- Newly public health-insurance upstarts, such as Bright and Oscar, continue to bleed money.
- But the still private Devoted Health turned a profit in the first half of 2022, regulatory filings show.
- They also show that Devoted is plotting a major expansion into new states.
Newly public health-insurance upstarts continue to bleed money.
But Devoted Health, the private, venture-backed insurer focused on the lucrative health-plan market for seniors, managed to eke out a profit in the first half of 2022, Insider's analysis of its regulatory filings found.
Now, armed with $1.2 billion in fresh funds from a Series D round in October, Devoted is plotting a big expansion into eight new states and adding hundreds of staff, a company spokesperson confirmed.
Devoted, in Waltham, Massachusetts, combines a health insurer and a medical group under one roof. It was founded in 2017 by the brothers Ed Park, a former executive at the electronic medical-record company Athenahealth, and Todd Park, a cofounder of Athenahealth and former US chief technology officer in the White House.
The startup has raised almost $2 billion in funding from investors, including Uprising, SoftBank, Andreessen Horowitz, and General Catalyst. The October round valued Devoted at $12.7 billion.
Devoted's aiming to attract members in the booming Medicare Advantage market, where enrollment reached just under 30 million as of August 2022, the latest federal data indicated. While the market is dominated by industry giants, including the CVS Health-owned Aetna, Humana, and UnitedHealthcare, younger upstarts are increasingly stealing membership. Devoted had 78,305 Medicare Advantage members as of June 30, up from 39,268 at the same time in 2021.
Most of the newly public upstarts have struggled to make money, though, and they've taken a beating in the stock market. Alignment Healthcare, Clover Health, Bright Health Group, and Oscar Health, all of which went public in 2021, reported losses in the first half of 2022.
Bright, which reported the deepest loss, warned investors this week that it could be forced to stop operating if it didn't raise more cash soon. Bright's stock is down 89% from its initial-public-offering price, while Oscar's is down 80% and Alignment's is down 16%. Clover's stock has fallen 80% since completing its SPAC merger.
Devoted, so far, is bucking the trend. Its state regulatory filings show that its insurance operations were profitable in the first six months of the year, even as Devoted doubled its membership and paid more medical costs as a result. The question is whether it can sustain that profit as it launches new health plans across the country.
Devoted grew membership and revenue as it swung to a profit
Most of Devoted's members were in Florida and Texas, but the company also grew its roster in Arizona, Ohio, and Illinois, which was a new state for Devoted this year.
Devoted is still smaller than competitors. California's Alignment Healthcare had 95,900 members on June 30, almost all of them enrolled in Medicare Advantage, while Clover served 255,406 members, a third of whom were enrolled in Medicare Advantage.
Bright and Oscar, which serve a mix of individual, employer, and Medicare members, each had more than 1 million members on June 30. Bright had 120,000 Medicare Advantage members, while Oscar had 4,658.
Thanks to the influx of new members, Devoted's revenue swelled to $537.8 million in the first six months — more than it collected for all of 2021.
The insurer spent about 92% of its revenue on members' medical expenses, Insider's analysis found. That's down from about 101% a year ago. Insurers typically aim to spend about 85% of premiums on medical care. The rest goes toward administrative expenses or is collected as profit.
Devoted's net income was $7.7 million in the first half of the year, compared with a loss of $27.2 million over the same period a year ago. For all of 2021, it reported a loss of $116.3 million.
The startup's expanding into 8 new states in 2023
When Devoted announced last year that it had raised new funding, it said it would use the cash to speed up its expansion.
It wasted no time: Quarterly filings show the insurer has set up new companies in 15 additional states.
A spokesperson for the startup said that Devoted applies to enter a range of states as part of the normal market-development process before selecting which ones it will formally enter.
In 2023, it plans to start serving members in eight new states — Alabama, Colorado, Hawaii, North Carolina, Oregon, Pennsylvania, South Carolina, and Tennessee — if approved by the Centers for Medicare and Medicaid Services, the spokesperson said.
Meanwhile, Devoted's in-house medical group is bulking up to support the new members. The company confirmed to Insider that the medical group plans to employ about 1,000 clinicians and other staff next year, up from 400 people now.
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