Good day, and thank you for standing by. Welcome to Clover Health's Third Quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now like to hand the conference over to your first speaker today, Derrick Nueman, Vice President of Investor Relations. Thank you. Please go ahead.

Good afternoon, everyone. Joining me on the call today is our CEO, Vivek Garipalli; our President and CTO, Andrew Toy; and our interim CFO, Mark Herbers. We will discuss third quarter results, recent trends, and answer your questions. The call today is being recorded. Before we get started, I would like to remind you that our third quarter earnings materials, including the release, are available on our website cloverhealth.com. I'd also like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause the actual results to differ materially from expectations are detailed in our SEC filings, including the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2020, and in our periodic SEC filings, including our quarterly report on Form 10-Q for the quarter ended September 30, 2021. Information about non-GAAP financial measures referenced, including a reconciliation of those measurement to GAAP measures, can also be found in the earnings materials available on our website. With that, I will now turn over the call to Vivek.

Thanks, Derrick. And thanks everyone for joining us today. Clover's wide network and Clover Assistant platform helped drive record growth in the third quarter and was complemented by a significant decrease in MCR. We believe our technology enables us to deliver lower-cost plans without compromising access or quality, while also addressing head-on one of the most important public policy issues: equity. Our mission to improve every life is firmly on track, as is our objective to create a healthcare company that is sustainable for all of our stakeholders. We serve a broader variety of communities than is typical in Medicare Advantage. Approximately 66% of our members live in communities in the top half of the area deprivation index, and approximately 49% of our members who self-identify are minorities. And we are proud that we have been identified as a high-performing Medicare Advantage plan based on a prototype of the health equity summary score. We published an extensive white paper on Friday that details how our approach works to create a more equitable healthcare system, and I strongly recommend you all read it. Getting into the key highlights from the quarter. Our revenue was $427 million, up 153% year-over-year. Lives under Clover management more than doubled year-over-year due to the launch of direct contracting, and our Medicare Advantage business continued to grow well above industry averages. Our GAAP MA MCR improved by 850 basis points compared to the second quarter, and we saw a similar improvement in direct contracting, where we are nearing break-even margins. The Clover Assistant continues to be a differentiator with a Medicare Advantage MCR differential of over 1000 basis points for returning members who see a Clover Assistant primary care provider compared to those who do not. And we're doing this while operating on a wide network and driving a positive impact on health equity. With more minority or underserved beneficiaries than typical Medicare providers of scale, Clover is building a next-generation healthcare company centered around technology and physician enablement, which we believe gives us access to a much larger serviceable addressable market in Medicare than our competitors have. This has helped us drive significant year-over-year growth in revenue and lives under management in both Medicare Advantage and original Medicare fee-for-service. We believe we can pursue the full potential of the trillion-dollar Medicare market as evidenced by our ability to use the Clover Assistant in both the Medicare Advantage market and the fee-for-service market via direct contracting. Our wide-open network provides us with the ability to grow in geographic areas most traditional incumbents and new upstarts have historically avoided. This is important as we think about sustainable growth, not just in the next year or two, but also over the next 5-10 years as we continue to increase physician access while driving more affordability and improved clinical decision-making. A recent proof point that our approach is working is the recent upgrade of our Medicare Advantage PPO plan to 3.5 stars. We were able to accomplish this in spite of operating on a wide network and with a minority member population that is significantly higher than average. Not only does the stars upgrade highlight our approach and operational execution, but it will also have a significant financial benefit in 2023. Our focus is now towards achieving 4.0 stars, something which we are striving to accomplish in measurement year 2022. While I'm proud of our recent results and the stars upgrade, I'm equally excited about how Medicare policy is evolving to support our approach. First, COVID-19 has focused policymakers on improving health equity for the Medicare population. Clover is a leader in health equity; nearly 50% of our members who self-identify are minorities, and we were identified as a high-performing Medicare Advantage plan based on a prototype of the Medicare Advantage health equity summary score. Second, we expect there will be increased scrutiny on practices that increase incentives towards the risk adjustment factor, directly or indirectly, ranging from full capitation to employment-based models and also narrow network models. Clover's model is designed to ensure that our payment model focuses on clinical value with zero incentives for increased coding. We vigorously support any policy proposals that create dramatically heightened rigor around risk adjustment, especially when it comes to perverse incentives. Finally, we believe there will be growth challenges for narrow network plans as we discussed earlier. Clover Assistant's ability to support care management on a wide-open network is a true differentiator, which unlocks populations that are not financially attractive for competitors. Another validation of our approach is demonstrated by the growth of the PPO market, which in Medicare Advantage has grown at a roughly double the CAGR compared to the HMO markets since 2016. This is important as the highlights that we're competing in the right part of Medicare Advantage. In short, we believe Clover's ability to improve healthcare for a broader swath of Medicare eligibles reaffirms our approach and our massive long-term potential. With that, let me hand over the call to Andrew to talk about Clover Assistant and specifics around how it is driving a difference.

Thanks Vivek. I am similarly proud of the results we reported this quarter. As a reminder, our vision is to transform healthcare through personalized, data-driven primary care powered by the Clover Assistant. And unlike most other approaches, the Clover Assistant allows us to manage that care over a wide-open network of physicians that provide broad flexibility and choice to our Clover members. After Clover Assistant evolves, we believe it will continue to help drive better outcomes for all constituents: physicians, patients, and the government. We are absolutely focused on developing and shipping Clover Assistant features to improve physician enablement through our wide network, driving things like care gap closure, personalized evidence-based medication recommendations, earlier novel diagnoses, and care planning, all of which we believe lead to better outcomes for Clover members at lower cost to society. This is best highlighted by the fact that Medicare Advantage members with Clover Assistant primary care providers had an MCR that was over 1000 basis points lower than those with a non-Clover Assistant primary care provider. Further, we believe the impact of the Clover Assistant compounds over time. During 2021, members with primary care providers that went live on Clover Assistant in 2019 have had a lower MCR than members of primary care providers who went live on Clover Assistant in 2020. The corresponding 2018 cohort had a lower MCR than the 2019 cohort. Additionally, the differential between the 2018 cohort and the non-Clover Assistant primary care provider cohort was significant at over 1,500 basis points, highlighting the value of the Clover Assistant. In short, our data suggests that the longer a primary care provider uses the Clover Assistant for care management, the lower the MCR of that patient. The important point is that we will continue to focus on executing on our strategy: deploying Clover Assistant, continuing to roll out features that make it easier for primary care providers to make data-driven care decisions, and driving other operational milestones such as around starts. Another key statistic is that lives under Clover Assistant management grew 223% year-over-year to approximately 94,000. This was driven by an increase in the number of clinicians that use the Clover Assistant to approximately 2,900 in the third quarter, up approximately 45% from a year ago. And we expect this to increase as many new direct contracting providers come onto our platform on January 1st. We are also increasing engagement. The Clover Assistant has surfaced approximately $1.3 million in production recommendations since its launch, and Clover Assistant visits grew 73% year-over-year in the third quarter. This is important as these visits and physician interactions provide us with a feedback loop to help us constantly improve the platform. Over the past quarter, we also began the rollout of a significant update to the Clover Assistant aimed at improving primary care physician workflows and adding interoperability features enabling the Clover Assistant to integrate with electronic health record systems. We intend to further develop these features, including key capabilities around single sign-on, chart integration, and other features that we believe will drive up engagement even further by improving physician quality of life. We've also launched an exciting new feature to enable primary care providers to have easy access to care management support services around oncology. We believe this is a really powerful capability of the Clover Assistant, where we can leverage our high engagement with primary care providers and put advanced care management capabilities provided by experts at their fingertips. Oncology is the first area we are supporting, and we plan to continue to launch similar capabilities to cover additional conditions. To close, I believe the Clover Assistant is working as envisioned on our wide network. The rollout and upgrade to our latest major release of Clover Assistant is almost complete, and this new framework will allow us to roll out clinical features even more quickly. Our software-based scaling model allows us to target underserved segments in Medicare Advantage, expand our direct contracting entity faster than most, and achieve synergies with physicians who benefit from rolling Clover Assistant out to both Medicare Advantage and direct contracting, often simultaneously. With that, I will now hand it to Mark for the financial update.

Thanks, Andrew. We delivered $427 million in revenue in the third quarter, up 153% year-over-year. This growth was driven by the launch of direct contracting and growth in our Medicare Advantage membership. As of quarter end, we now have approximately 129,100 lives under Clover management, roughly doubled from the third quarter of 2020. This is comprised of Medicare Advantage membership and direct contracting lives of 67,281 and 61,818 respectively. Moving to MCR, our net medical claims incurred for the quarter were $436 million, down from last quarter, and up year-over-year primarily due to the inclusion of direct contracting. Our Medicare Advantage GAAP MCR was 102.5%, down 850 basis points from the second quarter. The sequential decrease was driven largely by operational efficiencies, a decline in direct COVID costs, and seasonal trends. Also, our non-GAAP normalized Medicare Advantage MCR was 94.8%, down 150 basis points as compared to the second quarter. We also recognized a premium deficiency reserve in the quarter equating to an expense of $20.8 million. Direct contracting net medical claims incurred on a GAAP basis were $228 million, and our margin improved significantly in our second quarter of operation to 102.4%. Excluding direct COVID costs and prior-period development, the non-GAAP adjusted direct contracting margin was 101.4%, which puts us near break-even and represents a significant improvement over last quarter. Third quarter non-GAAP adjusted operating expenses, which excludes non-cash stock-based compensation, from salaries and benefits plus general and administrative expenses were $72.3 million, representing 17% of total revenues, compared to $45 million and 27% of total revenues in the third quarter of 2020. We expect adjusted operating expenses to become a smaller portion of revenue as we grow and drive efficiencies, which is a key focus in our 2022 operating strategy. Our adjusted EBITDA loss for the third quarter was $102.3 million compared to $138.7 million in the second quarter and $20 million in the year-ago quarter. After excluding gross loss from direct contracting and normalizing our Medicare Advantage business for the MCR impact of COVID, our normalized adjusted EBITDA loss for the quarter was $61.1 million. Our GAAP net loss for the quarter was $34.5 million compared to net income of $12.8 million for the third quarter of 2020. This included a non-cash benefit of $115.2 million relating to a change in the fair value of the warrant liability. Clover had approximately 414.6 million shares outstanding at the end of the third quarter, including an additional 9.4 million shares related to our redemption. Our cash, cash equivalents, and investments totaled $588.6 million as of September 30, 2021. Now, moving to guidance. For the full year 2021, total revenues are expected to be in the range of $1.42 billion to $1.47 billion. This reflects Medicare Advantage revenue of $780 million to $790 million, and Medicare direct contracting revenue of $640 million to $680 million. Medicare Advantage membership is expected to be in the range of 67,300 to 68,000 by December 31, 2021. Direct contracting beneficiaries are expected to remain roughly flat for the remainder of the year. Normalized non-GAAP MCR for Medicare Advantage, which again adjusts for the impacts of COVID-19, is expected to be in the range of 94% to 96% for the full year 2021. We estimate full-year non-GAAP adjusted operating expenses, which excludes stock-based compensation expenses, will be between $270 million and $280 million. Non-GAAP normalized adjusted EBITDA loss is expected to be in the range of $250 million to $230 million. Wrapping up, we had a good quarter with strong revenue growth, lower medical expenses, and significant operational execution and planning, which will benefit us in future quarters. I'm going to pass the call back to Vivek in a minute, but first, I just want to quickly clarify something I said in my prepared remarks and make one final comment. I misspoke earlier; the non-cash benefit relating to a change in the fair value of the warrant liability was actually $115.2 million, not $134.5 million as previously mentioned. And we had approximately 420.6 million shares outstanding at the end of the third quarter, which includes the additional 9.4 million shares related to our warrant redemption. Finally, I just want to reiterate that we improved our GAAP Medicare Advantage MCR by 850 basis points in Q3 compared to Q2 as our MCR is reverting to the mean. In contrast, other public companies that have reported as of today have reported plus or minus approximately 100 basis points change quarter-over-quarter, with an overall average of up 31 basis points. We believe this highlights that our MCR is reverting to the mean and that our core New Jersey market has had more variability than most other markets. Vivek will now provide some details on 2022 around Medicare Advantage and overall expected operating efficiencies.

Thank you, Mark. Before taking questions, I just wanted to provide some high-level thoughts on 2022, mostly focused around our Medicare Advantage business. We expect another strong year of above-market growth driven by continued Medicare Advantage success and our second year of direct contracting. For Medicare Advantage, we preliminarily expect our membership to average 82,000 for the full year next year, representing an acceleration in year-over-year growth to more than 20%. This is being driven by continued market share gains in New Jersey and strong growth in Georgia, where we expect to double members to a projected 2022 average of 8,500. In direct contracting, we expect significant growth in 2022, up from current levels and plan to provide more details as expected lives are finalized. Similar to this year, almost all growth will come through claims. At the same time, we expect meaningful reductions in MCR as we drive continued clinical program enhancements, improved risk scores, and as COVID-19 becomes less of a direct and indirect impact. We expect this to lead to Medicare Advantage GAAP MCR in the range of 95% to 99% and an improved direct contracting margin, both of which are well below where we've been throughout 2021. Further, as we look beyond 2022, we expect 3.5 stars to have a meaningful impact on 2023 Medicare Advantage MCR, and we currently expect that impact to be in the range of 300 to 500 basis points. Importantly, the potential achievement of 3.5 stars to 4.0 stars would have an even higher future benefit to Medicare Advantage MCR than the movement from 3.0 to 3.5 stars. Finally, despite the COVID impact this year, Clover has made significant strides in its planning towards achieving profitability. As we head into the new year, we are excited about our planning process focused on the following three phases: First, leverage our position-centric model, which will create unique operating cost synergies across multiple lines of business. Second, continued favorable negotiations with vendors who see business value in Clover as a partner. And third, leverage human-assisted automation technology to achieve efficiencies that are unique to Clover's organic growth. We believe we'll make significant progress over the next 18 months. That will also show in our operating margin over time. We believe we are executing on our mission to improve every life, and that our results this past quarter are early proof points of that execution. Before we get to questions, a reminder that we published an extensive white paper on Friday that details how our approach works to create a more equitable healthcare system. I strongly recommend that you all read it. With that, let's take questions.

Thank you, sir. As a reminder, we will now begin the question-and-answer session. As we've done in the past, we will be taking questions first from analysts, followed by reading and answering questions received from Reddit. To all participants, standby while we compile the Q&A roster. Your first question is from Kevin Fischbeck with Bank of America. Your line is open.

Okay. Great, thanks. I guess looking at the 2022 guidance, I guess when I think about the normalized Medicare Advantage MCR that your guidance for this year, I kind of think that the GAAP Medicare Advantage MCR for next year should be comparable, but you are looking for MLR to peak up next year on that basis. Is there something we should be thinking about as far as next year's GAAP MLR, or is there a reason why MLR would be higher than the normalized MLR this year?

So we've embedded next year a few hundred basis points of potential COVID costs. This is helpful. Is that just pro rata, or do you believe more in the first half of the year or any color on that?

Okay, that's helpful. Is that just pro rata or do you believe more in the first half of the year or any color on that?

Yeah, I think we didn't attempt to make assumptions as to how COVID costs would trend next year. So we did a reasonable estimate throughout next year, and we think we're pretty modest in terms of how we've assumed impact to clinical program enhancements and risk adjustment. The goal was to really put forward what we felt really comfortable as an estimate, and we feel really good about it. And at the same time, as we mentioned, Kevin, none of us really know what is going to be the impact of COVID next year, or at the same time, we thought it was appropriate to embed some reasonable assumptions based into next year's numbers. So I wouldn't view next year's GAAP estimates as normalized. So we're still assuming there'd be a meaningful spread between Medicare Advantage GAAP MCR next year and normalized Medicare Advantage MCR next year. And that's why we've focused just on GAAP projection for next year.

Okay, but is there a way to think about that? It sounds like in the commentary was that you expect improvement. I wasn't clear with what you were just saying: improvement versus this year's GAAP MA, MCR or do you expect that GAAP versus less for 2021 normalized as relatively flattish, or do you think it will actually show improvement of the normalizing in 2022?

Yes. So we purposefully showed GAAP for next year as part of our guidance. And so we're comparing GAAP to GAAP, so just from an expectations perspective, we think it makes sense to stick to GAAP is really to project the guidance. But our goal would be to surface normalized MCR numbers as we report next year. But to be clear, we did bake in a few hundred basis points of COVID impact next year.

Okay, that's helpful. And then I guess as we think about the direct contracting performance, why do you think that it is that the leverage of growth is still going to be driven largely by direct attribution? Are there structural reasons why, or is it a delay in getting the other kind, or how should we think about that?

I know there's a lot of discussion around voluntary alignment models. However, the public policy intent of direct contracting was not primarily focused on voluntary alignment. Claims alignment should be the main driver for direct contracting. We believe that this will be closely examined from a policy standpoint. The goal of voluntary alignment is to accommodate those who are switching practices for better data access during the year or those who are aging into Medicare. I can’t comment on the models of other organizations, but fundamentally, claims alignment should account for the majority of enrollment. Voluntary alignment tends to stabilize over the year in relation to those who leave a practice or due to mortality. As we mentioned earlier, once the life numbers are finalized, we plan to share that guidance, and we are optimistic about the DCE growth from this year into January 1 next year.

Okay. And I guess the membership numbers for next year, if you are looking for largely in line with what we were expecting, but I guess maybe if any color? I know last year you talked about how COVID disrupted some of the in-person marketing, and just maybe give some commentary about how you are feeling about the in-person marketing versus the more online and telephonic broker engagement?

Yes. So, we frame it in kind of two different ways. We believe that in terms of paying for digital leads, it's not an area that we focus on. We know many or most competitors pay a lot of money for digital leads. Our reluctance with that has been a very high growth rate, 20% to 30% compounded growth rate on digital lead costs over the last 3, 4 years; we have not. So all of our growth is what we'll call pure Medicare Advantage growth, so driven by field sales, which obviously was impacted last year, a bit this year in terms of what we'll see, I think, but definitely a meaningful recovery for the last year. And then just inbound calls from Clover marketing, and that's been affected as well. I think that as we described in the guidance part, New Jersey has been our main market for many years. We're very unusual in the sense that there are very few Medicare Advantage plans across the country that have gotten to as large a market share, and a significant market like Clover.

And then maybe the last question that slide with the bridge to longer-term MLR improvements helpful. Should we think about stars improvements leading to MLR improvement that way? Or is there some balance of reinvestment back into benefits over time as you get the stars?

I think it's fair to say that we shared the graph of the year reflecting the year-to-date through September 30, 2021, along with the long-term pro forma and the MCR graph in the earnings release. From a modeling perspective, I would assume that this will directly contribute to gross margin for a few reasons. We provided an estimate of 300 to 500 basis points for 3.5 stars. Given that we bid well below the benchmark, we believe an increase of more than 500 basis points from 3.5 to 4 stars is quite logical and straightforward. We expect a significant portion of this increase to go directly to gross margin because our long-term pro forma illustrative example includes any assumptions about enhanced Clover Assistant coverage or the introduction of improved features for Clover Assistant, which we are very excited about rolling out over the next 18 months. We aim to derive value from this and would like to pass some of it back to consumers through better benefit designs. This is where we anticipate seeing improved value for consumers.

Yeah, all right. Excellent. Thank you.

Your next question is from Ralph Giacobbe with Citi. Your line is open.

Thanks. Good afternoon. Just one to follow up on the 2022 MLR and just make sure I'm following. So GAAP MLR next year you're saying is 95% to 99%, you said a few hundred basis points sort of from COVID next year. Again, not necessarily for a spot estimate, but if we take 300 basis points off that, it would be sort of a 92 to 96 range. Would that be comparable to the 94 to 96 normalized MLR from this year? Is that a way to look at it or no?

I don't think that's a wrong way to look at. I think it's a fair summary.

Great. And then I guess from a non-COLA utilization standpoint, could you give us where we are relative to 2019 baseline and maybe how you see that playing out in '22 or what your assumptions include for non-COVID related utilization?

Yes, Mark mentioned this earlier, and we definitely observe a significant reversion to the mean occurring. To reiterate, we experienced an 850 basis point drop in MCR from Q2 to Q3, which is unprecedented in Medicare Advantage. This drop is clearly driven by a reversion to the mean, a topic we've discussed throughout the year regarding the unique nature of the New Jersey market. When we look at publicly traded Medicare Advantage companies, none experienced a drop close to ours; in fact, most saw slight increases in MCR. We conducted further analysis and can share some graphs to illustrate this. When comparing the latter half of 2019 to that of 2018, we actually saw a decrease in PMPM allowed costs in Medicare Advantage. Then, the events of 2020 and 2021 occurred, leading to significant fluctuations. However, we are reasonably confident that reversion to the mean will persist, as demonstrated by the drop from Q2 to Q3, and we anticipate this trend will continue into Q4 and into next year. While it's difficult to estimate the impact of COVID next year, we have made efforts to factor that into our GAAP MCR guidance for the upcoming year.

And just wanted to clarify. I mean I appreciate the comparison to some of the managed care companies. You're talking directly sort of Medicare related MLR because I think the commentary for most of the total of the trade was that commercial was up in Medicare, actually still remained fairly well below baseline. So I just want to make sure we're comparing sort of apples-to-apples in that comment.

Yes. If you look at Humana, for instance, they increased their Medical Care Ratio from 85.8% to 87.1% in the third quarter, which is a rise of about 130 basis points in the wrong direction from Q2 to Q3. While they are not solely a Medicare Advantage plan, they are likely the closest national comparison. So, it's useful to note that their situation worsened by 130 basis points while ours improved by 850 basis points. I'm mentioning this to highlight the specific impact of our New Jersey presence and the return to normalcy that we are currently seeing.

Yeah, okay. All right, makes sense. That's helpful. And then, last one from me, just in terms of membership now, and you expanded into a number of counties for next year; I think above-original expectations going there. I looked at your expected Medicare Advantage lives of 82,000; it's below the original target, which I don't know how much we should be looking at benchmarking against that original target, but I guess, is there any you sort of attribute to lower capture initially than what you originally thought, or how you can build that sort of presence and scale as you think about things going forward? Thanks.

Yes, that's a great question. We feel really good about our growth maybe for two reasons. There are almost no Medicare Advantage plans in the U.S. that are as high market share in a region like us in New Jersey, for example, that are maintaining the growth rate that we're maintaining. So typically a growth rate is pretty high when you're at the bottom of market shares, you're growing over a small base. So to see us still have really strong growth and market like New Jersey where we keep it up, we think we can get to number one share over time in New Jersey. When you take into account the synergy of our business. So when we think about Medicare Advantage, we think about it really in terms of physicians that we get on Clover Assistant, and then lives being actually managed by corporate systems. So, we're not too far off in New Jersey where Clover will have the most Medicare lives in the state being managed when you include fee-for-service in Medicare Advantage, and that's a pretty impressive accomplishment. And then when we look at Georgia, that's a market now we're growing off of a fairly large base where we think we're going to double or more going into January 1. And that trajectory we think is going to set us up pretty well to replicate what we've done in New Jersey. And that, we think is unique and very hard to build is to get to a really high share in large markets, and that's our goal versus just spreading everywhere and getting minimal share across a bunch of markets. At the same time, just referencing a point I made earlier, I do really believe a lot of the growth that's happening in Medicare Advantage outside of Clover is not of high quality. There's a lot of dialers being poured into purchasing digital leads. It is not a game we're going to play because we don't view it as sustainable. We don't view the costs of acquisition as sustainable. And so, we view all of our Medicare Advantage growth as truly pure versus buying leads at ever-increasing costs. And we just view that game is going to end over the next 2 or 3 years.

Okay, got it. Very helpful. Thank you.

Sure.

Your next question is from Jonathan Yong with Credit Suisse. Your line is open.

Thanks. Appreciate the question. Sorry to go back to this, just back on the 2022 MLR. Appreciate the comments about the few hundred bits of COVID costs, but I guess you've broken out kind of excess utilization. Are you assuming any excess utilization in 2022? And then similarly, are you expecting the Medicare Advantage headwind from this year to effectively reverse all of next year, or is there still some lingering component out there for 2022?

We do expect it to reverse to what we think would have been normal for this year. We think we've been pretty reasonable in our projection there. And then when we describe COVID impact, it's meant to be a catch-all, seeing we kind of view it this year so direct and indirect COVID costs and then also pent-up demand that could continue into next year. Again, it's hard to be precise on that. And we didn't want to get overly precise on the guidance, and it's the GAAP estimate versus trying to give a normalized Medicare Advantage MCR estimate for that; that's our thought process. When we do feel very good about the range that we gave.

Okay. Great. And then just on the membership growth for next year. Since you called out Georgia, is most of the growth that you're expecting to come through? Is that more on the existing footprint, or is that through the county expansion component? Obviously, you expanded into a lot of counties for 2022, so just curious on that.

Yeah, it's continued share in the counties that we're in, but also growth in the new counties. We will definitely share more once open enrollment is completed, but we just wanted to give folks a sense of where we felt pretty good for next year in terms of overall numbers.

Okay. Turning to the technology aspect, Andrew, you mentioned some care management features and their integration with the EHRs. What other developments are on the horizon? Regarding care management, is everything built in-house, or are you collaborating with a third-party administrator for that?

Everything we're doing around there is steered and architected by us as part of the Clover Assistant platform. We do have some partners who are able to provide specific areas like integrations or like commodity sort of fire API integration where we can use those partners to actually pull in data faster. But we all consider that to be part of our Clover Assistant platform. So that goes for back-end data integration; that also goes for EHR integrations that we talked about. You'll see us launch more and more of those EHR integrations to make sure that we are constantly focusing on efficient workflow experience and engagement and driving those numbers up into the right. In addition, in terms of the critical future load, we have a full map in terms of what we're looking to do there. We'll announce those ASOS features come out. But what you'll see us do is always be oriented towards is the visual conditions, therapeutics, drug around where we see that we can do better in terms of personalized, data-driven care management. I mentioned oncology in the call; we have more of those coming, where we can pick large swaths of our population and give them a better, more personalized care management and care planning experience. And those will all launch within the Clover Assistant service.

Great, thanks.

Your next question is from Calvin Sternick with JPMorgan. Your line is open.

Hi, good afternoon. Just a couple of quick ones from me. First on the DCE commentary in the press release is those are expecting a significant step up next year. Can you help give us any sense for just sort of the magnitude for how much enrollment you're expecting to come through in terms of the voluntary alignment?

Yeah, we believe it will be a significant growth. I think from a guidance perspective, CMMI is finalizing their initial lives estimates for DCEs over the next week or so. So we made the decision to just hold off on specific guidance till we get that first file.

A quick note. Don't forget that because you asked about voluntary alignment, I want to remind you, Calvin, that we also grow by signing up new providers. So even with the claims alignment, we will grow because we have new providers coming in. Just a quick note that that's how we also grow.

Okay. Understood.

Thanks.

Okay. And the other thing I wanted to ask was, so you mentioned the big drop in MLR sequentially and that came in a little bit better than what we were looking for, and then you still have in the PDR in the quarter. Can you talk about what's driving that and whether the PDR is primarily driven by Medicare Advantage or direct contracting?

The PDR, I think, was Medicare Advantage, but Mark, just correct me if I'm wrong on that.

Yes, it is Medicare Advantage. And it's essentially a timing issue between when we receive claims and what we expect the IBNR to run out to be.

Thanks very much.

Your next question is from the line of Gary Taylor with Cowen. Your line is open.

Sorry. Can you hear me now?

Yes, sir.

Apologies. Just following up on the PDR questions. So, I do think it's the second quarter in a row. There's been month once. We think about your '22 MLR guidance, which you generally report MLR excluding any PDR, there's none contemplated in addition to that GAAP MLR guidance; is that correct?

That's correct.

And another question is, and I apologize. I missed maybe the first five minutes of the call, but why did the direct contracting economic performance improve so much sequentially when I think we're still 8 or 9 months out from a CMS reconciliation? What allows you to book closer to break-even result there?

Yeah. It's a great question. There's a large part of it, part estimated as well again as reversion to the mean in our markets on the Medicare Advantage trend, as we've guided throughout the year, indicated there has been a unique impact in some of our markets where we're obviously an MA, which is Jersey, but also in direct contracting, and we do have meaningful lives in the New Jersey-New York area. So that's one area. Secondly, hard to estimate the exact impact, but we're now at about a 60% Clover Assistant visit rate in direct contracting. We hope to get to meaningfully above 70% by the end of the year, as we shared in our going-public process and in our MCR cohort data with physicians. There's a pretty significant impact that Clover Assistant has on Medicare Advantage as well, which is the entire crux of the direct contracting model.

Good. And then last question, did I miss parent cash for the quarter or I presume that'll be in the Q, which I might've seen that flash and a chance to look at it? Do you have a parent cash for quarter-end, regulated?

I think we don't, but we can follow up with you on that. I don't think it'll probably be in the files.

Thank you.

As there are no additional questions from the phone lines, we will now shift to take questions from Reddit. With that, I'll hand the call back to Derrick, sir.

Thank you. Our first question comes from a caller. I'd like to know about the general market, which appears to depend on the previously reported MCR. Does the Company provide guidance on how to lower MCR with this new business model? What MCR would be considered a success and a leader in size? What changes have you made to address this issue?

Thanks, Eric. That’s a great question. To address it specifically, we aim to achieve a mid-eighty MCR, which we believe is very achievable, especially with excellent plan designs. We’ve improved from our current position, which is in the low nineties at about 94%. If we adjust for 3.5 stars, we’re around 90%, and for 4.0 stars, we're already in the low-to-mid 80s. This does not factor in potential improvements from Clover Assistant or increased coverage from it. There are two interesting dynamics at play: first, there are significant public policy challenges facing large Medicare Advantage players along with those relying on narrow networks or capitation relationships, which will eventually work to our advantage. Second, regarding star ratings, we believe it’s just a matter of time. We are optimistic that our health equity summary score will positively influence our star ratings eventually. Despite this, we feel confident in achieving our targets even without these anticipated policy changes, though we believe those changes will occur at some point.

Great. Our next question comes from Winky86. We understand that the Clover Assistant helps providers gain a more thorough understanding of a patient's health, but I would like to see some metrics or key performance indicators regarding its usage frequency. What is being done? Additionally, could you provide examples of medical issues that have been addressed due to the presence of Clover Assistant? Andrew.

Thanks. I appreciate that. So our Product and Tech team are looking at metrics like these all the time because they're vital to us through building the platform, looking at how we iterate and how we can provide better value in terms of care management. We've shared some additional facts. We said that today we grew 223% year-over-year to Clover Assistant lives under management. We've said before about 2,900 NPIs are using the Clover Assistant, which is up around 45% year-over-year. So a lot of impact that we see really good engagement, really good growth in the Clover Assistant footprint. The number of Clover visits have also increased about 73% year-over-year in the third quarter. We've struck with about 1.3 million recommendations to physicians since the inception of the Clover Assistant, something that we're really proud of. And all of this is because of high engagement of that wide network, right? We're constantly growing more CA users and growing that engagement within the CA user cohort. We’ll be launching clinical content into the actual assistant all the time, right along the lines of what they did in the question. Like, we showed lab information, we make evidence-based suggestions to say, have you considered making personalized adjustments to the care plans, etc. And so we have a roadmap of those things. We don't share engagement statistics around those; it's something I'll bring back to the tech team to see whether we can maybe put up some additional information for people who are interested in what we're seeing as I'm sharing some more of that. We don't do that during earnings, but we'll think about it going forward. We're really proud of what we've achieved so far, though, like Vivek said.

Great. Our next question comes from Boost lever. How is the CFO search going? And do you foresee an announcement in 2021? Maybe I'll hand this to Mark.

Yes, the search is actively underway. Each search carries its own life. So it's hard to predict when it will be concluded, but it is active. We're receiving candidates to evaluate, so it's well underway. In the meantime, I will remain in place until that transition begins.

Awesome. I'd just add, Mark, the team that we've assembled and some additional books Mark has brought on have given us a lot of bandwidth and runway to be patient and really bring on the next great candidate.

Great. We have another question from Low Brow High Standards. When you say your mission is to improve every life, does this mean you envision the future of Clover Assistant expanding its reach beyond Medicare Advantage individuals? Can one expect that as Clover Health grows, Clover Assistant will eventually be available for the general population? If so, what metrics are you waiting for to expand into the open market? Andrew, why don't you take this question.

Sure, I'll begin and then hand it over to Vivek. From the perspective of Clover Assistant, our main objective is to assist as many individuals as we can. It was designed to help manage chronic diseases and support a large population effectively. These principles can be applied across the healthcare sector. Currently, we implement Clover Assistant primarily within our Medicare Advantage segment, but we are also applying it to direct contracting with the fee-for-service population. In the future, you can expect us to introduce it to various other sectors, including potentially third-party payers who may benefit from Clover Assistant or any entities taking on risk. We aim to support those groups using Clover Assistant, which is why we shared the statistic regarding the number of lives managed under Clover Assistant, regardless of specific business lines. We continuously seek opportunities to increase the number of lives managed by Clover Assistant because that aligns with our purpose. Vivek, do you have anything to add?

The only thing I would add is that since the founding of the Company many years ago, we've always been clear and very intentional about stating that every life, and not just every Medicare life, is our mission. Our mission is where we aim to be in the long term, and while ambitious, we believe it is something we will achieve over time.

Great. Our last Reddit question comes from Choice Diet. Does Clover intend to expand into managed care plans for Medicaid in any of the 50 states or to license Clover Assistant to companies that provide such coverage? Vivek.

Great question. We've been actively considering ways to make a significant positive impact on Medicaid from a mission standpoint and to achieve unique results there. We believe we could be well positioned, especially regarding the Clover Assistant infrastructure. The goal, we'll share more on that in the future.

Great. Vivek, you want to give any closing comments?

A big, big thank you to the team for a really tremendous quarter and huge improvement versus Q2. And we're excited about what's happening on the growth side, on Medicare Advantage and fee-for-service. Really, really big milestone for us to get to pretty massive traction in Georgia. And we think that's really exciting for the next many years.

This concludes today's conference call. Thank you for joining. You may now disconnect. Have a great day. Stay safe.