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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40295

 

ALIGNMENT HEALTHCARE, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

46-5596242

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1100 W. Town and Country Road, Suite 1600

Orange, California

92868

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (844) 310-2247

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

ALHC

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☐    No  ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐    No  

As of May 12, 2021, the registrant had 187,273,782 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

4

 

 

 

Item 1.

Financial Statements (Unaudited)

4

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Operations

5

 

Condensed Consolidated Statements of Stockholders' Equity

6

 

Condensed Consolidated Statements of Cash Flows

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

 

 

 

PART II.

OTHER INFORMATION

36

 

 

 

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Mine Safety Disclosures

36

Item 5.

Other Information

36

Item 6.

Exhibits

37

Signatures

39

 

 

 


 

FORWARD-LOOKING STATEMENTS

Throughout this quarterly report on Form 10-Q (this “Quarterly Report”), we make “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Quarterly Report are forward-looking statements. Forward-looking statements give our current expectations relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning. The forward-looking statements contained in this Quarterly Report are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” but may be found in other locations as well. These statements are based upon management’s current expectations, assumptions and estimates and are not guarantees of timing, future results or performance. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

our history of net losses, and our ability to achieve or maintain profitability in an environment of increasing expenses;
the impact of the COVID-19 pandemic or any other pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide on our business, financial condition and results of operations;
the effect of our relatively limited operating history on investors’ ability to evaluate our current business and future prospects;
the viability of our growth strategy and our ability to realize expected results;
our ability to attract new members;
the quality and pricing of our products and services;
our ability to maintain a high rating for our plans on the Five Star Quality Rating System;
our ability to develop and maintain satisfactory relationships with care providers that service our members;
our ability to manage our growth effectively, execute our business plan, maintain high levels of service and member satisfaction or adequately address competitive challenges;
our ability to compete in the healthcare industry;
the impact on our business of security breaches, loss of data or other disruptions causing the compromise of sensitive information or preventing us from accessing critical information;
the impact on our business of disruptions in our disaster recovery systems or management continuity planning;
the cost of legal proceedings and litigation, including intellectual property and privacy disputes;
risks associated with being a government contractor;
the impact on our business of the healthcare services industry becoming more cyclical;
our ability to manage acquisitions, divestitures and other significant transactions successfully;
our ability to maintain, enhance and protect our reputation and brand recognition;
our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems;
our ability to obtain, maintain, protect and enforce intellectual property protection for our technology;

 

1


 

the potential adverse impact of claims by third parties that we are infringing on, misappropriating or otherwise violating their intellectual property rights;
our ability to protect the confidentiality of our trade secrets, know-how and other internally developed information;
the impact of any restrictions on our use of or ability to license data or our failure to license data and integrate third-party technologies;
risks associated with our use of “open-source” software;
our dependence on our senior management team and other key employees;
the concentration of our health plans in California, North Carolina and Nevada;
the impact on our business of an economic downturn;
our management team’s limited experience managing a public company;
our ability to maintain our corporate culture;
the impact of shortages of qualified personnel and related increases in our labor costs;
the risk that our records may contain inaccurate or unsupportable information regarding risk adjustment scores of members;
our ability to accurately estimate incurred but not reported medical expenses;
the impact of negative publicity regarding the managed healthcare industry;
the impact of federal efforts to reduce Medicare spending;
the impact of weather and other factors beyond our control on our clinics, the centers out of which our external providers operate, and the facilities that host our AVA platform (as defined below);
our dependence on reimbursements by CMS and premium payments by individuals;
the impact on our business of renegotiation, non-renewal or termination of risk agreements with hospitals, physicians, nurses, pharmacists and medical support staff;
risks associated with estimating the amount of liabilities that we recognize under our risk agreements with providers;
our ability to develop and maintain proper and effective internal control over financial reporting;
the potential adverse impact of legal proceedings and litigation;
the impact of reductions in the quality ratings of our health plans;
the risk of our agreements with care providers being deemed invalid;
the impact on our business of the termination of our leases, increases in rent or inability to renew or extend leases;
our ability to engage and maintain our relationships with hospitals, physicians, nurses, pharmacists and medical support staff;
the impact of state and federal efforts to reduce Medicare spending;

 

2


 

our ability to comply with applicable federal, state and local rules and regulations, including those relating to data privacy and security; and
other factors disclosed in the section entitled “Risk Factors” and elsewhere in this Quarterly Report.

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report.

All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this Quarterly Report in the context of these risks and uncertainties.

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Quarterly Report are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

 

3


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Alignment Healthcare, Inc.

Condensed Consolidated Balance Sheets

(amounts in thousands, except par value and share amounts)

(Unaudited)

 

 

 

March 31,
2021

 

 

December 31,
2020
(1)

 

Assets

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash

 

$

528,417

 

 

$

207,311

 

Accounts receivable (less allowance for credit losses of $8 at March 31, 2021
   and $
0 at December 31, 2020, respectively)

 

 

49,458

 

 

 

40,140

 

Prepaid expenses and other current assets

 

 

26,773

 

 

 

17,225

 

Total current assets

 

 

604,648

 

 

 

264,676

 

Property and equipment, net

 

 

28,403

 

 

 

27,145

 

Right of use asset, net

 

 

9,577

 

 

 

9,888

 

Goodwill and intangible assets, net

 

 

34,563

 

 

 

34,645

 

Restricted and other assets

 

 

2,153

 

 

 

2,148

 

Total assets

 

$

679,344

 

 

$

338,502

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Medical expenses payable

 

$

128,673

 

 

$

112,605

 

Accounts payable and accrued expenses

 

 

19,639

 

 

 

15,675

 

Accrued compensation

 

 

21,481

 

 

 

25,172

 

Total current liabilities

 

 

169,793

 

 

 

153,452

 

Long-term debt, net of debt issuance costs

 

 

145,734

 

 

 

144,168

 

Long-term portion of lease liabilities

 

 

9,565

 

 

 

10,271

 

Total liabilities

 

 

325,092

 

 

 

307,891

 

Commitments and Contingencies (Note 12)

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

Preferred stock, $.001 par value; 100,000,000 and 0 shares authorized as of
   March 31, 2021 and December 31, 2020 respectively;
no shares issued and
   outstanding as of March 31, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $.001 par value; 1,000,000,000 and 164,063,787 shares authorized
   as of March 31, 2021 and December 31, 2020 respectively;
187,273,782 and
   
164,063,787 shares issued and outstanding as of March 31, 2021 and
   December 31, 2020, respectively

 

 

188

 

 

 

164

 

Additional paid-in capital

 

 

790,509

 

 

 

410,018

 

Accumulated deficit

 

 

(436,445

)

 

 

(379,571

)

Total stockholders' equity

 

 

354,252

 

 

 

30,611

 

Total liabilities and stockholders' equity

 

$

679,344

 

 

$

338,502

 

(1)
The condensed consolidated balance sheet as of December 31, 2020 was derived from the audited consolidated financial statements as of that date and was retroactively adjusted, including shares and per share amounts, as a result of the Reorganization. See Note 1 to the condensed consolidated financial statements for additional details.

 

See accompanying notes to condensed consolidated financial statements.

 

4


 

Alignment Healthcare, Inc.

Condensed Consolidated Statements of Operations

(amounts in thousands, except share and per share amounts)

(Unaudited)

 

 

 

For the Three Months
Ended March 31,

 

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

Earned premiums

 

$

267,000

 

 

$

224,266

 

Other

 

 

82

 

 

 

367

 

Total revenues

 

 

267,082

 

 

 

224,633

 

Expenses:

 

 

 

 

 

 

Medical expenses

 

 

251,095

 

 

 

193,396

 

Selling, general, and administrative expenses

 

 

64,914

 

 

 

32,787

 

Depreciation and amortization

 

 

3,737

 

 

 

3,565

 

Total expenses

 

 

319,746

 

 

 

229,748

 

Loss from operations

 

 

(52,664

)

 

 

(5,115

)

Other expenses:

 

 

 

 

 

 

Interest expense

 

 

4,248

 

 

 

4,160

 

Other (income) expenses

 

 

(38

)

 

 

797

 

Total other expenses

 

 

4,210

 

 

 

4,957

 

Loss before income taxes

 

 

(56,874

)

 

 

(10,072

)

Provision for income taxes

 

 

 

 

 

 

Net loss

 

$

(56,874

)

 

$

(10,072

)

 

 

 

 

 

 

Total weighted-average common shares outstanding - basic and diluted(1)

 

 

154,432,027

 

 

 

140,764,196

 

Net loss per share - basic and diluted

 

$

(0.37

)

 

$

(0.07

)

(1)
The weighted-average shares used in computing net loss per share, basic and diluted were retroactively adjusted as a result of the Reorganization. See Note 1 to the condensed consolidated financial statements for additional details.

 

See accompanying notes to condensed consolidated financial statements.

 

 

5


 

Alignment Healthcare, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(amounts in thousands, except par value and share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In Capital

 

 

Accumulated
Deficit

 

 

Total

 

Balance at December 31, 2019(1)

 

 

147,157,801

 

 

$

147

 

 

$

277,787

 

 

$

(356,645

)

 

$

(78,711

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(10,072

)

 

 

(10,072

)

Issuance of common stock at $7.99 per
    share, net of issuance costs of $
3,700

 

 

16,905,986

 

 

 

17

 

 

 

131,283

 

 

 

 

 

 

131,300

 

Equity-based compensation

 

 

 

 

 

 

 

 

326

 

 

 

 

 

 

326

 

Equity repurchase

 

 

 

 

 

 

 

 

(516

)

 

 

 

 

 

(516

)

Balance at March 31, 2020

 

 

164,063,787

 

 

$

164

 

 

$

408,880

 

 

$

(366,717

)

 

$

42,327

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In Capital

 

 

Accumulated
Deficit

 

 

Total

 

Balance at December 31, 2020(1)

 

 

164,063,787

 

 

$

164

 

 

$

410,018

 

 

$

(379,571

)

 

$

30,611

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(56,874

)

 

 

(56,874

)

Issuance of common stock upon initial
    public offering at $
18 per share, net of
    issuance costs of $
28,999

 

 

21,700,000

 

 

 

22

 

 

 

361,579

 

 

 

 

 

 

361,601

 

Issuance of common stock to third-party
    business partners

 

 

573,782

 

 

 

1

 

 

 

6,479

 

 

 

 

 

 

6,480

 

Issuance of common stock to stock
    appreciation rights holders

 

 

936,213

 

 

 

1

 

 

 

11,509

 

 

 

 

 

 

11,510

 

Equity-based compensation

 

 

 

 

 

 

 

 

2,398

 

 

 

 

 

 

2,398

 

Equity repurchase

 

 

 

 

 

 

 

 

(1,474

)

 

 

 

 

 

(1,474

)

Balance at March 31, 2021

 

 

187,273,782

 

 

$

188

 

 

$

790,509

 

 

$

(436,445

)

 

$

354,252

 

(1)
The consolidated balances as of December 31, 2019 and 2020 were derived from the audited consolidated financial statements as of that date and were retroactively adjusted, including shares and per share amounts, as a result of the Reorganization. See Note 1 to the consolidated financial statements for additional details.

 

See accompanying notes to condensed consolidated financial statements.

 

6


 

Alignment Healthcare, Inc.

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(Unaudited)

 

 

 

For the Three Months
Ended March 31,

 

 

 

2021

 

 

2020

 

Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(56,874

)

 

$

(10,072

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Provision for doubtful accounts

 

 

8

 

 

 

10

 

Depreciation and amortization

 

 

3,789

 

 

 

3,670

 

Amortization-debt issuance costs and investment discount

 

 

550

 

 

 

540

 

Payment-in-kind interest

 

 

1,015

 

 

 

982

 

Loss on disposal of property and equipment

 

 

 

 

 

860

 

Equity-based compensation and common stock payments

 

 

20,388

 

 

 

326

 

Non-cash lease expense

 

 

648

 

 

 

573

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(9,326

)

 

 

(9,671

)

Prepaid expenses and other current assets

 

 

(9,547

)

 

 

(8,908

)

Other assets

 

 

(6

)

 

 

2

 

Medical expenses payable

 

 

16,069

 

 

 

(5,516

)

Accounts payable and accrued expenses

 

 

(298

)

 

 

6,544

 

Accrued compensation

 

 

(3,691

)

 

 

(1,101

)

Lease liabilities

 

 

(832

)

 

 

3,883

 

Noncurrent liabilities

 

 

 

 

 

(3,941

)

Net cash used in operating activities

 

 

(38,107

)

 

 

(21,819

)

Investing Activities:

 

 

 

 

 

 

Purchase of investments

 

 

(750

)

 

 

(1,000

)

Sale of investments

 

 

750

 

 

 

250

 

Acquisition of property and equipment

 

 

(4,446

)

 

 

(3,085

)

Proceeds from the sale of property and equipment

 

 

 

 

 

100

 

Net cash used in investing activities

 

 

(4,446

)

 

 

(3,735

)

Financing Activities:

 

 

 

 

 

 

Equity repurchase

 

 

(1,474

)

 

 

(516

)

Issuance of common stock

 

 

390,600

 

 

 

135,000

 

Common stock issuance costs

 

 

(25,467

)

 

 

(3,000

)

Net cash provided by financing activities

 

 

363,659

 

 

 

131,484

 

Net increase in cash

 

 

321,106

 

 

 

105,930

 

Cash and restricted cash at beginning of period

 

 

207,811

 

 

 

86,484

 

Cash and restricted cash at end of period

 

$

528,917

 

 

$

192,414

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

2,682

 

 

$

2,637

 

Supplemental non-cash investing and financing activities:

 

 

 

 

 

 

Acquisition of property in accounts payable

 

$

474

 

 

$

93

 

Common stock issuance costs included in accounts payable and accrued expenses

 

$

3,532

 

 

$

700

 

 

 

7


 

The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets to the total above:

 

Cash

 

$

528,417

 

 

$

192,414

 

Restricted cash in restricted and other assets

 

 

500

 

 

 

 

Total

 

$

528,917

 

 

$

192,414

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

8


 

Alignment Healthcare, Inc.

Note to Condensed Consolidated Financial Statements

(amounts in thousands, except share amounts)

1. Organization

Alignment Healthcare, Inc. (collectively, “we” or “us” or “our” or the “Company”), formerly, Alignment Healthcare Holdings, LLC, is a next generation, consumer-centric health care platform that is purpose-built to provide seniors with high quality, affordable care with a vastly improved consumer experience. Enabled by our innovative technology and care delivery model, the Company focuses on improving outcomes in the Medicare Advantage sector.

The Company’s operations primarily consist of the following:

The Company owns Medicare Advantage Plans in the states of California, North Carolina and Nevada.
The Company coordinates and provides covered health care services, including professional, institutional, and ancillary services, to members enrolled in certain benefit plans of unaffiliated Medicare Advantage Health Maintenance Organizations (“HMO”) (collectively, “Third-Party Payors”). The Company’s contracts with two different Third-Party Payors terminated on December 31, 2020 and 2019, respectively. The Company continues to service the claims in runoff related to their respective agreements.

Reorganization

We historically operated as a Delaware limited liability company under the name Alignment Healthcare Holdings, LLC. On March 17, 2021, Alignment Healthcare Holdings, LLC converted to a Delaware corporation pursuant to a statutory conversion and we changed our name to Alignment Healthcare, Inc. for purposes of completing an initial public offering ("IPO") ("the Reorganization"). As part of the Reorganization, Alignment Healthcare Partners, LP ("the Parent"), the sole unitholder of Alignment Healthcare Holdings, LLC, exchanged its membership units for our common stock and became the sole holder of our shares of common stock. Prior to the closing of the IPO, the Parent merged with and into the Company with Alignment Healthcare, Inc. surviving the merger.

The membership units that were owned by the Parent prior to the Reorganization were converted to our common stock using an approximately 1 to 260 common stock split. All share and per share amounts in these condensed consolidated financial statements and related notes have been retroactively adjusted, where applicable, for all periods presented to give effect to the common stock split and exchange ratio applied in connection with the Reorganization. As a result, we reclassified the capital contributions associated with the issuance of the membership units to additional paid-in capital and common stock using a par value of $0.001 for all periods presented within the condensed consolidated financial statements.

Initial Public Offering

On March 25, 2021, our Registration Statement on Form S-1 for the initial public offering of 27,200,000 shares of common stock was declared effective by the Securities and Exchange Commission. Our common stock began trading on March 26, 2021 on the Nasdaq Global Select Market under the ticker symbol “ALHC."

On March 30, 2021, we completed an IPO through issuing and selling 21,700,000 shares of common stock and certain stockholders selling 5,500,000 shares of common stock, in each case at a price of $18.00 per share. On April 6, 2021, pursuant to a partial exercise of the underwriters' over-allotment option, certain selling stockholders sold an additional 3,314,216 shares of common stock at the IPO price. The Company did not receive any proceeds from the sale of shares of common stock by the selling stockholders in the IPO. We received proceeds of $361,601 after deducting underwriting discounts and commissions of $24,389 and deferred offering costs of $4,610. Deferred direct offering costs were capitalized and consisted of fees and expenses incurred in connection with the sale of our common stock in the IPO, including legal, accounting, printing and other offering related costs. Upon completion of the IPO, these deferred offering costs were reclassified from prepaid and other current assets to stockholders' equity and recorded against the net proceeds from the offering.

 

9


 

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such regulations. These financial statements have been prepared on a basis consistent with the accounting principles applied for the fiscal year ended December 31, 2020 as presented in the Company’s Form S-1, as amended, filed with the SEC. In the opinion of management, all adjustments (consisting of all normal and recurring adjustments) considered necessary for a fair presentation have been included.   These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying note thereto as of December 31, 2020.

The condensed consolidated financial statements include the accounts of the Company, our subsidiaries, and two immaterial variable interest entities in which we are the primary beneficiary. All intercompany transactions have been eliminated in consolidation.

We have no components of other comprehensive income (loss), and accordingly, comprehensive income (loss) is the same as the net loss for all periods presented.

Use of Estimates

The preparation of the condensed consolidated financial statements requires management to make estimates and judgments that affect the amounts reported in the condensed consolidated financial statements. Our significant estimates include, but are not limited to, the determination of medical expenses payable; the impact of risk adjustment provisions related to our Medicare contracts; collectability of receivables; right of use (“ROU”) assets and lease liabilities valuation; valuation of related impairment recognition of long-lived assets, including goodwill and intangible assets; equity-based compensation expense; and contingent liabilities. Estimates and judgments are based upon historical information and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ materially from those estimates and the impact of any change in estimates is included in earnings in the period in which the estimate is adjusted.

Segments

We have determined that our chief executive officer is the chief operating decision maker (“CODM”). We operate and manage the business as one reporting and one operating segment, which is referred to as the Medicare Advantage segment. Factors used in determining the reportable segment include the nature of operating activities, our organizational and reporting structure, and the type of information reviewed by the CODM to allocate resources and evaluate financial performance. All of our assets are located in the United States.

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Our current assets and current liabilities approximate fair value because of the short-term nature of these financial instruments. Financial instruments measured at fair value on a recurring basis were based upon a three-tier hierarchy as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities

Level 2 - Other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability

Level 3 - Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date

The fair value of cash was determined based on Level 1 inputs. The fair value of deposits of US Treasury bills and certificate of deposits, which were included in restricted and other assets in the condensed consolidated balance sheets, was determined based on Level 2 inputs. There were no assets or liabilities measured at fair value using Level 3 inputs for the three months ended March 31, 2021 and 2020. Our long-term debt was reported at carrying value.

 

10


 

Revenue and Accounts Receivable

Earned premium revenue consisted of premium revenue and capitation revenue as of March 31, 2021 and 2020:

 

 

 

March 31,
2021

 

 

March 31,
2020

 

Premium

 

$

264,713

 

 

$

204,277

 

Capitation

 

 

2,287

 

 

 

19,989

 

 

$

267,000

 

 

$

224,266

 

 

Premium revenue is derived monthly from the federal government based on our contract with the Centers for Medicare and Medicaid Services (“CMS”). In accordance with this arrangement, we assume the responsibility for the outcomes and the economic risk of funding our members’ health care, supplemental benefits and related administration costs. We recognize premium revenue in the month that members are entitled to receive health care services, and premiums collected in advance are deferred. The monthly reimbursement includes a fixed payment per member month (“PMPM”), which is adjusted based on certain risk factors derived from medical diagnoses for our members. The adjustments are estimated by projecting the ultimate annual premium and are recognized ratably during the year, with adjustments each period to reflect changes in the estimated ultimate premium. Premiums are also recorded net of estimated uncollectible amounts and retroactive membership adjustments.

Capitation revenue consists primarily of capitated fees for medical care services provided by us under arrangements with our Third-Party Payors. Under those arrangements, we receive a PMPM payment for a defined member population, and we are responsible for providing health care services to the member population over the contract period. We are solely responsible for the cost of health care services related to the member population and in some cases, we are financially responsible for the supplemental benefits provided by us to the members. We act as a principal in arranging for and controlling the services provided by our provider network and we are at risk for arranging and providing health care services.

The premium and capitation payments we receive monthly from CMS for our members are determined from our annual bid or similarly from Third-Party Payors under our capitation arrangement. These payments represent revenues for providing health care coverage, including Medicare Part D benefits. Under the Medicare Part D program, our members and the members of our Third-Party Payors receive standard drug benefits. We may also provide enhanced benefits at our own expense. We recognize premium or capitation revenue for providing this insurance coverage in the month that members are entitled to receive health care services and any premium or capitation collected in advance is deferred. Our CMS payment related to Medicare Part D is subject to risk sharing through the Medicare Part D risk corridor provisions.

Revenue Adjustments

Payments by CMS to health plans are determined via a competitive bidding process with CMS and are based upon the cost of care in a local market and the average utilization of services by the member enrolled. These payments are subject to periodic adjustments under CMS’ “risk adjustment model,” which compensates health plans based on the health severity and certain demographic factors of each individual member. Members diagnosed with certain conditions are paid at a higher monthly payment than members who are healthier. Under this risk adjustment model, CMS calculates the risk adjustment payment using diagnosis data from hospital inpatient, hospital outpatient, and physician treatment settings. The Company and health care providers collect, capture, and submit the necessary and available diagnosis data to CMS within prescribed deadlines. Both premium and capitation revenues (including Medicare Part D) are subject to adjustments under the risk adjustment model.

Throughout the year, we estimate risk adjustment payments based upon the diagnosis data submitted and expected to be submitted to CMS. Those estimated risk adjustment payments are recorded as an adjustment to premium and capitation revenue. Our risk adjustment data is also subject to review by the government, including audit by regulators.

Our recognized premium revenue for our Medicare Advantage Plans in California, North Carolina and Nevada are each subject to a minimum annual medical loss ratio (“MLR”) of 85%. The MLR represents medical costs as a percentage of premium revenue. The Code of Federal Regulations define what constitutes medical costs and premium revenue, including certain additional expenses related to improving the quality of care provided, and to exclude certain taxes and fees, in each case as permitted or required by CMS and applicable regulatory requirements. If the minimum MLR is not met, we are required to remit a portion of the premiums back to the federal government. The amount remitted, if any, is recognized as an adjustment to premium revenues in the condensed consolidated statements of operations. There were no amounts payable for the MLR as of March 31, 2021 and December 31, 2020, respectively.

Medicare Part D payments are also subject to a federal risk corridor program, which limits a health plan’s overall losses or profit if actual spending for basic Medicare Part D benefits is much higher or lower than what was anticipated. Risk corridor is recorded within

 

11


 

premium revenue. The risk corridor provisions compare costs targeted in our bids or Third-Party Payors’ bids to actual prescription drug costs, limited to actual costs that would have been incurred under the standard coverage as defined by CMS. Variances exceeding certain thresholds may result in CMS or Third-Party Payors making additional payments to us or require us to refund a portion of the premiums we received. We estimate and recognize an adjustment to premiums revenue related to these provisions based upon pharmacy claims experience. We record a receivable or payable at the contract level and classify the amount as current or long-term in our condensed consolidated balance sheet based on the timing of expected settlement.

Receivables, including risk adjusted premium due from the government or through Third-Party Payors, pharmacy rebates, and other receivables, are shown net of allowances for credit losses and retroactive membership adjustments.

Property and Equipment—Net

Depreciation expense is computed using the straight-line method generally based on the following estimated useful lives:

 

Description

 

Estimated Service Lives (years)

Computer and equipment

 

5

Office equipment and furniture

 

5-7

Software

 

3-5

Leasehold improvements

 

15 (or lease term, if shorter)

 

Depreciation expense related to property and equipment used to service our members or at our clinics are included within medical expenses in the condensed consolidated statements of operations.

Medical Expenses and Medical Expense Payable

Medical expense includes claim payments, capitation payments, pharmacy costs net of rebates, allocations of certain centralized expenses, internal care delivery expenses and various other costs incurred to provide health insurance coverage and care to members, as well as estimates of future payments to hospitals and others for medical care and other supplemental benefits provided.

We have contracts with a network of hospitals, physicians, and other providers and compensates those providers and ancillary organizations based on contractual arrangements or CMS Medicare compensation guidelines. We pay these contracting providers either through fee-for-service arrangement in which the provider is paid negotiated rates for specific services provided or a capitation payment, which represent monthly contractual fees disbursed for each member regardless of medical services provided to the member. We are responsible for the entirety of the cost of health care services related to the member population, in addition to supplemental benefits provided by us to our seniors.

Capitation-related expenses are recorded on an accrual basis during the coverage period. Expenses related to fee-for-service contracts are recorded in the period in which the related services are dispensed.

Pharmacy costs represent payments for members’ prescription drug benefits, net of rebates from drug manufacturers. Receivables for such pharmacy rebates are included in accounts receivable in the condensed consolidated balance sheet.

Medical Expenses Payable

Medical expenses payable includes estimates of our obligations for medical care services that have been rendered on behalf of our members and the members of the Third-Party Payors, but for which claims have either not yet been received or processed, loss adjustment expense reserve for the expected costs of settling these claims, and for liabilities related to physician, hospital, and other medical cost disputes.

We develop estimates for medical expenses incurred but not yet paid (“IBNP”) using an actuarial process that is consistently applied and centrally controlled. Medical expenses payable includes claims reported but not yet paid, estimates for claims incurred but not reported, and estimates for the costs necessary to process unpaid claims at the end of each period. We estimate our medical claims liability using actuarial methods that are commonly used by health insurance actuaries and meet Actuarial Standards of Practice. These actuarial methods consider factors, such as historical data for payment patterns, cost trends, product mix, seasonality, utilization of health care services, and other relevant factors. Each period, we re-examine previously established medical expense payable estimates based on actual claim submissions and other changes in facts and circumstances. As the medical expenses payable estimates recorded in prior periods develop, we adjust the amount of the estimates and include the changes in estimates in medical expenses in the period in which the change is identified.

 

12


 

Actuarial Standards of Practice generally require that the medical claims liability estimates be adequate to cover obligations under moderately adverse conditions. Moderately adverse conditions are situations in which the actual claims are expected to be higher than the otherwise estimated value of such claims at the time of estimate. In many situations, the claims amount ultimately settled will be different than the estimate that satisfies the Actuarial Standards of Practice. We include in our IBNP an estimate for medical claims liability under moderately adverse conditions, which represents the risk of adverse deviation of the estimates in our actuarial method of reserving. We believe that medical expenses payable is adequate to cover future claims payments required. However, such estimates are based on knowledge of current events and anticipated future events. Therefore, the actual liability could differ materially from the amounts provided.

We reassess the profitability of contracts for providing coverage to members when current operating results or forecasts indicate probable future losses. A premium deficiency reserve is established in current operations to the extent that the sum of expected future costs, claim adjustment expenses, and maintenance costs exceed related future premiums under contracts without consideration of investment income. For purposes of determining premium deficiencies, contracts are grouped in a manner consistent with the method of acquiring, servicing, and measuring the profitability of such contracts. Losses recognized as a premium deficiency result in a beneficial effect in subsequent periods as operating losses under these contracts are charged to the liability previously established.

Part D Subsidies

We also receive advance payments each month from CMS related to Catastrophic Reinsurance, Coverage Gap Discount, and the Low-Income Member Cost Sharing Subsidy (“Subsidies”). Reinsurance subsidies represent funding from CMS for our portion of prescription drug costs, which exceed the member’s out-of-pocket threshold or the catastrophic coverage level. Low-income cost subsidies represent funding from CMS for all or a portion of the deductible, the coinsurance and co-payment amounts above the out-of-pocket threshold for low-income beneficiaries. Additionally, the Health Care Reform Law mandates consumer discounts of 75% on brand-name prescription drugs for Part D plan participants in the coverage gap. The majority of the discounts are funded by the pharmaceutical manufacturers, while we fund a smaller portion and administer the application of the total discount. These Subsidies represent cost reimbursements under the Medicare Part D program and are recorded as deposits.

These Subsidies received in excess of, or less than, actual subsidized benefits paid are refundable to or recoverable from CMS through an annual reconciliation process following the end of the contract year.

Shared Risk Reserve Arrangements

We established a fund (also referred to as “a pool”) for risk and profit-sharing with various independent physician associations (“IPAs”). The pool enables us and our IPAs to share in the financial responsibility and/or upside associated with providing covered medical expenses to our members. The risk pool is based on a contractually agreed upon medical budget, typically based upon a percentage of revenue. If actual medical expenses are less than the budgeted amount, this results in a surplus. Conversely, if actual medical expenses are greater than the budgeted amount, this results in a deficit. We will distribute the surplus, or a portion thereof, to each IPA based upon contractual terms. Deficits are charged to shared risk providers’ risk pool as per the contractual term and evaluated for collectability at each reporting period.

We record risk-sharing receivables and payables on a gross basis on the condensed consolidated balance sheet. Throughout the year, we evaluate expected losses on risk-sharing receivables and record the resulting expected losses to the reserve. We systematically build and release reserves based on adequacy and its assessment of expected losses on a monthly basis. Credit loss associated with risk share deficit receivables are recorded within medical expense in the condensed consolidated statements of operations. As of March 31, 2021 and December 31, 2020, we recorded a valuation allowance for substantially all of the risk-sharing receivable balance due to collection risk related to the balance. The risk-sharing payable is included within medical expenses payable on the condensed consolidated balance sheet.

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash deposits and restricted investments with financial institutions. Accounts at each financial institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to certain limits. At March 31, 2021 and December 31, 2020, there was $525,983 and $205,882, respectively in excess of FDIC-insured limits.

Industry Tax

Section 9010 of the Patient Protection and Affordable Care Act imposes an annual, nondeductible insurance industry tax (“Industry Tax”), which is levied proportionately across the insurance industry for risk-based products. The Industry Tax was estimated

 

13


 

based on a ratio of our net premiums written compared to the US Health insurance total net premiums. The Industry Tax was $3,343 for the three months ended March 31, 2020 and was reported as selling, general and administrative expenses. The Industry Tax has been repealed for calendar years beginning after December 31, 2020.

Equity-Based Compensation

Equity-based compensation expense is measured and recognized based on the grant date fair value of the awards. The grant date fair value of stock options is estimated using the Black-Scholes option pricing model. The grant date fair value of Restricted Stock Units (“RSUs”) and Restricted Stock Awards (“RSAs”) is estimated based on the fair value of our underlying common stock.

The Black-Scholes option pricing model requires the use of highly subjective assumptions, including the award’s expected term, the fair value of the underlying common stock, the expected volatility of the price of the common stock, risk-free interest rates, and the expected dividend yield of the common stock. The assumptions used to determine the fair value of the stock-based awards are management’s best estimates and involve inherent uncertainties and the application of judgment. The expected term represents the period the stock-based awards are expected to be outstanding. As we do not have sufficient historical experience for determining the expected term of the stock option awards granted, it was on the simplified method available under U.S. GAAP. As we do not have trading history, volatility assumptions were developed using the historical volatilities of a set of peer companies, adjusted for debt-equity leverage. Equity-based compensation expense for awards with service-based vesting only is recognized on a straight-line basis over the requisite service period of the awards, which is generally four years. We account for forfeitures as they occur.

Additionally, prior to the IPO, the Parent had granted its Class B and Class C units to certain of our executives and board members ("Incentive Units") and had also approved the Company’s Stock Appreciation Rights (“SARs”) Plan. Upon the IPO, SARs were modified and concurrently were, partially settled in cash and partially settled with issuance of common stock, a portion of which is restricted as discussed in Note 10 below.

During March of 2021, we also amended certain of our contracts with third-party business partners and agreed to issue shares of common stock at the IPO price, in consideration for the discharge of certain contingent payment obligations under such agreements ("Stock Payment") as discussed in Note 10.

Equity-based compensation is recorded within selling, general and administrative expense, and medical expenses based on the function of the applicable employee and non-employee.

Net Loss per Share

The numerator for basic net loss per share is calculated as the net loss for the three months ended March 31, 2021 and 2020, respectively. The denominator for basic net loss per share is determined as the weighted-average number of unrestricted common shares outstanding during the period ended March 31, 2021 and 2020, respectively.

The following table sets forth the computation of basic and diluted net loss per share for the three months ended March 31, 2021 and 2020:

 

 

 

March 31, 2021

 

 

March 31, 2020

 

Numerator:

 

 

 

 

 

 

Net loss attributable to common stockholders

 

$

(56,874

)

 

$

(10,072

)

Denominator:

 

 

 

 

 

 

Total weighted-average common shares outstanding - basic and diluted

 

 

165,611,120

 

 

 

152,916,985

 

Less: Restricted shares of common stock

 

 

11,179,093

 

 

 

12,152,789

 

Total weighted-average common shares outstanding, net of restricted shares of
    common stock - basic and diluted

 

 

154,432,027

 

 

 

140,764,196

 

Net loss per share:

 

 

 

 

 

 

Net loss per share - basic and diluted

 

$

(0.37

)

 

$

(0.07

)

 

Basic net loss per share is the same as diluted net loss per share as the inclusion of all potentially dilutive shares would have been anti-dilutive.

 

14


 

In addition to the restricted shares of common stock, we also excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the three months ended March 31, 2021 and 2020:

 

 

 

March 31, 2021

 

 

March 31, 2020

 

Stock options

 

 

11,123,391

 

 

 

 

Restricted stock units

 

 

1,517,000

 

 

 

 

Total

 

 

12,640,391

 

 

 

 

Emerging Growth Company Status

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

As described in “Recent Accounting Pronouncements Adopted” and “Recent Accounting Pronouncements Not Yet Adopted” below, we early adopted certain accounting standards, as the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies. We expect to use the extended transition period for any other new or revised accounting standards during the period in which it remains an emerging growth company.

Recent Accounting Pronouncements Adopted

On January 2021, we early adopted Accounting Standards Update (“ASU”) No. 2017-04, Simplifying the Test for Goodwill Impairment. This ASU eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. A goodwill impairment charge would be recognized if the carrying amount of a reporting unit exceeds the estimated fair value of the reporting unit. This guidance did not have a material impact to our condensed consolidated financial statements.

On January1, 2021, we adopted ASU No. 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities, which provides clarification on determining whether a decision-making fee is a variable interest. This ASU requires reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety. This guidance did not have a material impact to our condensed consolidated financial statements.

On January1, 2021, we adopted ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalization implementation costs incurred in a hosting arrangement that is a service contract with the requirement for capitalizing implementation costs incurred to develop or obtain internal-use software. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement. New disclosures are required. This guidance did not have a material impact to our condensed consolidated financial statements. 

3. Fair Value

US Treasury bills and certificate of deposits are reported at amortized costs which is equivalent to fair value. The following tables present the carrying value and fair value of these financial instruments as of March 31, 2021 and December 31, 2020:

 

 

 

March 31, 2021

 

 

 

 

 

 

Fair Value

 

 

 

Carrying
Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

US Treasury bills

 

$

325

 

 

$

 

 

$

325

 

 

$

 

Certificate of deposits

 

 

1,116

 

 

 

 

 

 

1,116

 

 

 

 

Total

 

$

1,441

 

 

$

 

 

$

1,441

 

 

$

 

 

 

15


 

 

 

 

December 31, 2020

 

 

 

 

 

 

Fair Value

 

 

 

Carrying
Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

US Treasury bills

 

$

325

 

 

$

 

 

$

325

 

 

$

 

Certificate of deposits

 

 

1,115

 

 

 

 

 

 

1,115

 

 

 

 

Total

 

$

1,440

 

 

$

 

 

$

1,440

 

 

$

 

 

The carrying value of long-term debt represents the outstanding balance, net of unamortized debt issuance costs. As of March 31, 2021, the carrying value and fair value of our long-term debt was $145,734 and $150,754, respectively. As of December 31, 2020 the carrying value and fair value of our long-term debt was $144,168 and $149,965, respectively.

The fair value of our long-term debt is classified as a Level 3 financial instrument because certain inputs used to determine its fair value are not observable. The fair value was estimated using a discounted cash flow (“DCF”) methodology. The discount rate used in the DCF model was estimated based on a synthetic credit rating analysis for us, and a screening of market data to identify market yields of instruments within the range of identified credit ratings and with otherwise similar features.

Our nonfinancial assets and liabilities, which include goodwill, intangible assets, property, and equipment, are not required to be measured at fair value on a recurring basis. However, on a periodic basis, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable, we assess these assets for impairment. No such impairment resulted during the three months ended March 31, 2021 and 2020.

4. Accounts Receivable

Accounts receivable consisted of the following as of March 31, 2021 and December 31, 2020:

 

 

 

March 31,
2021

 

 

December 31,
2020

 

Government receivables

 

$

18,828

 

 

$

10,392

 

Pharmacy rebates

 

 

28,512

 

 

 

25,888

 

Other receivables

 

 

2,126

 

 

 

3,860

 

Total accounts receivable

 

 

49,466

 

 

 

40,140

 

Allowance for credit losses

 

 

(8

)

 

 

 

Accounts receivable, net

 

$

49,458

 

 

$

40,140

 

 

The allowance for expected credit losses for accounts receivable is based primarily on past collections experience relative to the length of time receivables are past due. However, when available evidence reasonably supports an assumption that future economic conditions will differ from current and historical payment collections, an adjustment is reflected in the allowance for expected credit losses. We record pharmacy rebates and other receivables based on contractual terms and expected collections and our estimation process for contractual allowances for such balances generally results in an allowance for balances outstanding greater than 90 days or if expected credit risks are known.

Receivables and any associated allowance are written off only when all collection attempts have failed and such amounts are determined unrecoverable. We regularly review the adequacy of these allowances based on a variety of factors, including age of the outstanding receivable and collection history. When circumstances related to specific collection patterns change, estimates of the recoverability of receivables are adjusted. Because substantially all of our receivable amounts are readily determinable and a large portion of our creditors are governmental authorities, our allowance for credit losses is insignificant.

We recorded credit loss related to accounts receivable of $8 and $10 during the three months ended March 31, 2021 and 2020, respectively. The amount was recorded in selling general, and administrative expense in the condensed consolidated statements of operations.

 

16


 

5. Property and Equipment

Property and equipment consisted of the following as of March 31, 2021 and December 31, 2020:

 

 

 

March 31,
2021

 

 

December 31,
2020

 

Computers and equipment

 

$

8,608

 

 

$

8,309

 

Office equipment and furniture

 

 

4,380

 

 

 

4,363

 

Software

 

 

84,168

 

 

 

79,204

 

Leasehold improvements

 

 

6,116

 

 

 

6,083

 

Construction in progress

 

 

1,500

 

 

 

1,893

 

Subtotal

 

 

104,772

 

 

 

99,852

 

Less accumulated depreciation

 

 

(76,369

)

 

 

(72,707

)

Property and equipment-net

 

$

28,403

 

 

$

27,145

 

 

Depreciation expense for the three months ended March 31, 2021, was $3,707, of which $52 was included in medical expenses. Depreciation expense for the three months ended March 31, 2020, was $3,588, of which $105 was included in medical expenses.

6. Goodwill and Intangible Assets

Intangible assets consisted of the following as of March 31, 2021 and December 31, 2020: 

 

 

 

March 31, 2021

 

 

Gross Carrying Value

 

 

Accumulated Amortization

 

 

Net Carrying Value

 

 

Weighted Average Life

Goodwill

 

$

29,303

 

 

$

 

 

$

29,303

 

 

License (indefinite lived)

 

 

4,500

 

 

 

 

 

 

4,500

 

 

Plan member relationships

 

 

2,700

 

 

 

2,103

 

 

 

597

 

 

9 years

Other

 

 

633

 

 

 

470

 

 

 

163

 

 

2 - 10 years

 

$

37,136

 

 

$

2,573

 

 

$

34,563

 

 

 

 

 

 

December 31, 2020

 

 

Gross Carrying Value

 

 

Accumulated Amortization

 

 

Net Carrying Value

 

 

Weighted Average Life

Goodwill

 

$

29,303

 

 

$

 

 

$

29,303

 

 

License (indefinite lived)

 

 

4,500

 

 

 

 

 

 

4,500

 

 

Plan member relationships

 

 

2,700

 

 

 

2,034

 

 

 

666

 

 

9 years

Other

 

 

633

 

 

 

457

 

 

 

176

 

 

2 - 10 years

 

$

37,136

 

 

$

2,491

 

 

$

34,645

 

 

 

 

Amortization expense relating to intangible assets for the three months ended March 31, 2021 and 2020, was $82. Estimated amortization expense relating to intangible assets for each of the next five years ending December 31, is as follows:

 

Remainder of 2021

 

$

245

 

 2022

 

 

327

 

 2023

 

 

166

 

 2024

 

 

22

 

Thereafter

 

 

 

 

 

$

760

 

 

There were no impairment charges related to goodwill and intangible assets for the three months ended March 31, 2021 and 2020.

 

17


 

7. Medical Expenses Payable

The following table is a detail of medical expenses payable at March 31, 2021 and December 31, 2020:

 

 

 

March 31,
2021

 

 

December 31,
2020

 

Claims incurred but not paid

 

$

81,337

 

 

$

82,391

 

Capitation payable, risk-sharing payable, and other

 

 

47,336

 

 

 

30,214

 

 

$

128,673

 

 

$

112,605

 

 

Each period, we re-examine previously established outstanding claims reserve estimates based on actual claims submissions and other changes in facts and circumstances. As more complete claim information becomes available, we adjust the amount of the estimates and include the changes in estimates in claim costs in the period in which the change is identified. Substantially, all of the total claims paid by us are known and settled within the first year from the date of service, and substantially, all remaining claim amounts are paid within a three-year period.

The following table presents components of the change in medical expenses payable as of March 31, 2021 and 2020:

 

 

 

March 31,
2021

 

 

March 31,
2020

 

Claims incurred but not paid - beginning balance

 

$

82,391

 

 

$

83,939

 

Incurred related to:

 

 

 

 

 

 

Current year

 

 

83,223

 

 

 

70,693

 

Prior years

 

 

(3,745

)

 

 

(7,078

)

Total incurred, net of reinsurance

 

 

79,478

 

 

 

63,615

 

Payments related to:

 

 

 

 

 

 

Current year

 

 

22,746

 

 

 

25,825

 

Prior years

 

 

57,786

 

 

 

49,547

 

Total payments, net of reinsurance

 

 

80,532

 

 

 

75,372

 

Claims incurred but not paid - ending balance

 

 

81,337

 

 

 

72,182

 

Other medical expenses payable

 

 

47,336

 

 

 

28,447

 

Total medical expenses payable

 

$

128,673

 

 

$

100,629

 

 

In March 2020, the COVID-19 outbreak was declared a pandemic. The COVID-19 virus disproportionately impacts older adults, especially those with chronic illnesses, which describes many of the seniors we serve. For the three months ended March 31, 2021, we experienced higher claims costs due to COVID-19 related inpatient admissions in the first half of the quarter. The ultimate impact of COVID-19 to us and our financial condition is presently unknown and we continue to monitor the impact of COVID-19 on our claims reserve estimate.

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