8-K: Clover Health's 2026 Star Ratings & Profitability Outlook

Clover Health announced its 2026 Medicare Advantage Star Ratings, receiving 3.5 Stars for PPO plans and 4.0 Stars for HMO plans, while reiterating confidence in future profitability and growth.

Summary

• The Centers for Medicare & Medicaid Services (CMS) awarded Clover Health's PPO Medicare Advantage plans 3.5 Stars and its HMO Medicare Advantage plan 4.0 Stars for 2026.
• These 2026 Star ratings will impact the payment year 2027.
• Clover Health emphasizes that its technology-centric care strategy, particularly the AI-driven Clover Assistant, positions it to offset any effect from the Star ratings.
• Through the first half of 2025, which is also a 3.5 Star payment year, Clover Health achieved 34% year-over-year revenue growth and 32% membership growth, alongside sustained Adjusted EBITDA profitability.
• Clover Health scored exceptionally high on HEDIS clinical quality measures for its PPO plans, achieving a 4.72 score, largely attributed to the Clover Assistant clinical platform.
• The company believes the current Star Ratings methodology places disproportionate weight on non-outcomes measures rather than actual clinical outcomes and health improvements.

Sentiment

Score: 7

Explanation: The company maintains a positive outlook, emphasizing its technology-driven strategy to mitigate the impact of mixed Star Ratings. Strong H1 2025 growth and profitability, coupled with confidence in future expansion, suggest a resilient business model despite regulatory rating challenges.

Positives

• The HMO Medicare Advantage plan achieved a solid 4.0 Star rating.
• Clover Health scored exceptionally high on HEDIS clinical quality measures for its PPO plans, achieving a 4.72 score, indicating strong clinical outcomes.
• The company reported robust financial performance through the first half of 2025, with 34% year-over-year revenue growth and 32% membership growth.
• Clover Health delivered sustained Adjusted EBITDA profitability through the first half of 2025.
• Management reiterates confidence in driving above-market membership growth and increasing Adjusted EBITDA profitability through 2027, independent of Star ratings.
• The company's technology-centric business model, powered by Clover Assistant, is designed to mitigate the impact of Star ratings on its results.

Negatives

• The PPO Medicare Advantage plans received a 3.5 Star rating, which is lower than the HMO plan and could potentially impact future payment adjustments.
• Clover Health believes the current Star Ratings methodology does not fully reflect the excellent health outcomes it delivers to its members.

Risks

• Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from expectations.
• The company's financial performance and growth are influenced by the Centers for Medicare & Medicaid Services (CMS) Star Ratings program, which the company believes has methodological flaws.
• Future performance is dependent on the successful development and adoption of AI-powered features within the Clover Assistant platform, increasing physician adoption, and effective member retention strategies.

Future Outlook

Clover Health expects to continue delivering strong above-market Medicare Advantage growth and Adjusted EBITDA profitability expansion during both 2026 and 2027. This outlook is primarily driven by a strong roadmap of AI-powered features within its Clover Assistant technology platform, increasing physician adoption, prioritizing member retention, and operating leverage gains from optimizing SG&A.

Management Comments

• "Our technology centric care strategy fortunately puts us in a position where the Star rating does not dominate our results in the way it does for other plans." Andrew Toy, Chief Executive Officer
• "With the year over year AI-driven improvements that we see in Clover Assistant and momentum in additional doctors signing up for our platform, we feel our business model can offset any effect from the Star rating." Andrew Toy, Chief Executive Officer
• "We are built to offer amazing wide-network benefits to our members independent of the rating, and we will drive growth and profitability while doing so." Andrew Toy, Chief Executive Officer
• "We believe the industry is entering a period where Congress and CMS will take a hard look at how the Star Ratings program measures quality and improvements that actually benefit members health outcomes." Andrew Toy, Chief Executive Officer
• "Plans that can demonstrate real clinical outcomes, and that are not existentially dependent on quality bonuses, will be the ones that thrive. By design, Clover is positioned for that future." Andrew Toy, Chief Executive Officer
• "We will continue to be singularly focused on true quality and improving health outcomes for our members, as demonstrated by the results we are delivering with Clover Assistant and as documented in our whitepapers." Andrew Toy, Chief Executive Officer

Industry Context

The Medicare Advantage industry is heavily influenced by CMS Star Ratings, which directly impact payment adjustments and competitive positioning. Clover Health's commentary suggests a broader industry debate on the methodology of these ratings, particularly regarding the emphasis on non-outcomes measures versus clinical results. The company's focus on technology-driven clinical outcomes via Clover Assistant positions it to potentially differentiate itself in a market where many plans are highly dependent on Star Rating bonuses.

Comparison to Industry Standards

• Clover Health's PPO plans received 3.5 Stars, while its HMO plan received 4.0 Stars, which can be compared to other Medicare Advantage plans' ratings released by CMS.
• The company's HEDIS clinical quality score of 4.72 for its PPO plans is exceptionally high, suggesting strong performance in clinical outcomes compared to general industry averages.
• Clover Health's reported 34% revenue growth and 32% membership growth in H1 2025 are described as "above-market," implying a stronger performance than many competitors in the Medicare Advantage sector.

Stakeholder Impact

• Shareholders: Potential for continued above-market growth and Adjusted EBITDA profitability expansion through 2027, driven by strategic initiatives, could positively impact shareholder value.
• Members: Continued focus on wide-network benefits and improved health outcomes through Clover Assistant aims to provide high-quality care.
• Healthcare Providers: Increased adoption of Clover Assistant technology is expected to support clinical decision-making and improve health outcomes.
• CMS: Clover Health's engagement with CMS regarding Star Ratings methodology suggests an ongoing dialogue that could influence future regulatory frameworks.

Next Steps

• Clover Health will continue to actively engage with CMS to ensure its assigned Star rating appropriately captures the strength and quality of its Medicare Advantage offerings.
• The company plans to continue developing AI-powered features within its flagship Clover Assistant technology platform.
• Focus on increasing physician adoption of Clover Assistant technology among its member base.
• Prioritizing member retention to drive continued strong cohort performance and improved unit economics.
• Optimizing variable, fixed, and growth SG&A to achieve operating leverage gains.

Key Dates

Recommendation

While the 3.5 Star rating for PPO plans presents a potential headwind for 2027 payments, the company's strong H1 2025 performance (34% revenue growth, 32% membership growth, sustained Adjusted EBITDA profitability) and confident outlook for continued above-market growth and profitability expansion through 2027 are encouraging. The emphasis on the Clover Assistant's ability to offset Star rating impacts and deliver superior clinical outcomes (4.72 HEDIS score) suggests a resilient business model. Investors should hold to monitor the execution of their technology-driven strategy and its ability to consistently deliver profitability despite regulatory rating fluctuations.

Keywords

Clover Health, Medicare Advantage, Star Ratings, CMS, CLOV, Healthcare Technology, Clover Assistant, Adjusted EBITDA, HEDIS, PPO, HMO