What changed in Alignment Healthcare, Inc.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of Alignment Healthcare, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+270 added−270 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)
Top changes in Alignment Healthcare, Inc.'s 2023 10-K
270 paragraphs added · 270 removed · 206 edited across 1 sections
- Item 7. Management's Discussion & Analysis+270 / −270 · 206 edited
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
206 edited+64 added−64 removed237 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
206 edited+64 added−64 removed237 unchanged
2022 filing
2023 filing
Biggest changeConsolidated Statements of Stockh olders' Equity (Deficit) (amounts in thousands, except par value and share amounts) Common Stock Shares Amount Additional Paid-In Capital Accumulated Deficit Noncontrolling interest Total Balance at December 31, 2019 (1) 147,157,801 $ 147 $ 285,624 $ ( 364,482 ) $ — $ ( 78,711 ) Net loss attributable to Alignment Healthcare, Inc. — — — ( 22,926 ) — ( 22,926 ) Issuance of common stock at $ 7.99 per share, net of issuance costs of $ 3,371 16,905,986 17 131,612 — — 131,629 Equity-based compensation — — 2,124 — — 2,124 Equity repurchase — — ( 1,505 ) — — ( 1,505 ) Balance at December 31, 2020 (1) 164,063,787 $ 164 $ 417,855 $ ( 387,408 ) $ — $ 30,611 Net loss attributable to Alignment Healthcare, Inc. — — — ( 195,286 ) — ( 195,286 ) Noncontrolling interest attributable to subsidiary — — — — 15 15 Issuance of common stock upon initial public offering at $ 18.00 per share, net of issuance costs of $ 29,011 21,700,000 22 361,567 — — 361,589 Issuance of common stock 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 Forfeitures ( 80,169 ) ( 1 ) — ( 1 ) Equity-based compensation — — 92,611 — — 92,611 Equity repurchase — — ( 1,474 ) — — ( 1,474 ) Balance at December 31, 2021 187,193,613 $ 187 $ 888,547 $ ( 582,694 ) $ 15 $ 306,055 Net loss — — — ( 149,547 ) ( 92 ) ( 149,639 ) Issuance of common stock upon vesting of restricted stock units 456,509 — — — — — Forfeitures ( 370,107 ) — — — — — Equity-based compensation — — 81,718 — — 81,718 Noncontrolling interest attributable to subsidiary — — ( 85 ) — 1,253 1,168 Balance at December 31, 2022 187,280,015 $ 187 $ 970,180 $ ( 732,241 ) $ 1,176 $ 239,302 (1) The consolidated balances were derived from the audited consolidated financial statements as of December 31, 2020 and December 31, 2019, and were retroactively adjusted, including shares and per share amounts, as a result of the Reorganization.
Biggest changeConsolidated Statements of Stockh olders' Equity (amounts in thousands, except par value and share amounts) Common Stock Shares Amount Additional Paid-In Capital Accumulated Deficit Noncontrolling interest Total Balance at December 31, 2020 (1) 164,063,787 $ 164 $ 417,855 $ ( 387,408 ) $ — $ 30,611 Net loss attributable to Alignment Healthcare, Inc. — — — ( 195,286 ) — ( 195,286 ) Noncontrolling interest attributable to subsidiary — — — — 15 15 Issuance of common stock upon initial public offering at $ 18.00 per share, net of issuance costs of $ 29,011 21,700,000 22 361,567 — — 361,589 Issuance of common stock 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 Forfeitures ( 80,169 ) ( 1 ) — — — ( 1 ) Equity-based compensation — — 92,611 — — 92,611 Equity repurchase — — ( 1,474 ) — — ( 1,474 ) Balance at December 31, 2021 187,193,613 $ 187 $ 888,547 $ ( 582,694 ) $ 15 $ 306,055 Net loss — — — ( 149,547 ) ( 92 ) ( 149,639 ) Issuance of common stock upon vesting of restricted stock units 456,509 — — — — — Forfeitures ( 370,107 ) — — — — — Equity-based compensation — — 81,718 — — 81,718 Noncontrolling interest attributable to subsidiary — — ( 85 ) — 1,253 1,168 Balance at December 31, 2022 187,280,015 $ 187 $ 970,180 $ ( 732,241 ) $ 1,176 $ 239,302 Net loss — — — ( 148,017 ) ( 156 ) ( 148,173 ) Issuance of common stock upon vesting of restricted stock units 1,762,086 2 — — — 2 Forfeitures ( 90,458 ) — — — — — Equity-based compensation — — 66,835 — — 66,835 Noncontrolling interest attributable to subsidiary — — — — 105 105 Balance at December 31, 2023 188,951,643 $ 189 $ 1,037,015 $ ( 880,258 ) $ 1,125 $ 158,071 (1) The consolidated balances were derived from the audited consolidated financial statements as of December 31, 2020, and were retroactively adjusted, including shares and per share amounts, as a result of the Reorganization.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Medical expenses payable – Incurred but not paid claims - Refer to Notes 2 and 7 to the financial statements Critical Audit Matter Description Medical expenses payable includes estimates of obligations for medical care services that have been rendered on behalf of members and the members of the contracted third-party payors, but for which claims have either not yet been received or processed.
Medical expenses payable – Incurred but not paid claims - Refer to Notes 2 and 7 to the financial statements Critical Audit Matter Description Medical expenses payable includes estimates of obligations for medical care services that have been rendered on behalf of members and the members of contracted third-party payors, but for which claims have either not yet been received or processed.
Leases We determine if an arrangement is a lease at inception and evaluate each lease arrangement to determine whether the lease is an operating or financing leases. ROU assets and lease liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term.
Leases We determine if an arrangement is a lease at inception and evaluate each lease arrangement to determine whether the lease is an operating or financing lease. ROU assets and lease liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term.
We have contracts with a network of hospitals, physicians, and other providers and compensate those providers and ancillary organizations based on contractual arrangements or CMS Medicare compensation guidelines.
We have contracts with a network of hospitals, physicians, and other providers and compensate those providers and ancillary organizations based on contractual arrangements or CMS Medicare compensation guidelines.
We develop estimates for medical expenses incurred but not yet paid (“IBNP”), which includes an estimate for claims incurred but not reported (“IBNR”) and a payable for adjudicated claims. IBNR is estimated using an actuarial process that is consistently applied and centrally controlled.
We develop estimates for medical expenses incurred but not yet paid (“IBNP”), which includes an estimate for claims incurred but not reported (“IBNR”) and a payable for adjudicated claims. IBNR is estimated using an actuarial process that is consistently applied and centrally controlled.
As the IBNR 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. Actuarial Standards of Practice generally require that the IBNP estimates be adequate to cover obligations under moderately adverse conditions.
As the IBNR 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. Actuarial Standards of Practice generally require that the IBNP 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.
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.
The Oxford Loan Agreement includes customary events of default, including, among others, payment defaults, breach of representations and warranties, covenant defaults, judgment defaults, insolvency and bankruptcy defaults, and change of control.
The Oxford Loan Agreement includes customary events of default, including, among others, payment defaults, breach of representations and warranties, covenant defaults, judgment defaults, insolvency and bankruptcy defaults, and change of control.
During the existence of an event of default, the outstanding Term Loans will accrue interest at a rate per annum equal to 2.00 % plus the otherwise applicable interest rate.
During the existence of an event of default, the outstanding Term Loans will accrue interest at a rate per annum equal to 2.00 % plus the otherwise applicable interest rate.
The CMS Five Star Quality Rating System provides economic incentives to Medicare Advantage plans that achieve higher Star ratings by (i) meeting certain care criteria (such as completing particular 69 preventative screening procedures or ensuring proper follow-up care is provided for specific conditions or episodes) and (ii) receiving high member satisfaction ratings.
The CMS Five Star Quality Rating System provides economic incentives to Medicare Advantage plans that achieve higher Star ratings by (i) meeting certain care criteria (such as completing particular preventative screening procedures or ensuring proper follow-up care is provided for specific conditions or episodes) and (ii) receiving high member satisfaction ratings.
Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP and include the accounts of our wholly-owned subsidiaries and three variable interest entities (“VIEs”) in California and North Carolina that meet the consolidation requirements for accounting purposes.
Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP and include the accounts of our wholly owned subsidiaries and three variable interest entities (“VIEs”) in California and North Carolina that meet the consolidation requirements for accounting purposes.
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 its 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.
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 its actuarial method of reserving. 81 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.
These actuarial methods consider factors, such as cost trends and completion factors that are assessed based on historical data for payment patterns, product mix, 94 seasonality, utilization of health care services, and other relevant factors. Each period, we re-examine previously established IBNR estimates based on actual claim submissions and other changes in facts and circumstances.
These actuarial methods consider factors, such as cost trends and completion factors that are assessed based on historical data for payment patterns, product mix, seasonality, utilization of health care services, and other relevant factors. Each period, we re-examine previously established IBNR estimates based on actual claim submissions and other changes in facts and circumstances.
The risk-sharing payable is included within medical expenses payable on the 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.
The risk-sharing payable is included within medical expenses payable on the consolidated balance sheet. Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash deposits and current and restricted investments with financial institutions. Accounts at each financial institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to certain limits.
Additionally, in the event of any contemplated asset sale or series of asset sales yielding net proceeds in excess of $ 2,500 , except those excluded per the Loan Agreement, we are required to prepay the aggregate outstanding principal balance of the Term Loans in an amount equal to the entire amount of the asset sale net proceeds, plus any accrued and unpaid interest.
Additionally, in the event of any contemplated asset sale or series of asset sales yielding net proceeds in excess of $2,500, except those excluded per the Oxford Loan Agreement, we are required to prepay the aggregate outstanding principal balance of the Term Loans in an amount equal to the entire amount of the asset sale net proceeds, plus any accrued and unpaid interest.
The Term Loans are guaranteed by certain of our wholly owned subsidiaries and collateralized by all unrestricted assets. For certain prepayments of the Term Loans prior to the second anniversary of the Effective Date, the Borrower will be required to pay a prepayment fee ranging from 1.00% to 2.00% of the principal amount of the Term Loans being prepaid.
The Term Loans are guaranteed by certain of our wholly owned subsidiaries and collateralized by all unrestricted assets. 78 For certain prepayments of the Term Loans prior to the second anniversary of the Effective Date, the Borrower will be required to pay a prepayment fee ranging from 1.00% to 2.00% of the principal amount of the Term Loans being prepaid.
We also elected to account for lease and non-lease components as a single lease component. Leases with an initial term of 12 months are not included within the ROU assets and lease liabilities and the associated lease payments are recognized in the consolidated statements of income on a straight-line basis over the lease term.
We also elected to account for lease and non-lease components as a single lease component. Leases with an initial term of 12 months are not included within the ROU assets and lease liabilities and the associated lease payments are recognized in the 94 consolidated statements of income on a straight-line basis over the lease term.
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. 91 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.
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.
Historically, no equity-based compensation expense was recognized for the SARs or Performance-vesting Incentive Units as the change in control was not probable. As a result of the conversion and modification, we determined that the RSAs converted from the Performance-vesting SARs and the Performance-vesting Incentive Units should be remeasured as of the date of the modification (March 25, 2021).
Historically, no equity-based compensation expense was recognized for the SARs or Performance-vesting Incentive Units as the change in control was not probable. 107 As a result of the conversion and modification, we determined that the RSAs converted from the Performance-vesting SARs and the Performance-vesting Incentive Units should be remeasured as of the date of the modification (March 25, 2021).
These plan designs generally result in us sharing a greater portion of the responsibility for total prescription drug costs in the early stages of the year and less in the latter stages, which typically results in a higher MBR on our Part D program in the first half of the year relative to the second half of the year.
These plan designs generally result in us sharing a greater portion of the responsibility for total prescription drug costs in the early stages of the year and less in the latter stages, which typically results in a higher MBR on our Part D program in the 71 first half of the year relative to the second half of the year.
Medical expenses payable also includes an estimate for the costs necessary to process unpaid claims at the end of each period. We estimate IBNR liability using actuarial methods that are commonly used by health insurance actuaries and meet Actuarial Standards of Practice.
Medical expenses payable also includes an estimate for the costs necessary to process unpaid claims at the end of each period. We estimate IBNR liability using actuarial methods that are commonly used by health insurance 80 actuaries and meet Actuarial Standards of Practice.
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. Cash Cash includes currency on hand with banks and financial institutions.
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. Cash and Cash Equivalents Cash includes currency on hand with banks and financial institutions.
In conjunction with the IPO, the Company modified the Time-vesting Incentive Units to be converted into RSAs and subject to the same time-vesting conditions upon the IPO, and modified the Performance-vesting SARs and Performance-vesting Incentive Units to be converted into RSAs which 106 vest upon the later of the fourth anniversary of the original vesting commencement date or 50% annually on the first and second anniversary of the IPO.
In conjunction with the IPO, the Company modified the Time-vesting Incentive Units to be converted into RSAs and subject to the same time-vesting conditions upon the IPO, and modified the Performance-vesting SARs and Performance-vesting Incentive Units to be converted into RSAs which vest upon the later of the fourth anniversary of the original vesting commencement date or 50% annually on the first and second anniversary of the IPO.
Stock Appreciation Rights 80% of each stock appreciation right ("SAR") award vested 25 % annually over four years and only becomes payable to the extent vested upon a qualified change in control (“Time-vesting SARs”), while the remaining 20% vests concurrent to the change in control (“Performance-vesting SARs”) .
Stock Appreciation Rights 80% of each stock appreciation right ("SAR") award vested 25 % annually over four years and only becomes payable to the extent vested upon a qualified change in control (“Time-vesting SARs”), while the remaining 20% vests concurrent to the change in control (“Performance-vesting 106 SARs”) .
The amount of SARs settled in cash was $ 11,399 . The conversion of SARs resulted in the issuance of 300,489 RSAs. 105 The following table summarizes the equity-based awards activity as if the SARs were converted to RSAs and common stock at the earliest period presented.
The amount of SARs settled in cash was $ 11,399 . The conversion of SARs resulted in the issuance of 300,489 RSAs. The following table summarizes the equity-based awards activity as if the SARs were converted to RSAs and common stock at the earliest period presented.
The use of funds from these investments is limited as required by 107 regulation in the various states in which we operate, or as needed in the event of insolvency. Therefore, these deposits are reported within other assets on the consolidated balance sheets.
The use of funds from these investments is limited as required by regulation in the various states in which we operate, or as needed in the event of insolvency. Therefore, these deposits are reported within other assets on the consolidated balance sheets.
The maximum number 103 of shares available for issuance under the 2021 Plan may not exceed 20,744,444 shares (subject to a discretionary annual increase of up to 4 % effective as of January 1 of each year for 10 years ).
The maximum number of shares available for issuance under the 2021 Plan may not exceed 20,744,444 shares (subject to a discretionary annual increase of up to 4 % effective as of January 1 of each year for 10 years ).
Purchase obligations exclude agreements that are cancelable without penalty. 78 Not included in the table above are our medical expenses payable which are included within current liabilities in our financial statements included in this Annual Report on Form 10-K.
Purchase obligations exclude agreements that are cancelable without penalty. Not included in the table above are our medical expenses payable which are included within current liabilities in our financial statements included in this Annual Report on Form 10-K.
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 consolidated balance sheet. 73 Selling, General and Administrative Expenses.
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 consolidated balance sheet. Selling, General and Administrative Expenses.
The requirements take the form of risk-based capital (“RBC”) rules, which may vary from state to 76 state. Certain states in which our health plans or risk bearing entities operate have adopted the RBC rules.
The requirements take the form of risk-based capital (“RBC”) rules, which may vary from state to state. Certain states in which our health plans or risk bearing entities operate have adopted the RBC rules.
The occurrence of an event of default could result in the acceleration of the obligations under the Loan Agreement, termination of the Term Loan commitments and the right to foreclose on the collateral securing the obligations.
The occurrence of an event of default could result in the acceleration of the obligations under the Oxford Loan Agreement, termination of the Term Loan commitments and the right to foreclose on the collateral securing the obligations.
Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition. 81 Ite m 8. Financial Statements and Supplementary Data.
Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition. 82 Ite m 8. Financial Statements and Supplementary Data.
Premiums and discounts, if any, are amortized or accreted as interest expense or income over the life of the related asset using the effective interest method. As of December 31, 2022 and 2021, all investments had maturities with less than 12 months. Restricted assets are required to be maintained at a financial institution within certain states.
Premiums and discounts, if any, are amortized or accreted as interest expense or income over the life of the related asset using the effective interest method. As of December 31, 2023 and 2022, all investments had maturities with less than 12 months. Restricted assets are required to be maintained at a financial institution within certain states.
The amounts payable under this provision were immaterial at December 31, 2022 and December 31, 2021. The premiums we receive from CMS for our members are based on the annual bid that we submit to CMS. These payments represent revenues for providing healthcare coverage, including Medicare Part D benefits. Under the Medicare Part D program, members receive standard drug benefits.
The amounts payable under this provision were immaterial at December 31, 2023 and December 31, 2022. The premiums we receive from CMS for our members are based on the annual bid that we submit to CMS. These payments represent revenues for providing healthcare coverage, including Medicare Part D benefits. Under the Medicare Part D program, members receive standard drug benefits.
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 consolidated statements of operations. The amounts payable under this provision were immaterial at December 31, 2022 and December 31, 2021.
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 consolidated statements of operations. The amounts payable under this provision were immaterial at December 31, 2023 and December 31, 2022.
Subsequently, on February 9, 2022, the California governor signed Senate Bill 113 (S.B. 113), which restores the NOL deduction and eliminates the $ 5 million annual cap on business incentive tax credits, effective for tax years beginning on or after January 1, 2022. We have cumulative NOLs as of December 31, 2022 and 2021.
Subsequently, on February 9, 2022, the California governor signed Senate Bill 113 (S.B. 113), which restores the NOL deduction and eliminates the $ 5 million annual cap on business incentive tax credits, effective for tax years beginning on or after January 1, 2022. We have cumulative NOLs as of December 31, 2023 and 2022.
We may be involved in various litigation matters in the ordinary course of business. In the opinion of management, the ultimate resolution of legal proceedings is not expected to have a material adverse effect on the consolidated financial statements. Amounts accrued for legal proceedings were no t material as of December 31, 2022 and 2021.
We may be involved in various litigation matters in the ordinary course of business. In the opinion of management, the ultimate resolution of legal proceedings is not expected to have a material adverse effect on the consolidated financial statements. Amounts accrued for legal proceedings were no t material as of December 31, 2023 and 2022.
Such policies provide coverage for our employees, certain covered physicians, loss of income due to potential business interruption, and possible destruction or theft of assets. There have not been any reductions in coverage nor have there been any claims, which have exceeded such coverage(s) for the year ended December 31, 2022 and 2021.
Such policies provide coverage for our employees, certain covered physicians, loss of income due to potential business interruption, and possible destruction or theft of assets. There have not been any reductions in coverage nor have there been any claims, which have exceeded such coverage(s) for the year ended December 31, 2023 and 2022.
We may use a portion of our net proceeds to acquire or invest in complementary businesses, products, services or technologies. Purchase of Equity Securities by the Issuer and Affiliated Purchasers None. It em 6. [ Reserved] 67 It em 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
We may use a portion of our net proceeds to acquire or invest in complementary businesses, products, services or technologies. Purchase of Equity Securities by the Issuer and Affiliated Purchasers None. It em 6. [ Reserved] 68 It em 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
For North Carolina, Nevada, and Arizona, we have until July 31, 2022, to submit claims to the reinsurance carrier with dates of service prior to January 1, 2023. Each coverage period runs January 1 to December 31. As of December 31, 2022, we renewed our expiring policy for the 2023 coverage period with all existing terms and conditions remaining intact.
For North Carolina, Nevada, and Arizona, we have until July 31, 2024, to submit claims to the reinsurance carrier with dates of service prior to January 1, 2024. Each coverage period runs January 1 to December 31. As of December 31, 2023, we renewed our expiring policy for the 2024 coverage period with all existing terms and conditions remaining intact.
The graph set forth below compares the cumulative total stockholder return on our common stock between March 26, 2021 (the date our common stock commenced trading on the Nasdaq Global Select Market) and December 31, 2022, with the cumulative total return of (a) the Nasdaq Healthcare Index and (b) the S&P 500, over the same period.
The graph set forth below compares the cumulative total stockholder return on our common stock between March 26, 2021 (the date our common stock commenced trading on the Nasdaq Global Select Market) and December 31, 2023, with the cumulative total return of (a) the Nasdaq Healthcare Index and (b) the S&P 500, over the same period.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
For California, we have until April 30, 2023, to submit claims to the reinsurance carrier with dates of service prior to October 1, 2022. The coverage period starts October 1 to September 30 of the following year. As of September 30, 2022, we renewed our expiring policy for the 2022–2023 coverage period with all existing terms and conditions remaining intact.
For California, we have until April 30, 2024, to submit claims to the reinsurance carrier with dates of service prior to October 1, 2023. The coverage period starts October 1 to September 30 of the following year. As of September 30, 2023, we renewed our expiring policy for the 2023–2024 coverage period with all existing terms and conditions remaining intact.
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. We also record claims expenses related to our institutional and specialist care related to our DCE program with CMS as we act as the principal in the transaction.
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. We also record claims expenses related to our institutional and specialist care related to our ACO program with CMS as we act as the principal in the transaction.
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock. 66 COMPARISON OF CUMULATIVE TOTAL RETURN Among Alignment Healthcare, Inc., the NASDAQ Healthcare Index and the S&P 500 3/26/2021 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 Alignment Healthcare, Inc.
We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock. 67 COMPARISON OF CUMULATIVE TOTAL RETURN Among Alignment Healthcare, Inc., the NASDAQ Healthcare Index and the S&P 500 3/26/2021 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 Alignment Healthcare, Inc.
Pursuant to the Oxford Loan Agreement, the Borrower received an initial Term Loan of $165.0 million on the Effective Date (the “Initial Term Loan”) and may borrow up to an additional $85.0 million of Term Loans at its option (such additional Term Loans, the “Delayed Draw Term Loans”).
Pursuant to the Oxford Loan Agreement, the Borrower received an initial Term Loan of $165.0 million on the Effective Date and may borrow up to an additional $85.0 million of Term Loans at its option (such additional Term Loans, the “Delayed Draw Term Loans”).
Costs incurred in the planning and postimplementation phases, including post-configuration training and repairs and maintenance, are expensed as incurred. Costs incurred in the application and infrastructure development phases, including significant enhancements and upgrades, are capitalized once the planning phase is completed and management authorizes the project to commence.
Costs incurred in the planning and post implementation phases, including post-configuration training and repairs and maintenance, are expensed as incurred. Costs incurred in the application and infrastructure development phases, including significant enhancements and upgrades, are capitalized once the planning phase is completed and management authorizes the project to commence.
We may also provide enhanced benefits at our own expense. We recognize revenue for providing this insurance coverage in the month that members are entitled to receive healthcare services. Our CMS payment related to Medicare Part D is subject to risk sharing through the Medicare Part D risk corridor provisions. See “— Critical Accounting Policies — Revenue” below .
We may also provide enhanced benefits at our own expense. We recognize revenue for providing this insurance coverage in the month that members are entitled to receive healthcare services. Our CMS payment 74 related to Medicare Part D is subject to risk sharing through the Medicare Part D risk corridor provisions. See “— Critical Accounting Estimates — Revenue” below .
Pursuant to the Oxford Loan Agreement, we received an initial Term Loan of $ 165,000 on the Effective Date (the “Initial Term Loan”) and may borrow up to an additional $ 85,000 of Term Loans at our option (such additional Term Loans, the “Delayed Draw Term Loans”).
Pursuant to the Oxford Loan Agreement, we received an initial Term Loan of $ 165,000 on the Effective Date and may borrow up to an additional $ 85,000 of Term Loans at our option (such additional Term Loans, the “Delayed Draw Term Loans”).
Given the history of losses, and after consideration for the risk associated with estimates of future taxable income, we established a full valuation allowance against net deferred tax assets at December 31, 2022 and 2021.
Given the history of losses, and after consideration for the risk associated with estimates of future taxable income, we established a full valuation allowance against net deferred tax assets at December 31, 2023 and 2022.
Variable consideration estimates related to DCE contract revenue are based on the most likely outcome method and that a significant reversal in the amount of cumulative revenue recognized would not occur.
Variable consideration estimates related to ACO contract revenue are based on the most likely outcome method and that a significant reversal in the amount of cumulative revenue recognized would not occur.
The unrecognized stock compensation related to these RSAs of $ 1,024 will be recognized over a graded vesting schedule over the performance period of the award. Pre-IPO equity Our Parent issued Incentive Units to certain employees, board members, and advisors, which were profits interests issued in Class B and Class C units.
The unrecognized stock compensation related to these RSAs of $ 355 will be recognized over a graded vesting schedule over the performance period of the award. Pre-IPO equity Our Parent issued Incentive Units to certain employees, board members, and advisors, which were profits interests issued in Class B and Class C units.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.
Costs and the related accumulated depreciation are removed when property and equipment are sold or otherwise disposed of, and any resulting gains or losses are reflected in the consolidated statement of operations. Software development activities typically consist of three phases: (1) planning, (2) application and infrastructure development, and (3) postimplementation.
Costs and the related accumulated depreciation are removed when property and equipment are sold or otherwise disposed of, and any resulting gains or losses are reflected in the consolidated statement of operations. Software development activities typically consist of three phases: (1) planning, (2) application and infrastructure development, and (3) post implementation.
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 and restricted cash was determined based on Level 1 inputs.
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, cash equivalents, restricted cash and U.S.
These incentives impact financial performance in the year following the CMS Rating Year (for example, CMS’s announcement of the 2023 Ratings occurred in the second half of 2022 and will impact our financial performance in 2024).
These incentives impact financial performance in the year following the CMS Rating Year (for example, CMS’s announcement of the 2024 Ratings occurred in the second half of 2023 and will impact our financial performance in 2025).
The occurrence of an event of default could result in the acceleration of the obligations under the Loan Agreement, termination of the Term Loan commitments and the right to foreclose on the collateral securing the obligations.
The occurrence of an event of default 102 could result in the acceleration of the obligations under the Oxford Loan Agreement, termination of the Term Loan commitments and the right to foreclose on the collateral securing the obligations.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to IBNR claim liability included the following, among others: • We tested the effectiveness of controls over the Company’s actuarial process for estimating the IBNR claim liability. • We tested the underlying claims and membership data and other information that served as the basis for the actuarial analysis, to determine the inputs to the actuarial estimate were complete and accurate. • With the assistance of our actuarial specialists, we evaluated the reasonableness of the actuarial methods and assumptions used by management to estimate the IBNR claim liability by: o Performed an overlay of the historical claims data used in management’s actuarial model to the data used in prior periods to determine whether there were material changes to the claims data tested in prior periods. o Performed a retrospective review comparing management’s prior year estimate of IBNR claim liability to claims processed in 2022 with dates of service in 2021 or prior. o Developed an independent estimate of the IBNR claim liability and compared our estimate to management’s estimate.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the IBNR claim liability included the following, among others: • We tested the effectiveness of controls over the Company’s actuarial process for estimating the IBNR claim liability. • We tested the underlying claims and membership data and other information that served as the basis for the actuarial analysis, to determine the inputs to the actuarial estimate were complete and accurate. • With the assistance of our actuarial specialists, we evaluated the reasonableness of the actuarial methods and assumptions used by management to estimate the IBNR claim liability by: o Performing an overlay of the historical claims data used in management’s actuarial model to the data used in prior periods to determine whether there were material changes to the claims data tested in prior periods. o Performing a retrospective review comparing management’s prior year estimate of the IBNR claim liability to claims processed in 2023 with dates of service in 2022 and prior. o Developing an independent estimate of the IBNR claim liability and compared our estimate to management’s estimate.
For discussion of 2020 items and year-over-year comparisons between 2021 and 2020 that are not included in this Form 10-K, refer to Item 7.
For discussion of 2021 items and year-over-year comparisons between 2022 and 2021 that are not included in this Form 10-K, refer to Item 7.
These payments, which are adjusted for variable considerations, represent revenue for providing health care service, including primary care as well as institutional and specialist care. The DCE recognizes capitation revenue for providing these services in the period in which the performance obligations are satisfied by transferring services to the members.
These payments, which are adjusted for variable considerations, represent revenue for providing health care services, including primary care as well as institutional and specialist care. The ACO recognizes capitation revenue for providing these services in the period in which the performance obligations are satisfied by transferring services to the members.
Adjusted Gross Profit and Medical Benefits Ratio, or MBR Adjusted gross profit is a non-GAAP financial measure that we define as loss from operations before depreciation and amortization, clinical equity-based compensation expense, and selling, general, and administrative expenses.
Adjusted Gross Profit and Medical Benefits Ratio Adjusted gross profit is a non-GAAP financial measure that we define as net loss from operations before depreciation and amortization, clinical equity-based compensation expense, and selling, general, and administrative expenses.
These investments are carried at amortized cost, which approximates fair value. 12. Leases Our leases are primarily for our corporate office, including parking spaces, and healthcare services operating facilities and expire at various intervals up through 2025.
These investments are carried at amortized cost, which approximates fair value. 108 12. Leases Our leases are primarily for our corporate office, including parking spaces, and healthcare services operating facilities and expire at various intervals up through 2030.
Equivalent Shares of Restricted and Common Stock Outstanding at December 31, 2019 1,844,923 Grants — Canceled ( 156,695 ) Outstanding at December 31, 2020 1,688,228 Grants — Canceled ( 110,719 ) Cash settlement or converted into common stock ( 1,277,020 ) Converted into unvested RSAs ( 300,489 ) Outstanding at December 31, 2021 — Incentive Units A portion of Incentive Units vest annually over four years (“Time-vesting Incentive Units”) and the remaining Incentive Units vest upon a change in control (“Performance-vesting Incentives Units”).
Equivalent Shares of Restricted and Common Stock Outstanding at December 31, 2020 1,688,228 Grants — Canceled ( 110,719 ) Cash settlement or converted into common stock ( 1,277,020 ) Converted into unvested RSAs ( 300,489 ) Outstanding at December 31, 2021 — Incentive Units A portion of Incentive Units vest annually over four years (“Time-vesting Incentive Units”) and the remaining Incentive Units vest upon a change in control (“Performance-vesting Incentives Units”).
The MLR represents medical costs as a percentage of premium revenue. The Code of Federal Regulations defines what constitutes medical costs and premium revenue, including certain additional expenses related to improving the quality of care provided, and the exclusion of certain taxes and fees, in each case as permitted or required by CMS and applicable regulatory requirements.
The Code of Federal Regulations defines what constitutes medical costs and premium revenue, including certain additional expenses related to improving the quality of care provided, and the exclusion of certain taxes and fees, in each case as permitted or required by CMS and applicable regulatory requirements.
As of December 31, 2022 and December 31, 2021, we were in compliance with the Oxford and CRG financial covenants, respectively. Future maturities under the term loan as of December 31, 2022 are as follows: Period Ending December 31, Amount 2023 $ — 2024 — 2025 1,650 2026 1,650 2027 161,700 Total $ 165,000 9.
As of December 31, 2023 and December 31, 2022, we were in compliance with the Oxford financial covenants. Future maturities under the term loan as of December 31, 2023 are as follows: Period Ending December 31, Amount 2024 — 2025 1,650 2026 1,650 2027 161,700 2028 — Total $ 165,000 9.
The amount of undistributed dividends from our regulated subsidiaries that may be paid out to our parent without regulatory approval was $ 11,086 and $ 24,957 as of December 31, 2022 and 2021, respectively. We were in compliance with the RBC and TNE requirements as of December 31, 2022 and 2021.
The amount of undistributed dividends from our regulated subsidiaries that may be paid out to our parent without regulatory approval was $ 24,349 and $ 11,086 as of December 31, 2023 and 2022, respectively. We were in compliance with the RBC and TNE requirements as of December 31, 2023.
The DCE acts as a principal in arranging for and controlling services provided directly by its contracts with primary care physicians, as well as services provided by preferred institutional care providers and specialists. Capitation payments for the DCE program are determined from an annual benchmark established by CMS.
The ACO acts as a principal in arranging for and controlling services provided directly by their contracts with primary care physicians, as well as services provided by preferred institutional care providers and specialists. Capitation payments for the ACO program are determined from an annual benchmark established by CMS.
Short term and finance lease costs were immaterial. For the year-ended December 31, 2022, 2021 and 2020, cash paid for amounts included in the measurement of lease liabilities included within our operating cash flows was $ 4,214 , $ 3,817 and $ 3,310 , respectively.
Short term and finance lease costs were immaterial. For the year-ended December 31, 2023, 2022 and 2021, cash paid for amounts included in the measurement of lease liabilities included within our operating cash flows was $ 3,510 , $ 4,214 and $ 3,817 , respectively.
The DCE is responsible for the cost of health care services related to the patient population attributed to the DCE by participating in 100% savings/losses via the risk share model and in some cases, are financially responsible for the supplemental benefits provided to the patients.
The ACO REACH entity ("ACO") is responsible for the cost of health care services related to the patient population attributed to the ACO by participating in 100% savings/losses via the risk share model and in some cases, are financially responsible for the supplemental benefits provided to the patients.
See Note 1 to the consolidated financial statements for additional details. See accompanying notes to consolidated financial statements. 86 Alignment Healthcare, Inc.
See Note 1 to the consolidated financial statements for additional details. See accompanying notes to consolidated financial statements. 88 Alignment Healthcare, Inc.
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.
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; valuation of related impairment recognition of 91 long-lived assets, including goodwill and intangible assets; equity-based compensation expense; and contingent liabilities.
Our independent estimate included development of per member per month claims cost trends and completion factors using management’s data, and comparison of these assumptions to current and historical claims trends and current industry benchmarks. /s/ Deloitte & Touche LLP Los Angeles, California February 28, 2023 We have served as the Company’s auditor since 2019. 84 Alignment Healthcare, Inc.
Our independent estimate included development of per member per month claims cost trends and completion factors using management’s data, and comparison of these assumptions to current and historical claims trends and current industry benchmarks. /s/ Deloitte & Touche LLP Los Angeles, California February 27, 2024 We have served as the Company’s auditor since 2019. 85 Alignment Healthcare, Inc.
This metric excludes third party payor members with respect to which we are at-risk for managing their healthcare expenditures, which represented 500 members and 600 members as of December 31, 2022 and December 31, 2021, respectively.
This metric excludes third party payor members with respect to which we are at-risk for managing their healthcare expenditures, which represented 400 members and 500 members as of December 31, 2023 and December 31, 2022, respectively.
The noncontrolling interest in the subsidiary was initially recognized at estimated fair value on October 1, 2022 and is presented within total equity in the Company's consolidated balance sheet. The net loss attributable to this noncontrolling interest was $ 92 for the year ended December 31, 2022.
The noncontrolling interest in the subsidiary was initially recognized at estimated fair value on October 1, 2022 and is presented within total equity in the Company's consolidated balance sheet. The net loss attributable to this noncontrolling interest was $ 156 and $ 92 for the years ended December 31, 2023 and December 31, 2022, respectively.
The following table illustrates the sensitivity of these factors and the estimated potential impact on our medical expenses payable estimates for the most recent two months as of December 31, 2022: Medical Cost PMPM Quarterly Trend Increase (Decrease) In Medical Expenses Payable Increase (Decrease) in Factors (in thousands) 3% $ 3,126 2 2,084 1 1,042 (1) (1,042 ) (2) (2,084 ) (3) (3,126 ) Each period, we re-examine previously established IBNR estimates based on actual claim submissions and other changes in facts and circumstances.
The following table illustrates the sensitivity of these factors and the estimated potential impact on our medical expenses payable estimates for the most recent two months as of December 31, 2023: Medical Cost PMPM Quarterly Trend Increase (Decrease) In Medical Expenses Payable Increase (Decrease) in Factors (in thousands) 3% $ 3,804 2 2,536 1 1,268 (1) (1,268 ) (2) (2,536 ) (3) (3,804 ) Each period, we re-examine previously established IBNR estimates based on actual claim submissions and other changes in facts and circumstances.
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 losses related to accounts receivable o f $ 150 , $ 111 , and $ 118 during the years ended December 31, 2022, 2021, and 2020, respectively.
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 losses related to accounts receivable of $ 91 , $ 150 , and $ 111 during the years ended December 31, 2023, 2022, and 2021, respectively.
We had approximately 108,300 Health Plan Members across these markets as of January 1, 2023. Our ultimate goal is to bring this differentiated, advocacy-driven healthcare experience to millions of senior consumers in the United States and to become the most trusted senior healthcare brand in the country.
We had approximately 155,500 Health Plan Members across these markets as of January 1, 2024. Our ultimate goal is to bring this differentiated, advocacy-driven healthcare experience to millions of senior consumers in the United States and to become the most trusted senior healthcare brand in the country.
As of December 31, 2021, there was $ 110,534 in unrecognized compensation expense related to all non-vested awards (RSAs, options and RSUs) that will be recognized over the weighted-average period of 1.76 years. 11.
As of December 31, 2022 and December 31, 2021, there was $ 120,241 and $ 110,534 , respectively, in unrecognized compensation expense related to all non-vested awards (RSAs, options and RSUs) that will be recognized over the weighted-average period of 2.42 and 1.76 years, respectively. 11.
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