Q3 2025 Earning Insights: Alignment Health
- November 5, 2025
- Alignment Health Earnings Release Q3 2025
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Table of Contents
Summary
Exceptional Q3 Performance
Alignment Healthcare delivered a standout Q3 2025 with exceptional margin expansion and positioning for aggressive 2026 growth amid industry-wide disruption.
Outstanding Results
Guidance Raised
Full-Year EBITDA Guidance
Devoted Health
Up from $47.5M at midpoint—demonstrating exceptional execution
Fourth consecutive guidance raise
Conservative planning and excellent execution continue to exceed expectations
Key Strategic Themes
Quality Dominance
100% of members in 4+ star plans (vs 63% national average), with two 5-star contracts in NC and NV
Clinical Excellence
Inpatient admissions per thousand in low 140s, demonstrating superior care management driving 87.2% MBR
Market Opportunity
Confident in 20%+ growth for 2026 despite flat industry enrollment, capitalizing on competitor exits
Risk Model Evolution
Shifting from global capitation (65-70% of business) to shared risk arrangements
Operational Leverage
SG&A ratio improved 120 bps to 9.6%, demonstrating platform scalability while investing in AI
Bottom Line
Alignment is executing a textbook strategy for the post-V28 world—managing care better than competitors can code, maintaining benefit stability, and taking share from disrupted incumbents. Their model proves that superior care management trumps coding optimization in the new MA paradigm.
Q3 2025 Deep Dive
Q3 Revenue
+44% YoY
Adjusted Gross Profit
+58% YoY
Adjusted EBITDA
3.3% margin
Membership
+26% YoY
Margin Drivers
Clinical Excellence
Inpatient ADK in low 140s maintained through Q3—exceptional performance driving MBR improvement
MBR (↓120 bps YoY)
Operational Leverage
SG&A ratio down to 9.6% from 10.8%, demonstrating platform scalability
SG&A Ratio (↓120 bps)
Additional Drivers
- Part D Stability: IRA changes stabilized; moderated utilization growth sequentially
- Care Model Scaling: Successfully onboarded and managed 60% growth cohort from 2024
Q4 2025 Guidance
Membership
Revenue
Adjusted Gross Profit
Adjusted EBITDA
Seasonality Notes
- Higher MBR due to flu season (normal)
- SG&A higher due to growth-related costs
- Timing reversal from Q3 benefits
2026 Strategic Roadmap
2026 Growth Target
Year-End 2025 Members
Full-Year EBITDA
Target MBR 2025
"We believe we are the best Medicare solution for seniors everywhere, and we look forward to serving even more seniors across our markets in 2026."
Execution Roadmap
Complete 2026 AEP Strong
Geographic diversity in growth (CA + 5-star leverage in NC/NV)
Accelerate Provider Risk-Sharing
Move more IPA relationships from global cap to shared risk (currently 65-70%)
Pursue Ancillary M&A
Tuck-in acquisitions for supplemental benefits (4-5% of premium opportunity)
Expand Geographic Footprint
New markets within existing states + new states for 2027 launch
Maintain Stars Momentum
California HMO raw score at 4.05 with Health Equity Index cushion for 2027
Investment Priorities
Automation & AI
Continuous improvement in automation across the organization, improved AI logic in Care Anywhere and AVA AI, and productivity improvements in clinical programs. Expected to pay out even more for 2026 and 2027.
Provider Network Evolution
Strategic shift from global capitation to shared risk arrangements, creating win-win scenarios with improved IPA financials and better clinical outcomes while maintaining Alignment's control and visibility.
Vertical Integration
Pursuing tuck-in acquisitions for supplemental benefits (dental PPO, behavioral HMO) to capture 4-5% of premium currently going to external vendors while seeding with 250K+ member base.
Strategic Takeaways
Clinical Performance Separates Winners from Losers
Alignment’s inpatient ADK in the low 140s is exceptional—likely 20-30 points below many competitors. This performance drives their 87.2% MBR and enables benefit stability.
Action Item: Benchmark your ADK performance and assess whether your care management infrastructure can compete in this environment.
Market Share Up for Grabs in 2026
Despite flat industry enrollment projections, Alignment expects 20%+ growth by capitalizing on competitor exits and disruption.
Action Item: Identify which competitors are exiting your markets and position to capture displaced members with superior value propositions.
Stars Excellence Creates Compounding Advantage
100% of Alignment members in 4+ star plans vs. 63% nationally. Two 5-star contracts (NC, NV) drive enrollment while generating bonus payments.
Action Item: If you don’t have a path to consistent 4+ stars, consider whether your model is sustainable long-term or if footprint consolidation is warranted.
Provider Risk-Sharing Beats Global Cap
Alignment deliberately shifting from global capitation to shared risk arrangements where they take inpatient risk. Result: better outcomes, better IPA financials.
Action Item: Evaluate your capitation strategy—are you taking enough risk to truly manage outcomes, or are you delegating control?
Benefit Stability Trumps Rich Supplementals
Alignment stands out on core benefits (MOOP, cost-sharing) but is selective on supplementals, ensuring quality over quantity.
Action Item: Assess whether your rich supplemental benefits are driving retention or just increasing MLR without value creation.
Benchmark Your Position
% Members in 4+ Star Plans
Alignment
Inpatient ADK
Alignment
MBR (Q3 2025)
Alignment
SG&A Ratio
Alignment
2026 Growth Target
Alignment
Provider Risk Model
Alignment (growing)
Additional Drivers
- What is our inpatient ADK, and how does it compare to Alignment's low 140s?
- Are we competing on core benefits or supplemental flash?
- What percentage of our business is global cap vs. shared risk?
- How do our AI/automation investments compare?
- Which competitors are exiting our markets? How are we positioned to capture displaced members?
Key Executive Quotes
“I know there’s a concern that we’re going to grow too much and we’re going to pick up a bunch of bad business... I’m less worried about that simply because we had a 60% growth year in 2024. Not only did we onboard it well, we managed the risk really, really well. I think we’re proving that we can scale the clinical model and we can actually manage the polychronic population really, really well.”
“Our Part D experience through the first nine months of the year gives us confidence that all of the moving parts related to the IRA changes have been appropriately captured and that we are on pace to meet the Part D margin assumptions embedded within our guidance.”
“We believe we are the best Medicare solution for seniors everywhere, and we look forward to serving even more seniors across our markets in 2026.”
“Stability is the name of the game. As we said, we’ve done a really good job executing against Part D through 2025. We were prudent and thoughtful about how we did it, and we think that sets up well for next year.”
“The investments that we’re making now are really going to start paying out even more for 2026 and 2027... continuous improvement that we’re making to improve automation across the entire organization, improved AI logic in our care anywhere and in AVA AI, and even more productivity improvements and efficiency in a lot of our clinical programs.”
“Our base case is that it’s going to be here. It’s just a question of timing... We’ve never been an organization that has really relied on risk adjustment as a revenue tool. We’re just being prudent about that. We do feel the base case is that it’s going to be there. Washington is not letting go of this topic just yet.”
“We ended the third quarter with $644 million in cash, cash equivalents, and investments. Cash in the quarter was favorably impacted by the timing of certain medical expense payments.”
“Our ability to consistently earn high STARS results from AVA’s centralized data architecture that provides our organization and clinical resources with the cross-functional visibility to execute on each STARS metric.”
“I’m not going to be happy until we get the five stars for every one of our plans.”
“Our ability to deliver low cost through our care management capabilities is creating the capacity to keep benefits across our products generally stable to modestly down. We believe this disciplined approach supports our growth objectives while staying mindful of the third and final phase in V28.”
“A lot of our thinking around [supplementals] has been driven by not just the bid economics, but also by quality. Can we ensure our members that we can provide the right quality of supplemental benefits? That’s just something we always think about.”
“When you talk about 4% to 5% of premium being really applied to the supplemental business... if we bought or started some ancillary business, whether it be a dental PPO or a behavioral HMO or whatever it is, that we could seed it with 250,000 lives right off the bat. I think there’s going to be some margin improvement opportunity for us to do that, and I think we can do that with very little execution risk.”
“We’re very, very pleased with across-the-board growth in California and really leveraging the five stars in North Carolina and Nevada. We’re very pleased about the geographic kind of composition of the growth. I’d say even more importantly is the product mix and the kind of provider networks that we think are very highperforming and where the growth is actually occurring.”
“We really wanted to fund that growth from cash flow from operations. Obviously, we’re going to fulfill that promise. We’re being diligent and looking at both new markets within the existing state footprint. That’s going to be the most capital-efficient, brand-efficient as well, as well as looking at some new states for 2027.”
“We’re about 65% to somewhere between 65% and 70% is in what we would refer to as our shared risk business... What we have done starting last year is really take on more of the component, and we’ve done that in a way that is resulting in better clinical outcomes and improved financial outcomes for our IPA partners. It’s kind of a win-win for everybody.”
“Outside of California, you’re going to have more shared risk and/or just directly contracted in the sense where we really are the IPA. We are the network, and we are supporting the practices... that’s what’s caused us to get to five stars. In North Carolina and Nevada, we have more visibility and control with the direct providers, PCP specialists, and the hospital partners.”
“I think you’re going to see some changes with respect to how CMS is going to deal with HRAs. I think there’s going to be more program integrity around ensuring there be clinical validation around an HRA. Same with chart reviews. The encounter-based baselining was referred to in last year’s advance notice. I don’t know if they’re going to be implementing any of that in this advance notice. I would be surprised, actually.”
“From a policy point of view, a lot of what we’re hearing about really is around Medicare Advantage program integrity, making sure that trust in the program is high and gaming is eliminated.”
“There’s a little bit of a pause in the action, as you know, given the fact that this humanicates. The courts overturn RADV procedures based on Procedures Act violations. I think our internal point of view is that CMS still has a lot of ways to pursue this, and we don’t think that it’s going to go away.”
“We believe CMS’s transition to the excellent health outcomes for all reward, formerly known as the Health Equity Index, will add cushion to our four-star rating in California. This change rewards health plans that effectively serve the most vulnerable, low-income seniors, including those who are dually eligible. Our model is particularly well-suited to manage this population.”
“I thought that they would not be as aggressive as they were this past year. They were aggressive. We’re actually really happy with the fact that we still got the four stars for all of our members.”
“After V28, the final third year phase-in in 2026, they’re not going back to V24. I mean, it’s still going to be a tight reimbursement environment... the organizations that can provide the highest quality care at the lowest cost will ultimately be the winners, which is why you’ve seen us do so well in 2024 and 2025.”
“CMS is calling for basically flat year-over-year enrollment. I think the plan said they actually expected to decline. Just wondering if you have any view on overall Medicare Advantage market growth in 2026.”
“California typically is lower than the industry, again, year to year. There’s a lot of disruption out there. There’s a lot of changes going on out there. We feel very well positioned on the growth side and the retention side.”
“I know you’re now actually planning for the first time to invest into your brand. I think I saw on LinkedIn, Healthcare there’s a commercial video. How should we think about the brand investment going forward?”
“As we continue to scale the business, there’s going to be a decline in our SG&A ratio. I think we’re going to take a balanced approach to that in the sense that we want to continue investing in the business.”
“I think we’re just getting big enough that it’s an opportunity for us to establish not only a brand for Alignment Healthcare, but really, it’s an opportunity for us to demonstrate what is possible if you do Medicare Advantage the way it was designed to be operated. This is why we always talk about MA done right.”
“Can you offer some perspective on retention versus gross new adds for 2026?”
“We’re happy with both, Jess. Gross ads are strong across the board, and retention is actually better than we anticipated across the board. It’s a both-and situation, which is where we need to be. The investments we’ve made in member experience are paying off. It continues to pay off.”
“Wanted to follow up on some of the seasonal flu comments in the context of what’s going on with the broader policy guidance on vaccines. Are you seeing any behavioral changes from seniors or vaccine uptake this year?”
“We’re following essentially our Part D cost, which is basically a lot of it’s flu shots, and literally tracking it daily, weekly. It seems to be trending pretty much in line with what we’ve seen in the past. I’d say a little bit softer in Q3, but picking up in October.”
“Can you help us understand how much of that investment spend is already captured in current spend versus what’s new or incremental? It’d also be helpful to understand how much of that investment or that spend is directly earmarked for things like STARS.”
“I don’t think there’s any leaps and bounds types of investment. What we’re doing is we’re being very smart in applying investment dollars.”
“What’s really impacting the fourth quarter is more making sure we’re prepared for growth as we typically are in Q4. As we move forward, we’re making sure that we have enough room to make the investments in the platform, in our capabilities, in our human capital, etc., as we go forward. One of the things that I’m very focused on is making sure that we’re really underwriting those investments smartly and making our choices well.”
“John, I noticed during your prepared comments, you mentioned the term replicability several times. Is that an indication of more willingness from you and the board to move into additional markets going forward?”
“Yeah. Absolutely. What I’ve stated in the past is we really wanted to fund that growth from cash flow from operations. Obviously, we’re going to fulfill that promise. I think we’ve come a long way in the last few years with our confidence, not only in how we deploy the care model, but how we ensure that our shared services can scale in terms of ingesting the members, onboarding the members, and then caring for the members. I think that’s going to be good for seniors everywhere.”
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