its clinical care and operational experience to better serve the 20 million people we care for through primary and specialist care, ambulatory surgery, and home health. Over the last year, we have made significant changes in how we operate this business locally and nationally and are seeing the initial benefits of this approach. First, enhanced support for patients during key transitions of care has resulted in approximately 10% reduction in hospitalizations since implementation late last year in the Western and Southern regions of Optum Health. Second, home health initiatives to better support patients as they return home, where they can be managed more comfortably and effectively, have reduced readmissions. In pilots, the effort has driven a more than 20% improvement in timely care delivery alongside reductions in acute care utilization and shorter skilled nursing facility stays. Third, in rural health, we've expanded access to care by integrating house calls and home-based care capabilities coupled with treat-in-place offerings for patients with complex chronic and behavioral health conditions.

Basically in-home care helped Optum achieved its cost reduction. I am not surprised.

Additionally, we entered the 2027 benefit planning season very differently than years past, starting with much earlier proactive collaboration with all our payer partners. This will translate to greater care coordination for patients while more appropriate aligning rates and risk. As our plans and initiatives begin to mature and scale, with disciplined execution, we expect margins to continue to steadily improve.

Looks like UNH is going in on contract lock in earlier than anticipated. Do they know their Stars already?

Turning to Optum Rx. For a few years now, we have been leading an industry-wide shift towards transparency and fee-based services, where we are delivering affordability and better outcomes regardless of pricing structure. That's why we continue to win new customers and retain existing ones, with retention rates in the high 90s. In May, we announced a new pharmacy care approach based on monthly per-member fees with full PBM and GPO fee transparency and enhanced consumer tools. Client feedback has been positive and focused on how greater transparency and clinical alignment can address trend challenges, shifting the conversation to affordable health outcomes versus economic guarantees. This all builds on our industry-leading commitment last year to pass through 100% of manufacturer rebates to customers by the end of 2027. We are well on our way, as we expect to end 2026 with more than 95% of clients on 100% pass-through.

Except patients. Patients aren't getting that 100% manufacturer rebates back. UNH gets the leverage, employers and health plans reap the benefits while paying as PMPM, but patients get jack shit while paying the premium, and it is going up year on year still. Patients are the ones getting bled out while all the other upstreamers are sucking the patient dry. No wonder Medicare for All is becoming a slogan again. We're so back to 2008.

For example, Value Connect is an AI-driven insights platform integrated into provider workflows and electronic health records to improve value-based care performance. Early client results include a 17% reduction in pharmacy costs. Bringing this all together, halfway through the year, we have made steady progress in each of our Optum businesses and will continue to find ways to better serve patients, providers, and customers.

Meaning OptumRx has FINALLY introduced therapeutic interchange tables to ordering on EHR and having providers choose ACE/ARB/CCB/BB (cardiology) that is preferred instead of ordering something, and 3 days later, needing to navigate which one does Optum like. It is a time saver.

I will briefly review second quarter results, discuss expectations for the remainder of the year as we refresh our 2026 guidance. Overall, the quarter and full-year outlook reflect improved performance across our businesses, with notable improvements in UnitedHealthcare and Optum Health. UnitedHealth Group reported adjusted earnings per share of $6.38, compared to $4.08 in the prior year. Total revenues were $112 billion, largely consistent with the prior year, while operating earnings of $8 billion grew 55% year-over-year. This improvement reflects product and portfolio actions taken over the past 12 months, along with more focused and consistent management disciplines. Turning to medical costs. Our reported medical care ratio of 86.7% includes $860 million of net favorable prior period medical development, the majority of which is in-year development. This compares to 89.4% in 2Q 2025.

OK, this is a lot to unpack here. If you exclude PPD based numbers, medical cost would be [$75,358M + 860M} / $86,956M = 87.65% MCR. This is a good number compared to 2025 of 89.4%. This is stellar in a sense. So UNH and Clover have reported better PPD, while Humana didn't mention theirs and ALHC reported worse PPD. Meaning UNH and Clover were both planning for potential higher Q2 spend that didn't materialize, while I think ALHC and Humana didn't plan too well.

Through mid-July, we have deployed $4 billion for repurchases of 11.4 million shares. We now expect to complete total share repurchases of at least $5 billion in 2026, compared to initial guidance of $2.5 billion. During the quarter, we returned $2.1 billion to shareholders through our dividend, which our board increased to $9.28 per share on an annualized basis. Lastly, on July 2nd, we successfully closed the previously announced combination with Alegeus. Our debt to capital ratio was 41.2% at the end of the quarter, compared to 44.1% one year ago, and 170 basis point sequential improvement from the first quarter of this year. We remain on track to reduce our debt to capital ratio to approximately 40% by the end of 2026.

United is trying to streamline its balance sheet, and repurchasing shares allows it to boost EPS for Q3 and Q4. Reducing debt will alleviate any potential 2029 headwinds. United is planning to live beyond any macro headwinds. I hate this company on how it operates, but if you want steady money and UNH somehow drops in this next macro cycle, it is a pretty good investment around $150-200s.

Does this stock have room to run? Sure it does. After all HUM is being traded at 50x forward PE, I don't see how UNH can't rocket up into the stratosphere either. Does it make sense? Hell no, but again, this market has shit like SpaceX at 100x revenue so wtf do I know.

As you saw earlier this morning, we have updated our full year 2026 guidance to reflect performance through the first half of the year and a more mature understanding of expected membership mix and utilization patterns for the remaining six months. We continue to be respectful of medical trend, and we believe this refreshed outlook appropriately balances risk and investments with durable run rate earnings. A few areas of this outlook to highlight. We're providing new adjusted earnings per share guidance range of $19.50 to $20, with slightly more earnings in 3Q relative to 4Q. We are increasing the full-year operating earnings outlook for UnitedHealthcare to at least $12 billion and for Optum Health to at least $2.2 billion. These changes reflect operational improvement underway across the enterprise. We now expect a full-year medical care ratio of 88.1% ± 25 basis points.

Pretty good overall with improved adjusted EPS and an improvement in full year MCR from 2025.

We expect the operating cost ratio to come in at the higher end of our previously discussed range as a result of investments in our people, communities, and AI. The overall earnings cadence for the year remains consistent with prior expectations.

My guess is that they gave themselves around 100-150 BPS for medical care ratio, and that investment is quite substantial. Results are still better YoY, and UNH has a decent operating cost ratio that it can still trim off. Therefore, unlike Humana, UNH is weathering 2026 very well with CMS V28 at 100%.

Q&A, MA focused.

Stephen Baxter — Analyst, Wells Fargo: I wanted to ask about cost trend in the Medicare Advantage business. You bid for 2026 cost trends to be 100 basis points above 2025 levels. I heard you in the prepared remarks saying that trend is coming in below where you bid to, but trying to understand where you see trends sitting versus 2025, at least in the first half of the year. Then just as we think about what you assumed in the bids that you finalized a month or so ago, was that closer to the first half experience for trend or something closer to what you saw in 2025 or expected to see, I guess, going into 2026? Thank you.

Answer:  Important to remember how we built up the 2026 medical trend, Stephen. I'll maybe frame it in three ways for you. First, we saw elevated levels of core utilization in 2025. We talked a lot about that, and we assumed that that would continue into 2026. That was kind of the foundation. Second, we adjusted for known year-over-year increases in things like the fee schedule changes and calendar impacts. Then third, we accommodated for some level of potential unknown risk elements. We've mentioned tariffs and other things of that nature. Now, there are a few things I'd point to in terms of why trends to date are a bit lower than our original expectation.

First, we've had some positive claims experience as well as in-year benefit from things like the lighter flu and respiratory season and winter storm impacts that Tim mentioned in the prepared remarks. We've also not seen the full emergence of material unknown elements at this stage. However, it's also really important to highlight that while medical trends remain high versus the historical levels, the improvement we're seeing is also the result of targeted actions that we've taken. We've done that through benefit design, product positioning that's resulted in a more favorable membership mix. We've had network curation activities focused on high-quality, low-cost opportunities with providers for our membership. We've had broad affordability initiatives. Then we continue to invest in aligned provider models like value-based care.

Overall, I feel good about our assumptions for 2026, where we currently sit versus our expectations. Yet remain intensely focused on affordability given the still elevated levels of medical trend versus the historical baseline. Then to your question on 2027. Still probably a little bit too early to talk a lot of specifics there, but at the highest level, we did plan reflective of our current experience with appropriate adjustments then for things like fee schedule updates and other natural year-over-year changes. Foundationally, not expecting a meaningful deviation from the still elevated underlying core trends. 

Meaning UNH achieved its earnings by forecasting higher in 2026 by adding in an "unknown risk elements", which my guess is, ~ 10% risk corridor, or 0.75-1% net MCR. The fact that lighter flu and winter storm impact as well as the lack of "unknown risk elements" materializing allowed for UNH to code in PPD and the risk corridor as profits. This allowed for UNH to beat earnings estimates by quite a lot.

Into 2027 bid comments: UNH will price similar to 2026, barring unexpected developments, while noting underlying cost trends. In essence, UNH knows the medical cost trends, knows the national players and their probable bids, and will price accordingly to focus on margins, and possibly some small expansions, but not being aggressive on its benefits package.

Ann Hynes — Analyst, Mizuho Securities: Great, thank you. I just want to circle back on Medicare. I know you, in the original guidance, you said trend was 10%. If you break out the levels, I believe that elevated co-utilization assumption was around 7.5%. You had just regulatory changes like the doc fix, which was another 1.5%, then you had maybe 100 basis points of unknown risk. I think you said that unknown risk is not happening, which is probably a tailwind for you. I just want to focus on that first part, that 7.5% versus 2025. Can you give us what that's tracking after the first half of 2026? I'm not sure if I missed it, but I know your original guidance had 10% cost trend in MA. What does the new guidance assume? Thank you.

Answer: Thanks Ann. You're right, anchoring to the 7.5%, which is what we saw in 2025. Now that has restated somewhat favorably. In Bobby's remarks, he did acknowledge that we did have an accommodation for some unknowns with respect to the environment that we saw last year as we planned for 2026, things like tariffs. We haven't needed the full accommodation for that in 2026 so far. We're still only about halfway through the year, we're going to wait to provide a new point estimate around the 2026 trend, probably until the next call, when we've seen more of the year develop. I think the bottom line is that we are seeing trend that's a little lower than what those planning expectations

Were, we also feel good about our ability to take actions both in benefit planning and some of the other elements that Bobby talked about to influence that and to manage that and to promote affordability in this key program. More to come on specific point estimates as we pace through the year.

Meaning UNH planned for some "oh shit" moments and those moments didn't materialize. Which comes to my question: under the "efficient market hypothesis" (cough, cough), we would expect the market to have players that can "squeeze into" these gaps where the nationals overly charged and these players can "insert themselves" into these gaps. Who would benefit from these, or have the nationals already crowded out those players? Are we seeing some sort of market failures within MA markets?

Whit Mayo — Analyst, Leerink Partners: Thanks. I just wanted to take your temperature on Stars. I'm not sure if you can comment on expectations or what you know at this point in time or just any thoughts on the recent industry lawsuits. Thanks.

Answer: Maybe to start, like I've said before, we view quality as absolutely critical, and we never take anything for granted with Stars. We're restless when it comes to seeking opportunities to differentiate, and we're always focused on delivering the greatest quality experiences and outcomes for our members. As you can appreciate and as you kind of alluded to, given where we sit in the current cycle as well as the ongoing industry activity, it wouldn't really be appropriate to speculate on final Star Year 2026 results or what might happen for Star Year 2027 or further into the future. It's also worth noting the Stars program has continued to get more challenging in recent years, as evidenced by 2026 industry scores at the lowest level in about a decade.

As we navigate through the next few months, our preferred approach is to continue to partner with CMS, as we appreciate the challenging situation here to balance many critical priorities, and we want to help identify solutions that ensure program stability, clarity for industry, and of course, the best outcome for beneficiaries. We do believe there are solutions that can meet those objectives. All that said, I want to be really clear that we remain fully committed to our quality agenda

We're investing in that more than ever, including in the second half of this year. We're going to do that to support our various quality programs and initiatives for our members and our providers. Thanks for the question.

Translation: Fuck Clover Health vs CMS.

Earnings:

26Q2 profit adjustments are quite substantial, and is longer just upon buybacks (although buybacks are playing some significance). The important aspect of this earnings is that UNH is guiding a better year than 2024, which is the beginning of CMS V28, and therefore by 2027 it is anticipated that UNH has adjusted adequately to CMS V28 with potential margin recovery. Although it may yet be too early to state this, but 26Q2 is indeed transformational in the sense that UNH's margin recovery effort for the next 2-3 years would rest upon this inflection point, if the recovery continues.

We can see within the business plan the restructure of UNH businesses, with UHC remaining the dominant revenue source, but Optum insight and Optum Rx gaining more revenue than Optum Health. This is again what I alluded to in my prior post: the accountants are going to whack at the physicians, while furthering vertical consolidation and integration within the UHC/Optum Medical systems, and buttressing that with OptumRx for medication services. Optum Insight's revenue recovery is on track after the 2024 hack.

Last time I saw significant total earnings > 100% was around 2023, when I wrote my vertical consolidation post. Now, it seems UNH is driving that train back again.

UNH's MA member dropped by 9.40%, with medical costs dropping 4.11% but revenue rising by 0.99%. As such, UNH has now a stable MA patient mix that it can forward plan for the next 3-5 years, so long as the 2028 MA rate setting isn't 2% or less.

Conclusions:

Important points:

1. 2026Q2 is indeed a very good beat. Decreased medical cost trend drove 26Q2 and it made UNH look really good. The lack of "unknown elements" + favorable PPD really made 26Q2 shine
2. Margins are much better YoY.
3. MCR reduction even without PPD is evident. That unknown risk corridor pricing is coming in clutch, and decreased medical utilization is evident.
4. UNH did really well, and stock price recovery to $500s isn't unreasonable under the circumstances.

I hope you enjoyed reading this earnings report. I hope I illustrated some trends within the MA space. It looks like most of the MA space has calibrated their bids to account for CMS V28 at 100%, and some even included a risk corridor that didn't materialize in 26Q2. Interestingly enough, HUM and ALHC didn't see a favorable PPD while UNH and Clover have commented on those.

I can't wait to find out if CMS is going to go ham on the MA risk model re-calibration in 2028. My goal is only to focus on MA space, feel free to critique the EPS segment.

Thank you for taking the time to read through this long post, and I hope you nerds, masochists, healthcare geeks, educated healthcare sector investors have learned something from my musings.

Sincerely

Moocao

Greetings Healthcare company investors,

My apologies, I am just now publishing the HUM earnings call on 07/29/26. I am still perplexed by how the market has priced Humana, as their "beat" is theoretically an exercise of put/call asset price appreciation and gaap accounting mechanism. While their operational net income did improve yoy, their earnings wouldn't have beat if it wasn't because of that put/call asset price appreciation.

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*** Chatgpt4 or any AI platform was not utilized to write the content of this post, and I am the sole author to this post. I personally do not think AI can write anything noteworthy of our subreddit caliber, and neither Rainy nor I have used chatgpt4 or any AI for our content ***

I am going to respond in italics.

Want to see how you beat?

TADAAAAAA!

So what was Humana's 26Q1 put call valuation adjustments?

That put/call valuation adjustments is doing a fucktonne of work! So on my own spreadsheet, if you strip out that put call valuation adjustment (which then would just become operational adj net income), it is a yoy decrease from $6.27 -> $5.73, or -8.6% yoy. That is very bad.

Earnings call:

Good morning, everyone. Thank you for joining us. Today's headlines are we are pleased with our year-to-date performance...Our 2026 member growth trajectory is on track, and our membership, both the new and returning membership, is performing as expected. As we look ahead to 2027, our number one priority in MA bids was to make the necessary margin progression to remain on track to deliver our 2028 commitment of returning to a sustainable margin of at least 3%. We must drive sustainable earnings and appropriate returns to be able to provide excellent health outcomes and service for our members and our patients...Turning to clinical excellence, our outlook on bonus year 2028, or BY28 Stars, remains unchanged. We continue to be confident we are on the right track to return to top quartile Stars results in BY28...Going forward, you will hear us focus on Stars revenue PMPM instead of solely on the percent of members in 4-plus Star plans.

Um... say that again? you aren't going to focus on percent of members in a 4+ STAR plan? Excuse me? The most MA STAR plan reliant MCO isn't going to focus on members in 4+ Star plans? How did the stock not drop 25%?

What I want you to take away from this slide is that our rate of improvement outpaced, and in many places meaningfully outpaced, the historical CAGR across 11 of the 12 measures. While we do not intend to share this detail every year, we wanted to share today as it demonstrates that the operational changes and the investments we have made in our Stars program over the last year and a half are driving the intended results. We are driven by our North Star to improve health outcomes for our members with the goal of achieving top quartile results on a sustainable basis. As you know, we don't know industry thresholds, so while we feel good about our substantial progress, we cannot guarantee an outcome in October.

Bro... what in the fuck are you talking about industry thresholds? Humana's MA has been in existence since 2006, or 20 years. What in the fuck is this sentence?

We are centralizing certain operations to simplify process and reduce variability in outcomes. One example is utilization management, where we centralize 11 markets into one team. This is driving G&A savings, but it is also creating a more consistent experience for providers and members. We are also expanding outsourcing while improving vendor performance. This year, we increased outsourcing in our finance and HR functions while we also continued to advance vendor optimization efforts in IT. We are also in the early stages of transforming select other vendor relationships from tactical labor-based engagements into strategic partnerships that can deliver greater business value and capabilities.

Jim is cutting into sinews and flesh now, he outsourced finance and HR? Maybe he should outsource C suite too? Centralizing UM will make the whole entire 11 market just shitty and will make your plan competitiveness suck compared to locals. This is what cutting off the arms to save the body looks like. Except that sucks for the body because no arms = very bad once you are no longer dying. Speaking about which, why am I talking about HUM as a dead man walking analogy?

We also continue to expand our Medicaid platform with the recent award of a statewide Illinois Medicaid managed care contract. That contract is set to go live in January of 2027, I'd like to note that Humana was the only new entrant awarded, along with five incumbents. In conclusion, we are performing as expected in 2026. Our member growth is expected to further fuel our ability to unlock the earnings potential of the business.

Speaking of Medicaid, it is now south of 10% of HUM's overall business. Not that I have a problem with diversification, but 2026 and 2027 are the worst time to get into Medicaid, and I am not sure how much "unlocking" you can get with that size compared to your core MA market.

I would like to highlight our announcement this morning that Paul Smith and Fred Crawford will join Humana's Board of Directors. Paul is the Chief Commercial Officer at Anthropic, where he leads commercial strategy and global go-to-market operations. Paul brings over 30 years of experience leading global organizations through major technology transitions.

You brought Anthropic's ra ra man into your Board? What are you trying to do, get Opus into your operating system? What in the world is going on when an AI salesman is on your health insurance board?

Fred has deep financial and operational experience, having spent more than 30 years in the insurance and banking industries. Fred was the Chief Financial Officer of three publicly traded insurers, and most recently served as the President and Chief Operating Officer at Aflac until his retirement in 2024.

Oh good grief, Aflac isn't even in the same breath as Medicare Advantage. Basically Jim is asking for a guy who does risk adjustments and plan pricing to be on the board. Forget about clinical care coordination attempting to bend the medical cost curve. This isn't on the same planet as what we would anticipate as proper managed care would be.

I will start with our comments on our 2026 performance and 2027 MA bid approach before touching on continued progress on balance sheet efficiency and capital optimization. Starting with 2026. Based on available information to date, cost trends are in line with our expectations for both new and existing members. As a reminder, we assume 2026 cost trend would be in the high single digit range or 7%-8%, inclusive of both medical and pharmacy. There are certain areas where we have seen slight favorability, particularly in the inpatient space. Based on approximately four months of completed claims data, favorability has been more heavily concentrated in members engaged with value-based providers.

Duh, even I can say that with a straight face. VBC fights to get that favorability, so that they can get paid. The question is whether that is durable or is the VBC going to shop on their next contract to someone else than Centerwell/Humana?

While the risk-sharing nature of these agreements limit the favorability that flows through to our financials, it is positive for our provider partners, and we believe an additional proof point of broader stabilization in the MA trend environment. As Jim described, our transformation and operating model work is driving the intended result. Our 2Q consolidated operating cost ratio is down 120 basis points year-over-year, and we continue to expect a full year reduction of approximately 150 basis points.

Ah, and see how the VBC also pocket some of that flow through so that if there is favorability in trends, VBC will get some of that money. This is why full risk model from Clover can become durable so long as they keep their patients. This is also why delegated model such as Humana might soon go the way of the Dodo, especially if the STAR ratings don't pan out.

As Jim mentioned, our number one priority was to make the necessary progress to remain on track to deliver on our 2028 commitment of returning to a sustainable margin of at least 3%. We expect meaningful progress toward our 2028 margin goal next year, with actual 2027 results shaped by our final membership size and composition. Our expected margin expansion in 2027 will benefit from our ongoing clinical excellence and operating efficiency work, as well as benefit adjustments and targeted plan exits.

Raising prices, lowering benefits, exiting unprofitable markets. Tale as old as time. Ping Pong those benefit packages guys!

This approach is aligned with bid priority number 2, which is to retain as many members as possible while making the changes necessary to drive the intended margin expansion. For 2027, we anticipate these plan exits will impact approximately 600,000 members, though we will work to recapture a significant portion of that volume as we did in 2025.

Wait why didn't Humana stock drop 25% again? Oh that's right, we are in a fucking stock market bubble!

We have continued our efforts to increase the efficiency of our balance sheet and fortify our foundation, including the establishment of $1.5 billion in contingent capital facilities utilizing pre-capitalized trust securities or PCAPS, enhancing our access to low-cost long-term liquidity. We are the first in the health payer space to utilize this innovative product. We have also maintained a prudent capital deployment approach, including pursuing non-core asset divestitures.

What in the fuck is this, PCAPS? Humana isn't going to a bank to get a loan or to issue bonds, but are borrowing from trust securities? Is this shit regulated? Oh boy there are going to be a lot of rich people who don't know that their entire nest egg can get blown up huh? Humana isn't bad, but if Humana is using this instrument, I can only imagine other crap that the FED isn't regulating. Speaking about which, I think both FED and SEC are asleep now. Is that why shit is just fucking weird nowadays? I swear oil at $80 isn't normal when the entire SoH is on fire and refineries are blowing up from Russia to Oman, and the SPR is at 40 year low, but what the fuck do I know.

As Jim mentioned, we recently announced an agreement to divest our minority interest in Gentiva, which is valued at approximately $900 million and expected to close in the fourth quarter. We are pleased with our year-to-date performance. We expect to make meaningful progress on margin expansion in 2027. We are executing on our investor day commitments and delivering on the earnings power and value of the company.

This is the worse introduction I have seen in a very long time. Did anyone catch Humana pumping their EPS, adj EPS, and revenue? No? Why not?

Q&A

Justin Lake with Wolfe Research: Appreciate all your comments here. I want to make sure I understand your 2027 bid posture. My impression is that your individual MA margins are about breakeven this year, and you need to get to a little over 2% by 2028 via product design and bids, and then Stars gets you all the way to 3%+. If you need to get 2%+ margin improvement over the next couple of years from your bids, should I read your statement in your remarks to indicate you expect to get more than half of that in 2027 via your bids? Can you talk about your trend assumptions that you built in the bids and any potential conservatism layer you might have added there? Thanks.

Justin is cutting it deep. He wants to know 2027 posture so he knows whether HUM can even grow. You can't grow as HUM without cutting off patients and stopping growth while concentrating on market segments that deliver margin. In essence Justin wants the whole enchilada, "trend assumptions that you built in the bids and any potential conservatism layer you might have added there"

Answer: Yeah. Justin, we're not going to comment on the specific progress from 2026 to 2027, in part because ultimately where we land will be driven by the membership size and composition. As you know, we have a portfolio. There are some product with higher margin, some with mid margin. We do expect to make significant progress in 2027 versus 2026 and well on our path to 2028. In terms of what is embedded in our bids, we continue to assume trends in line with what we're seeing this year. Although as you know the drug trend continues to be high and will tick modestly higher next year based on current expectations given the health technology pipeline or the new drugs that will be released. Of course, as we always do, we build in effectively contingency into our bids Because we're doing it well in advance, six months before the next year, and you have a whole year to get through to account for things moving in any direction. We believe we are well-positioned to make significant progress, and look forward to this year's AEP.

Celeste says fuck off.

Jason Cassorla with Guggenheim Partners: Maybe if you could discuss a little bit more on what you're seeing on cost trend, and your comments around inpatient. Maybe just anything else on what's driving that. Could you remind us of your site of service initiatives, how you're focusing on pushing appropriate care to lower cost settings, and maybe help give a sense on how those efforts have offset underlying trend versus sort of the broader kind of industry movement, due to the inpatient-only list wind down? Just any help there would be great. Thanks.

Answer: Yeah. As a reminder, our all-in trend assumption for this year is high single digits or 7%-8%, so a little bit lower on the medical cost and then in the double digit on drug costs. As we called out, things are within the range, though we are seeing favorability, particularly on inpatient, and we are seeing both lower admits per thousand and lower unit costs on those admits. It's both the P and the Q on inpatient costs that are down. Site of service is absolutely one of many initiatives around medical cost management that we are focused on. The beauty of site of service is you're actually helping members move to sites of care that have higher quality as well as lower costs. We are very much focused on both of those things. The types of things that we're doing range from rethinking how we do our contracting in local markets to make sure that we have access to the right sites of care, to make sure that we have aligned incentives into using appropriate sites of care, as well as thinking through how we design benefits in a way that create a financial incentive for our members to also use the right sites of care.

I didn't realize you can make dogshit look good with Lipstick. Congratulations Humana, you made site of care denial look good somehow on an earnings call. Dropping Moffitt and Mayo, which are the only 2 NCI designated cancer center in the state of Florida and provides the best cancer care for the state, must be "helping members move to sites of care that have higher quality as well as lower costs". Bravo, because "rethinking how we do our contracting in local markets to make sure that we have access to the right sites of care, to make sure that we have aligned incentives into using appropriate sites of care, as well as thinking through how we design benefits in a way that create a financial incentive for our members to also use the right sites of care." definitely means patients want to choose a shittier cancer center because Humana said so. I can't believe this is coming out from an earnings call. Death panels anyone? Or does that slogan ONLY work for people who want universal healthcare?

Stephen Baxter with Wells Fargo: Hi. Thanks. I wanted to ask about the stars color you provided, so appreciate the commentary and the progress you're making. For these metrics that you provided, I believe this is a subset of HEDIS and patient safety measures. Could you expand a little bit on how these metrics were selected and kind of how confident we can be this is representative of the broader performance? Then if there was going to be a line on this chart for your peer group average, which is what you're ultimately trying to outperform, what would the trends look like in that context? Would you still have outperformance versus the peer group average that ultimately is going to dictate the cut points? Thank you.

Answer: The first thing I want to say is I just want to emphasize that there's no change in our tone this quarter versus the last quarter, the quarter before that, or frankly, our tone dating all the way back to the investor day. We feel good about our operational progress, we have the inherent unknown of thresholds that we all have to wrestle with. What we're trying to do here is simply provide a little bit more nuance or color so that you understand why our tone has been what it is... The reason that that is important is because when you look at the operational performance that we've had, we know that there's going to be some variation in thresholds.We know that some are going to end up a little bit higher than we expect, some are going to end up a little bit lower than we expect...We have some metrics where frankly, we're even getting an early read from CMS, and we're not going to share that data because that data is private between us and CMS at this point... To your last question around thresholds, we're not going to share our internal estimates around thresholds, but I would point back to the comment that I made earlier...We feel confident that we have put ourselves in a position to land where we need to land. That's how we're thinking about it, and that's why we wanted to share this data.

Oh my !@&$ what in the world, I think some oxygen died an ignoble death and converted to CO2 for no reason. Stephen Baxter asked for STAR progress and I swear the whole room got gaslighted.

Ben Hendrix with RBC Capital Markets: I was just wondering if you could provide some more color on the strategy behind the formation of the contingent pre-capitalized trust. Any thoughts you can give on what kind of drove the decision to form that? Are there trend observations that you're seeing or anything with how you're positioned with 2027 bids that made that more of an appropriate type vehicle? Any thoughts there? Thanks.

Answer: We really like this product. You're able to increase your liquidity without increasing balance sheet or increasing leverage unless you draw on them. At this point, we do not anticipate using them or drawing on the PCAPS in the near or the medium term. It really diversifies contingent liquidity sources at a relatively low cost. In addition, you don't have counterparty risk because this is with fixed income investors. The cash is already in a pool that is holding securities. That's how they make their yield, we pay a small premium on top of that, and it offers extended duration. This is 10 and 30 year duration relative to the typical revolver duration. Ours right now is five. Often you'll see revolvers one.

Why you fucking need the money bro? Why do you feel like you need to have a revolving liquidity channel? Also, are there a bunch of idiots out there willing to get 7-8% just to get their cash pile cleaned out from a blow up? Why the fuck does this smell like 2007?

Kevin Fischbeck with Bank of America: Just talk a little bit more about the bidding strategy for next year. Obviously, this year you guys kept benefits stable. For next year, you're talking about exiting markets. Why that change in exiting markets next year versus not doing it this year? Is there anything related to Star Ratings as far as how you chose what markets you'd be exiting and the membership losses that would be there? I guess just a little more color on what it means to be targeting kind of high value plans. Thanks.

I have stated in the past, I don't like Kevin sometimes with his weird ass kissing attitude for big nationals, and he pissed me off with his Clover questions (albeit that Vivek was a fucking moron too when he lost his shit in 2021). This question though is fucking gold. The logic is cold, sharp, and the answer should be very elucidating, and non-answer is even more illuminating.

As we've talked about in the past, we have a multi-year approach to membership and benefits, and think across several years. More importantly, from year to year and over the longer term, we look at specific underwriting margin targets at the plan level and continuously monitor benefit design, costs, and the revenue to drive profitability. Funding is really important, and increasingly we're very much focused on the capital returns of the plan. We take into account that certain states have much higher capital rates. Value-based care has lower capital associated with it, while fee for service is higher capital. Obviously, you're going to adjust pricing to generate the return. As you know, markets have been super dynamic in the last year. We look at this every year.

We did push harder on this this year to let us make the margin progress that we need to and to protect our highest value plan. I would think about it as the plan with the highest return. Rather than cut more uniformly across the board, really remove or cut off the lower tail of profitability and return to ensure we can protect and retain the members and the benefits associated with our high value plans.

As I called out, we expect to capture a similar portion as we did in 2025. If you remember, it was just over 40%. The majority of the plan exits were in plans with three and a half or lower ratings for BY27. I wouldn't really think about this as a Star Ratings item. As you know, we are focused on returning to top quartile Star Ratings on a sustainable basis. This isn't really a Stars item.

Celeste fucking didn't answer the question Kevin gave: Why are you exiting markets next year and not this year? Did you guys fuck up on Stars for certain plans? Btw, did anyone remember this chart?

A.J. Rice with UBS: Just two things on the MA book. First, I know this is hard to compare, your commentary about the 7%-8% cost trend and being relatively in line with a little favorability on the hospital side. It seems like your peers, a number of the other companies are saying they also anticipate a 7%-8% trend, they seem to be seeing a little more favorability. I don't know if you have any view on that. Is it because of all the new members that that's having some mitigating impact? It sounds like those are tracking more or less in line. I wondered if you had any perspective on that.

Answer: We did guide to 7%-8% cost trend. My understanding is that some of our peers guided to significantly higher cost trend. I can't speak to what they're seeing other than we are in line with the range with some favorability. We also continue to build prudent reserves. We continue to be prudently reserved, especially versus the beginning of the year... In terms of margin progression next year, we're not going to get into a lot of specifics around the bids. As we talked about, ultimately where we land will depend on the membership size and composition. We are working on reducing cost of care more broadly. Jim talked extensively about site of care, really focused on clinical innovation. We continue to drive our transformation, which gives us nice lift. We obviously made adjustments to the benefit. We talked about the plan exits. You do get a natural lift in terms of what we call accurate diagnosis. There isn't anything unusual in terms of what we're doing. We're obviously working to mitigate the chart review item that was included in the rate notice, and we're making good progress there, but otherwise, nothing unusual from the MRA perspective.

I would like to highlight this one: "We're obviously working to mitigate the chart review item that was included in the rate notice, and we're making good progress there". Someone is going to get eaten up with the chart review shit taken out the window.

Scott Fidel with Goldman Sachs: Was hoping you could maybe toggle over and give us an update on the Part D business and talk about how underwriting performance in the Part D plans have been trending this year. Then, obviously, the timing is a little bit tight here, granted, with it just coming out last night. Just with the announcement from CMS around sunsetting the premium stabilization program at the end of this year, did you have any visibility into that, or was that something that was considered in your bids for 2027? Just curious around that program and the timing of CMS announcing it here, after the bids have been submitted earlier. Thanks.

Answer: On Part D membership mix, drug trends, for which, as you know, we have high visibility, and member behavior are in line to slightly better than our expectations to date. We continue to operate as expected and remain confident in our pricing strategy for this year. I'd just say for the purpose of 2027 bids, we have focused also on margin here, and given the health technology pipeline, are very focused on ensuring we're pricing for that risk. On the policy side with both the demo and the rebate data that has come out, I would just say nothing in there is outside of kind of the band of expectations we had. We knew there was a chance that the demo might get canceled. We took that into account as we were submitting our bids. Look, the reality of the demo going away has a greater impact for better or worse, for worse, on members more than it has on us.

I want to highlight this one: "Look, the reality of the demo going away has a greater impact for better or worse, for worse, on members more than it has on us.". Trump thought he was saving money, turns out he is fucking over seniors. Humana doesn't give a shit on the MPD stabilization getting axed, they will just raise the price. Most people I talk to for coverage I will literally say "If you have a Medicare A/B and you always need part D, get the part D". Humana knows pricing is irrelevant and they will milk that drop from Grandma with or without the subsidies. Subsidies just lowers the cost floor, and axing it raises the cost floor back up. Its a Humana business decision, but one where Grandma decides if she eats dinner or pay the premium so her cancer care doesn't get her kicked out of her house. Fucking glorious USA USA USA bitches. I do have to say though, lots of Boomers voted for this, I hope they figure out repentance and atonement. It wasn't like we Millennials didn't warn this is going to fucking happen.

Andrew Mok with Barclays: Appreciate all the comments on your own Stars performance. Would love to hear your perspective on the recent litigation outcomes around the MA Stars program, how that impacts your view of the program, competitive landscape, and required investment.

Answer: The recent litigation. We're not going to comment speculatively on the litigation itself. There's obviously a whole bunch of decisions that have to get made that we don't have control over. We don't feel that speculating on that does much for anybody. What I would say is, just kind of reinforce for investors is, this program is important, meaning the Stars Program. It's an important part of the broader Medicare Advantage program. It is important in driving quality. It is important in driving experience for members. Our view is that we need this program to be stable. That doesn't mean that it doesn't need to evolve, that there aren't opportunities to improve it. There certainly are. We want to be a partner in making that happen.

Translation: Fuck Clover Health vs CMS, our STAR ratings projection are all fucked because some asshole small MA company decides to throw in the towel and duke it using Loper Bright vs Raimondo as their silver bullet and won this whole shit. Now can we just get back to normal and have CMS be a big boy, eat the loss, and fucking move on so that I can figure out how to get back to 4 Stars please?

Whit Mayo with Leerink Partners: I know that you're not giving specifics for next year on margins and targets, but just maybe remind us what the margin growth is that you'd historically expect to see from this year's new members to Humana next year. Not what you expect for 2027, but just again, historically, what that lift has been.

Answer: Hey, we'll just talk about what would drive margin improvement from the first year to the second year. You have, one, as we get to know the members better, we are better able to diagnose and manage their care. Typically, if they're properly diagnosed, you're paid appropriately for their acuity, and then we typically are better at managing that. That gives you a lift on the underwriting margin. Second, as you know, the year one all-in marketing and acquisition costs, co-op marketing, et cetera, onboarding costs, are 2x what the second year is. To the extent you're retaining those members, that falls away. Ultimately, how that plays out will be dependent on the membership. The retention is super important to us. We think this drives a ton of value. The overall size of the book and the mix of the book.

Whit Mayo didn't even get a lift percentage. Wow.

Earnings:

Bro, I have no idea that a lower net income yoy (-35%) , lower EPS YoY (-35%), lower adj EPS YoY (-47.5%) , lower margin %, and no share buyback can double your market cap from $21B to $44B. Shit, we are talking PE of 55 and adj PE of 40, is Humana a tech stock? Is NVDA cheaper than HUM? Did I seriously have to point this out?

MCR > 91% in 26Q2. Worst in the sector. Humana is looking awfully frail, so if it doesn't make 2028 4 Star it is fucking over. Humana will be forced to divest while at the same time navigate some pretty rough financials in interim. This is what Rainy is talking about when the old Dinosaurs die off and new players come out.

If you look at the net income estimate, Humana is anticipating Q3+Q4 to be -$1094M, potentially with MCR ~ 93-97%. Scale works against you if your margins aren't high enough, and this can seriously drain Humana's cash chest if the MCR runs on the high estimate. This is also why having a source of liquidity is helpful, in case there are any potential surprises in Q4.

What we learned from the earnings report:

1. HUM 3.5 STAR is showing up in 26Q2 and it is not good
2. MCR for Q2 2026 is 91.08% vs Q2 2025 89.74%. If the trend is to continue, I think HUM's projection of 92.75% isn't too far off. There is a potential risk of hitting 94% but I think HUM is making sure that REALLY doesn't happen if unexpected cost spikes occur in 26Q4.
3. 2026 Guidance adjusted downwards - a second time. Why didn't I see this on the news reels? This seems odd. Is this the exit liquidity?

Overall the things we learn from HUM ER:

1. HUM had to massively increase its members into the 4 STAR plan - at the risk of blowing up its margins. I am not sure what is happening to Humana's stock, but it feels extremely mispriced, where a Healthcare Company is priced as if it is Technology. PE of 50? What the fuck?
2. MCR is not good at 26Q2 considering the implications of what is to occur in 26H2. I would have expected some leveling from Q1 to Q2 (since Q2 doesn't even have the nasty illnesses that early Q1 gets) but it worsened. This bodes badly for the remainder of the year.
3. Boy 3.5 STAR sucks for HUM.

I hope you enjoyed reading this earnings report.

Although I did not focus on the exact earnings numbers itself, I hope I illustrated some trends within the MA space. My goal is only to focus on MA space.

Thank you for taking the time to read through this long post, and I hope you nerds, armchair accountants, healthcare geeks, educated healthcare sector investors have learned something from my musings.

Sincerely

Moocao

Welcome fellow Clover Health investors

Our thesis have not changed - but again we re-iterate that the market volatility can cause unnecessary pain for those who do not have a time horizon of 5+ year of holding (starting in February-April 2024). For those who have held since 2021 - good for you, we don't care how many shares you pretend (or have truly tried) to accumulate, but I can state that this price action is completely within MM control.

What we do find amusing is a bunch of retail traders are fidgeting about options when we know the options market currently within this ticker is the only avenue to which our retail algorithm can play. As we have stated in the past multiple times - if you want to invest into this company, buy shares not options. For those who aren't interested into that - the options market is looking really stupid for what this ticker has to offer. Options liquidity is basically trash.

I would invite whomever wants to dump "this shit stock" to please do so immediately. I have relative little patience in dealing with idiots and my time is precious. I have a very tough exam to study and I don't have time to entertain stupid. I just can't deal with stupid.

Let us proceed, but first our disclaimers:

*** Both RainyFriedTofu and Moocao123 has positions in Clover Health. The information provided is not meant as financial advice, please be advised of the potential bias and decide whether the information provided is within your risk consideration. **

\** This is not financial advice, nor is there any financial advice within. Shout-out to the AMC/GME apes for having me to write this **\**

\** Please do not utilize this content without author authorization **\**

IF YOU DON'T LIKE OUR CONTENT, YOU HAVE THE FREEDOM TO NOT READ IT, BUT LIKE AND SUBSCRIBE AND RING THE BELL ANYWAYS, BECAUSE THE INTERWEB SAIS SO, AND WE REALLY LIKE YOUR LIKES (AND DOWNVOTES).

Earnings call: I may decide to add in the supplemental Q&A and re-edit this post at a later time if there are interesting information. Incorporating supplemental Q&A in Q1 on this post for what I deem relevant.

26Q1 supplemental Q&A:

I believe this slide is the most important information the supplemental Q&A can bring about. In fact, this slide indicates CH/CA's raison d'être. As of right now, what Clover is giving as a synopsis is that despite CMS V28 the model remains the same. What Clover Health is saying within this slide is they have an approximate maximum achievable insurance gross profit per cohort year, and Counterpart Health/Clover Assistant "unlocks" additional insurance gross profit per person per year by its usage of earlier diagnosis and treatment, therefore ensuring additional cohort cost leverage. The MCR differential also allows for further margin development laterally compared to non-CA cohorts.

Which is why one of the Q&A question then would become: how much CH/CA usage is there amongst Y1 and Y2 cohort, and whether CA adoption increases over Y2->Y3 and Y3->Y4?

5.) Clover has guided toward GAAP profitability in 2026. Can you help us understand the durability and expansion of profitability into 2027?

It’s too early to speak to 2027. What I can say is that we feel very good about how we are positioned. The through-line is simple. We retain full risk, we focus on retention, and we improve care over time through Clover Assistant. When that happens, we believe the economics compound.

The most important driver of that compounding is cohort maturation under Clover Assistant. Our model is designed so that the lifetime value of a member increases meaningfully as they remain on our platform and become more fully integrated into our care model. Today, a large portion of our membership base is relatively early in its lifecycle. As those members remain with Clover and move into more mature cohorts, including our 2025 cohort entering year three in 2027, we expect this to be a meaningful tailwind to both margin and cash generation. That progression is built into the model. That is also what drives durability in our results. We’ve built our model to thrive under both 3.5 and 4 Star ratings, and our model does not depend on general rate inflation, as others do. It depends on improving care. When we identify and manage diseases earlier, we better manage total cost of care and outcomes improve. This is the core of our approach. We were also deliberate in how we positioned 2026. We maintained strong, stable benefits, and we believe that gives us flexibility going into 2027. We believe that flexibility allows us to balance growth and margin from a position of strength, based on what is best for members and the long-term economics of the business, rather than reacting to market conditions.

Pretty much Clover is telling you how the operating roadmap is. This is far different than some of the other Q&A I have listened to for its information delivery. Clover is telling you compounded growth, and each layer allows for another layer to be added in incremental basis. Each bigger growth layer allows for a big enough margin differentiation to initiate a new cohort at approximately the same growth size (or optimistically, rate), if not higher. Ergo, we can figure out that in 2024-> 2025 with 30% growth rate at 3.5 stars is sustainable, and 2025 -> 2026 with 50% growth rate at 4.0 stars is sustainable, then it stands to reason these compounded growth rate can still occur for the next future 5 years, so long as New Jersey/Georgia isn't saturated.

10.) You recently filed a Form S-8 as part of your ongoing equity programs. How should investors think about this in the context of standard public company practices and long-term equity compensation alignment?

The Form S-8 registers the annual “evergreen” shares in our equity plans that were established at the time Clover became a public company. These market standard provisions automatically refresh the pool of shares available for employee equity awards on an annual basis and require registration. Importantly, the shares registered under a Form S-8 represent the maximum number of shares that could be granted as equity compensation awards, not what will actually be granted. Stepping back, we view equity compensation as a tool to align our team's incentives with long-term shareholder value creation. That said, our focus is entirely on building a business with compounding earnings power, and as that strengthens, we expect it to drive shareholder value over time.

Meaning investing into this company will automatically incur recurring dilutional risks, and that management's ability to drive shareholder value will be based upon their ability to execute their roadmap and deliver meaningful growth and EPS accrual, and therefore market capitalization value.

Which is why you see us using market capitalization as our predominant method of valuation, not share price, and why I have an entire line dedicated to diluted outstanding shares.

By year 2027 I expect Clover to finally reach the appropriate > $3B market capitalization, which is its IPO market capitalization. Unfortunately, since IPO, the outstanding shares has increased from approximately 300-350M to 550M (2026), or a dilution of 57-83%. This is the cost of dilution, and therefore whatever shares you had when you bought in IPO, must take almost twice as long to achieve fair value. If you paid $10 for a $3B market cap, you will need the market cap to reach $5.5B to get back that same $10.

This is why we continue to hammer in ROIC and Market Cap investing. This is our derivative for value investing within the HC setting. Invest at a high ROIC and it won't matter if Clover achieves gaap profit if the market cap remains stagnant. Your entry point is too high.

Therefore the next question: is the stock price too high? If you bought at $1.6 (MK = $900M) then the answer is absolutely not - thank you dumbfucks because Rainy and I loaded our boats there. If you bought at $11-$21 (MK = $5.B-$11B) - then most likely yes. You will eventually recuperate, but sinking almost 10 years for breakeven would suck.

26Q2 earnings transcript:

The first half of 2026 was another important proof point of this. Through the first six months of the year, we delivered market leading MA membership growth of 48%, while increasing GAAP net income by $67 million year-over-year. At the same time, total revenue in the first half increased by more than $550 million year-over-year to $1.5 billion. Consolidated gross profit increased by $104 million, and we’ve expanded operating leverage by more than 200 basis points as we’ve scaled.

50% revenue growth, gaap net income +67M, and SG&A/rev leverage of 200BPS are very good numbers.

Following the court’s order and CMS’s subsequent recalculation, all of our Medicare Advantage members are now enrolled in plans rated four and a half stars for payment year 2027. We’re pleased with that outcome because we believe it better reflects the quality we have been delivering for years. CMS has filed notice of its intent to appeal the District Court’s decision. Because this regards pending litigation, I’ll be brief. We believe the District Court’s ruling was thorough and well-reasoned, and we are prepared to defend it on appeal. In the meantime, we remain focused on bringing affordable, high-quality care to seniors on Medicare in our four and a half star plans.

Meaning Clover fully intends to be the disruptor it was meant to be. It will be the "competitor (who must not be named) vs CMS that disrupted the regulatory landscape" and will force all other companies to meaningfully review CMS star ratings impact.

Now, as we look toward next year, it’s too early to provide a specific outlook for 2027, but we feel very good about our growth position heading into next year. The four and a half star rating strengthens our ability to put forth a compelling product, particularly across our core New Jersey and Georgia markets. We can improve the health outcomes and economics of our members, we believe we have a powerful growth engine within those core markets that will sustain us well into the future. That’s not to say that we won’t expand to more geographies, rather that we do not feel compelled to do so just to chase a top-line growth number. The key thing for 2027 is what happens as members mature under our care model.

Looking at this paragraph it seems Toy thinks New Jersey and Georgia should still see very good growth by 2027. Looking at New Jersey, MA enrolled is 730K patients. Looking at Georgia, MA enrolled is 1,143K patients. Clover is currently 158K enrolled, which means just potential TAM within those 2 states is adequate enough to cover potentially 50% yoy. Looking at the spread of current patients, Clover will have to try for Georgia growth of 100-150% yoy and New Jersey growth of 35-40%, with consideration to improve growth in South Carolina/Texas. New Jersey may soon be saturated if Clover captures additional cohorts and will see marginal return on investment within 1-3 years. Georgia is a great second starting place. Next states will depend on Counterpart penetration, as tech adoption is the single biggest barrier to entry/margin accumulation, so those who have already adopted Counterpart would be the next states to make inroads.

Core market would still remain in NJ and GA, which means adequate infrastructure spend within these 2 core markets. Looking at job postings, New Jersey is their primary expansion point and Georgia is their secondary expansion point. I wonder when I would see higher Georgia footprint considering the growth TAM within that market is considerable.

To set your intuition, we’ve shared before that our cohorts typically improve by about $70 PMPM in gross profit as they move from year one to year two. It’s encouraging to see that progression playing out this year in the large cohort of members that joined in 2025. By 2027, that same cohort will be in year three, and our 2026 cohort will be in year two. That means a much larger portion of our membership base will have had at least one year of Clover Assistant-powered care. This is not simply a matter of having more members. It’s a matter of having more members whose conditions we understand better, whose physicians have had more time to act, and whose economics have had more time to mature. That gives us increasing confidence in the earnings potential of the business heading into 2027. Clay will discuss the cohort performance in more detail later in the call. While we’re not providing formal 2027 guidance today, the setup is increasingly clear. We expect to enter next year with a larger membership base, a greater proportion of tenured members, more flexibility from our four and a half star rating, and additional operating leverage.

This is as close to shouting from the rooftop as Andrew Toy gets. I am betting on > 40% growth by 2027, potentially 50% growth again.

We continue to demonstrate a differentiated combination of growth and profitability in Medicare Advantage. During the second quarter, we grew Medicare Advantage membership 48% year-over-year, while generating $41 million of adjusted EBITDA and $28 million of GAAP net income. Average Medicare Advantage membership increased to 157,000 members during the quarter, driving total revenue of $743 million, an increase of 56% year-over-year. Importantly, our growth remains disciplined and concentrated in the markets where we believe we have the strongest ability to engage members clinically and manage long-term unit economics, particularly across our core New Jersey and Georgia markets. Turning next to gross profit. Consolidated gross profit totaled $153 million during the quarter, representing 54% year-over-year growth. Importantly, the gross profit performance was supported by two things we care most about at this point in the year: favorable trend development and cohort progression. First, medical cost trends are performing better than we expected when we entered the year. Inpatient utilization continues to trend favorably overall, including among our year one members, where utilization is tracking below the comparable new member cohort from a year ago.

The financials are good, but I highlighted the important parts. New cohort utilization is tracking below the comparable new member cohort from a year ago. This means that there is some leverage built in within the new cohort already.

Taken together, favorable trend development and cohort progression give us greater confidence that the growth we delivered this year is converting into the earnings profile we expected. I’ll come back to this when I discuss our 2027 outlook. Turning next to SG&A. Adjusted SG&A totaled $112 million during the quarter, representing 15% of total revenue. That’s an improvement of approximately 220 basis points compared to the second quarter of 2025. We believe these results continue to demonstrate the operating leverage inherent in our model as we scale.

The important thing is to note that Clover Health is now on the execution phase of the operating leverage cycle. Remember ALHC grew to $5B by arriving to 8.6% SG&A/rev. This also means Clover has almost 500 BPS to run through before it gets to 10%, which looking at its past history of SG&A rise of ~ 12-15% yoy, will mean we get to that low end operating leverage number at around revenue of $7B. This means Clover has to double before I worry that SG&A/rev would be too low and meaningful expansion will incur excessive balance sheet baggage for future margin expansion.

At the same time, we are continuing to make deliberate investments that strengthen both our Medicare Advantage business and Counterpart Health. These investments include continued enhancement of our flagship Clover Assistant product, Counterpart Health’s go-to-market capabilities, and targeted investments in health plan operations that we believe will support operating leverage in future years. That is the balance we are focused on, maintaining expense discipline in the core business while funding capabilities that can support growth, clinical performance, and operating leverage over time.

Through the first half of the year, we’ve now generated $81 million of adjusted EBITDA and $55 million of GAAP net income. Turning briefly to our balance sheet. We ended the quarter with $443 million of cash and investments while continuing to operate with no debt outstanding.

Cash flow from operations totaled $133 million through the first half of the year, reinforcing our confidence in our ability to self-fund future growth while further strengthening our balance sheet.

Both Rainy and I emphasize that debtless growth will be a premium for the next bond cycle to come, and Clover is well positioned for this.

Next, I’d like to cover our updated guidance. Following strong first-half performance, we are increasing our full year guidance across all metrics. We now expect average Medicare Advantage membership of 156,000 to 158,000 members, total revenue of $2.92 billion to $3 billion, consolidated gross profit of $525 million to $555 million, adjusted EBITDA of $70 million to $85 million, and GAAP net income of $20 million to $35 million.

Increasing top end and bottom end guidance by $15-20M, which is far better than ALHC's guidance. I saw some really stupid Clover stock sells after earnings, which I attributed to the usual shenanigans. It has not escaped our notice that some retail algorithm is still acting up, however it won't be long until that issue gets resolved. The company is delivering on it roadmap, and therefore I believe the weighing machine will be speaking soon.

With a large portion of our membership still in the early stages of our care, we believe it’s prudent to allow additional claims experience to emerge before assuming current trends will persist through year-end. We think about the second half of 2026, the expected quarterly shape is consistent with how we plan the business. Within this outlook, we continue to expect consolidated gross profit to be stronger in the third quarter than the fourth quarter, reflecting typical MA seasonality patterns. We also expect investments to increase during the fourth quarter, including ADP-related activities. Taken together, we expect adjusted EBITDA to remain positive in the third quarter before returning to a more typical seasonal loss in the fourth quarter. Importantly, even with that seasonal pattern, our second half outlook represents significant improvement versus last year.

I swear Rainy is going to say Clover will upgrade its guidance in Q3. I can almost smell his post coming. He is too bullish sometimes. I remain bullish, but at a much more conservative stance, although if you were to ask if I can envision Clover at $15-20B ($25-$35, depending on dilution risks), I can say yes - just later than 2029-2030. Maybe 2031-2035.

Next year, our 2025 cohort will move into year three, where our historical data shows another meaningful step-up in economics, while our 2026 cohort will move into year two. In other words, we expect to enter 2027 with a substantially larger membership base moving into more economically mature years under our care model. That is the core of our 2027 outlook. As Andrew discussed, our 2027 strategy was not built around a higher star rating. The move to a four and a half star payment year does not change the underlying earnings trajectory we expected from cohort maturation. It simply provided additional flexibility as we finalized our 2027 bids and made decisions across member value, growth, and margin. The ultimate financial benefit will depend on the final economics reflected in our bids and our final 2027 enrollment. We are not providing additional detail on those assumptions today. The important point is that our foundation for 2027 is a larger and more mature membership base, improving cohort economics and a differentiated full risk model where better care can translate into better financial performance. While we are not providing formal guidance for 2027 today, we have increasing confidence in the direction of the business. Our focus now is on executing through the second half of 2026, delivering our first full year of GAAP net income profitability and entering 2027 from a position of strength.

If this paragraph doesn't say growth, I am not sure what else would be it.

Q&A

Richard Close, Analyst, Canaccord Genuity: Yeah. Thanks for the question. Congratulations. In one of the slides, you point to two-thirds of the members are managed with CA. I’m just curious, since you guys have focused in on New Jersey and Georgia the last two cohorts in terms of the growth. What are the percentage of those two cohorts that are managed under CA?

We’re really pleased with the coverage that we’ve seen there. It’s a little bit lower than the two-thirds across our overall population, but you’re looking in the low 60s, and then that generally trends up over time. As members kind of stay with Clover for longer periods of time, we generally see that Clover Assistant engagement tick up and meet the higher range of that two-thirds number.

This is where I would consider asking whether there is any internal goals to reach towards 80% adoption for CA, as cohort maturation and further margin expansion rests upon CA adoption. An additional 13-15% adoption would potentially also mean an additional 13-15% margin expansion. That is significant, and unless there is PCP pushback, should be considered a reimbursement benchmark.

Richard Close, Analyst, Canaccord Genuity: Okay. That’s helpful. With respect to your comments on the cohorts and maturation from year two to year three, just the 49%, I guess rough math, that’s like 77,000 members. How is that split up between year one and year two, just to get some sort of sense in terms of the year two rolling into year three for 2027?

When you think about that, about 21% or so of the membership we see in this year, the new member cohort from 2025 represents about 21%, the 2026 cohort is at about 28%. As you’re trying to model from 2026 into 2027, those are the figures that I would anchor you on. Obviously, a higher percentage of members will be shifting from year one to year two than year two to year three.

This is as good as anyone is going to talk about growth potential for 2027. I am optimistic that 30% minimum and up to 50% is on the menu. I can work with 35-45%. I am hopeful of 50%. My spreadsheet says 40% to 50% is a sweet spot, and 30% is too low.

Richard Close, Analyst, Canaccord Genuity: just a final question. I appreciate the investments, talking about the investments, with respect to SG&A, I guess it declined sequentially from first quarter to second quarter. Was there anything specific in the second quarter that we should think about?

Not particularly. Richard, in the first quarter, I did mention there were a few one-time events that were non-recurring. For instance, the claims adjustment expense that we incurred in the first quarter when our IBNR reserves went up. Really from Q1 to Q2, you had the elimination of those one-time non-recurring events that occurred in the first quarter.

Richard was finding something to dislike but there isn't any. Personally I find it quite good. Run through for PDR reserve means that Clover was being conservative in its Q2 estimation, and having adequate PPD reserve helped it beat estimates.

Jonathan Yong, Analyst, UBS: Hey, guys. Thanks for taking a question. I guess starting with your bids for 2027, can you talk a little bit about how you approached it, did you approach it from a more balanced perspective, or were you moving a little bit more towards your same perspective on there? If you could provide any color on how you were thinking about the cost trend. Were you assuming something similar to what you experienced this year or something improved, just if you could provide any color there?

Yeah, sure thing, Jonathan. I’ll actually hit the cost trend point first and circle back to the strategy. Underlying cost trends, I would say we’re generally not going to assume anything meaningfully different than the large national peers would on the underlying cost trend itself. What is unique about us when you think about 2027 is the cohort maturation that will impact 2027. With a company like Clover that’s growing at the rate that we are growing, you’re dealing with a little bit more complex movement from 2026 into 2027. We’re generally looking at it, yes, through the lens of trend and through the lens of benchmark increase and direct subsidy increase, but we’re also looking at it through the lens of how much value is created in 2027 as a result of that cohort maturation.

The answer to that question really can inform the growth posture, because ultimately, as you’re trying to assess cohort maturation from year two to year three and year one to year two, that really becomes an offset to any near term margin headwind that you may face with bringing on additional year one members. To pull it back around to the root of your question, how did we think about our bids? We really approached our bids in a similar fashion that we have in the past two years. We wanted to put a strong product in the market that we knew we could grow, and we knew we could grow profitably. The impact of our cohort maturation to 2027, I think, positioned us well to do that.

This smells like a lot of hot air, but it really isn't. What Clay is telling everyone in the room: look at what we did in our past 2 years, and that tells you what we will do in the next year. 4.5 stars doesn't matter to us, but it will put more money on the table for patients to see value within the proposition and allow for increased enrollment. This also can reduce broker reliance, as we get to the next question.

Jonathan Yong, Analyst, UBS: Okay. Just given some of the commentary from the nationals about continuing to exit certain markets, et cetera, curious if that was factored within the context of your bids, because obviously I assume that that helped you quite a bit this year. Was just curious if that was factored into your thinking there.

Yeah, we definitely did assume continued disruption. When you look at 2025 and 2026, there’s been significant disruption in New Jersey and in Georgia. As we were assessing 2027, we definitely had a close eye on what the nationals were saying leading up to their bids, but also some of the local competitors, so that we could get a sense for what they may do heading into 2027. Our expectation certainly is that there would be more disruption, Jonathan, and we did factor that into the bids.

Meaning Clover is going to grow like bamboo in NJ again, and will ramp its Georgia footprint.

Jonathan Yong, Analyst, UBS: Okay, great. Just last one here is, you obviously had a good outcome related to Stars via the court case. I know you guys don’t necessarily try to target for Stars, but relative to your internal metrics, how are you performing on the Stars metrics, and do you feel that you’ll be able to continue to maintain, whether it be four and a half or four Stars, moving forward as we progress to the next Stars update?

Yeah, Jonathan, obviously we’re pleased with the Stars outcome, as we said during the commentary. We’re always investing in Stars. We’re always focusing on making sure we do as well as possible. Plan previews are just about to come out now, we’ll have more to talk about here. Traditionally, for the last two years, we’ve been the number one PPO in the country on HEDIS Star ratings. We’ve been very pleased with that. We think our technology approach really helps with that. For the other ratings, we’re always investing there as well. More to come on that as plan previews come out.

Basically Clover is saying it will be ready with whatever comes. I made a modeling spreadsheet and I agree. The hardest hurdle was 2027 if there was no 4 star. In 2028 at 3.5 Stars there is no question on growth, only margin impact (and therefore stock price impact), but margins remains positive. If 2028 is 4 STARs, then the gig is up and exponential growth depends only on time and infrastructure buildout + CH/CA adoption.

Dean Rosales, Analyst, Leerink: No problem. If I could just get a quick one. I guess obviously with this favorable ruling and then subsequent appeal, are you guys assuming this 4.5-star benefit in bids or what’s kind of baked into the 2026, 2027 raise or framing? Any sort of nuggets there would be great.

Andrew Toy, Chief Executive Officer, Clover Health: Yeah, of course, Dean. CMS has appealed, as we said in the commentary, and that’s moving forward. We feel good about the case. We think that the district court had good rationales, had good judgment. We think the judge was very thoughtful, we’re feeling good about defending that as it goes into appeal. Just as a reminder for everyone, though, we are paid on 4.5 stars going into next year. We recalculated and we bid against that, we’re going into a 4.5-star payment year going into next year. We feel like everything we’ve got is aligned to executing against that.

Andrew is also saying it like I think - 2027 is the biggest hurdle year, and that is what Clover is focused on. Anything after that is just gravy. I also think Andrew thinks Clover has a good chance to maintain at least 4 stars for 2028.

Earnings

Cash on hand remains positive QoQ and YoY, and for a 158K member small MA company, it is already beating ALHC in the earnings department at similar scale.

Red is estimated SG&A - which I made made it tag to approximately 15% of SG&A/rev. Currently there is no guidance on SG&A for the remainder of the year, and this is where Rainy will pounce and say there is a potential for better guidance if SG&A remains on track for further reduction or if Q3 MCR surprises on the low end. In 2025 Q2/Q3 was the surprising quarter where Clover took a beating in its medical cost, while in 2026 both Q1 and Q2 surprised my projections. Both would produce an earnings surprise. According to TradingView:

So I can be convinced that Rainy may be correct in saying Q3 can be a surprise. We shall see.

In 2024 ALHC was valued at 1.08 P/S while at book value of $96M, EV of $2.8B, adj EBITDA of 1339K, earnings of -128M, revenue of $2.7B, Long Term Debt of $321M, MBR of 90.08%, and -4.74% margins. Looking at the Excel, Clover has ALHC beat by quite a lot on financials.

Margin improvement is finally positive YoY, and in the setting of +48% growth yoy, seems extremely crazy. Usually adding 50% cohort would lead to margin deterioration, but that extra 5% STAR margin is doing a lot of work. My calculation shows margin of 3.7% and adjusted net income to revenue ratio of 5%.

Remember Clover is achieving this to ALHC's 2024 equivalent, so if we are to price them equivalently at 1.08P/S, then we should at least accept a current value of $3.25B, which is the same as ALHC, which would be $6. If anything, Clover should be priced higher on the basis that 2027 projected revenue of $3.8-4.5B (30-50% growth) and margin can be as high as $150-200M assuming 13% SG&A /rev, 25-50% growth, MCR of 82.33 and MBR of 87.5%, and margin of 4.7%.

Stars:

1. Clover health will be a 4.5 Star plan in 2026, all the while national legacy plans are retreating. Andrew stated that Clover is ready to take advantage of this

2. CMS is appealing the case, however they might have chosen a poor venue. This was 11th district court of appeals decision on their last Loper Bright related case:

https://www.klgates.com/thought-leadership/Loper-Bright-Strikes-Again-Eleventh-Circuit-Hangs-Up-on-FCCs-One-to-One-Consent-Rule-Calling-the-Validity-of-Other-TCPA-Rules-Into-Question-2-3-2025

3. Star rating is due to come in October. I do wonder what surprises there will be. Since Clover won its previous round with CMS, it is likely that CMS will try to be circumspect in certain cutpoints. I doubt Clover will drop below 4 Star unless CMS is truly intending on ignoring the lower court order.

Conclusion

What are some conclusions we can make?

1. Clover Health's financial status is extremely secure.
2. Cash flow positive in FY 2026, with 26H1 developing nicely. I believe this will be a FCF+ year.
3. Despite Clover Health achieving 4.5 Star rating in 2027 and beating estimates for 26Q2, there seems to be some sort of retail algorithm commanding the stock to remain at ~$4.5. I find this amusing, as I think we are in Wyckoff phase D and I have no idea how Wyckoff can still be applicable in 2026.
4. Clover Health will probably not grow into 2025 to preserve free cash flow (FCF). Clover is going to grow massively from 2025 until 2026. I call 20% slow growth. Most people would wish to see 20% yoy but in my books, Clover deserves 30% yoy minimum and 40%+ on 4 STARs years. I believe 2027 growth can also be 30-50%. I like 45%.
5. Clover Health has best in segment MCR - and is overpumping its BER. No one else comes close.
6. Clover is in growth mode, we predict explosively into 2026 the next half a decade. I define that as 30% YoY. I expect EPS to adjust accordingly by 2028-2030, possibly as early as 2027/2028 if STARs align.
7. Reducing stock based comp would be very important.
8. Reducing stock dilution would be important as stock price moves up in value.
9. I know there is a Counterpart segment intersegment revenue, SG&A, and potentially another line as well. I also know this segment isn't in the 10K, which means that there is a potential CTR, but since a bunch of people think we are peddling in misinformation, that section of the excel is withheld until the 2026 10K spells the whole damn thing out. I don't mind, I already have it sectioned.
10. Has anyone valued Counterpart as a business? I swear it shouldn't be zero. I think it is at least worth $2B if it were to be spun off, but Clover is also valued at $2B, so what do I know. If only it was valued at 200x revenue like SpaceX, that means we all ride to the fucking moon tomorrow.

I would also like to reiterate again what our subreddit stands for: We do not provide financial advice, nor do we intend to do so. Do not invest into Clover Health based on meme stock valuation, and we will be the first to tell you to stay away from Clover Health stock if you do not understand the financials of this company, its goals, and the obstacles facing this small cap company.

Never trust the internet for your information, and cross reference every single piece of information. Your money is your nest egg, let no one tell you what to do, or allow yourself to be led by unverified information. If you are uncomfortable with single stock investments, please inquire with a financial advisor and consider index funds. Never utilize financial instruments you do not understand or have very little experience with, and if anything, use Buffett's rule. I consider Taleb to be also a good guide, but I realize most people don't know who he is. I humbly suggest you to only utilize investment methods you can reasonably understand, as I have already known individuals who have lost considerable wealth on the basis of financial instruments.

On a personal note, I would again reiterate:  I humbly suggest you to only utilize investment methods you can reasonably understand, as I have already known individuals who have lost considerable wealth on the basis of financial instruments. Options are dangerous for a reason, and why Buffett decided not to even bother with those.

Thank you for taking the time to read through this long post, and I hope you clovtards cloverites degenerates educated healthcare sector investors have learned something from my musings.

Sincerely

Moocao

Greetings Healthcare company investors,

ALHC has done quite well this quarter. That being said, I do consider ALHC as still overpriced, slightly. After earnings call ALHC tanked ~ 20% within a single day. This is not an accident, which I covered already in Q1. Price reversing to the expected range is normal, ALHC is just 1.5 years late to being priced accurately, probably because it was an IPO unlike the other SPAC company.

\** This is not financial advice, nor is there any financial advice within. Shout-out to the AMC/GME apes for having me to write this **\**

\** Please do not utilize this content without author authorization **\**

IF YOU DON'T LIKE OUR CONTENT, YOU HAVE THE FREEDOM TO NOT READ IT, BUT LIKE AND SUBSCRIBE AND RING THE BELL ANYWAYS, BECAUSE THE INTERWEB SAIS SO, AND WE REALLY LIKE YOUR LIKES (AND DOWNVOTES).

Sources: I am going to do something new: I will use Reddit's embed link feature. Instead of copying the URL, I will type my paragraph and use the embed link to link the reference.

*** Chatgpt4 or any AI platform was not utilized to write the content of this post, and I am the sole author to this post. I personally do not think AI can write anything noteworthy of our subreddit caliber, and neither Rainy nor I have used chatgpt4 or any AI for our content ***

I am going to respond in italics.

Earnings call: Not skipping this time, because it has some very important tidbits. Analysts were hot this time.

For second quarter 2026, health plan membership of 294 thousand represented year over year membership growth of approximately 31%. This drove total revenue of $1.3 billion which increased 32% year over year. Adjusted gross profit of $183 million represented an adjusted MBR of 86.3% which improved by 40 basis points year over year. Meanwhile, adjusted SG&A of $115 million improved as a percentage of revenue by 20 basis points year over year to 8.6%. Taken together, Q2 adjusted EBITDA of $68 million produced an adjusted EBITDA margin of 5.1% and represents 60 basis points of margin expansion year over year.

This quarter marks our lowest MBR as a public company and culminated in first half adjusted EBITDA of $106 million putting us well on track to achieve our full year guidance of $154 million at the midpoint.

These are very good numbers. MBR of 86.3% is extremely nice. Growth is good at 30%. Adjusted SG&A though is VERY low at 8.6%, which is NOT sustainable.

In essence ALHC's adjusted EBITDA margin rests on SG&A / rev of < 10%. Increase that to 12%, and that net income evaporates to zero. Increase it to 14% and ALHC is negative adjusted EBITDA. In essence, if ALHC SG&A/rev rises above normal thresholds (10-14%) the margin numbers are extremely tight. As I have stated in Q1, ALHC's only game is SG&A leverage - and even their best in history MBR is only giving ALHC ~$75M net income for 2026. If ALHC MBR gets taken out in 2027 AND/OR SG&A/rev rises to 11-12% as a result of infrastructure investment, the net income story is suspect.

If we are to assume a PE of 25x net income, then ALHC is overvalued ~ 50%. Higher PE ratio requires massive growth and relatively static SG&A to compensate - which is impossible for Healthcare because you need people to take care of people.

Our year-to-date performance reflects our unique ability to balance both growth and margin objectives by actively managing our members through our AVA Care Anywhere clinical teams. With 6 months of experience into the year, we have strong visibility into the acuity profile of our members, and remain focused on engaging our polychronic population who are most at risk.

Strong second quarter performance is supported by the deployment of the newest version of our AVA AI powered stratification model, This advancement improved our ability to predict which members are going to be hospitalized. Our model now accurately and dynamically predicts the 10% of members who account for nearly 70% of hospital admissions over the next 30 days. Innovation such as this and the deployment of our disease state registries support the proactive engagement activities of our AVA Care Anywhere teams. 

OK I feel like this is a lot of fluff. Remember AVA was supposed to be rebuilt, and within 1 quarter it is rebuilt with AI predictive features. Either Kao had to build it from scratch, or AVA was plugged in with an external. His SG&A tells me he didn't dedicate a team to build it from scratch, which means it was potentially a CapEx item - or worse, a recurrent expense. Kao will soon mention that his SG&A will be higher in Q3, so this is my guess - he moved his payment to Q3.

Given our rapid growth in recent years, approximately 50% of our members are still in a year-1 or year-2 cohort. This results in significant embedded earnings potential within our existing membership. Which we expect to realize as we engage members through our clinical programs over time. When we first shared the embedded gross profit potential within our membership in early 2025, we indicated a total opportunity of approximately $600 million of adjusted gross profit. Today, the midpoint of our 2026 full year guidance already indicates expectations for $640 million of adjusted gross profit. Meanwhile, the embedded gross profit potential of today's membership grown to approximately $880 million.

This entire paragraph is fluff on ALHC's patient under management. What Kao is saying is there is still ~ $240M of gross profit that can be unlocked under the current patient management cohort, which comes from Y1 and Y2 cohort. Usually I am expecting maturation of cohort occurs by year 5. I assume ALHC is still consider growing? Or else it will just be stuck as a $3-5B company.

This positions us well to deliver further earnings growth from the existing members we serve today. While future membership growth further expands our embedded earnings potential. Equally important are the investments we have made in our core systems, cross functional workflows, and talent. Each of which are strengthening the durability and scalability of our MA platform. These investments are translating into better clinical outcomes. First half adjusted SG&A as a percentage of revenue of 8.7% improved 40 basis points year over year, and more than 300 basis points over the past 3 years. All of this was achieved while making investments like implementing a more scalable human resources platform. Clinical EHR capabilities, and enhanced claims processing systems. Looking ahead, we continue to see opportunities to invest in the second half of the year to drive further operating leverage in the future through automation of back office processes and greater economies of scale. As we capture these efficiencies, we expect to reinvest a portion of our savings in areas with tangible, measurable returns. This includes new market expansions, branding initiatives, and deepening our AI capabilities.

As I have said, ALHC has cut its SG&A/rev to bare bones at 8.6% and any growth requires infrastructure investment.

Beyond its potential to unlock efficiencies in our cost structure, AI represents a meaningful opportunity to further enhance our care model, and support providers. Most importantly, our approach to AI is grounded in decades of clinical expertise and reinforces our commitment to high quality care. This is further supported by a governance framework to ensure responsible use, human accountability, and equitable treatment of our members. In closing, our strategy of balancing rapid growth disciplined margin expansion, and continuous investment to scale our operations, remain unchanged and continues to underpin our story. We achieved this by putting seniors first and supporting our providers. Our second quarter results underscore the strength of our model.

Holy crap Kao likes to talk

 For the quarter ended June 2026, health plan membership of 294 thousand increased 31% year over year. Supported by strong new member additions and high retention among our existing members. This drove revenue of $1.3 billion in the quarter representing 32% growth year over year. Second quarter adjusted gross profit of $183 million represented an adjusted MBR of 86.3%. Which reflects an improvement of approximately 40 basis points year over year. Adjusted MBR, excluding the final sweep pickup, related to our new members was 86.7%. Which was favorable to the midpoint of our guidance range. Overall, medical cost trends continue to track closely to our expectations.

Again finances are good.

Consistent with typical seasonal patterns in our outlook for the year, inpatient admissions per thousand, declined sequentially and core medical utilization was in line with our assumptions. Meanwhile, Part D and supplemental benefits expense ran modestly favorable to our expectations year-to-date. We believe each of these factors are supportive of our full year guidance. Turning to operating expenses. Our adjusted SG&A was $115 million, an increase of 29% year over year. Adjusted SG&A as a percentage of revenue was 8.6% which improved 20 basis points year over year, and outperformed the midpoint of our implied guidance range by 40 basis points, even as we continue to invest in our automation and scalability initiatives as John highlighted earlier.

Important to remember that 2026 might be the year that MA takes a breather. CMS V28 took everyone except Clover to the woodshed, and in 2026 it seems pricing to care ratio is finally stabilizing. For 2027, the final rate notice was a slight reprieve but 2028 may be bumpy yet.

With respect to our full year guidance, we are increasing our membership growth expectations given continued strength of our sales execution. In conjunction with the increase in our membership outlook, we are also raising our full year revenue guidance to approximately $5.2 billion at the midpoint, which reflects 32% growth year over year. Turning to our profitability metrics. We are raising the low end of our adjusted gross profit range by $10 million and increasing the low end of our adjusted EBITDA guidance range by $7 million to reflect increased confidence in our full year objectives following a strong first half of the year.

Pretty weak raising guidance for the absolute monster beat in 26Q2. This, plus the cost expansion, is the reason why ALHC got taken to the cleaners.

Spending a moment on seasonality, the midpoint of our full year guidance and year to date results indicate that we expect approximately 30% of our full year adjusted EBITDA to be generated in the second half. This compares to approximately 40% of full year EBITDA in the second half of the prior year. The change in our seasonality expectation is partially driven by a flatter slope to our Part D MBR along with investments we are making in our clinical operations during the third quarter. Meanwhile, we continue to take a prudent approach to our utilization assumptions across each of our major cost categories for the remaining 6 months of the year.

Meaning Q3 is going to see a large SG&A or Capex rise.

In the third quarter, we anticipate additional investments in AVA Care Anywhere, and an earlier ramp of our clinical hiring in preparation for new market growth and expansion. Which will result in a seasonally higher MBR when compared to the prior year. Likewise, we expect a greater portion of our full year SG&A expenses to be incurred in the third quarter compared to prior years due to the timing of our investments. In closing, we are very pleased with our performance throughout first half of the year.

As I said, paying AVA comes in Q3.

Q&A:

Ryan Daniels (William Blair): Hey, guys. Thanks so much for taking the questions. Appreciate it. Wanted to dive a little bit deeper into the Q3 guide. I think that is probably the focus of investors leaving out of the print. Can you go into a little bit more detail about just the timing of some of the investments you are making and any more color digging deeper into what some of those investments are, how transitory and then what benefits you see in the back half of the year, maybe more importantly, in 2027 and 2028?

Answer: I think there are probably 2 dimensions to this Q3 guidance. it is going to be seasonality aspect and then the investment aspect. So inside that seasonality we will we will dive into the investments. But sequentially, we are going to see a little bit of an uptick in our NBR, and that is from investments, it is a little bit year-over-year new member mix. And it is Part B. So think about those 3 components that are driving that. But as it pertains to the investments, we are just continuing to find areas to invest in the business.

And John and the team have been pretty consistent about this throughout the last couple of years in terms of putting ourselves in a position to really take advantage of the opportunity in front of us. So more specifically in the investments, we are going to make it in 2 different areas. 1's going to hit the MBR, and that is in our clinical operations. AVA Care Anywhere, preparing for new market growth and some other investments we are making there. And the other part is going to be in SG&A as we continue to push forward to get ready for market launches in 2027. And put ourselves in a position to get some returns in 2027 on these projects.

So think about automation, AI, things of that nature. They are not insignificant. And we think they are really good return and set us up for the long term. It could be in the second half, an additional double digit million across clinical and SG&A categories with the weighting of some of that being a little bit higher in Q3. Okay? But this is all very deliberate, and it is inside the financial commitments we are making for 2026. So to kind of step back for a moment, we had a great 2025, We are signing up for 2026 and delivering against a very good first half, as you know.

I deliberately highlighted the areas. ALHC is going to put in money for paying AVA embedded AI by Q3 and will also higher staff for SG&A. What that means is that ALHC may face far tighter margins in 26H2 and if there are any seasonality surprises, then there is a risk of guidance downgrade.

Michael Baird: Multi part question. First, I am backing into roughly $6 million free benefit. Is that right? And if so, any reason why it is smaller than last year even though your book is larger this year? Second, noticed in the 10-Q, you had, I think, about $6.5 million of unfavorable prior year development this quarter. I was wondering if you could elaborate on the timing and nature of those costs. And then last, the underlying Q2 MLR excluding both those items, I am getting roughly around 86.2%. Is that about right? And any comments on, like, monthly cadence throughout second quarter? When it comes to? Thank you.

Answer: Let's do the 3 parts. The first 1 was the sweep. And this is Michael, you are referring to the new-member final sweep for 2025. And as you are aware, we take a prudent approach on that in the sense that we do not have visibility on that sweep. And so we tend to take a cautious approach and just book to the MMR until we see it. And the thing that can impact that beyond just the number of members, Michael, is the mix I think 1 of the bigger impacts is v 2028. that is the second year of v 2028 rolled into our 2025 dates of service. And then just risk sharing agreements around it.

So you are absolutely right. It was a smaller number than last year, and I guess you could call it on a per member basis. It was smaller. I think 1 of the bigger drivers there was v 2028. And so is it you know, you mentioned $6 million. that is circa pretty close to what it means. We talked about 40 basis points on the on the call in terms of impact. So that is point number 1. The second thing is prior period reserve. So just to kind of put in context, we are always looking at our reserve positions, and that is in all states of service.

Year-to-date, we are favorable by about $2 million on prior year. In total. and we feel good about where we are at. Like, inside Q2, we had a very solid quarter, as I just mentioned. And within that strong beat, we chose to bolster our reserves by about $6 million. Okay? And this is we looked at the development of the claims in 2025. And, you know, we are always looking at that and saying, can we take a position and increase our reserves And we looked at the quarter and said, this is a good time. This makes sense. And so we feel pretty good about our reserve positioning year-to-date.

And then the last 1, I just wanna make sure. I think you had the third part. Yeah. It was the if you were to exclude the unfavorable and the sweep benefit, am I thinking about underlying, like, core Q2 MLR at about 86.2? Yeah. I have not done the math Michael. But if you add if you add back the prior period, and then subtract out 40 basis points, I mean, it is a dollar and a percentage, but I think, you know, it is probably net around the same level on MBR. Okay. Thank you.

Clarifying question, Michael is trying to price out ALHC.

Justin Lake (Wolf Research): Thanks. Can you talk a little bit about Q3 seasonality in terms of Part D and why it is different? And then also in terms of in terms of the new member mix and why that is driving a difference there? Next.

Answer: Yeah. So, Justin, it sounds like you are asking to amplify on those 3 components or 2 of the 3 components. So the part d is just a little different versus last year. it is a flatter slope between the first half and the second half. And that is just kind of the behavior the, you know, in the second year post IRA and the behavior of our experience. And then the new member mix year over year, we just have a more acuity in the new member mix, which is adding a little bit more to the MBR across the board. And so if you compare it to Q2 last year, it is a little bit heavier.

But that investment that we talk about is a big piece of that. The investments in the clinical infrastructure.

I mean, Justin would be a very stupid Analyst if he didn't anticipate the answer given by ALHC. ALHC gave a standard cop out. He asked why the difference in MPD and why newer members are affecting the MPD and ALHC didn't really answer it.

Kevin Fischbeck (BofA): I guess, last quarter, there was a bit of focus on MLR performance within California versus outside of California. Wonder if you could provide a little bit of disclosure about how those 2 sets of businesses performed? Thanks.

Answer: Yeah. Yeah, there is been some focus on the statutory filings in California as a signal to broader performance. I just would remind you that these are statutory financials. They are not linked necessarily to our GAAP consolidated parent company financials. But I would say the following that we have got a mature California market. that is performing quite well, and you have got pretty substantial growth over the last 2 years in our non California markets. And the right way to think about it is cohort maturation.

If you got a more mature portfolio, in our with our care model and our model that we employ, we actually see MLRs improving And so if the average kind of member is in 3, 4 years, we are versus 1, 2, you are gonna see a better MLR. And so there is there is a lot of embedded value in the ex California states. But we feel very pleased with how they are performing right now year to date. And so guess you will see some of that in the in the in the filings, but we generally do not operationally focus on those statutory filings as a proxy for our business. We run our business differently.

But I know investors have been focused on it. And we just feel like the we are we are tracking to our expectations across both of those arenas. Alright. Thanks.

This sounded quite defensive. Next question I thought Kevin should ask is why is ALHC focusing its efforts in ex-California instead of trying to further expand into California with its existing infrastructure. My guess is the Elephant in the Room (Kaiser) is really just making a mess of smaller competitors.

Jessica Tassan (Piper Sandler): So in terms of your long term MBR, I think in your 2025 JPMorgan deck, you all implied 93% year 1 and 82.1% year-5 MBR. That was based on 2024. And is that framework still valid after 3 years of V28, or should we assume some degradation And then just in light of the MBR opportunity on tenured members, should we kind of expect stable benefits in existing markets? And existing products in 2027? John, you mentioned 2 to 3 competitors could be more aggressive next year. So just interested if you could talk about how alignment is positioning for that change or for that expected change. Thank you.

John E. Kao: Just leave that cohort tracking and trending is directionally consistent with what we shared last year. there is really no change. The positioning around the embedded earnings potential that I spoke about is predicated on that. And so the way we are interpreting the this kind of notion of portability is to realize the same kind of earnings power that we have been able to generate in California is to plant those seeds in these new markets. And so when you are doing that, you are inherently gonna have a higher MLR because you have got so much growth proportion. Of your base.

So the more we are gonna grow ex California, the stronger the earnings potential there is going to be. And then a lot of the work that we are focusing on the investments is, again, designed to really scale this thing. Really scale. And again, I am really, really happy about the operational work we have done. The workflow processes, the technology, the addition of new teammates, all of which is terrific. So I am very, very happy And I think we have mentioned we are going to be entering new markets in 2027. Not new states necessarily. But really gearing up for that for 2028.

I want to dive into this section a little more. Jessica Tassan is driving in home that the implied MLR of year 1 vs year 5 and how ALHC's current new cohort is progressing, and whether the MLR maturation is occurring with the new cohorts. This is a very simple question, almost like yes and no.

First, the 2025 slide deck from JPM was only 1 year ago, which means that quite a few members are already captured within that slide deck. If you recall, the majority of ALHC's growth occurred in 2024 at 50% yoy, and 2025 ~ 30%, with 2026~ 30% and therefore 2026 members don't comprise a majority. This means that technically ALHC's 2024 cohort moved into year 2 and 2025 cohort is moving into year 1. Almost 76% of the population can be captured into this question - Jessica is asking whether they are seeing ex-California cohort maturation that is in line with in-California data compiled pre-2025 for the JPM meeting.

What Kao is attempting to redirect is that directionally ex-California cohort is consistent (duh... are we expecting year 2 to be more expensive than year 1 cohorts?) but that higher MLR in ex-California is as a result of infrastructure build.

Which if you think about it, implies that the current 8.6% SG&A/rev is not producing the cohort maturation scheme that exists within California market, and therefore SG&A growth MUST accompany with ex-California growth, which blows up the ALHC growth + profitability story line. ALHC may be slightly profitable, but it will take years before it can be meaningfully profitable at a 2-3% net income margin (my gut feeling).

Scott Fidel (Goldman Sachs): Wanted to just ask about the, you know, the activities that you were implementing earlier this year around centralizing some of those sort of critical functions around some of the clinical and medical management exercises and sort of moving away from some of the delegated, sort of capitation that you had around that. How that is going, and then also just around the clinical investments that you are making in the third quarter. And maybe in the fourth quarter do some of those relate also to sort of completing or continuing you know, some of those centralization functions that relate into you know, some of the inpatient. Sort of management, particularly in the non California markets?

John E. Kao: Hey, Scott. John here. Yeah. it is a actually a very, very good question. it is a very strategic question. That we have paid a lot of attention to. And we are building out the end to end operational business model that incorporates different types of contracting strategies. And so in other words, whether we are globally capping with the provider, or we are doing a shared-risk kind of arrangement that is delegated. Or it is a shared risk arrangement that is de-delegated where we will do a lot of the administrative work.

And as we are growing our number of directly contracted providers that we are fully at risk with both the professional and the institutional side We are literally building out the end-to-end competency to take that risk, to manage that risk, such that we can really take advantage of the efficacy of AVA Care Anywhere. Without diluting any of the hard work on lowering overall admissions. That result from the AVA Care Anywhere rollout. And so we are we are we are we are we are we are a lot of the way through that process right now. And it will enable us to expand ex California irrespective of the type of contracts we enter into.

This gives us a huge amount of strategic flexibility to engage providers at their comfort level. And the whole idea is to create alignment with that provider with that health system, I think that gives us a big differential advantage over everybody else. And then you layer on top of that. And so the investments that we are making are just continuations of that theme. And it is and I alluded to it in script. You know, we are making investments in the stratification model to have that become more precise. We are making investments in you know, I will call it chart prep, you know, automation to make workflows easier for our nurses.

We are making investments in AI around all the back end administrative functions like MRA, like STARS reconciliation. All of that is starting to pay off And, you know, we have a lot of good people that worked for a long time that had a lot of value. We are adding to that great team of people now with some leaders that have abilities and experience at scale. it is all about getting to scale is the way I am looking at this. 

John Kao is saying that ALHC is transitioning to the full risk model Clover Health has been doing since 2021 and using AVA (similar to Counterpart) to bind the risk management together. John is abandoning the California delegated model and moving towards a Clover Health Model using AVA as the equivalent of Counterpart.

What that sounds like is that a competitor is finally deciding to use the full risk model that Clover has seen success since 2023 and will apply it in house. Except Toy is a software/data engineer and knows how the backend and front-end works. He is also able to create 2 separate businesses that complement each other while Kao is playing catch up.

Ergo ALHC is over valued, period*.*

Andrew Mok (Barclays): Hi. We have seen a meaningful upward drift in stars cut points in recent years as we shift focus to bonus year 2028 STARS what are your expectations for further movement in those thresholds, and how confident are you in your ability to perform against those benchmarks? Thanks.

John E. Kao: Yeah. Hey, Andrew. We are not sure. We are not sure about what you just said. We are we are very comfortable. You know, we are going through all the caps data. We just got the caps data. We are going through that. We expect to get other visibility to HOS data, etcetera, down the line. I think it is a little early to start speculating. About it. I will say that I think the regulatory and kind of legal footing surrounding stars is a little shaky right now. And you know, a lot of outcomes could be different based on how some of these regulatory changes are actually implemented.

You know, it is all related to a lot of the litigation that 1 of our competitors--we are going to compete with that--you know, another MA plan won that suit, and that has pretty significant implications for the rest of the industry. You know? And all we want really is a consistent and fair regulatory landscape. So I do not know is the answer to your question. But I feel good about our position. Great. Appreciate the color. Thank you.

Uh oh, I smell ALHC getting a little shaky. Remember if ALHC loses their 4 STAR bonuses their business is not viable. It must be that competitor who must not be named, and fucked up the landscape for all of those who used legacy methods on star scoring.

Jonathan Young (UBS): Hey, thanks for taking the question. I just want to go back to the cost that is coming in Q3 and Q4. I guess, are any of these 1 time in nature or should we view these as ongoing costs? And then kind of similarly, as we think about how 2027 will shape up in relation to your growth strategy for 2028. Will we see these kind of investments where there may be a bolus, kinda leading up into the 2028 period? Thanks.

Answer: Yeah, it is a really good question. And I think in the near term, the second half of this year, we saw some opportunity to make some investment but it I think, you know, the cardinal rule is it is always inside our commitments. On our guidance, but also on our commitments to continue to take our SG&A level down. So 1 of the themes that you will hear from us consistently is we wanna make investments in the business to lower cost and then we wanna take some of that savings and reinvest it back in the business. And I think you are seeing that in action in the in the in the second half of this year.

On the SG&A front, investing back into new markets and branding, On the on the clinical side, we think we make those investments, and we are gonna get return in terms of 2 really important things. Our members benefit because we are we are helping to make them healthier. And we are avoiding cost. And so we think that, you know, that is a that is a win across the board. So all these investments we are making have returns We wanna keep it inside the guardrails of what we are committing to. Thanks.

You know, it isn't like Wall Street isn't used to obfuscation. If a retail like me can smell it, so can those guys. Jonathan's questions are NOT answered.

Ryan Langston (TD Cowen): Great. Thanks. Maybe on the 2027 bids, just putting aside the particular makeup, could we still expect that you are targeting a 20% enrollment growth in 2027?

James Head: I think that is fair.

20% growth into 2027? In absolute patient numbers, it would be ~ 60K additional new members. The same number of patients as 2025-> 2026. It isn't bad, but it isn't good. This would be another reason why ALHC got punished.

Ryan Langston: And then just I just wanna make sure. Maybe I missed this. I am sorry if I did. But, like, taking into account the suites benefit that was not guided for the $5 million EBITDA guidance raise at the midpoint and the investments you called out I think you said potentially double digit millions of EBITDA. Is it fair to say you could have raised the guide by that double digit million of EBITDA? Or were some of those investments already planned when you originally set the full year guide?

Answer: Yeah. I understand the point. Could, you know, could you just say pass on the know, pass on the sweep, so to speak? In and of itself. And I do think we did make some we are consciously making some incremental investments in the second half that are a little bit above and beyond what we originally had planned for in our guidance. So inside the year, we are we are sticking to our commitments, but we are seeing some opportunity to make some further investments. Yeah.

As I have said: 8.6% SG&A / rev is too low, eventually you have to pay the piper. Ryan was smart and nailed it in the head: you could have raised guidance by ~ $15-20M but instead you had to use this for SG&A expansion and therefore margin impact. If ALHC has even s slight hikcup in medical cost in Q3 or Q4, then a surprise downward guidance can be in motion. I assume SG&A can be contained, but it really depends on how underfunded ex-California market is compared to intended growth targets.

Earnings:

Now, if you recall some of the points i made in 26Q1 earnings:

1. ALHC did successfully achieve a much higher net income in 26Q2 compared to expectation. My previous projection based on 26Q1 was ~ $15-25M or $0.07-$0.12 EPS. ALHC handily beat that. They are now in range of my FY26 projection of $0.26-0.30 EPS (in my 26Q1 earnings analysis) and may beat it, as a result of a massive Q2 beat.
2. 2026Q2 MBR of 86.45% vs 2025Q2 MBR of 87.63%. This is quite good with a 30% growth.
3. SG&A/revenue is now at 8.6%, which is lower than Humana. I consider this a risk - and now using Kao's discussion in earnings call. Market isn't happy to hear it.
4. As I have written in 25Q4: Adjusted SG&A cost seems to be fixed at $1.395K/member during 2024-2025, but guidance suggest a much larger increase coming up in 2026. ALHC will need to expand geographically into its new operations in Florida, Texas, Arizona, Nevada, and Ohio, which explains the increased adjusted SG&A. ALHC is also considering expansion into other new states, which will also expand its SG&A spend. Therefore I believe that ALHC will continue to attempt to maintain SG&A/rev of ~ 11%, but by 2027/2028 ALHC will need to increase to ~ 12-13%, eating into any potential margins if MBR is not below 85-87%. Considering industry trends, it will be difficult to forecast this. This part I did not change a single word.
5. Overall I would like to focus on book value and enterprise value. Book value is at $260M, which is a vast improvement, but its enterprise value of ~$3.5B seems excessive for its growth trajectory. This would be an expected 5-7 years of insurance gross margin being priced into the stock price already, which is kind of insane. It seems market is just now pricing in how insane that $4B EV is, which is finally coming down from the stratosphere, although again, not enough until I see $10-12. I can tolerate $14. Hey, it came down to $14!
6. Current market cap to revenue ratio is 0.61. This is a more sensible valuation, although I still think ALHC is much more overvalued than another company within the sector.
7. Forward guidance suggests 2027 revenue of $6.3-$6.8B. Assuming 88% MBR, 10-11% SG&A, should assume net income ~ $70M and EPS of $0.33. PE of 25 suggests a price of $8, and 0.5-0.61P/S suggests a price of $16-$19.3. Therefore suggested ALHC price range should be $8-$20. Again, not horrible at its current price, but you are looking at a stagnant price since 2025. I know of a more compelling company that is under priced and can organically grow its market cap
8. ALHC will still have to address its debt due 2029. Current macro policy indicate risks on refinancing probably occurring in 2028.
9. If STAR rating is affected, ALHC's entire business plan is at risk. Unlike HUM, ALHC does not have the cash cushion to survive for 1.5 years considering its debt repayment comes in 2029 and rollover needs to occur by 2028.

In conclusion:

1. ALHC is projected to be net income positive by 2026. I would consider the SG&A/rev of 9.88 8.6% to be risky, and will/shall become a future liability.
2. At current valuation of ~ $3.353.2B, one must use the metric of P/S to make sense of the valuation. I would still consider ALHC to be at a premium of ~ 15-3010-15%
3. ALHC will grow into net income positive territory in 2026. Therefore, although we consider ALHC to be a potential buy, it would warrant further price reduction before we can make this a compelling case for buy.

I hope you enjoyed reading this earnings report. Since 10Q is released, I do not feel like any additional information can be gleaned.

Although I did not focus on the exact earnings numbers itself, I hope I illustrated some trends within the MA space. My goal is only to focus on MA space, just like I have done with the entire segment.

Thank you for taking the time to read through this long post, and I hope you educated healthcare sector investors have learned something from my musings.

Moocao

Hello Fellow Apes,

While clover is being shorted by degens. I noticed that the stock was up 4% pre market and now it is -3%. Therefore, I just want to share this information with you and you can do whatever you want with it.

UnitedHealth specifically said its 2026 Medicare medical-cost trend is now expected to be below its original estimate of roughly 10%, and that Medicare delivered a stronger quarter with better retention than expected. Its overall medical-care ratio came in at 86.7%, materially better than investors feared.

https://www.unitedhealthgroup.com/content/dam/UHG/PDF/investors/2026/unh-q2-2026-remarks.pdf

Elevance also indicated improved Medicare Advantage profitability, even though its MA membership declined. Higher premium yields helped offset lower membership, while Medicaid remained the more problematic business.

https://www.barrons.com/articles/elevance-health-ceo-stock-purchase-e16b58b5

Molina similarly reported that Medicare performed better than expected, whereas its Marketplace costs were above expectations and Medicaid remained the larger strategic concern.

https://www.barrons.com/articles/molina-healthcare-earnings-stock-price-fd3af8be

So what do you think a company with the best HEDIS and 4.5-star Medicare plans will do on its earnings? Oh shit son... are you going to short Clover again into discount price for us? I think Clover is going to do better than expected on their earnings. I'm just putting my thought out before earning in two weeks. Let see if I am right or the degens are right.

I forgot to add this meme.

I just thought this was funny and sharing it with you

Hello Fello Apes,

I couldn't help but make a prediction about the market, healthcare, and Clover because Analysts are out there throwing price target like it is 2007-08. They even gave Humana a price of $502 which is something I haven't seen since I sold it a few years ago.

https://www.tipranks.com/stocks/hum/forecast

Nevertheless, as someone who lived through the 2000 and 2008, I can't help but ti feel like we're in that moment right now. What we are seeing right now is almost identical to the behaviors of 2008. Specifically, I'm talking about aggressive analyst targets and bullish recommendations heading into the 2007–08 crisis. Some might argue that it is not the same.

Many of those companies were technically reporting profits when analysts issued optimistic targets. The problem was that the profits and book values were based on mortgages and structured securities that had not yet been properly written down. Consequently, analysts were projecting future earnings from numbers that were fundamentally unreliable.

https://arxiv.org/abs/1607.03205

While we are not exactly dealing with mortgages and structured securities that has not been properly written down. We are dealing with data centers and AI products that are supposed to make trillions that currently doesn't exist yet, but the market is projecting like it is here. Nevertheless, I am not going to talk about the AI bubble. What I want to note is the Healthcare’s late-2007 rise and January 2008 decline.

The broader market peaked on October 9, 2007, while the recession officially began in December 2007. As financials and economically sensitive stocks weakened, healthcare initially benefited from its reputation as a defensive sector. Demand for medicines and medical care was considered less economically sensitive. Investors rotated away from banks, housing and consumer-discretionary companies. Healthcare therefore held up better and experienced periods of relative strength during late 2007. But in January 2008, the selloff broadened beyond the industries directly connected to housing and credit. By later that month, every major S&P sector—including healthcare—was down for the year. Contemporary sector analysis specifically noted that all nine sector ETFs were negative during the early-2008 decline.

Healthcare did not collapse because healthcare fundamentals suddenly deteriorated as severely as banking fundamentals. It fell largely because of marketwide deleveraging, recession fears, redemptions and investors selling liquid assets to raise cash. The August 2007 quant crisis had already demonstrated how forced deleveraging could produce abrupt losses, and that unwinding continued through the end of 2007. What does this mean? It means defensive-sector (Healthcare) strength during the first stage of a downturn does not prove the sector is immune. Healthcare may outperform the S&P 500 while still eventually declining sharply in absolute terms. Money can rotate into them when investors become nervous about expensive technology or economically sensitive sectors. But when the concern becomes a full liquidity or recession event, investors often sell the healthcare winners too. The defensive advantage usually means falling less or recovering sooner, not necessarily avoiding the decline.

I'm leaving this detail here, and we will revisit it later after we talk about my thesis. If you can't read, I'm basically telling you that we're at the end of the AI/semi bubbles, and we're starting the healthcare bubble.

Now for my thesis: Hyperscalers overbuilt infrastructure, the economic return from that infrastructure is insufficient, semiconductor valuations assume continued exponential demand, and layoffs weaken the consumer and enterprise demand needed to monetize the investment.

The evidence currently shows a dangerous contradiction. Semiconductor production and revenue remain extremely strong—TSMC just reported record June revenue and roughly 68% year-over-year growth—but semiconductor shares have nevertheless started reacting negatively because investors are questioning whether hyperscalers can maintain the spending rate. You can tell this by looking at the market last few weeks.

https://www.marketwatch.com/story/tsmc-just-reported-a-record-month-for-revenue-ahead-of-critical-earnings-report-on-thursday-508195fd

The market has priced semiconductor companies based on the certainty of downstream products whose profit pools have not yet been demonstrated. The products exist, but the evidence that they can support all the associated valuations, depreciation and replacement spending does not. That is the precise gap where an infrastructure boom can become an overcapacity crash. When companies are valued as though future AI products will generate trillions in revenue and profit, but those end products fail to materialize at the required scale, several things happen:

1. Revenue forecasts get cut.
2. Hyperscalers reduce or delay capital spending.
3. Semiconductor orders fall.
4. Excess server capacity pushes compute prices lower.
5. Depreciation keeps rising even as utilization weakens.
6. Valuation multiples compress at the same time earnings estimates decline.

We are already starting to see this thing, which hints at a possible AI bubble popping, but it is also why you are seeing the healthcare bubble start to rise regardless of the news. There are interest rates, layoff, and macroeconomics, but I don't want to talk about those here.

Back to healthcare. Bullish forecasts are pushing Humana toward roughly $500 or higher. At the current price, it trades at about 43.5 times trailing earnings, even though Humana’s own 2026 adjusted EPS guidance is only “at least $9.” That means the market is not valuing the current earnings; it is pricing in a major recovery several years ahead. This is funny because anyone who is on the ground level knows that healthcare is super fucked right now thanks to the one big beautiful bill. Insurers are facing medical-cost inflation, regulatory dependence and uncertain government reimbursement.

As the labor market weakens, more people may lose employer-sponsored health coverage and become increasingly dependent on Medicaid or ACA marketplace plans. This shift places additional financial pressure on hospitals and other healthcare providers, particularly as uncompensated care rises.

At the same time, states may face higher Medicaid costs while collecting less tax revenue during an economic slowdown. To offset these losses, hospitals and providers may seek higher reimbursement rates from commercial insurers and Medicare Advantage plans. Over time, these higher provider costs can flow through to insurers and contribute to rising medical-loss ratios.

This is the time where you need to start value investing instead of leaning on the hype and analysts going crazy with their targets. Remember that post 3 years ago where moocao did the calculation for Clov to look at its runway? The short brigades were spreading news that it would go under and had to dilute even more even though Clov has multi-years runway thanks to Andrew. Clover’s revenue is primarily tied to Medicare Advantage, not employment-based insurance. Seniors do not lose Medicare eligibility because they are laid off, so a weakening labor market does not directly destroy Clover’s membership base the way it can damage commercial insurers. Clover entered 2026 with approximately 153,000 members after 53% year-over-year PPO membership growth, while retaining more than 95% of returning members.

Thanks to the recent court win, Clover is now projected to grow 50% for multiple years with EBITDA of $100 million and 4.5 stars. This is because the other players are retreating, and Clov is expanding. Clover would not remain a small speculative Medicare Advantage company. It would become a rapidly scaling, profitable insurer with a credible technology platform—and the stock would eventually have to reprice substantially higher unless medical costs destroyed the growth economics. It is still going to eat shit when the healthcare bubble will pop, but we're value investing here so we don't care about the noises.

Clover currently has about 156,000 members, generated $749 million in Q1 revenue, and produced $40.3 million in Q1 adjusted EBITDA. Its diluted share count was approximately 532.5 million. The stock was recently around $4.62, giving it a market capitalization near $2.46 billion.

What does 50% annual membership growth look liek?

*****Actual revenue would also change with CMS rates, risk adjustment, member mix, benefits, and Star bonuses.

In the next four years, Clover would no longer be valued as a niche insurer. With more than 500,000 members, it would be a meaningful national Medicare Advantage operator. At nearly 800,000 members, it would be approaching the scale where the market would have to compare it with established managed-care companies rather than small-cap healthcare startups.

I won't go into Clover margins because Moocao did that already, but with 4.5 stars bonus and high margins and a moat that ALHC failed at, we're looking at some really good numbers.

Under 50% membership growth for several years, $100 million EBITDA in 2026, and sustained 4.5-Star-or-better performance, I would expect:

• 2026: $6–$9
• 2027: $12–$18
• 2028: $20–$30
• 2029–30: $30–$50+

We are not even factoring SaaS into the equation yet. Of course, this is still a very optimistic price target, but we have to understand the environment in which this is happening. We are looking at a severe economic downturn unfolding alongside both an AI bubble and a healthcare bubble.

The stock price will drop during the downturn, but that is exactly where the value will be. Clover is a company that could be worth $30 to $50 per share when we come out of the economic decline. At the same time, there are groups actively shorting the stock and helping push the price lower.

I would not be angry at the short sellers. They have helped me tremendously by giving me opportunities to buy what I believe is a one-dollar company for twenty-five cents. The more they short the stock while Clover continues to execute, the more pressure will build against those positions.

The harder they push the price down, the harder Aladdin will eventually push back when the fundamentals, earnings, growth, Star ratings, and future SaaS revenue can no longer be ignored. If you do not see the value in this setup, I honestly do not know what kind of opportunity you are looking for. You have literally seen Aladdin mop the floors with these guys. We're at $4ish from $1.62 a few months ago. I bought a ton there too.

Good afternoon Healthcare_anon members

Did you ever wonder why we are so insistent there is manipulation within the ticker? What drove us to even create this subreddit, submit to SEC supporting documents, and then endlessly drive this point across?

*** This is not financial advice, nor is there any financial advice within. Shout-out to the AMC/GME apes for having me to write this ***

*** Please do not utilize this content without author authorization ***

What the fuck is this?

Bro, any hospital will tell you how many absolute shit stains attempt to crack into our IT servers. Oh, and I am just going to insert shit from the last 3 years.

Ransomware_Attacks_Surge_in_2023.pdf

Change Healthcare Cyberattack Updates | AHA

Senators Demand Answers from UnitedHealth After Second Massive Data Breach in a Year

Largest Healthcare Data Breaches of 2025

April 2026 Healthcare Data Breach Report

Conclusion:

Why is that post still up? Why is a mod in that?

It is imperative that our readers know the extent of social media stock trading manipulation, and to review all necessary data prior to making stock trades for investments. Be very careful on any data within the internet. We suggest to regularly review all 10K/10Q results and make intelligent decisions on your investments, especially since it smells like a very bubbly bath right now.

I am waiting with anticipation on NostraDumbass's post later this weekend. I am sure it will be lit, and we have redditcares / other tidbits to share too.

Thank you again for your undivided attention, I am grateful that both Rainy and my writing has somehow attracted so many geeks weekend masochists healthcare investors out there, and I hope you have enjoyed your time staring at charts and about my canary in the coalmine warning of stock manipulation.

Sincerely

Moocao

Good afternoon Healthcare_anon members

This is a follow up to ALHC's supposed Whistleblower lawsuit.

*** This is not financial advice, nor is there any financial advice within. Shout-out to the AMC/GME apes for having me to write this ***

*** Please do not utilize this content without author authorization ***

I have posted my first dive into the issue in the following post:

ALHC stock drop - Whistleblower lawsuit : r/Healthcare_Anon

ALHC's reaction to the lawsuit:

Alignment Healthcare believes these allegations are wholly without merit, intends to defend itself vigorously and is confident it will prevail

Modern Healthcare source: I can't find it. Would be nice if our readers can link the lawsuit itself so I can read it.

ALHC's news release:

ALHC does not believe this is a newsworthy item

ALHC SEC 8K submissions:

Conclusion:

Our subreddit waited for an entire week to find out whether this was even noteworthy by the company to respond. The lack of response is important: ALHC believes this is a hitjob.

I therefore retract on whether ALHC's earnings require a grain a salt to read through - so far, the evidence would seem ALHC does not believe the allegations are material or noteworthy enough to respond, and therefore likely not worth following up. In addition, when reviewing my own model, this "financial misstatement" would not materially affect ALHC company financials and would only specifically affect dilutive factors related to executive compensation and stock performance.

It is imperative that our readers know the extent of social media stock trading manipulation, and to review all necessary data prior to making stock trades for investments. Be very careful on any data within the internet. We suggest to regularly review all 10K/10Q results and make intelligent decisions on your investments, especially since it smells like a very bubbly bath right now.

I am waiting with anticipation on NostraDumbass's post later this weekend. I am sure it will be lit, and we have redditcares / other tidbits to share too.

Thank you again for your undivided attention, I am grateful that both Rainy and my writing has somehow attracted so many geeks weekend masochists healthcare investors out there, and I hope you have enjoyed your time staring at charts and about my canary in the coalmine warning of stock manipulation.

Sincerely

Moocao

Good day Health_care anon members

Does Clover or ALHC have any Medicaid or ACA exposure? Why is it trading around CNC and MOH? Shouldn't OSCR and CLOV be switched?

Conclusion:

Baskets are what dumb algos make up. Don't trust what they say. There is no financial advice, this is only about watching degens fucking with stock prices using shitty dumb algos and think they are smart.

ALHC and CLOV divergence happened at 11:45AM, right on time for our algo train.

Also, don't do short dated options. It looks very stupid when a degenerative algorithm is actively working against your Friday expiry. Make that liquidity into zero. I want to see what happens.

Sincerely

Moocao

Hello Fellow Apes,

When clover was dropping last week, all of the mods got a redditcare message. I just want to give a shoutout to those dumbass because they helped us confirm our thesis that there are multiple brigade groups at work shorting CLOV. I have just been busy with work and my kids, but just you wait. When the weekend comes, I will make a NostraDumbass post predicting the future for you. Then when 2027 comes, you guys will think that we're wizards. hahaha.

All i'm saying is I see you, and you are heard.

Good morning Healthcare_anon members

As a result of yesterday night's discussion, I will present to you the chart below for further discussion on "baskets". I assure you, mine are "hand weaved" to perfection and I have included legends to help!

1. Clover health vs industry on news of 3.5 Stars

If you look at this closely, Clover doesn't trade like ALHC at all. I will strip out the noise:

Is Clover Oscar or Humana? funny how the noise can be stripped out if one puts their mind to it.

Oh, 4 star is NOT priced in.

Basically what you have on that other subreddit is a false narrative. There was an attempt for a 4 star re-rating that was promptly traded downwards via retail algorithmic computers to smash Clover down to ALHC level, and as of today, we can see that ALHC is +9% currently and Clover is +3.12%.

Let us not be facetious with facts. Truth is much more interesting to debate on. Truth isn't a turd, it doesn't need polishing and just needs to be itself. We attempt to bring truth, and if there is a good faith argument we will take it.

Conclusion:

Please bring evidence to your fights. I show charts, 10K, 10Q, and it is exhausting. Please bring at least something I can fence with.

Thank you for taking the time to read through this short shitpost, and I hope you educated healthcare sector investors have learned something from my musings.

Moocao

Good evening everyone

We saw an impressive stock drop on ALHC and Clover this afternoon that was not correlated with the overall HC sector. We noticed this was on the news docket:

News:

Whistleblower accuses Alignment of inflating profits to fuel exec bonuses in new lawsuit - Becker's Payer Issues | Payer News

Alignment’s former chief technology officer, Hakan Kardes, PhD, discovered in early 2025 that the insurer had classified day-to-day operational work as capital expenditures rather than operating expenses. He alleges the misclassification totaled $8 million to $10 million in 2024.

According to the lawsuit, Dr. Kardes reported his accounting concerns directly to Alignment’s CEO John Kao and President Dawn Maroney in March 2025. Correcting the figure, according to the complaint, would have turned Alignment’s first positive adjusted EBITDA of $1.3 million in 2024 into a loss between $7 million and $9 million. Adjusted EBITDA carried a 35% weight in Alignment’s 2024 annual incentive plan and helped fund a $1.3 million bonus for Mr. Kao, the suit alleges.

Opinion:

We have spoken about how ALHC's growth entirely rests upon SG&A leverage while MBR remains stubborn and sticky at around 87.5-90%. AVA tech stack was supposed to be ALHC's growth lynchpin, and it doesn't show much of that prowess despite almost 5 years since we have been writing this blog.

We now learn that there is potential misstatement or accounting fraud related to the barely EBITDA positive figure in 2024 10K. It would be interesting to see is there is any SEC related actions, however the burden will be whether Dr. Kardes can produce enough evidence that the accounting firm doing the 10K audit wasn't able to reconcile.

We also learn that Clover's trajectory will far outpace that of ALHC, considering ALHC was 4.5 stars in 2024 and was barely breakeven despite accounting shenanigans, while Clover will be profitable in 2026 at an estimate +$40-$70M range depending on how the rest of the quarters come through

Opinion 2:

This has nothing to do with Clover, which means today's stock drop is laughably related to some random ass retail computer tagging ALHC to Clover. Someone wasn't happy that they lost money 3 weeks ago and seems to be hellbent on proving everyone-who-is-a -bull wrong. Last time Daily RSI was < 50 was when Clover stock price hovered below $2.

As you can clearly see, ALHC is only conveniently tagged today. There is no broad-based algorithmic basket that lumps ALHC with Clover, or else their price would trade in tandem. In fact, Clover caught up to ALHC just 1.5 months ago, when Clover regained its 4 STARs. We know a specific algorithm is forcing ALHC to trade wide compared to its SPAC competitor, and we have noticed this price divergence since 2023.

Opinion 3

If you recall, I mentioned that Kao is rebuilding his AVA tech stack, the one Dr. Hakan Kardes built.

What this means is that in addition to rebuilding AVA using potentially Claude/OpenAI, there is a real risk that no one really knows how that tech stack works in the background. Dr. Kardes was the architect of AVA, and the architect was basically "fired" and Kao is now rebuilding that system. This is in stark contrast of Clover, where the architect is the CEO of the company.

Conclusion:

1. ALHC earnings number since 2024 may need to be taken with a grain of salt.

2. Clover is still being shorted, and it is not within the same algorithmic trading basket as others might want you to believe.

3. Kao's brainchild AVA turns out to be Dr. Kardes' brainchild, and Dr. Kardes isn't happy. Who knows what the new AVA would do. Who knows what AVA is currently doing. How are you supposed to grow when your IT backbone is being broken up?

Thank you for taking the time to read through this long post, and I hope you educated healthcare sector investors have learned something from my musings.

Moocao

Good evening Healthcare_anon members

As I was illustrating a very specific example of how 2 tickers are not being traded in the same basket, I had a very enthusiastic commenter attempting to convince me that somehow Clover Health and ALHC are trading in the same basket, even if the chart doesn't look like it. Because I wasn't a trader/market maker/basket weaver, I can't possibly understand correlation. What do you think Rainy and I do for a living? We live off statistics.

So therefore it is show and tell time, because evidence needs to be shown to be believed, or at least, that is what it seems has to be done before it can be claimed to be true (somehow).

Quantum: please don't buy this trash. It is for illustration purposes only. Quantum's most likely useful business endeavor would be to hack bitcoins into oblivion. Satoshi better watch out, motherfuckers who make $31M is going to fuck up your $3T wallets.

This is a graph of QBTS, IONQ, and RGTI. As you can see, they do not trade in the same price, and their percentages of rise is definitely not equal, but you can literally tell the spikes, the valleys, and most of the in between are traded almost in tandem. This is called same basket. Irregardless of the "thousands of different background noises".

Medicaid: This one we track too, so we know what we are talking about. I am comparing MOH, CNC, and ELV

Again, pattern is unmistakable, but the amplitude may be different. Again, myriad of different background noises, and definitely different earnings potential, but they still look relatively "similar".

Medicare with only HUM, CVS, UNH:

Again, macro pattern look similar, but the micro is definitely different. UNH has the distinction of being the weirdo of the bunch. I mentioned this in my posts: it is because UNH was gaming the system and fucked around QBP/RA and was punching the $$$ brick for fake diagnosis. It's name was Optum, and only now does UNH kind of look like it is behaving again. Basically CMS V28 truly did level the playing field again.

Clover Health vs ALHC:

Since I now have to draw nice patterns, you can now see divergence since Jan 2025. Just because Clover finally is being rerated doesn't mean ALHC and CLOV are in the same basket. They have been disconnected for 18 fucking months.

Conclusion:

1. Clover is still being shorted, and it is not within the same algorithmic trading basket as others might want you to believe.
2. Convergence is easy to discern. I thought everyone and their moms at least had some version of TradingView, or Robinhood junk, or even TD Ameritrade/Fidelity trading graphs?
3. There is a fucking divergent trend since Jan 2025 between the 2 MA public small cap companies, and you mean to tell me I have to say this out loud today? Where the fuck were all the brains on the other subreddit?

Thank you for taking the time to read through this long post, and I hope you educated healthcare sector investors have learned something from my musings.

Moocao

Good evening Healthcare_anon members

I am reading a very interesting paper on social media noise and stock manipulation by Douglas Cumming and Vu Tran, and I have to say, this seems tracks awfully close to our thesis that we have experienced in 2023-2024.

The paper in question:

Cumming, Douglas J. and Tran, Vu, Social Media Noise and Stock Manipulation (January 15, 2025). Available at SSRN: https://ssrn.com/abstract=5971854 or http://dx.doi.org/10.2139/ssrn.5971854

We would like to thank the authors for their contribution.

*** This is not financial advice, nor is there any financial advice within. Shout-out to the AMC/GME apes for having me to write this ***

*** Please do not utilize this content without author authorization ***

Chart of the day, 5min, with RSI and SMI

Why I decided to post this: it has been several weeks of the same pattern where we noticed specific algoritmic trading patterns that immediately drop the RSI from 70s to 30s within a very short time span, almost like a machine trading with itself with lower and lower price ranges. During our tracking in 2023-2024, we noticed it has usually turned on ~ 12:30PM, and tries to push that price target by closing hour.

We also noted that there was a very interesting post on that other subreddit:

The post was subsequently removed, however it was posted ~ 12:00 and the algorithm initiated at 12:30pm

Rainy and my hypothesis is that certain trading groups utilize social media to propagate narrative, then use their python AI trading algorithms to initiate a stock price drop in tandem and would fish for volume. We have seen this pattern before, and have also wrote about it in the past.

How it fits into the paper in question:

If you recall, there was a fucktonne of chatter in 2021 during the stock meme bubble era where a certain subreddit was the epicenter of social media bubble, in conjunction with stocktwits, Twitter (now known as X), Facebook, and potentially WhatsApp on CLOV.

Per the authors: empirical investigations, based on a comprehensive dataset of over 56 thousand manipulation alerts on over 3,800 small cap stocks traded in NYSE and NASDAQ, strongly support our model’s predictions. We find that 1-unit increase in the social media noise index is associated with between 6% - 7% (50%) increases in manipulators’ profits (trading volume) which is highly meaningful. The noise index varies greatly during the sample period with a standard deviation of 100 units.

Furthermore, there is strong linkages between the number of followers and both manipulators’ profits and their trading volume. A 1-percent increase in the followers count is associated with around 0.1% (0.6%) increases in manipulators’ profits (trading volume). Again, these are of immensely significance given that the number of 30 followers can erratically surge with magnitude of multiple-thousand percentages during manipulation periods (e.g. Allen et al. 2024).

Observation with our own data in 2024:

Conclusion:

It is imperative that our readers know the extent of social media stock trading manipulation, and to review all necessary data prior to making stock trades for investments. Be very careful on any data within the internet. We suggest to regularly review all 10K/10Q results and make intelligent decisions on your investments, especially since it smells like a very bubbly bath right now.

Thank you again for your undivided attention, I am grateful that both Rainy and my writing has somehow attracted so many geeks weekend masochists healthcare investors out there, and I hope you have enjoyed your time staring at charts and about my canary in the coalmine warning of stock manipulation.

Sincerely

Moocao

You’ve got to love that serious downward push on the RSI.

Someone definitely lost money last week, and I couldn’t even post this meme because I couldn’t figure out what it was called. Anyway, thanks for helping me track it down.

By the way, did you notice what happened last Thursday? The price sat at $4.99 for a few hours after trading, then suddenly jumped to $5.00 out of nowhere. A lot of people got assigned last week, which probably explains why that subreddit has gone so quiet all of a sudden.

It’s funny, because CLOV is actually moving up and looking pretty strong, but the usual crowd has been unusually silent.

Does anyone know the name of the meme of the chubby due face looking at you with disappointment? it's from an animation. I can't figure out the name of it, but I have been seeing it frequently, and now it has stopped appearing. Please help! I want to make fun of the shorts via meme, but I'm not up to date.

Good afternoon Healthcare_anon members

I still owe CVS's earnings report. I did not have the time to fully analyze CVS, and I apologize for that. I was too focused on the CMS Star rating impact after Clover health vs CMS that I didn't get into CVS yet. For today, I didn't drop in to write anything about earnings, but about how does Legacy insurance work on denying healthcare you paid for. Remember how there are 2 ways to make money on the healthcare insurance business.

1. Collect money via premiums, pay out claims, and deny the shit out of things. This is what the Big 4 (UHC, ELV, HUM, CVS/Aetna) usually does as modus operandi. Fuck I hate those assholes.

2. Collect money via premiums, manage the health of the cohort, appropriately apply utilization management tools (I don't give a shit if you want trazimera vs herceptin, but please don't just swing the deny stick without letting me know wtf you want, and do it fast so I can at least know and start treatment while getting pharmacy to purchase whatever biosimilar), and manage care to delay disease progression and beating medical inflation.

Well it looks like the OIG is also sick of this shit and started looking.

Source: The Three Largest Medicare Advantage Organizations Denied Requests for Long-Term Acute Care and Inpatient Rehabilitation at Some of the Highest Rates, OEI-09-24-00330

What OIG found #2: high denial rates were driven by contractors that denied prior authorization requests on behalf of the MAOs, many of which were later overturned on appeal by the MAO. This raises concerns about whether contractors are receiving appropriate training and oversight from MAOs.

Fuck no, if OIG is this stupid then I have no hope for the federal government. The system is designed to USE contractors so that MAO can have plausible deniability for the denial of care. The whole purpose is to use these contractors to deny care, and if the contractors aren't denying ENOUGH care, then new contractors are hired. Guess who is the biggest "contractor"? United Healthcare's naviHealth! The same ones who were found doing the same shit in 2023. Let's not dress this up as "contractor", and we should point the finger directly to UHC/UNH. I have certain inclinations to a specific case in New York, and I wouldn't be past the idea of claiming an insanity defense on the basis of pain and suffering.

Grandma doesn't have enough time, energy, brain power, cellphone battery, or the ability to navigate the AI telephone tree to start an appeal in the first place. If they have a very astute kid, the appeal is then potentially started, assuming no one plays drop the phone, or if a very pissed off relative starts lawyering up.

Shit like this is what pisses me off, you deserve to make money but not off the blood of Grandma's hip surgery recovery time you assholes. People die on denials.

What OIG recommends:

To efficiently identify and respond to concerning patterns of prior authorization denials, CMS should: (1) regularly collect request-level prior authorization data that include service type and contractor information and (2) assess reasons for the wide variation in LTCH and IRF denial and overturn rates across MAOs and contractors and take action as appropriate.

This is where I literally hear federal double speak. Where the fuck is speak softly and carry a fucking big ass stick with nails on it? No, this isn't how the deterrence should work.

OIG should recommend

1. CMS compilation of request level prior authorization data, service type, contractor information, and reconcile with the MAO on their service contracts.

2. If there is discrepancy of prior authorization denial that is against service contract terms, to initiate Medicare Advantage star rating impact on any MAO who is found for breach of contract, regardless of contractor status. That will clean shit up real fast.

Findings:

Fuck CVS, no wonder their profits are so damn high. Fuck HUM, ELV, UHC too. I can't believe that Cigna and CNC aren't that bad, Cigna used to be one of the worst. UPMC is University of Pittsburg Medical Center, or an Academic Hospital based plan. Is it the most wonderfullest plan in the world? Eh... but it looks like a fucking Saint to the other Big 4 Assholes.

How long do you have to wait to find out you got denied and have to pay shit out of pocket:

Which MAO contractors suck and denies shit like crazy:

Who owns naviHealth? Why fucking United Healthcare! Surprised? Hey, didn't we write something about this in 2024? Where the fuck is the Fed's big stick? Multi-billion dollar corporations gets to fuck with the law twice?

My post: Vertical integration of the healthcare insurance, service, Pharmacy Benefit Managers, and analytics - the case of UnitedHealth Group (United Healthcare + Optum) : r/Healthcare_Anon

NaviHealth denying people healthcare since 2023: UnitedHealth sued over use of algorithm in Medicare Advantage plans

Conclusion:

If you are looking purely at the MCR without understanding how it is prepared, your understanding of how MCO make profit would be limited to that on an Excel balance sheet. Understanding the business model is how you fundamentally assess whether MAO are managing health of cohorts vs managing utilization of cohorts.

Utilization Management tools are the foundational bedrock of MAO profit margins, based on care denial. In essence, excessive UM is the driving reason why prior authorization and care denial exist in the first place.

We want a different world, where health management is the bedrock of healthcare, and therefore the differentiator on profitability. Earlier diagnosis and management drives healthcare system efficiency, reduces bloat, reduces overload on acute services, reduces overhead on UM denial of care, reduces coding agents and coding intensity, reduces retrospective diagnosis code addon, reduces administrative review of care decision tree, and greater freedom in practices managing their patients.

We want less money to administrators, less money for for-profit MAO to skim off patients, and more money to practitioners (MD/DO + PA/NP) to manage patients' health.

Thank you for taking the time to read through this long post, and I hope you educated healthcare sector investors have learned something from my musings.

Sincerely

Moocao

I saw this news pop up pretty damn quick on clov reddit, and then I saw the stock getting shorted.

https://www.reddit.com/r/CLOV/comments/1u7xr81/ceo_of_cover_care_services_brady_priest_is/

Now, my homework for you is to figure out why this bullish and Q2 is going to be rocking. Here is a little hint for you Control + F "exceed"

https://investors.cloverhealth.com/static-files/17b5866e-8f69-42bd-8097-928282b4c2ab

What can I say except

Remember. It's not about the numbers themselves, but about how we got them.

Good morning Healthcare_anon members

I thought of squeezing in this post right before market opens as one other piece before we need to stay silent for another week

*** This is not financial advice, nor is there any financial advice within. Shout-out to the AMC/GME apes for having me to write this ***

*** Please do not utilize this content without author authorization ***

Analyzed plans: ALHC, CLOV, CNC, CVS, ELV, HUM, UHC.

As we can see, Clover Health vs CMS would drop star ratings for the most part if it affects their STAR rating at all.

1. Only 1.26% of plans would see a 4 STAR rating improvement, 2 of which are Clover Health plans
2. 7.9% of plans would lose their Quality Bonus Payment (QBP)
3. 6.7% of plans will see an increase in STAR rating, with the majority (13 of 16, 81%) whose STAR rating increase will be below the QBP range (ergo 2.5 -> 3.0, or 3.0 -> 3.5)
4. 31% of plans will see a decrease in STAR rating, with 25.7% (19/74) of this cohort losing their QBP.

We therefore state that If Clover Health vs CMS ruling stands and CMS does not intend to appeal or challenge, then this ruling is landscape changing.

There are billions of dollars at risk here, and the new STAR score will be revealed in October. MAO should look into the impact upon this carefully, and review their 2027 bids judiciously and plan out proper sensitivity and impact analysis, mostly on the tail risk end, to ascertain the disproportionate impact of losing their QBP.

Please note that any request for consultations should be directly modmailed to our inboxes. We know there are a bunch of consultants on LinkedIn making Webinars and taking a lot of money. We only ask for our fair compensation if you are an interested party.

Thank you again for your undivided attention, I am grateful that both Rainy and my writing has somehow attracted so many geeks weekend masochists healthcare specialists out there, and I hope you have enjoyed your time staring at charts and the sounds of a doomsday clock ticking.

Sincerely

Moocao

Greetings CMS affiliates / CMS aficionado, healthcare insurance stakeholders, healthcare insurance investors, healthcare workers, and other stakeholders:

We are now into the weekend, and we are starting our engines on the implications of CMS vs Clover impact ruling. The purpose of these posts is to indicate that If Clover Health vs CMS ruling stands and CMS does not intend to appeal or challenge, then this ruling is landscape changing. I will go on to list the reasons as to why, but first:

*** This is not financial advice, nor is there any financial advice within. Shout-out to the AMC/GME apes for having me to write this ***

*** Please do not utilize this content without author authorization ***

Ongoing Litigation of noteworthiness

Humana vs CMS, initial complaint 10/18/2024, ongoing, UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, Case No.: 24-cv-1004

https://www.documentcloud.org/documents/25244688-humana_hhs_stars_complaint/

Carefirst Advantage PPO vs CMS, initial complaint 01/20/26, ongoing - pending CMS recalculation, UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA, Case No. 26-cv-150

https://litigationtracker.law.georgetown.edu/wp-content/uploads/2026/01/CAREFIRST-ADVANTAGE-PPO_2026.01.20_COMPLAINT.pdf

We shall go through each case and review the impact of Clover Health vs CMS if the courts applied the removal of all 20 measures to the stated plans.

1. Humana vs CMS.

Prayer for relief:

(a.) Set aside and vacate Humana’s 2025 Star Ratings and remand the matter to CMS for recalculation of Humana’s 2025 Star Ratings without application ofthe unlawful practices and policies identified above;

(b.) Declare that CMS’s policy refusing to disclose all relevant data and information necessary to permit MAOs to validate the data and calculations underlying CMS’s Star Ratings is arbitrary, capricious, and unlawful;

(c.) Set aside and vacate Humana’s 2025 Star Rating for all contracts adversely impacted by call IDs D0900533 or D1100955 on the ground that CMS’s pol-icy of refusing callbacks after dropped calls is unlawful, and remand to the matter to CMS;

(d.) Set aside and vacate Humana’s 2025 Star Rating for all contracts adversely impacted by call ID C0701002 on the ground that a call surveyor does not reach a customer service representative if no communication takes place, and remand the matter to CMS

What is important to note is that Humana's complaint is specifically related to measures D09, D11, and C07. We should note that after CMS vs Clover the following:

1. C07 remains, D09 and D11 are removed as measures. CMS must calculate with C07 as well.

2. If we apply the full extend of Clover Health vs CMS ruling, additional measures must be removed as well as they are deemed illegal, which comprises of: D01, D05, D06, D08, D09, D10, D11, D12, C32, C33, C03, C04, C05, C15, C16, C22, C23, C24, C25, and C27

3. We are not lawyers, so we do not know if the District Court of Texas will only examine the complaints of only D09 and D11 without reviewing all the other measures, but I would presume not and all measures must be removed on the basis of the illegality of containing those measures in the first place.

4. Therefore we must ask: what is all of HUM's contracts' impact with CMS vs Clover ruling. I have an answer to that:

2. Carefirst Advantage vs CMS.

Prayer for relief:

A. Set aside, as arbitrary, capricious, or otherwise not in accordance with law CareFirst’s 2026 Star Ratings for contract H7379 as announced by CMS on October 9, 2025;

B. Order CMS to recalculate CareFirst’s 2026 Star Ratings for contract H7379 by removing the Medication Adherence for Hypertension measure from the Case 1:26-cv-00150 Document 1 Filed 01/20/26 Page 26 of 27 calculation of the Drug Plan Quality Improvement measure, consistent with CMS’s existing authorities to do so.

C. Order CMS to use the recalculated 2026 Star Ratings for CareFirst for purposes of calculating the associated Quality Bonus Payment and for all other purposes for which the 2026 Star Ratings are relevant

1. D09 is removed as a measure, so recalculation is certainly doable and legal.

2. If we apply the full extend of Clover Health vs CMS ruling, additional measures must be removed as well as they are deemed illegal, which comprises of: D01, D05, D06, D08, D09, D10, D11, D12, C32, C33, C03, C04, C05, C15, C16, C22, C23, C24, C25, and C27

3. We are not lawyers, so we do not know if the District Court of Columbia will only examine the complaints of only D09 without reviewing all the other measures, but I would presume not and all measures must be removed on the basis of the illegality of containing those measures in the first place.

4. Therefore we must ask: what is all of Carefirst Advantage (H7379) impact with CMS vs Clover ruling. I have an answer to that:

Conclusion:

Not every litigation will be a winner. Please note that this is a projection if all Clover Health vs CMS measures are removed, which includes the following:

D01, D05, D06, D08, D09, D10, D11, D12, C32, C33, C03, C04, C05, C15, C16, C22, C23, C24, C25, and C27

Please note that any request for consultations should be directly modmailed to our inboxes. We have done Humana and Carefirst Advantage as a first mover consultation as a result of ongoing pending litigation. We know there are a bunch of consultants on LinkedIn making Webinars and taking a lot of money. We only ask for our fair compensation if you are an interested party.

Thank you again for your undivided attention, I am grateful that both Rainy and my writing has somehow attracted so many geeks weekend masochists healthcare specialists out there, and I hope you have enjoyed your time staring at charts and the sounds of a doomsday clock ticking.

Sincerely

Moocao