Clover Health's Q3 2025 Earnings Call: Contradictions Emerge on Member Cost Trends, IRA Relief, and Counterpart Contributions

Date of Call: November 4, 2025

Financials Results

• Revenue: $479M insurance revenue in Q3, up 49% YOY; YTD insurance revenue $1.4B, up 39% YOY; membership grew 35% YOY to >109k; full-year 2025 insurance revenue guidance $1.85B–$1.88B

Guidance:

• FY2025 average membership guidance 106,000–108,000 (~33% YOY at midpoint)
• FY2025 insurance revenue guidance $1.85B–$1.88B (~39% YOY at midpoint)
• Adjusted SG&A guidance $325M–$335M (17%–18% of revenue; ~400 bps improvement YOY)
• Adjusted EBITDA and adjusted net income guidance $15M–$30M
• Insurance BER guidance 90%–91%
• Expect meaningful adjusted EBITDA expansion and full-year positive GAAP net income in 2026 driven by cohort maturation, 4-star payment tailwind, Part C/Part D updates, and SG&A leverage

Business Commentary:

• Membership and Revenue Growth:
• Clover Health Investments reported a 35% year-over-year increase in Medicare Advantage membership, reaching over 109,000 members.
• Insurance revenue grew by 49% year-over-year to $479 million.

• This growth was driven by strong new member acquisition and market consolidation as competitors retreated.

• Adjusted EBITDA and Profitability Challenges:

• Clover's adjusted EBITDA was positive year-to-date but faced significant pressure due to a higher-than-expected proportion of new members and increased utilization across both medical expenses and supplemental benefits.
• The company now expects to add roughly 44,000 gross new members within an expected year-end 2025 population of approximately 113,000 net members.

• The challenges were attributed to the cost profile of first-year members and the rapid growth that led to a higher proportion of new members than anticipated.

• Clover Assistant and Member Retention:

• Clover Assistant continues to strengthen, with improved performance in returning member cohorts and top PPO rankings in core HEDIS clinical quality scores.
• The company achieved a HEDIS score of 4.72 for its PPO plans, making it the highest performing PPO in the country on HEDIS measures.

• The focus on Clover Assistant and care delivery assets has led to strong member retention, with 2025 retention rates expected to remain above 90%.

• Star Ratings and Strategic Focus:

• Clover received a 3.5-star rating for the 2026 ratings year but aims for a 4-star plan.
• The company is focused on improving pharmacy measures to enhance its star ratings, despite not viewing the star rating as a true measure of overall healthcare quality and not an inhibitor for growth.

• Clover's strategy involves expanding its comprehensive PPO portfolio to maintain low out-of-pocket costs and physician choice, despite industry trends of narrowing networks.

• Counterpart Health Expansion:

• Counterpart Health continues to expand its capabilities, including integrated scribing and generative AI tools to support physician visits and reduce administrative burden.
• The company achieved industry-leading clinical quality HEDIS results and is seeing good demand for its technology, expanding its go-to-market team to support new partnership opportunities.
• Clover Assistant is positioned as a key differentiator, enabling small independent doctors to participate in value-based care, a blue ocean opportunity for the company's technology.
  

  Sentiment Analysis:

  Overall Tone: Neutral

  • Management acknowledged misses: "we missed our targets on both overall adjusted EBITDA and stars," but emphasized strong growth: "membership by 35% and revenue by nearly 50% year-over-year." CFO: "underlying incurred cost trends, excluding pharmacy, is around 4%" and forecasted "full year positive GAAP net income in 2026" driven by cohort maturation and 4-star/Part C/Part D tailwinds.

Q&A:

• Question from Jonathan Yong (UBS): Given elevated utilization (inpatient/outpatient/supplemental) and prior pharmacy/dental issues, how should we think about 2026 BER given cohorts will mature but you’ll also grow materially and have richer benefits—could there be a mispricing issue for 2026? Also, your guidance seems to imply BER steps down from 3Q to 4Q—can you explain that?
  Response: Core point: underlying incurred medical cost trend ex-pharmacy is ~4% and is baked into bids; that is offset by tailwinds (4-star payment, Part C rate update, higher Part D direct subsidy, SG&A operating leverage). Marketing/growth will be targeted to priority markets with strong Clover Assistant coverage to protect BER; intra-year claim developments explain the 3Q drawdown versus an averaged baseline for 4Q.

Contradiction Point 1

Member Cost Trends

It implicates the company's cost management strategy and member profitability, which are critical for financial forecasting and investor expectations.

Can you hear me? - Jonathan Yong(UBS)

2025Q3: The increase in the DR guide for the full year is mostly related to Part D and supplemental benefits, specifically dental. Initiatives are in place to monitor this going forward. There is some relief expected on the Part D pressure from the IRA going into 2026. - Peter J. Kuipers(CFO)

Is the rising cost trend specific to new cohorts or is it broad-based? - John Granville Pinney(Canaccord Genuity)

2025Q2: The cohorts in Clover's tech-first model are performing as expected. There is no specific split between new and returning members for Part D and supplemental benefits. Returning members are improving in terms of MCR and BER as expected. - Peter J. Kuipers(CFO)

Contradiction Point 2

Financial Relief from IRA

It affects the company's financial outlook and the potential impact of regulatory changes on its bottom line.

Can you hear me? - Jonathan Yong(UBS)

2025Q3: There is some relief expected on the Part D pressure from the IRA going into 2026. - Peter J. Kuipers(CFO)

How much conservatism is in the MCR BER guidance, and how much visibility do you have into the trend's continuation in the second half of the year? - Jonathan Wong(UBS)

2025Q2: There is some relief expected on the Part D pressure from the IRA going into 2026. - Peter J. Kuipers(CFO)

Contradiction Point 3

Go-to-Market Strategy and Contribution Timeline

It involves differing expectations and timelines for the contribution of the Counterpart business to the company's revenue and profitability, which are critical for investor expectations.

Can you hear me? - Jonathan Yong(UBS)

2025Q3: Revenue and contributions will be reflected in consolidated financials. We are focused on improving profitability in the Insurance segment. - Andrew Toy(CEO)

Can you provide an update on the progress of the go-to-market strategy, any significant wins, and when we can expect to see contributions? - Jonathan Yong(UBS)

2025Q1: We remain excited about the Counterpart business. Revenue and contributions will be reflected in consolidated financials. We are focused on improving profitability in the Insurance segment. - Andrew Toy(CEO)

Contradiction Point 4

Core Medical Trends and Member Behavior

It involves changes in financial forecasts, specifically regarding core medical trends and member behavior, which are critical for understanding the company's financial performance.

Can you clarify how core medical trends are progressing between new and existing cohorts? Are members reaching out-of-pocket drug maxes in line with expectations? Has behavior changed? - Jonathan Yong(UBS)

2025Q3: Cost trends are as expected. Both new member cohorts and returning member cohorts are trending in line with expectations from MCR and BER perspectives. - Peter Kuipers(CFO)

Can you provide insight into core medical trends between new and existing cohorts? Are members reaching their out-of-pocket drug maximums in line with expectations? Has there been any behavioral change? - Jonathan Yong(UBS)

2025Q1: Cost trends are as expected. Both new member cohorts and returning member cohorts are trending in line with expectations from MCR and BER perspectives. - Peter Kuipers(CFO)

Contradiction Point 5

Counterpart Health Revenue Contributions

It highlights differing expectations for the timeline and impact of revenue contributions from Counterpart Health, which could influence investor expectations and strategic planning.

Can you hear me? - Jonathan Yong(UBS)

2025Q3: Counterpart Health has begun generating revenue. The expectation is that this will contribute to the company's growth in the coming quarters. - Andrew Toy(CEO)

When will Counterpart Health's revenue appear in financials and what are expectations for pipeline growth? - Jonathan Yong(UBS)

2024Q4: Counterpart Health is initially focused on expanding reach rather than immediate financial returns. - Andrew Toy(CEO)