Home » World News » Clover Health laid out ambitious growth plans as part of its $3.7 billion deal, but they rely on an untested new Medicare experiment
Clover Health laid out ambitious growth plans as part of its $3.7 billion deal, but they rely on an untested new Medicare experiment
The Social Capital SPAC led by billionaire Chamath Palihapitiya is acquiring Clover Health in a $3.7 billion deal that'll take the health insurance company public.
In 2021, Palihapitiya projects the company will grow its membership roughly five times what it was this year.
Clover Health president and chief technology officer Andrew Toy said that projected growth largely comes from the potential participation in a new Medicare program that's yet to be finalized.
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Social Capital's Chamath Palihapitiya is looking to acquire the health insurance company Clover Health via a SPAC.
The special-purpose acquisition company Social Capital Hedosophia Holdings Corp. III will merge with Clover in a $3.7 billion transaction that's slated to close in 2021, the companies said in a statement.
Clover offers private health-insurance plans for seniors, a product called Medicare Advantage. Competition is fierce for the more than 24 million Americans enrolled in Medicare Advantage plans, and for the thousands signing up daily as they turn 65. Startups like Clover are facing off against industry giants like UnitedHealthcare, Humana, and Aetna.
In a tweet Tuesday, Palihapitiya laid out his expectations of growth for Clover. By 2021, Clover's membership is projected to be 273,000 people, roughly five times what it was at the middle of this year. Clover. That in turn would lead to revenue of $880 million, roughly double the company's 2019 figures. Bloomberg News first reported that Clover was in talks to go public via the SPAC earlier on Tuesday.
The rapid expansion contrasts with the slower growth Clover has seen over the past few years.
Clover enrolled 39,400 members in 2019, 10,000 more than the year before. It signed on 54,400 people this year, according to Business Insider's reporting. As of the end of June, Clover's Medicare Advantage plans had 56,816 members.
A large part of that projected growth will come from Clover's plan to participate in Medicare's direct contracting program. The new program is a test to find new ways to lower costs for the federal Medicare program, drawing in part from lessons learned through Medicare Advantage, in which insurers apply to participate.
In an investor presentation, Clover said that it has already agreed to care for 200,000 seniors through the direct contracting program next year, and it expects that will grow to 450,000 by 2023. By contrast, it estimates it will cover 139,000 Medicare Advantage members that year.