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We have incurred net losses in the past, and we may not be able to achieve or maintain profitability.
−Removed: We have incurred Net losses of $338.8 million and $587.8 million, and $136.4 million for the years ended December 31, 2022, 2021, and 2020, respectively.
+Added: We have incurred net losses of $213.4 million, $339.6 million, and $587.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Our accumulated deficits were approximately $2,159.8 million and $1,946.4 million at December 31, 2023 and 2022.
−Removed: We expect our losses will continue as we expect to invest significant additional funds towards growing our business.
+Added: We expect our net losses will continue as we expect to invest significant additional funds towards growing our business.
In particular, we expect to continue to invest in improving Clover Assistant and our technology infrastructure, developing our clinical care programs, increasing adoption of Clover Assistant platform, expanding our marketing and outreach efforts, expanding our operations geographically, and developing future offerings that improve care and supplement our revenue streams.
These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these expenses.
−Removed: Even if we are successful in increasing our Total revenues from Insurance premiums earned and Non-Insurance revenues, we may not successfully and effectively predict, price, and manage the medical costs relating to those revenue streams.
+Added: Even if we are successful in increasing our Total revenues from Insurance premiums earned, we may not successfully and effectively predict, price, and manage the medical costs.
Furthermore, even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.
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We have relatively limited experience with Clover Assistant, and initial results may not be indicative of future performance.
−Removed: Since launching Clover Assistant in 2018, we have continued to develop its features and capabilities, adapt our go-to-market strategy and adjust its integration with our MA plans, our Direct Contracting/ACO REACH business, and third-party systems.
+Added: Since launching Clover Assistant in 2018, we have continued to develop its features and capabilities, adapt our go-to-market strategy and adjust its integration with our MA plans and third-party systems.
As a result, we may not fully understand the impact of Clover Assistant on our business and long-term prospects.
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There can be no assurance that these effects will improve or persist over time in our current markets or that we can replicate these results as we expand into new markets.
−Removed: If we are unable to drive and maintain significant reductions in MCR for our members or net medical claims incurred as a percentage of Non-Insurance Revenue (Non-Insurance Margin) for our ACO REACH Beneficiaries
−Removed: to support our business model, it would have a material and adverse effect on our business, financial condition, and results of operation.
−Removed: Our Non-Insurance business and continued participation in the Medicare fee-for-service market presents unique risks to our business.
−Removed: In April 2021, we expanded our Non-Insurance business into CMS' DC Model enabling us to target a larger market opportunity, the Medicare fee-for-service ("FFS") market, which is the largest segment of Medicare.
−Removed: On February 24, 2022, CMS announced, among other things, that the DC Model would be transitioned to a new model called the ACO REACH Model starting January 1, 2023.
−Removed: Our Non-Insurance business remains in the relatively early stages of development, and we are subject to the risks inherent to the launch of any new business, including the risks that we may not generate sufficient returns to justify our investment and that it may take longer or be more costly to achieve the expected benefits from this new program.
−Removed: In connection with our expansion into the FFS market, we have been enhancing and iterating the functionality of Clover Assistant as well as developing relationships with providers, and we may face new risks and difficulties, many of which we may not be able to predict or foresee.
−Removed: Also, because the ACO REACH Model is a new model designed by CMS' Center for Medicare & Medicaid Innovation ("CMMI"), CMMI is constantly evaluating the program and may revise the applicable rules and design at any time, and such changes may have a significant impact on our ability to carry out our business.
−Removed: For example, certain CMMI model methodologies, including but not limited to, allowed provider classes, beneficiary alignment, benchmark establishment, and risk score modeling, are subject to continued evaluation and could materially impact profitability.
−Removed: Similarly, while the ACO REACH Model is expected to run through December 31, 2026, CMMI can determine to terminate the program at any time, and in some cases may be required to do so.
−Removed: Program termination could reduce the return on our investments and negatively impact our business, financial condition, and results of operations.
+Added: We will incur costs in connection with our exit from the ACO REACH Program and may not achieve the expected benefits from our exit.
+Added: On December 1, 2023, we notified CMS that we will no longer participate as a REACH ACO in the CMS ACO Reach Program, effective as of the end of the 2023 performance year.
+Added: Our exit from the ACO REACH Program was made after the Company determined that it was in its best interest to fully exit the ACO REACH Program, and follows the Company's November 2022 announcement of a strategic reduction in the number of ACO REACH participating physicians in 2023.
+Added: Non-Insurance revenue for the years ended December 31, 2023 and 2022 was $773.2 million and $2,380.1 million, respectively.
+Added: Our business, financial condition, and results of operations may be adversely impacted as a result of the loss of this revenue.
+Added: We have incurred and expect to incur a number of costs associated with our exit from the ACO REACH Program.
+Added: We expect to incur total charges related to the exit from the ACO REACH Program of approximately $8 million to $10 million.
+Added: Our business, financial condition, and results of operations could be adversely impacted in future periods if our expectations, accounting judgments and estimates prove to be inaccurate, if the exit takes significantly longer than anticipated, if we incur additional, unanticipated costs, if we do not achieve the expected benefits and savings or if we face litigation related to the exit.
Our future performance depends in part on increasing the lifetime value of enrollments, which are realized over several years, and utilizing our clinical care capabilities to improve the quality of care for our beneficiaries.
Any failure to do so could negatively affect our financial condition and results of operations, including our ability to achieve or increase profitability.
−Removed: The lifetime value of our enrollments could be impacted by a variety of factors, including but not limited to cost of care reductions from our clinical programs and the length of time a member remains enrolled in our plan or a Non-Insurance Beneficiary remains aligned to our ACO.
+Added: The lifetime value of our enrollments could be impacted by a variety of factors, including but not limited to cost of care reductions from our clinical programs and the length of time a member remains enrolled in our plan.
Thus, our future performance is heavily dependent on our ability to utilize Clover Assistant to drive down the medical care ratios for our beneficiaries.
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Our future performance also depends on utilizing our clinical care capabilities to improve the quality of care for our members so that they remain members.
−Removed: If we are unable to retain our members and Non-Insurance Beneficiaries, our ability to realize the returns on our investments in the Clover Assistant platform could be negatively affected.
+Added: If we are unable to retain our members, our ability to realize the returns on our investments in the Clover Assistant platform could be negatively affected.
For example, since returning members tend to have lower MCR than do new members, rapid membership growth or other shifts in the mix of new and returning members could adversely affect our MCR in the near-term and lead to greater losses.
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Accordingly, if we are unable to retain our members and realize a significant lifetime value for our enrollments in line with our projections, we may not be able to generate sufficient revenues to offset our losses and expenses, which would adversely affect our business, financial condition, and results of operations and our ability to achieve or increase profitability.
−Removed: While we are only in our third performance year under the ACO REACH Model, formerly the DC Model, we believe that similar to our members, returning Non-Insurance Beneficiaries could also tend to have a lower Non-Insurance Margin than do the average Non-Insurance Beneficiaries who are newly aligned to our ACO, due in part to consistent adoption of the ACO's strategies by participant providers through the demonstration period.
−Removed: Rapid growth in Non-Insurance Beneficiaries or other shifts in the mix of net and returning Non-Insurance Beneficiaries could adversely affect our Non-Insurance Margin in the near-term and lead to greater losses.
If adoption and use of Clover Assistant is lower than we expect, our growth may slow or stall.
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We have directed, and intend to continue to direct, a significant portion of our financial and operating resources toward developing Clover Assistant platform and expanding its usage.
−Removed: There can be no assurance that adoption of Clover Assistant will
−Removed: continue to grow, or that rates of use will be maintained or increase.
+Added: There can be no assurance that adoption of Clover Assistant will continue to grow, or that rates of use will be maintained or increase.
A number of factors could potentially negatively affect provider adoption and use of Clover Assistant, including but not limited to:
−Removed: • difficulties convincing providers of the value, benefits, and usefulness of Clover Assistant, particularly in markets where we have fewer beneficiaries;
+Added: • difficulties convincing providers of the value, benefits, and usefulness of Clover Assistant, and continued physician participation in the Clover Assistant program, particularly in markets where we have fewer beneficiaries;
• our failure to integrate with EHR systems;
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• technical or other problems impacting availability or reliability of the platform, including limited broadband access in certain rural areas;
−Removed: • difficulties for members and ACO Beneficiaries in accessing their Providers and a corresponding decrease in the number of primary care visits;
+Added: • difficulties for members and Non-Insurance Beneficiaries in accessing their Providers and a corresponding decrease in the number of primary care visits;
• privacy and communication, safety, security or other similar concerns;
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If Clover Assistant is not adopted as quickly as we anticipate in the markets in which we operate, we may be unable to collect and provide valuable actionable data to providers treating our beneficiaries in such markets, which could prevent us from driving significant reductions in MCR for our beneficiaries in such markets.
+Added: Additionally, the reduction in ACO REACH Beneficiaries following our exit from the ACO REACH Program may affect our ability to realize the returns on our investments in the Clover Assistant platform because we will have less beneficiary data to generate provider-focused machine learning, artificial intelligence, and rules-based insights.
This would in turn curtail our ability to offer competitively priced MA Plans and realize shared savings against the Non-Insurance benchmark in such markets.
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The Patient Protection and Affordable Care Act ("ACA") requires that we spend at least 85% of those premiums on healthcare services, covered benefits, and quality improvement efforts, and we generally use at least 85% of our premium revenues to pay for these costs.
−Removed: Our ability to enhance the profitability of our Insurance and Non-Insurance businesses depends in significant part on our ability to
−Removed: predict, price, and effectively manage medical costs, which are affected by utilization rates, the cost of service and the type of service rendered.
−Removed: Through our Non-Insurance business, we assume full risk (i.e., 100% shared savings and shared losses) for the total cost of care of Non-Insurance Beneficiaries, with the exception of certain CMS risk mitigation mechanisms (i.e., the optional stop-loss program and the mandatory risk corridor program).
−Removed: Our ACO's expenditures on covered items and services (Medicare Parts A and B) for our Non-Insurance Beneficiaries and capitation paid to the ACO during a performance year are compared to a target amount of Medicare expenditures on those covered items and services (Performance Year Benchmark), and as such, managing those covered items and services in an effective manner is directly related to our financial impact.
−Removed: Further, as part of the ACO REACH Model, the Performance Year Benchmark is scheduled to be lowered by CMS on a gradual scale, starting at a 2% discount in 2021 and increasing to 3.5% by 2026.
−Removed: Due to this increasing discount, one of the primary mechanisms to mitigate the financial impact of this adjustment will be for the ACO to continually improve its medical expense management over the demonstration period.
−Removed: Two key factors in our ability to manage medical expenses are the adoption of Clover Assistant by the providers who treat our members and Non-Insurance Beneficiaries (collectively, the "Providers") and enrollment in our clinical care programs, including our in-home primary care program ("Clover Home Care"), by our most at-risk members and Non-Insurance Beneficiaries.
+Added: Our ability to enhance the profitability of our Insurance and Non-Insurance businesses depends in significant part on our ability to predict, price, and effectively manage medical costs, which are affected by utilization rates, the cost of service and the type of service rendered.
+Added: Through our former Non-Insurance business, we assumed full risk (i.e., 100% shared savings and shared losses) for the total cost of care of Non-Insurance Beneficiaries, with the exception of certain CMS risk mitigation mechanisms (i.e., the optional stop-loss program and the mandatory risk corridor program).
+Added: On December 1, 2023, we notified CMS of our decision to exit the ACO Reach Program, and our final settlement with respect to 2023 participation in that program is anticipated to occur in the second half of 2024.
+Added: Two key factors in our ability to manage medical expenses are the adoption of Clover Assistant by the providers who treat our members and Non-Insurance Beneficiaries (collectively, the "Providers") and enrollment in our clinical care programs, including our in-home primary care program ("Clover Home Care"), by our most at-risk members.
By driving adoption of Clover Assistant by our Providers, we seek to promote the provision of high-quality medical care driven by real-time, personalized and actionable insights to healthcare providers.
−Removed: If we fail to drive adoption of Clover Assistant by our Providers or fail to accurately identify beneficiaries at high risk for near-term hospitalization for our complex care management program, we could fail to drive significant reductions in MCR for our members and Non-Insurance Margin for our Non-Insurance Beneficiaries, which would have a material and adverse effect on our business, financial condition, and results of operation.
+Added: If we fail to drive adoption of Clover Assistant by our Providers or fail to accurately identify beneficiaries at high risk for near-term hospitalization for our complex care management program, we could fail to drive significant reductions in MCR for our members, which would have a material and adverse effect on our business, financial condition, and results of operation.
Our premiums under MA plans are based on bids submitted to CMS in June the year before the contract year.
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increased cost of individual services;
−Removed: large-scale medical emergencies (such as the COVID-19 pandemic);
+Added: large-scale medical emergencies;
the introduction of new or costly drugs, treatments and technology;
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While we believe Clover Assistant may enable us to make better predictions regarding future medical costs, there can be no assurance that better predictions will be made or that we would be able to realize the benefits of those predictions.
−Removed: Our ACO REACH Performance Year Benchmark, which is a target amount of Medicare expenditures against which the ACO's performance year expenditures are compared to measure shared savings or losses with CMS, is a product of a number of variables, many of which are difficult to estimate at the beginning of the performance year.
−Removed: While we believe our estimate of the Performance Year Benchmark will become more accurate through the performance year as claims are incurred, our exact Performance Year Benchmark will not be known until final reconciliation with CMS.
−Removed: These variables include, but are not limited to, claims trends, beneficiary risk scores, and the mix of claims aligned vs.
−Removed: voluntarily aligned beneficiaries.
−Removed: If the final Performance Year Benchmark is less than anticipated, the profitability of our Non-Insurance business will suffer.
Our MA and Medicare Part D plans are also subject to risks associated with increased medical or pharmaceutical costs.
−Removed: Business models for market participants involved in the financing and supply of pharmaceutical products rely on certain benchmarks and practices (e.g., pricing based on Average Wholesale Price, or the use of Maximum Allowable Cost lists).
+Added: Business models for market participants involved in the financing and supply of pharmaceutical products rely on certain benchmarks and
+Added: practices (e.g., pricing based on Average Wholesale Price, or the use of Maximum Allowable Cost lists).
It is uncertain how these business models will evolve and whether other pricing benchmarks will be introduced and widely adopted.
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Therefore, there is a possibility that our risk adjustment data collection efforts and data submitted to CMS might have been or will be inadequate.
−Removed: If the risk adjustment data incorrectly
−Removed: overstates the health risk of our members, we might be required to return to CMS overpayments and/or be subject to penalties or sanctions;
+Added: If the risk adjustment data incorrectly overstates the health risk of our members, we might be required to return to CMS overpayments and/or be subject to penalties or sanctions;
conversely, if the data incorrectly understates the health risk of our members, we might be underpaid for the care that we must provide to our members.
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Further, if we are unable to obtain additional capital when required or are unable to obtain additional capital on satisfactory terms, our ability to continue to support our business growth or to respond to business opportunities, challenges, or unforeseen circumstances would be adversely affected.
−Removed: We are subject to risks and uncertainties related to the global COVID-19 pandemic and other public health emergencies, which could have a material adverse effect on our business, results of operations, financial condition, and financial performance.
−Removed: We are susceptible to the adverse effects associated with the global COVID-19 pandemic, which continues to have a major impact on health systems, businesses, governments and beneficiary activities.
−Removed: We are also susceptible to other public health emergencies.
−Removed: The ultimate severity, magnitude, and duration of the COVID-19 pandemic is uncertain.
−Removed: The full extent to which the COVID-19 pandemic may impact our business, results of operations, and financial condition remains uncertain.
−Removed: Current uncertainties relating to the COVID-19 pandemic that could impact our future results include the development of new COVID-19 variants, the potential for prolonged effects of past infections.
−Removed: and/or uncertainty in risk adjustment and benchmarks against which future CMS bids will be assessed.
−Removed: We continue to mobilize the full strength of our resources to deliver support for our members and Providers and deliver innovative solutions and support for the communities we serve.
−Removed: For example, we have implemented multi-channel member communications to support COVID-19 vaccination access and availability, Provider support for telehealth adoption by Clover Home Care practices, and the provision of in-home COVID-19 vaccinations for our most vulnerable beneficiaries.
−Removed: However, there can be no assurances that our efforts will be successful or that any of our solutions will be adopted by our Providers.
−Removed: With respect to our Insurance business, our ability to maintain or improve our Star Rating may be significantly compromised by the COVID-19 pandemic.
−Removed: With respect to our Non-Insurance line of business, the Performance Year Benchmark is based on national
−Removed: While we believe we have certain protections in our ACO's participation agreement with CMS, Clover could be disproportionately affected by COVID-19 if impacts in concentrated regional service areas are significantly above or below national averages.
−Removed: Governmental authorities in the United States have proposed or issued vaccine mandates requiring certain employers, including certain federal contractors, to ensure that their employees are fully vaccinated against COVID-19, subject to certain exceptions as provided for in the applicable mandate, or, in some cases, be regularly subject to COVID-19 testing.
−Removed: As we are a federal contractor, any such recently issued or future vaccine mandate could negatively impact our ability to attract or retain workers, including healthcare providers.
−Removed: The loss of, or inability to attract, employees could negatively impact our ability to carry out our business and provide care to our beneficiaries and other critical services, which could have a material adverse effect on our business and results of operations.
−Removed: We may take further actions that alter our business operations as may be required by local, state, or federal authorities or that we determine are in the best interests of our employees or beneficiaries.
−Removed: Such measures could negatively affect our sales and marketing efforts, sales cycles, employee productivity, or beneficiary retention, any of which could harm our financial condition and business operations.
−Removed: Disruptions in public and private infrastructure, including supply chains providing medical supplies, could also adversely disrupt our business operations.
−Removed: Additionally, the enactment of emergency powers by governments could disrupt our business operations, including further restricting our beneficiaries' ability to receive care, our providers' ability to operate, or our ability to access necessary supplies.
−Removed: The COVID-19 pandemic has also adversely impacted global access to capital and caused significant volatility in financial markets.
−Removed: Significant deterioration of the U.S.
−Removed: and global economies could have a significant adverse impact on our investment income, the value of our investments, or future liquidity needs.
−Removed: If we are unable to succeed in expanding our Lives under Clover Management, or if our future growth is limited, our business, financial condition, and results of operations could be harmed.
−Removed: We derive substantially all of our Total revenues from premiums earned and Non-Insurance revenue, which are primarily driven by the number of members under our MA plans and the number of our Non-Insurance Beneficiaries, respectively.
+Added: If we are unable to succeed in expanding the number of members under our MA plans, our business, financial condition, and results of operations could be harmed.
+Added: We derive substantially all of our Total revenues from premiums earned, which is primarily driven by the number of members under our MA plans.
Additionally, the number of Lives under Clover Management is critical to our success, and we are continually executing several growth initiatives, strategies, and operating plans designed to increase the number of Lives under Clover Management.
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In addition, in some instances, Original Medicare or other insurers' MA plans may be more attractive to a consumer than our MA plans.
−Removed: For example, though a substantial majority of our members are on open-network plans that enable them to visit any doctor
−Removed: participating in Medicare who will see them, our HMO plans have restrictions on the network of doctors that HMO members can see.
+Added: For example, though a substantial majority of our members are on open-network plans that enable them to visit any doctor participating in Medicare who will see them, our HMO plans have restrictions on the network of doctors that HMO members can see.
Other providers participating in Medicare may choose to see no members or only members participating in specific plans.
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The growth in our membership is highly dependent upon our success in attracting new members during the Medicare annual enrollment period and open enrollment period.
−Removed: If our ability or the ability of our partners to market and sell our MA plans is constrained during an enrollment period for any reason, such as technology failures, reduced allocation of resources, any inability on the part of our partners to timely employ, license, train, certify and retain employees and contractors and their agents to sell plans, interruptions in the operation of our website or systems, disruptions caused by other external factors, such as the COVID-19 pandemic, or issues with government-run health insurance exchanges, we could acquire fewer new members than expected or suffer a reduction in the number of our existing members.
+Added: If our ability or the ability of our partners to market and sell our MA plans is constrained during an enrollment period for any reason, such as technology failures, reduced allocation of resources, any inability on the part of our partners to timely employ, license, train, certify and retain employees and contractors and their agents to sell plans, interruptions in the operation of our website or systems, disruptions caused by other external factors, or issues with government-run health insurance exchanges, we could acquire fewer new members than expected or suffer a reduction in the number of our existing members.
Our business, results of operations, and financial condition could be harmed by any of these factors.
−Removed: At December 31, 2022, we had 164,887 aligned Non-Insurance Beneficiaries.
−Removed: As of that date, we had approximately 1,560 contracted participant providers managing primary care for our Non-Insurance Beneficiaries and, additionally, we had approximately 1,675 preferred providers and preferred facilities in our Non-Insurance network.
−Removed: In connection with the 2023 performance year, we strategically reduced the number of ACO REACH participant physicians, and, at the beginning of January 2023, we had approximately 605 contracted participant providers who manage primary care for our Non-Insurance Beneficiaries in 13 states.
−Removed: Additionally, at the beginning of January 2023, we had approximately 1,540 preferred providers and preferred facilities in our ACO REACH network.
−Removed: Non-Insurance Beneficiary growth is dependent upon the number and size of the providers that contract with the ACO, and CMS' alignment rules.
−Removed: Our ability to grow and maintain our number of Non-Insurance Beneficiaries may be impacted by several factors, including, without limitation:
−Removed: • lack of brand recognition;
−Removed: • regulatory changes affecting the overall pool of Medicare-eligible patients;
−Removed: • regulatory changes impacting provider participation in Medicare value-based programs;
−Removed: • failure to effectively compete and offer competitive payment incentives to attract participant providers and "preferred" providers, which include specialists and ancillary facilities that agree to participate in Non-Insurance with Clover's ACO;
−Removed: • programmatic adjustments made to the ACO REACH Model;
−Removed: • changes in existing shared savings programs or the addition of new shared savings programs;
−Removed: • changes in the alignment methodology that CMS uses to align beneficiaries to participants in the ACO REACH Model;
−Removed: • changes in our ability, or the process required, to voluntarily align beneficiaries;
−Removed: • any notification that CMS intends to discontinue or alter the ACO REACH Model or our participation in the program in a significant manner.
−Removed: Other factors that could limit our beneficiary growth include, among others:
−Removed: potential non-compliance with CMS requirements and other laws and regulations, which could result in sanctions against us that prevent us from, among other actions, marketing or enrolling in existing markets or entering new markets;
−Removed: delays in the anticipated timing of activities related to such growth initiatives, strategies, and operating plans;
−Removed: increased difficulty and cost in implementing these efforts, including difficulties in complying with existing as well as new regulatory requirements;
−Removed: and the incurrence of other unexpected costs associated with operating the business.
−Removed: In addition, our decisions concerning the allocation of management and financial resources toward efforts to grow our Lives under Clover Management in certain markets may not lead to the growth we expect, or any growth.
−Removed: Similarly, our potential decisions to delay entering or terminate our services in any market may subsequently also prove to be suboptimal and could cause us to miss valuable opportunities.
−Removed: We may also choose to terminate contracts with providers contracted with our ACO if they do not meet our performance standards, or providers may choose not to continue working with us, either of which could reduce our number of Non-Insurance Beneficiaries.
−Removed: If we make incorrect determinations regarding the viability or potential for membership growth in any specific market, our business, financial condition, and results of operations could be materially adversely affected.
−Removed: As a result, we may fail to capitalize on viable commercial opportunities or be required to forgo or delay pursuit of opportunities that may later prove to have greater commercial potential than those we choose to pursue.
As a result, we cannot assure you that we will be able to increase our number of Lives under Clover Management or assure you about the extent to which we will be able to achieve beneficiary growth.
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Many are low-income, and a significant number are people of color.
−Removed: At December 31, 2022, approximately 81.6% of our Medicare Advantage members, most of whom were in two metropolitan areas, were residents of New Jersey.
−Removed: With respect to the DCE, at December 31, 2022, approximately 15.6% of our Non-Insurance Beneficiaries were aligned to providers in New York, with an additional 24.6% in New Jersey and 18.5% in Kansas.
+Added: At December 31, 2023, approximately 87.0% of our MA members, most of whom were in two metropolitan areas, were residents of New Jersey.
Unfavorable changes in healthcare or other benefit costs or reimbursement rates or increased competition in these states or any other geographic area where our members and Non-Insurance Beneficiaries become concentrated in the future could therefore have a disproportionately adverse effect on our results of operations.
−Removed: Our new markets, particularly rural markets, may not be as profitable to serve as our existing markets.
−Removed: While we have plans to grow our Lives under Clover Management geographically and across demographics, there is no guarantee that we will be successful in doing so.
−Removed: In addition, as a result of our mission to make great healthcare available to everyone, we seek to provide high-value and affordable MA plans in every market in which we operate, which may expose us to higher risk for increased medical costs.
−Removed: Through our participation in the ACO REACH Model, we are also planning to expand into new markets through contracting with participant and preferred providers.
−Removed: Given that there are significant health disparities in the United States based on minority and socioeconomic status, and that our low-income and minority beneficiaries tend to have more chronic illnesses, our strategy could result in our healthcare costs exceeding those of comparable MA plans and other participants in the ACO REACH Model who seek to curate their membership.
−Removed: While we believe that with Clover Assistant, we can reduce costs of all of our beneficiaries and drive increasingly better unit economics at scale, there can be no assurances that we will succeed in doing so.
−Removed: We intend to expand into an increasing percentage of counties that CMS classifies as rural.
−Removed: Due to the rural nature of these markets, we may have difficulty providing the same level and types of clinical care as we provide in our other markets.
−Removed: If the medical expenses of beneficiaries in such counties are higher than we anticipate, or if the rates of Clover Assistant adoption in such counties are lower than we anticipate, we may not be able to serve such counties with economic results as favorable as we expect in non-rural counties that we currently predominately serve.
−Removed: If the clinical care we can provide in these rural markets is limited, we may not be able to achieve the same cost savings in these markets as we have previously achieved in our existing markets.
−Removed: As a result, if we are unable to profitably grow and diversify our Lives under Clover Management geographically, our revenue and operating results may be disproportionately affected by adverse changes affecting our beneficiaries.
Our results of operations may be adversely affected if we are unable to grow our provider networks or contract with providers, medical facilities, and other entities on competitive terms.
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We currently face competition from a range of companies, including other incumbent MA providers and health insurance companies, many of whom are developing their own technology or partnering with third-party technology providers to drive improvements in care.
−Removed: Our competitors generally include large, national insurers, such as United Health, Aetna, Humana, Cigna, Centene, and Elevance Health that provide MA plans, as well as regional-based companies or health plans that provide MA plans, including Blue Cross Blue Shield affiliates, Bright Health, Alignment Health, Devoted Health, Oscar Health, hospital systems, and provider-based organizations.
−Removed: As a result of our recent entry into CMS' new ACO REACH Model, we also face competition from other Non-Insurance participants including provider groups, ACOs, and MCOs.
−Removed: These competitors include Oak Street Health, VillageMD, Humana, Elevance Health, Aledade, Signify, Bright Health Group, Cano Health, and Iora with One Medical.
+Added: Our competitors generally include large, national insurers, such as United Health, Aetna, Humana, Cigna, Centene, and Elevance Health that provide MA plans, as well as regional-based companies or health plans that provide MA plans, including Blue Cross Blue Shield affiliates, Alignment Health, Devoted Health, Oscar Health, hospital systems, and provider-based organizations.
Competition from these and other new entrants may intensify as the FFS market develops and business models evolve to address it.
−Removed: In addition, as we enter into new markets, we may compete with regional start-up companies that offer MA plans and other participants in the ACO REACH Model.
+Added: In addition, as we enter into new markets, we may compete with regional start-up companies that offer MA plans.
Also, as we develop other products and enter new lines of business, and other companies do the same, we may compete with providers of healthcare technology platforms, EHR providers, telehealth providers, healthcare data analytics providers, and ACOs.
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If we are unable to contract with a provider in a market that has experienced significant consolidation, we may face challenges to establishing or maintaining network adequacy and attractiveness in those markets.
−Removed: Additionally, new competitors may arise as consolidation may create providers that, in and of themselves, meet
−Removed: network adequacy requirements for a market and, as a result, start their own MA plans in that market.
+Added: Additionally, new competitors may arise as consolidation may create providers that, in and of themselves, meet network adequacy requirements for a market and, as a result, start their own MA plans in that market.
In addition, our current or potential competitors may be acquired by third parties with greater available resources.
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Our failure to estimate incurred but not reported claims accurately would affect our results of operations.
−Removed: Due to the time lag between when medical services are actually rendered by our providers and when we (or CMS with respect to the ACO) receive, process and pay a claim for those medical services, our medical care costs include estimates of our incurred but not reported ("IBNR") claims.
+Added: Due to the time lag between when medical services are actually rendered by our providers and when we receive, process and pay a claim for those medical services, our medical care costs include estimates of our incurred but not reported ("IBNR") claims.
We estimate our medical expense liabilities using actuarial methods based on historical data adjusted for claims receipt and payment patterns, cost trends, product mix, seasonality, utilization of healthcare services, changes in beneficiaries, provider billing practices, benefit changes, known outbreaks of disease, including COVID-19, or increased incidence of illness such as influenza, the incidence of high dollar or catastrophic claims and other relevant factors.
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Further, our inability to estimate IBNR accurately may also affect our ability to take timely corrective actions, further exacerbating the extent of any adverse effect on our results.
−Removed: Financial accounting for the Medicare Part D benefits requires difficult estimates and assumptions, and if they prove to be incorrect, our results of operations could be adversely affected.
+Added: Estimating and accounting for Medicare Part D costs involves certain regulatory calculations that carry inherent risks.
+Added: Should these estimates and assumptions deviate from actual outcomes, it could negatively impact our operational results.
With respect to our CMS contracts that cover members' prescription drugs under Medicare Part D, these contracts contain provisions for risk sharing and certain payments for prescription drug costs for which we are not at risk.
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If we are unable to expand our sales and marketing infrastructure or if we fail to overcome challenges relating to marketing of our Insurance business and Non-Insurance business, we may fail to enroll sufficient beneficiaries to meet our forecasts.
−Removed: We are and will continue to be highly dependent on the ability of our sales force to adequately promote and market our Insurance business MA plans to enroll new members and retain our existing members, and to successfully market our Non-Insurance business to the national provider network to contract with new participant providers and grow our number of Non-Insurance Beneficiaries.
+Added: We are and will continue to be highly dependent on the ability of our sales force to adequately promote and market our Insurance business MA plans to enroll new members and retain our existing members, and to successfully market our Non-Insurance business.
If our sales and marketing representatives fail to achieve their objectives, our Lives under Clover Management could decrease or may not increase at levels that are in line with our expectations.
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In addition, any factor that diminishes our reputation or that of our management, including failing to meet the expectations of our providers or beneficiaries, could harm our reputation and brand and make it substantially more difficult for us to attract new providers or beneficiaries.
−Removed: If we do not successfully develop widespread brand recognition and maintain and enhance our reputation, our business may not grow and we
−Removed: could lose our relationships with providers or beneficiaries, which would harm our business, financial condition, and results of operations.
+Added: If we do not successfully develop widespread brand recognition and maintain and enhance our reputation, our business may not grow and we could lose our relationships with providers or beneficiaries, which would harm our business, financial condition, and results of operations.
If we do not continue to innovate and provide services that are useful to our beneficiaries and providers, we may not remain competitive, and our business, financial condition, and results of operations could suffer.
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Our success depends on our ability to keep pace with technological developments, satisfy increasingly sophisticated beneficiary and provider user requirements, and sustain and grow market acceptance.
−Removed: Our future financial performance will depend in part on our growth in this market and on our ability to adapt to emerging market demands, including adapting to the ways our beneficiaries access and use our MA plans, ACO, and clinical care programs, and the ways our providers use Clover Assistant.
+Added: Our future financial performance will depend in part on our growth in this market and on our ability to adapt to emerging market demands, including adapting to the ways our beneficiaries access and use our MA plans and clinical care programs, and the ways our providers use Clover Assistant.
Our competitors may develop products and services that may appeal more to our beneficiaries and/or providers.
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We depend on third parties for certain of our customer service operations.
−Removed: If we or our vendors fail to provide service that meets our beneficiaries' expectations, we may have difficulty retaining or growing our Lives under Clover Management, which could adversely affect our business, financial condition, and results of operations.
+Added: If we or our vendors fail to provide service that meets our beneficiaries' expectations, we may have difficulty retaining our Lives under Clover Management, which could adversely affect our business, financial condition, and results of operations.
While we have designed Clover Assistant to be easy to adopt and use, once providers begin using it, they rely on our support services to resolve any platform issues.
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For example, if the clinical features or suggestions provided through Clover Assistant were to fail, our systems could experience data loss and/or providers may become frustrated with Clover Assistant, which in turn may affect retention and adoption of Clover Assistant by providers.
−Removed: Additionally, if a bug was discovered in Clover Assistant that made Clover Assistant vulnerable to malicious attacks or exposed our beneficiary data to third
−Removed: parties, providers may cease to trust and use the platform.
+Added: Additionally, if a bug was discovered in Clover Assistant that made Clover Assistant vulnerable to malicious attacks or exposed our beneficiary data to third parties, providers may cease to trust and use the platform.
Among other things, this would affect our ability to collect data.
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In order to remain competitive, we must continue to enhance and improve the responsiveness, functionality, and features of our platform.
−Removed: Our disaster recovery plan may not be sufficient to address all aspects or any unanticipated consequence or incidents, and our insurance may not be sufficient to compensate us for the losses that could occur.
+Added: Our disaster recovery plan may not be sufficient to address all aspects or any unanticipated consequence or incidents, and although we maintain insurance covering certain business interruptions, such coverage may not be sufficient to compensate us for the losses that could occur.
+Added: Issues in the development and use of artificial intelligence ("AI"), combined with an uncertain regulatory environment, may result in reputational harm, liability, or other adverse consequences to our business operations.
+Added: We use machine learning and artificial intelligence ("AI") technologies as part of our Clover Assistant platform, and we are making investments in expanding our artificial intelligence capabilities in our products, services, and tools, including ongoing deployment and improvement of existing machine learning and AI technologies, as well as developing new product features using AI technologies, including, for example, generative AI.
+Added: AI technologies are complex and rapidly evolving, and we face significant competition from other companies as well as an evolving regulatory landscape.
+Added: The introduction of AI technologies into new or existing products may result in new or enhanced governmental or regulatory scrutiny (such as the recent White House executive order on the development and use of AI and other proposed state and federal regulations), litigation, confidentiality or security risks, ethical concerns, legal liability, or other complications that could adversely affect our business, reputation, or financial results.
+Added: Uncertainty around new and emerging AI technologies, such as generative AI, may require additional investment in the development and maintenance of proprietary datasets and machine learning models, development of new approaches and processes to provide attribution or remuneration to creators of training data, and development of appropriate protections and safeguards for handling the use of member data with AI technologies, which may be costly and could impact our expenses if we use generative AI in our product offerings.
+Added: AI technologies incorporated into our product offerings may use algorithms, datasets, or training methodologies that may be flawed or contain deficiencies that may be difficult to detect during testing.
+Added: Failure to properly address any legal or ethical and social issues in the development and use of our AI technologies could slow adoption of AI in our product offerings.
+Added: AI technologies, including generative AI, may create content that appears correct but is factually inaccurate, flawed or biased.
+Added: The Clover Assistant platform may rely on or use such content to our detriment, or it may lead to discriminatory or other adverse outcomes, which may expose us to brand or reputational harm, competitive harm, regulatory investigations, and/or legal liability.
+Added: The use of AI technologies presents emerging ethical and social issues, and if we enable or offer solutions that draw scrutiny or controversy due to their perceived or actual impact on customers or on society as a whole, we may experience brand or reputational harm, competitive harm, regulatory investigations, and/or legal liability.
Our business, results of operations, and financial condition may fluctuate on a quarterly and annual basis, which may result in a decline in our stock price if such fluctuations result in a failure to meet any projections that we may provide or the expectations of securities analysts or investors.
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• our ability to increase provider adoption of Clover Assistant;
−Removed: • our ability to attract new beneficiaries;
• breaches of information security or privacy, and any associated fines or penalties or damage to our reputation;
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• the cost and potential outcomes of ongoing or future regulatory audits, investigations, or litigation;
−Removed: • reinstitution of travel restrictions, shelter-in-place orders and other social distancing measures implemented to combat any health emergency or pandemic (including the COVID-19 pandemic), and their impact on economic, industry and market conditions, patient visits and our ability to conduct business;
−Removed: • political, economic and social instability, including terrorist activities, geopolitical events such as the Russia-Ukraine war and health epidemics, and any disruption these events may cause to any of our offices, to the healthcare system, or to the global economy;
• changes in our and our competitors' pricing policies;
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As such, we believe that quarter-to-quarter and year-to-year comparisons of our operating results may not be meaningful and should not be relied upon as an indication of our future performance.
−Removed: Market, regulatory and political conditions, including general economic conditions, rates of inflation and political developments in the United States and abroad, may have adverse consequences on our business, financial condition and share price.
+Added: Market, regulatory and political conditions, including global economic conditions, rates of inflation and political developments in the United States and abroad, may have adverse consequences on our business, financial condition and share price.
Our business may be affected by conditions and trends in the financial markets and general economic and political conditions.
−Removed: The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, higher cost of human capital, geopolitical uncertainty and instability, including the ongoing conflict between Russia and Ukraine, declines in economic growth, increases in unemployment rates, increases in inflation rates, higher interest rates, changes in tax policy and uncertainty about economic stability.
+Added: The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, higher cost of human capital, geopolitical uncertainty and instability, including heightened rates of inflation, higher interest rates, changes in tax policy and uncertainty about economic stability.
federal government and other governments may reduce funding for health care or other programs or make changes that adversely affect the number of persons eligible for certain programs, the services provided to enrollees in such programs and premiums we can charge.
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The principal assumptions relating to our market opportunity include the growth of the Medicare eligible population as well as the growth and stability of risk-adjusted payments paid by CMS, among other things.
−Removed: Our market opportunity is also based on the assumption that our existing and future offerings will be more attractive to our beneficiaries and providers and potential beneficiaries and providers than competing MA plans and other participants in the ACO REACH Model.
+Added: Our market opportunity is also based on the assumption that our existing and future offerings will be more attractive to our beneficiaries and providers and potential beneficiaries and providers than competing MA plans.
If these assumptions prove inaccurate, our business, financial condition, and results of operations could be adversely affected.
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With respect to Clover Home Care, the direct provision of healthcare services by certain of our subsidiaries involves risks arising from medical malpractice claims relating to the delivery of healthcare and related services.
−Removed: Although we maintain insurance covering medical malpractice claims in amounts that we believe are appropriate in light of the risks attendant to our
−Removed: business, we cannot predict the outcomes of medical malpractice cases, or the effect that any claims of this nature, regardless of their ultimate outcome, could have on our business or reputation or on our ability to attract and retain members.
+Added: Although we maintain insurance covering medical malpractice claims in amounts that we believe are appropriate in light of the risks attendant to our business, we cannot predict the outcomes of medical malpractice cases, or the effect that any claims of this nature, regardless of their ultimate outcome, could have on our business or reputation or on our ability to attract and retain members.
Any claims made against us that are not fully covered by insurance could be costly to defend against, result in substantial damage awards against us and divert the attention of our management and our providers from our operations, which could have a material adverse effect on our business, financial condition, and results of operations.
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Our international operations pose certain risks to our business that may be different from risks associated with our domestic operations.
−Removed: We have direct operations in Hong Kong and Canada, as well as contracted operations in other countries including the Philippines, Colombia, India, the UK, and New Zealand .
+Added: We have direct operations in Hong Kong and Canada, as well as contracted operations in other countries including the Philippines, Colombia, India, the UK, Mexico, New Zealand, Uruguay and the Dominican Republic .
We may in the future expand our operations to other countries.
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If we are unable to leverage our full software development team, this may result in decreased ability to innovate and maintain Clover Assistant and carry out health plan data operations, which may in turn lead to adverse effects on our business, financial conditions and results of operations.
−Removed: Additionally, we conduct certain of our call center operations in the Philippines and Colombia and work with a company in India for claims processing and coding.
+Added: Additionally, we conduct certain of our call center operations in the Philippines and work with a company in India for claims processing and coding.
Our oversight aimed at ensuring adherence to applicable quality and compliance standards may be more difficult with vendor companies located outside of the United States and may both make it more difficult for us to achieve our operational objectives and expose us to additional liability.
Countries outside of the United States may be subject to relatively higher degrees of political and social instability and may lack the infrastructure to withstand political unrest or natural disasters.
−Removed: The occurrence of natural disasters, pandemics (such as the COVID-19 pandemic), or political or economic instability in these countries or regions could interfere with work performed by these labor sources or could result in our having to replace or reduce these labor sources.
+Added: The occurrence of natural disasters, pandemics, or political or economic instability in these countries or regions could interfere with work performed by these labor sources or could result in our having to replace or reduce these labor sources.
Our vendors in other countries could potentially shut down suddenly for any reason, including financial problems or personnel issues.
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Violations of these laws and regulations could materially adversely affect our brand, growth efforts, and business.
−Removed: Furthermore, weakness of the U.S.
+Added: Furthermore, fluctuations or weakness of the U.S.
dollar in relation to the currencies used in these foreign countries may also reduce the savings achievable through our strategy of contracting out certain services and could have an adverse effect on our business, financial condition, and results of operations.
Our failure to successfully manage our international operations and the associated risks effectively could limit the future growth of our business.
−Removed: If we are successful in expanding our Lives under Clover Management across the United States, we may incur increased expenses and risks related to compliance with state licensure requirements, which could impact our business and results of operations.
+Added: We conduct business in various jurisdictions and we are subject to significant expenses and risks related to compliance with state licensure requirements, which could impact our business and results of operations.
State regulators require us to maintain a valid license in each state in which we transact health insurance business, maintain minimum amounts of capital and surplus.
They further require that we adhere to sales, documentation and administration practices specific to that state.
−Removed: We must maintain our health insurance licenses to continue marketing our plans and might have to secure additional
−Removed: licenses if we expand in markets where we do not yet have licenses.
+Added: We must maintain our health insurance licenses to continue marketing our plans and might have to secure additional licenses if we expand in markets where we do not yet have licenses.
In addition, each employee who participates in the sale of health insurance on our behalf must maintain a valid license in one or more states.
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The level of service provided by cloud service providers could affect the availability or speed of our platform, which may also impact the usage of, and our provider users' satisfaction with, our platform and could materially harm our business and reputation.
−Removed: If cloud service providers increase pricing terms, terminate or seek to terminate our contractual relationship, or if we are unable to renew any agreement on commercially reasonable terms, establish more favorable relationships with our competitors, or change or interpret their
−Removed: terms of service or policies in a manner that is unfavorable with respect to us, we may be required to transfer our servers and other infrastructure to a different service provider, and our business, results of operations, and financial condition could be harmed.
+Added: If cloud service providers increase pricing terms, terminate or seek to terminate our contractual relationship, establish more favorable relationships with our competitors, or change or interpret their terms of service or policies in a manner that is unfavorable with respect to us, or if we are unable to renew any agreement on commercially reasonable terms, we may be required to transfer our servers and other infrastructure to a different service provider, and our business, results of operations, and financial condition could be harmed.
This may result in significant additional costs and possible services interruptions.
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and business delays, service or system disruptions or denials of service.
−Removed: If any of these breaches of security should occur, we cannot guarantee that recovery protocols and backup systems will be sufficient to prevent data loss.
−Removed: The harm related to such breaches might include interruption, disruption, or malfunction of operations, including with respect to telehealth services;
−Removed: costs relating to breach remediation, deployment of additional personnel and protection technologies, and response to governmental investigations and media inquiries and coverage;
−Removed: engagement of third-party experts and consultants;
−Removed: and litigation, regulatory action, and other potential liabilities.
+Added: If any of these breaches of security should occur, we cannot guarantee that recovery protocols and backup systems will be sufficient to prevent data loss, or the interruption, disruption, or malfunction of our operations, including with respect to telehealth services.
+Added: As a result, we could incur costs relating to breach remediation, deployment of additional personnel and protection technologies, and response to governmental investigations and media inquiries and coverage;
+Added: be required to engage third-party experts and consultants;
+Added: and face litigation, regulatory action, and other potential liabilities.
Our reputation and brand could be damaged, our business may suffer, and we could be required to expend significant capital and other resources to alleviate problems caused by such breaches.
Actual or anticipated security breaches or attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants.
+Added: Certain of our third-party service providers provide technology-related services and/or store or have access to our data and may not have effective controls, processes, or practices to protect our information from loss, unauthorized disclosure, unauthorized use or misappropriation, cyberattacks or other data security incidents.
+Added: A vulnerability in such service providers’ software or systems, a failure in their safeguards, policies or procedures, or a cyber-attack or other data security incident affecting any of these third parties result in harm our business.
Any compromise or breach of our security measures, or those of our third-party service providers, could violate applicable privacy, data protection, data security, network and information systems security, and other laws, and cause significant legal and financial exposure, adverse publicity, and a loss of confidence in our security measures.
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We also rely on integrations with EHR providers and clinical software developers.
−Removed: If their services become unavailable, our operations and business strategies could be significantly disrupted.
−Removed: For example, we have entered into agreements with our PBM services suppliers to provide us and certain of our beneficiaries with certain PBM services, such as claims processing, mail pharmacy services, specialty pharmacy services, retail network pharmacy network services, participating pharmacy audit services, reporting, and formulary services.
−Removed: If any such agreements were to terminate for any reason or one of our PBM services supplier's ability to perform their respective obligations under their agreements with us were impaired, we may not be able to find an alternative supplier in a timely manner or on acceptable financial terms.
−Removed: As a result, our costs may increase, we would not realize the anticipated benefits of our agreements for PBM services, and we may not be able to meet the full demands of our beneficiaries.
+Added: We have entered into agreements with our PBM services suppliers to provide us and certain of our beneficiaries with certain PBM services, such as claims processing, mail pharmacy services, specialty pharmacy services, retail network pharmacy network services, participating pharmacy audit services, reporting, and formulary services.
+Added: In April 2023, we entered into an agreement with UST HealthProof pursuant to which UST HealthProof will perform certain of our plan operation functions in support of our MA members, including claims, enrollment, contact center, medical management, payment integrity, revenue integrity, print, fulfillment, and related configuration and certain IT functions.
+Added: However, we may be unable to realize all of the expected benefits, including cost savings, in connection with this agreement within the expected time frame, or at all, and we may incur additional and/or unexpected costs to realize them.
+Added: If the services become unavailable or are not adequately performed, our operations and business strategies could be significantly disrupted which could have a material adverse effect on our business, brand, reputation, and results of operations.
+Added: Additionally, if any such agreements were to terminate for any reason or one of our PBM services supplier's ability to perform their respective obligations under their agreements with us were impaired, we may not be able to find an alternative supplier in a timely manner or on acceptable financial terms.
+Added: As a result, our costs may increase, we would not realize the anticipated benefits of our agreements for PBM services, we could become overly dependent on such agreements, which could cause us to lose core competencies and we may not be able to meet the full demands of our beneficiaries.
Any of these events could have a material adverse effect on our business, brand, reputation, and results of operations.
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it could also require us to seek alternative service providers on less favorable contract terms, any of which can adversely affect our business, brand, reputation and results of operating.
−Removed: Additionally, if our service partners and vendors do not utilize
−Removed: industry standards with respect to privacy and data requirements, or other applicable safeguards, we may be exposed to additional liability, the breach of our patient data, or loss of our ability to provide plans and services.
+Added: Additionally, if our service partners and vendors do not utilize industry standards with respect to privacy and data requirements, or other applicable safeguards, we may be exposed to additional liability, the breach of our patient data, or loss of our ability to provide plans and services.
Identifying partners, and negotiating and documenting relationships with them, requires significant time and resources.
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Fraud, waste, and abuse prohibitions encompass a wide range of activities, including kickbacks for referral of beneficiaries or federally reimbursable healthcare products or services, fraudulent coding practices, billing for unnecessary medical and/or other covered services, improper marketing and violations of patient privacy rights.
−Removed: In recent years, the DOJ and the Department of Health and Human Services Office of Inspector General (the "OIG") have increased their scrutiny of healthcare payers and providers, and Medicare Advantage insurers, under the federal FCA, in
+Added: In recent years, the DOJ and the Department of Health and Human Services Office of Inspector General (the "OIG") have increased their scrutiny of healthcare payers and providers, and Medicare Advantage insurers, under the federal FCA, in particular.
There have been a number of investigations, prosecutions, convictions, and settlements in the healthcare industry.
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Funding for these programs is dependent on many factors outside our control, including general economic conditions, continuing government efforts to contain health care costs and budgetary constraints at the federal or applicable state or local level and general political issues and priorities.
−Removed: federal government and our other government
−Removed: customers also may reduce funding for health care or other programs, cancel or decline to renew contracts with us, or make changes that adversely affect the number of persons eligible for certain programs, the services provided to enrollees in such programs, our premiums and our administrative and health care and other benefit costs, any of which could have a material adverse effect on our businesses, results of operations and cash flows.
−Removed: We derive substantially all of our Total revenues from Medicare Advantage premiums and Direct Contracting revenue and expect to continue to derive a substantial portion of our Total revenues in the future from these lines of business.
+Added: federal government and our other government customers also may reduce funding for health care or other programs, cancel or decline to renew contracts with us, or make changes that adversely affect the number of persons eligible for certain programs, the services provided to enrollees in such programs, our premiums and our administrative and health care and other benefit costs, any of which could have a material adverse effect on our businesses, results of operations and cash flows.
+Added: We derive substantially all of our Total revenues from Medicare Advantage premiums and expect to continue to derive a substantial portion of our Total revenues in the future from Medicare Advantage premiums.
Changes or developments in Medicare or the health insurance system and laws and regulations governing the health insurance markets in the United States could materially adversely affect our business, results of operations, financial condition, and prospects.
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For example, CMS has in the past reduced or frozen Medicare Advantage benchmarks, and additional cuts to Medicare Advantage benchmarks are possible.
−Removed: CMS could apply similar changes to the DC Model in the future.
−Removed: See the risk factor entitled "—Our Non-Insurance business and continued participation in the Medicare fee-for-service market presents unique risks to our business."
Reductions or less than expected increases in funding for Medicare programs could significantly reduce our revenues and profitability.
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In addition, lower quality scores or Star Ratings, when compared to our competitors, may adversely affect our ability to attract members and obtain regulatory approval for acquisitions or expansions.
−Removed: maintain or continue to improve our Star Ratings, if we fail to meet or exceed our competitors' ratings, or if quality-based bonus payments are reduced or eliminated, we may experience a negative impact on our revenues and the benefits that our plans can offer, which could materially and adversely affect the marketability of our plans, our number of members, results of operations, financial condition and cash flows.
+Added: If we do not maintain or continue to improve our Star Ratings, if we fail to meet or exceed our competitors' ratings, or if quality-based bonus payments are reduced or eliminated, we may experience a negative impact on our revenues and the benefits that our plans can offer, which could materially and adversely affect the marketability of our plans, our number of members, results of operations, financial condition and cash flows.
Our business activities are highly regulated, and new and proposed government regulation or legislative reforms could increase our cost of doing business and reduce our number of beneficiaries, profitability, and liquidity.
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Comprehensive statutes and regulations govern the manner in which we are compensated for providing coverage for our members and Non-Insurance Beneficiaries, our contractual relationships with our providers, vendors and beneficiaries, our marketing activities and other aspects of our operations.
+Added: Proposed changes to statutes and regulations may become the subject of campaign promises, litigation, administrative action, or legislation leading up to or following the 2024 Presidential election.
+Added: In addition, even if regulations are not amended or repealed, the President and the executive branch of the federal government, as well as CMS have a significant impact on the implementation of regulation, and a new administration could make changes impacting such implementation which could harm our business, operating results and financial condition.
Of particular importance are:
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the regulation of the development and use of drug formularies and/or maximum allowable cost list pricing;
−Removed: and regulations or regulatory activity increasing the regulation of prescription drug pricing, imposing additional rights to access to drugs for individuals enrolled in healthcare benefit plans or reducing the cost of such drugs to those individuals, imposing requirements relating to the
−Removed: receipt or required disclosure of rebates from pharmaceutical manufacturers, and restricting the use of average wholesale prices;
+Added: and regulations or regulatory activity increasing the regulation of prescription drug pricing, imposing additional rights to access to drugs for individuals enrolled in healthcare benefit plans or reducing the cost of such drugs to those individuals, imposing requirements relating to the receipt or required disclosure of rebates from pharmaceutical manufacturers, and restricting the use of average wholesale prices;
• laws that regulate debt collection practices;
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Food and Drug Administration (the "FDA");
−Removed: • federal law governing CMMI models, such as the DC Model, including a requirement under section 1115A of the Social Security Act for CMMI to modify or terminate the design or implementation of a model if it is determined that it is not expected to achieve the aims of the statute to improve the quality of care without increasing Medicare spending, to reduce Medicare spending without reducing the quality of care, or to improve the quality of care and reduce spending.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to scrutiny or challenge under one or more of such laws.
−Removed: Also, it is possible that some of our business activities, such as participation in the DC Model, could discontinue.
Achieving and sustaining compliance with these laws may also prove costly.
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The FDA has also issued a number of guidance documents, concerning, for example, clinical decision software, to clarify how it intends to interpret and apply the new exemptions under the 21st Century Cures Act.
−Removed: Although we believe that our Clover Assistant
−Removed: platform does not meet the definition of medical device and/or meet the criteria that the FDA has announced for its exercise of enforcement discretion to apply, there is a risk that the FDA could disagree with our determination or that the FDA could develop new guidance documents or revise current guidance documents that would subject our platform to active FDA oversight.
+Added: Although we believe that our Clover Assistant platform does not meet the definition of medical device and/or meet the criteria that the FDA has announced for its exercise of enforcement discretion to apply, there is a risk that the FDA could disagree with our determination or that the FDA could develop new guidance documents or revise current guidance documents that would subject our platform to active FDA oversight.
If the FDA determines that any of our current or future analytics applications, including Clover Assistant, are regulated as medical devices, we would become subject to various requirements under the FDCA and the FDA's implementing regulations, including extensive requirements relating to premarket approval or clearance, labeling, manufacturing, adverse event reporting and quality controls, among others.
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federal and state laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability and integrity of personally identifiable information ("PII"), including protected health information ("PHI").
−Removed: These federal and state laws and regulations include, but are not limited to HIPAA, as amended by HITECH, which we refer to collectively as HIPAA, and the California Consumer Privacy Act of 2018 (the "CCPA"), as amended by the California Privacy Rights Act (the "CPRA").
+Added: These federal and state laws and regulations include, but are not limited to HIPAA, as amended by HITECH, which we refer to collectively as HIPAA, and the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act (the "CPRA"), which took effect on January 1, 2023 (the “CCPA”).
HIPAA establishes a set of basic national privacy and security standards for the protection of PHI by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, which includes us, and the business associates with whom such covered entities contract for services, which also includes us.
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While HIPAA does not create a private right of action allowing individuals to sue us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.
−Removed: In addition, HIPAA mandates that the HHS conduct periodic compliance audits of HIPAA-covered entities or business associates for compliance with the HIPAA Privacy and Security Standards.
+Added: In addition, HIPAA mandates that HHS conduct periodic compliance audits of HIPAA-covered entities or business associates for compliance with the HIPAA Privacy and Security Standards.
It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the Civil Monetary Penalty fine paid by the violator.
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Numerous other U.S.
−Removed: federal and state laws protect the confidentiality, privacy, availability, integrity, and security of PII, including PHI.
+Added: federal and state laws, such as the CCPA, protect the confidentiality, privacy, availability, integrity, and security of PII, including PHI.
These laws in many cases are more restrictive than, and may not be preempted by, the HIPAA rules and may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and our providers and business associates and potentially exposing us to additional expense, adverse publicity and liability.
−Removed: The CCPA requires companies that process information regarding California residents to make new disclosures to consumers about their data collection, use, and sharing practices, allows consumers to opt out of certain data sharing with third parties and exercise certain individual rights regarding their personal information, provides a new cause of action for data breaches, and provides for penalties for non-compliance of up to $7,500 per violation.
−Removed: On November 3, 2020, California voters approved the CPRA, which amends the CCPA and extends the scope to apply to certain of our employees, their dependents, and other individuals residing in California.
−Removed: The CPRA's substantive provisions became effective on January 1, 2023.
−Removed: The CPRA created a new California data protection agency specifically tasked to enforce the law, which will likely result in increased regulatory scrutiny of California businesses in the areas of data protection and security.
−Removed: Beginning July 1, 2023, the California Privacy Protection Agency will have full administrative authority to enforce the CPRA while the California Attorney General will retain civil enforcement authority.
−Removed: However, it remains unclear how stringent the California Privacy Protection Agency and the California attorney general's office will be in enforcing the law.
−Removed: It also remains unclear how much private litigation will ensue under the data breach private right of action.
−Removed: In 2022, we incurred costs implementing compliance processes leading up to the effective date.
+Added: Among other things, the CCPA gives California residents expanded data privacy rights, allowing consumers to opt out of certain data sharing with third parties, provides a private cause of action for data breaches, imposes additional obligations such as data minimization and storage limitations;
+Added: on covered businesses;
+Added: and forms a dedicated privacy regulator in California, the California Privacy Protection Agency, to implement and enforce the law.
+Added: The CCPA marked the beginning of a trend toward more stringent state data privacy legislation in the United States, which may result in significant costs to our business, damage our reputation, and require us to amend our business practices, and could adversely affect our business, especially to the extent the specific requirements vary from those and other existing laws.
+Added: Four such laws, in Virginia, Colorado, Connecticut, and Utah, have taken effect in 2023, and at least three more laws in Montana, Texas and Oregon are scheduled to take effect in 2024.
Similar laws have been proposed in other states and at the federal level.
4 unchanged sentences
Because of the extreme sensitivity of the personal information, including PHI, that we store and transmit, the security features of our technology platform are very important.
−Removed: If our security measures, some of which are managed by third parties, are breached or fail, unauthorized persons may be able to obtain access to sensitive provider and beneficiary data, including HIPAA-regulated PHI.
+Added: We also contract with third parties for important aspects of the storage and transmission of beneficiary information, and thus rely on those third parties to manage functions that have material cyber-security risks.
+Added: We attempt to address these risks by requiring subcontractors who handle beneficiary information to sign business associate agreements contractually requiring those subcontractors to adequately safeguard personal health data to the same extent that applies to us and in some cases by requiring such subcontractors to undergo third-party security examinations.
+Added: However, we cannot ensure that these contractual measures and other safeguards will adequately protect us from the risks associated with the storage and transmission of such information on our behalf by our subcontractors.
+Added: If our security measures, some of which are managed by third parties, or those of the third parties with whom we contract, are breached or fail, unauthorized persons may be able to obtain access to sensitive provider and beneficiary data, including HIPAA-regulated PHI.
As a result, our reputation could be severely damaged, adversely affecting PCP and beneficiary confidence.
4 unchanged sentences
In any event, insurance coverage would not address the reputational damage that could result from a security incident.
−Removed: We contract with third parties for important aspects of the storage and transmission of beneficiary information, and thus rely on those third parties to manage functions that have material cyber-security risks.
−Removed: We attempt to address these risks by requiring subcontractors who handle beneficiary information to sign business associate agreements contractually requiring those subcontractors to adequately safeguard personal health data to the same extent that applies to us and in some cases by requiring such subcontractors to undergo third-party security examinations.
−Removed: However, we cannot ensure that these contractual measures and other safeguards will adequately protect us from the risks associated with the storage and transmission of such information on our behalf by our subcontractors.
We also publish statements to our beneficiaries that describe how we handle and protect personal information.
−Removed: Any failure or perceived failure by us to maintain posted privacy policies that are accurate, comprehensive and fully implemented, and any violation or perceived violation of our privacy-, data protection-, or information security obligations to providers, beneficiaries, or other third parties could result in claims of deceptive practices brought against us, That could lead to significant liabilities and consequences, including, without limitation, governmental investigations or enforcement actions, costs of responding to investigations, defending against litigation, settling claims and complying with regulatory or court orders, all of which could have material impacts on our revenues and results of operations.
+Added: Any failure or perceived failure by us to maintain posted privacy policies that are accurate, comprehensive and fully implemented, and any violation or perceived violation of our privacy-, data protection-, or information security obligations to providers, beneficiaries, or other third parties could result in claims of deceptive practices brought against us.
+Added: That could lead to significant liabilities and consequences, including, without limitation, governmental investigations or enforcement actions, costs of responding to investigations, defending against litigation, settling claims and complying with regulatory or court orders, all of which could have material impacts on our revenues and results of operations.
Furthermore, the Federal Trade Commission and many state attorneys general continue to enforce federal and state consumer protection laws against companies for online collection, use, dissemination, and security practices that appear to be unfair or deceptive.
−Removed: There are a number of legislative proposals in the United States, at both the federal and state level, that could impose new obligations or liability for copyright infringement by third parties violating those laws.
+Added: There are also a number of legislative proposals in the United States, at both the federal and state level, that could impose new obligations or liability for copyright infringement by third parties violating those laws.
We cannot yet determine the impact that future laws, regulations, and standards may have on our business.
29 unchanged sentences
As we rely in part on brand names and trademark protection to enforce our intellectual property rights, efforts by third parties to limit use of our brand names or trademarks and barriers to the registration of brand names and trademarks in various countries may restrict our ability to promote and maintain a cohesive brand throughout our key markets.
−Removed: can also be no assurance that our pending or future U.S.
+Added: There can also be no assurance that our pending or future U.S.
or foreign trademark applications will be approved in a timely manner or at all, or that such registrations will effectively protect our brand names and trademarks.
41 unchanged sentences
We do not know if these dynamics will return or how long they will last if they return.
−Removed: In addition, the market price of our Class A common stock declined sharply during 2022.
+Added: In addition, the market price of our Class A common stock has declined sharply in the recent years.
Volatility or declines in our trading price could make it more difficult to attract and retain talent, adversely impact employee retention and morale, and may require us to issue more equity to incentivize team members, which could dilute stockholders.
20 unchanged sentences
Securities litigation against us could result in substantial costs and divert resources and the attention of management, which could adversely affect our business.
−Removed: Further, we provide
−Removed: indemnification for our officers and directors for certain claims in connection with such litigation.
+Added: Further, we provide indemnification for our officers and directors for certain claims in connection with such litigation.
Large indemnity payments could adversely affect our business, results of operations, and financial condition.
−Removed: If our Class A common stock price declines from current levels, our Class A common stock may be subject to delisting from NASDAQ
+Added: If our Class A common stock does not satisfy NASDAQ's minimum bid price rules, our Class A common stock may be subject to delisting from NASDAQ
If the closing bid price of our Class A common stock is less than $1.00 per share for 30 consecutive trading days, we may receive a letter from the staff of The NASDAQ Stock Market LLC stating that our Class A common stock will be delisted unless we are able to regain compliance with the minimum price Nasdaq Listing Rule requirement.
+Added: In recent months, our Class A common stock closing bid price has been below $1.00 on multiple occasions, including from December 26, 2023 through February 1, 2024, and most recently from February 16, 2024 through March 13, 2024.
The listing requirement provides that we must maintain a closing bid price for our Class A common stock of at least $1.00 per share.
2 unchanged sentences
If our Class A common stock is delisted, this would, among other things, substantially impair our ability to raise additional funds and could result in a loss of institutional investor interest and fewer development opportunities for us.
+Added: Furthermore, a delisting would likely have a negative effect on the price of our Class A common stock and would impair the ability of stockholders to sell or purchase our Class A common stock when they wish to do so.
+Added: In the event of a delisting, we would expect to take actions to restore our compliance with NASDAQ’S listing requirements, but we can provide no assurance that any such action taken by us would allow our Class A common stock to become listed again, lead to stability in the market price of our Class A common stock, improve the liquidity of our Class A common stock, prevent our Class A common stock from dropping below the NASDAQ minimum bid price requirement, or prevent future non-compliance with NASDAQ’S listing requirements.
+Added: As a result of these factors, a delisting of our Class A common stock from NASDAQ would have an adverse impact on the trading, liquidity, and market price of our Class A common stock.
Our business and financial performance may differ from any projections that we disclose or any information that may be attributed to us by third parties.
19 unchanged sentences
Furthermore, additional weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future.
−Removed: current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
+Added: Further, current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our consolidated financial statements for prior periods.
24 unchanged sentences
The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares over the long term.
−Removed: As a result, it is possible that one or more of the persons or entities holding our Class
−Removed: B common stock could gain significant voting control as other holders of Class B common stock sell or otherwise convert their shares into Class A common stock.
+Added: As a result, it is possible that one or more of the persons or entities holding our Class B common stock could gain significant voting control as other holders of Class B common stock sell or otherwise convert their shares into Class A common stock.
Our dual class structure may negatively impact the trading price of our Class A common stock.
−Removed: Certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indices.
−Removed: For example, S&P Dow Jones has announced restrictions on including companies with multiple-class share structures in certain of their indices, including the S&P 500.
−Removed: Under such announced policies, the dual class structure of our common stock would make us ineligible for inclusion in certain indices and, as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track those indices would not invest in our Class A common stock.
−Removed: These policies are relatively new and it is unclear what effect, if any, they will have on the valuations of publicly-traded companies excluded from such indices, but it is possible that they may depress valuations, as compared to similar companies that are included.
−Removed: Because of the dual class structure of our common stock, we will likely be excluded from certain indices, and we cannot assure you that other stock indices will not take similar actions.
−Removed: Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors.
−Removed: As a result, the trading price of our Class A common stock could be adversely affected.
−Removed: Our directors, executive officers and principal stockholders will have substantial control over us, which could limit the ability of our other stockholders to influence the outcome of key transactions, including a change of control.
+Added: Several stockholder advisory firms and large institutional investors oppose the use of multiple class structures.
+Added: As a result, the dual class structure of our common stock may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure, and may result in large institutional investors not purchasing shares of our Class A common stock and could result in a less active trading market for our Class A common stock.
+Added: Any actions or publications by stockholder advisory firms or institutional investors critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A common stock.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
23 unchanged sentences
These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
−Removed: This could result in
−Removed: continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
+Added: This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
We intend to invest substantial resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management's time and attention from business operations to compliance activities.
48 unchanged sentences
However, these choice of forum provisions may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees.
−Removed: While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring such a claim arising under the Securities Act against us, our directors, officers, or other employees in a venue other than in the federal district courts of the United States of
+Added: While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring such a claim arising under the Securities Act against us, our directors, officers, or other employees in a venue other than in the federal district courts of the United States of America.
In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation.
This may require significant additional costs associated with resolving such action in other jurisdictions, and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
−Removed: Unresolved Staff Comments.
−Removed: Not applicable.
−Removed: Not applicable.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.