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What changed in Alignment Healthcare, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Alignment Healthcare, Inc.'s 2024 and 2025 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 2025 report.

+380 added−379 removedSource: 10-K (2026-02-27) vs 10-K (2025-02-27)

Top changes in Alignment Healthcare, Inc.'s 2025 10-K

380 paragraphs added · 379 removed · 265 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

53 edited+42 added−22 removed85 unchanged
Biggest changeThe strength of our model is further reinforced by delivering a premium member experience. Our concierge and a clinical service hotline is available 24/7 at no additional cost to our members and our state-of-the-art in-house call centers provide us with more consistency and control over member-facing functions.
Biggest changeOur concierge and a clinical service hotline is available 24/7 at no additional cost to our members and our state-of-the-art in-house call centers provide us with more consistency and control over member-facing functions. 5 Table of Contents Our virtuous cycle, based on the principle of doing well by doing good, is highly repeatable and a core tenet of our ability to continue to expand in existing and new markets in the future.
See “ Risk Factors — Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or our members, or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation .” Our business and operations may also be subject to federal, state, and local consumer protection laws governing marketing communications, including the Telephone Consumer Protection Act (“TCPA”), which places restrictions on the use of automated tools and technologies to communicate with wireless telephone subscribers or communications services consumers generally and the CAN-SPAM Act, which regulates the transmission of marketing emails.
See “ Risk Factors — Cybersecurity breaches, loss of data and other disruptions could compromise sensitive information related to our business or our members, or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation .” Our business and operations may also be subject to federal, state, and local consumer protection laws governing marketing communications, including the Telephone Consumer Protection Act (“TCPA”), which places restrictions on the use of automated tools and technologies to communicate with wireless telephone subscribers or communications services consumers generally and the CAN-SPAM Act, which regulates the transmission of marketing emails.
In addition, certain of our businesses are also subject to the Payment Card Industry Data Security Standard (“PCI DSS”), which is a multifaceted industry security standard that is designed to protect credit card account data as mandated by payment brands and acquiring banks.
In addition, certain of our businesses are also subject to the Payment Card Industry Data Security Standard (“PCI DSS”), which is a multifaceted industry security standard that is designed to protect credit and debit card account data as mandated by payment brands and acquiring banks.
HIPAA specifies that such notifications must be made without unreasonable delay and in no case later than 60 calendar days after discovery of the breach. If a breach affects 500 patients or more, it must be reported to HHS without unreasonable delay, and HHS will post the name of the breaching entity on its public website.
HIPAA specifies that such notifications must be made without unreasonable delay and in no case later than 60 calendar days after discovery of the breach. If a breach affects 500 individuals or more, it must be reported to HHS without unreasonable delay, and HHS will post the name of the breaching entity on its public website.
Chronic : The typical member in the “chronic” category is generally a complex patient with multiple chronic conditions in need of significant, coordinated care. Chronic members comprise 13% of our membership but account for 78% of the institutional claims submitted.
Chronic : The typical member in the “chronic” category is generally a complex patient with multiple chronic conditions in need of significant, coordinated care. Chronic members comprise 14% of our membership but account for 78% of the institutional claims submitted.
We 6 Table of Contents have entered into standard form agreements with CMS pursuant to Sections 1851 through 1859 and Sections 1860D-1 through 1860D-43 of the Social Security Act ("SSA"), pursuant to which we have agreed to operate our plans in accordance with applicable laws and regulations and CMS has agreed to make payments to us under the SSA.
We have entered into standard form agreements with CMS pursuant to Sections 1851 through 1859 and Sections 1860D-1 through 1860D-43 of the Social Security Act ("SSA"), pursuant to which we have agreed to operate our plans in accordance with applicable laws and regulations and CMS has agreed to make payments to us under the SSA.
The CCPA, as amended by the CPRA, expands on the existing rights provided to California residents and will include rights to know, delete, correct, personal information; limit the use of sensitive personal information; and opt out of the sale of personal information or the sharing of personal information with third parties for purposes of cross-context behavioral advertising.
The CCPA, as amended by the CPRA, expands on the existing rights provided to California residents and includes rights to know, delete and correct personal information; limit the use of sensitive personal information; and opt out of the sale of personal information or the sharing of personal information with third parties for purposes of cross-context behavioral advertising.
These regulations generally require, among other things, prior approval and/or notice of new products, rates, benefit changes, and certain material transactions, including dividend payments, purchases or sales of assets, intercompany agreements, and the filing of various financial and operational reports.
These regulations generally require, among other things, prior approval and/or notice of new products, rates, benefit changes, and certain 10 Table of Contents material transactions, including dividend payments, purchases or sales of assets, intercompany agreements, and the filing of various financial and operational reports.
The majority of our regulation and oversight comes from CMS, which regulates almost every aspect of our business, including our provider network, benefits, member enrollment, risk adjustment program, plan offerings, claims payments, quality improvement programs, and appeals and grievances.
The majority of our regulation and oversight comes from CMS, which regulates almost every aspect of our business, including our provider network, benefits, member 6 Table of Contents enrollment, risk adjustment program, plan offerings, claims payments, quality improvement programs, and appeals and grievances.
Management regularly reports to our board for input on important decisions related to human capital, including corporate culture, safety, compliance, talent management, organizational development, compensation, and benefits. Corporate Information We were originally formed as a Delaware limited liability company under the name Alignment Healthcare Holdings, LLC in 2013.
Management regularly reports to our board for input on important decisions related to human capital, including corporate culture, safety, compliance, talent management, organizational development, compensation, and benefits. Corporate Information 12 Table of Contents We were originally formed as a Delaware limited liability company under the name Alignment Healthcare Holdings, LLC in 2013.
This agency will be able to finance operations through penalties issued and, with the CPRA’s removal of the mandatory cure period from the CCPA, we will have less warning before compliance risk results in legal action. Additionally, the CCPA’s exemption for personal information of personnel (including employees, job applicants, officers, and directors) and business-to-business contacts has been allowed to sunset.
This agency will be able to finance operations through penalties issued and, with the CPRA’s removal of the mandatory cure period from the CCPA, we will have less warning before compliance risk results in legal action. Additionally, the CCPA’s exemption for personal information of personnel (including employees, job applicants, officers, and directors) and business-to-business contacts expired.
The information contained on, or that can be accessed through, our website is not incorporated by reference into this filing and you should not consider any information contained on, or that can be 12 Table of Contents accessed through, our website as part of this filing.
The information contained on, or that can be accessed through, our website is not incorporated by reference into this filing and you should not consider any information contained on, or that can be accessed through, our website as part of this filing.
There are also requirements for data processing and cybersecurity assessments, and contracting requirements for service providers, third parties, and contractors who receive and process information from the regulated “business.” The CPRA amendment created a state agency, the California Privacy Protection Agency (“CPPA”), to enforce and implement the law.
There are also requirements for privacy risk and cybersecurity assessments, and contracting requirements for service providers, third parties, and contractors who receive and process personal information from the regulated “business.” The CPRA amendment created a state agency, the California Privacy Protection Agency (“CPPA”), to enforce and implement the law.
See “ Risk Factors—Risks Related to Regulation—State Regulation of Insurance-Related Products .” 10 Table of Contents Intellectual Property We believe that our intellectual property rights are valuable and critical to our business stability and growth.
See “ Risk Factors—Risks Related to Regulation—State Regulation of Insurance-Related Products .” Intellectual Property We believe that our intellectual property rights are valuable and critical to our business stability and growth.
Many states in which we operate through our subsidiaries limit the practice of medicine to licensed individuals or professional organizations comprised of licensed individuals, and business corporations generally may not exercise control over the medical decisions of physicians.
Many states in which we operate through our subsidiaries limit the practice of medicine to licensed individuals or professional organizations exclusively owned and comprised of licensed individuals, and business corporations generally may not exercise control over the medical decisions of licensed physicians or other licensed clinicians.
See “ Risk Factors—Risks Related to Regulation. ” In addition to the SSA, CMS regulations, and our contractual obligations, we must also comply with a variety of other laws: HIPAA, HITECH Act and Other Laws, Rules and Regulations Related to Data Privacy; Security and Protection We are subject to data privacy and protection and breach notification laws and regulations that apply to the collection, transmission, storage and use of protected health information (“PHI”), and other types of personal data or personally identifiable information (“PII”), which among other things, impose certain requirements relating to the privacy and security of such PII.
See “ Risk Factors—Risks Related to Regulation. ” In addition to the SSA, CMS regulations, and our contractual obligations, we must also comply with a variety of other laws: HIPAA, HITECH Act and Other Laws, Rules and Regulations Related to Data Privacy; Security and Protection 7 Table of Contents We are subject to data privacy and protection and breach notification laws and regulations that apply to the collection, creation, receipt, maintenance, transmission, storage, use, disclosure and processing of protected health information (“PHI”), and other types of personal data or personally identifiable information (“PII”), which among other things, impose certain requirements relating to the privacy and security of such PHI and PII.
To execute upon this concept, we start by ingesting medical and demographic data through our proprietary AVA technology platform. AVA’s predictive algorithms provide unique insights into each member and identify those most at risk of an acute event.
To execute upon this concept, we ingest medical and demographic data through our proprietary technology platform, which we refer to as AVA. AVA’s predictive algorithms provide unique insights into each member and identify those most at risk of an acute event.
The primary competitive factors for our industry include, but are not limited to, the following: • premium price; • Star ratings; • breadth and richness of benefits, such as maximum out-of-pocket, deductibles, co-pays, Part B rebates, in addition to others; • diversity of services and products offered, particularly ones that address the social determinants of health; • breadth of network access; • level of member engagement; • level of member satisfaction; • the quality of the member experience provided, including member service; • care delivery and health outcomes; • costs of care; • ability to recruit and retain skilled employees and clinicians; • brand identity and reputation; and • regulatory compliance Environmental, Social and Governance and Human Capital Environmental, Social and Governance We are committed to implementing meaningful environmental, social, and governance (“ESG”) practices.
The primary competitive factors for our industry include, but are not limited to, the following: • premium price; • Star ratings; • breadth and richness of benefits, such as maximum out-of-pocket, deductibles, co-pays, Part B rebates, in addition to others; • diversity of services and products offered, particularly ones that address the social determinants of health; • breadth of network access; • level of member engagement; • level of member satisfaction; • the quality of the member experience provided, including member service; • care delivery and health outcomes; • costs of care; • ability to recruit and retain skilled employees and clinicians; • brand identity and reputation; and • regulatory compliance Corporate Responsibility We are committed to creating positive, measurable outcomes for our members, employees, communities, and shareholders.
Healthy members comprise approximately 71% of our membership base but account for only 5% of the institutional claims submitted. Healthy Utilizer : The typical member in the “healthy utilizer” category is an otherwise healthy senior who has had isolated or unexpected health challenges requiring significant medical care.
Healthy Utilizer : The typical member in the “healthy utilizer” category is an otherwise healthy senior who has had isolated or unexpected health challenges requiring significant medical care. Healthy utilizers comprise approximately 6% of our membership base and account for 16% of the institutional claims submitted.
The rules preempt all inconsistent state laws unless the state law is more privacy-protective. These regulations, in addition to other state laws, set standards for the security of electronic health information, including requirements that insurers provide customers with notice regarding how their individually identifiable health information is used.
These regulations, in addition to other state laws, set standards for the security of electronic health information, including requirements that insurers provide customers with notice regarding how their individually identifiable health information is used.
In March 2021, we completed the Corporate Conversion and Corporate Reorganization and changed our name to Alignment Healthcare, Inc. During the same month, we completed our initial public offering and our common stock began trading on the Nasdaq Global Select Market under the symbol “ALHC.” Our principal executive office is located at 1100 W.
In March 2021, we completed a corporate restructuring in connection with our initial public offering (“IPO”) changed our name to Alignment Healthcare, Inc. Following the IPO, our common stock began trading on the Nasdaq Global Select Market under the symbol “ALHC.” Our principal executive office is located at 1100 W.
As of December 31, 2024: • 74% of our employees were female; • 65% of our employees were ethnically diverse; • 20% of our executive team was ethnically diverse; • 10% of our executive team was female; • 22% of our Board of Directors was ethnically diverse; and • 44% of our Board of Directors was female.
As of December 31, 2025: • 74% of our employees were female; • 70% of our employees were ethnically diverse; • 22% of our executive team was ethnically diverse; • 11% of our executive team was female; • 22% of our Board of Directors was ethnically diverse; and • 44% of our Board of Directors was female.
Such proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs 8 Table of Contents and/or changes in business practices and policies.
However, this patchwork of state laws may add further complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.
Our active approach to monitoring gaps in care and acting before emerging health problems worsen is reflective of the culture of care embedded in our organization, and our focus on being a persistent advocate for our members.
Pre-chronic members comprise approximately 6% of our membership but account for only 1% of the institutional claims submitted. Our active approach to monitoring gaps in care and acting before emerging health problems worsen is reflective of the culture of care embedded in our organization, and our focus on being a persistent advocate for our members.
Failure to comply with any of these laws and regulations could result in enforcement action against us, including fines, public censure, claims for damages by affected individuals, damage to our reputation and loss of 7 Table of Contents goodwill.
Failure to comply with any of these laws and regulations could result in enforcement action against us, including fines, public censure, claims for damages by affected individuals, damage to our reputation and loss of goodwill. Ongoing efforts to comply with evolving laws and regulations may be costly and require ongoing modifications to our policies, procedures and systems.
The US Department of Health and Human Services, Office for Civil Rights announced on December 27, 2024, and published in the Federal Register on January 6, 2025, a Notice of Proposed Rulemaking proposing extensive modifications to the HIPAA security standards. If finalized, these modifications and could entail significant additional compliance obligations and costs for HIPAA-regulated covered entities and business associates.
The US Department of Health and Human Services, Office for Civil Rights ("OCR") announced on December 27, 2024, and published in the Federal Register on January 6, 2025, a Notice of Proposed Rulemaking proposing extensive modifications to the HIPAA security standards.
These laws and regulations require us to meet various standards relating to, among other things, reports to CMS, personnel qualifications, maintenance of proper records and quality assurance programs and patient care.
Regulation Our operations and those of our affiliated entities are subject to extensive federal, state and local governmental laws and regulations. These laws and regulations require us to meet various standards relating to, among other things, reports to CMS, personnel qualifications, maintenance of proper records and quality assurance programs and patient care.
We must devote significant resources to understanding and complying with this changing landscape. Failure to comply with laws regarding privacy and security of PHI and other PII could expose us to penalties under such laws.
Failure to comply with laws regarding privacy and security of PHI and other PII could expose us to penalties under such laws.
Our Human Capital strategy focuses on meeting business objectives by attracting, developing, engaging, and retaining a high-performing, diverse workforce. As of December 31, 2024, we had 1,679 full-time employees in addition to seasonal employees who assist with the Medicare AEP. Each year, we conduct an employee survey to further enhance employee engagement and productivity.
Our Human Capital strategy focuses on meeting business objectives by attracting, developing, engaging, and retaining a high-performing, diverse workforce. As of December 31, 2025, we had 1,849 full-time employees in addition to seasonal employees who assist with the Medicare AEP. We recognize that an inclusive workplace is crucial as we scale and build our high-performing team.
Versions of this Model Law have been passed in many states and are expected to be passed in more states in the coming years. Similar to HIPAA, the Model Law requires the implementation of technical, administrative, and physical information security practices and procedures and includes reporting requirements for data breaches. These Model Laws are typically enforced by state insurance regulators.
Similar to HIPAA, the Model Law requires the implementation of technical, administrative, and physical information security practices and procedures and includes reporting requirements for data breaches. These Model Laws are typically enforced by state insurance regulators. We are not currently subject to any of these laws that have been adopted to date.
Various state laws address the use and maintenance of individually identifiable health information. HIPAA includes administrative provisions directed at simplifying electronic data interchange through standardizing transactions, establishing uniform healthcare provider, payer, and employer identifiers, and establishing regulations aimed at protecting confidentiality and security of patient and member data.
HIPAA includes administrative provisions directed at simplifying electronic data interchange through standardizing transactions, establishing uniform healthcare provider, payer, and employer identifiers, and establishing regulations aimed at protecting confidentiality and security of patient and member data. The rules preempt all inconsistent state laws unless the state law is more privacy-protective.
Breaches affecting more than 500 patients in the same state or jurisdiction must also be reported to the local media. If a breach involves fewer than 500 people, the covered entity must record it in a log and notify HHS at least annually. We also publish statements to our members and partners that describe how we handle and protect PHI.
Breaches affecting more than 500 individuals in the same state or jurisdiction must also be reported to the prominent media outlets serving the state or jurisdiction. If a breach involves fewer than 500 individuals, the covered entity must record it in a log and notify HHS at least annually.
As a result, beginning on January 1, 2023, personal information of California resident personnel and business contacts became subject to the CCPA. This has created compliance obligations for our operations.
As a result, since January 1, 2023, personal information of California resident personnel and business contacts has been subject to the CCPA.
We, our in-house and externally engaged physicians and the facilities in which they operate are subject to various federal, state and local licensing and certification laws and regulations and accreditation standards and other laws, relating to, among other things, the adequacy of medical care, equipment, privacy of member information, physician relationships, personnel and operating policies and procedures. 9 Table of Contents Failure to comply with these licensing, certification and accreditation laws, regulations and standards could result in prior payments being subject to recoupment, requirements to make significant changes to our operations and can give rise to civil or, in extreme cases, criminal penalties.
We, our in-house and externally engaged physicians and the facilities in which they operate are subject to various federal, state and local licensing and certification laws and regulations and accreditation standards and other laws, relating to, among other things, the adequacy of medical care, equipment, privacy of member information, physician relationships, personnel and operating policies and procedures.
HIPAA imposes mandatory penalties for certain violations. In 2024, penalties for violations of HIPAA and its implementing regulations started at $141 per violation and could not exceed approximately $71,162 per violation, subject to a cap of approximately $2.1 million for violations of the same standard in a single calendar year.
In 2026, penalties for violations of HIPAA and its implementing regulations started at $145 per violation and could not exceed approximately $73,011 per violation, subject to a cap of approximately $2.2 million for violations of the same standard in a single calendar year.] However, a single breach incident can result in violations of multiple standards.
Using insights from AVA, we organize members into four categories to provide optimized care: healthy, healthy utilizer, pre-chronic and chronic. The data below represents a sample of our population stratification from 2024. Healthy : The typical member in the “healthy” category requires low levels of medical care.
Our care delivery model creates a highly personalized experience that is unique to each member. Using insights from AVA, we organize members into four categories to provide optimized care: healthy, healthy utilizer, pre-chronic and chronic. The data below represents a sample of our population stratification from 2025.
Statutes, regulations and court decisions relating to the practice of medicine, fee-splitting between physicians and referral sources, and similar issues vary widely from state to state. The laws and regulations in these areas are complex, changing, and often subject to varying interpretations. The interpretation and enforcement of these laws vary significantly from state to state.
The laws and regulations in these areas are complex, changing, and often subject to varying interpretations. The interpretation and enforcement of these laws vary significantly from state to state.
Ongoing efforts to comply with evolving laws and regulations may be costly and require ongoing modifications to our policies, procedures and systems. The use of individually identifiable health data by our business is regulated at federal and state levels. These laws and rules are changed frequently by legislation or administrative interpretation.
The use of individually identifiable health data by our business is regulated at federal and state levels. These laws and rules are changed frequently by legislation or administrative interpretation. Various state laws address the use and maintenance of individually identifiable health information.
The CCPA and CPRA contain exemptions for medical information governed by the California Confidentiality of Medical Information Act, and for PHI collected by a covered entity or business associate governed by the privacy, security, and breach notification rule established pursuant to HIPAA. This exempts much of the data we process with respect to patients and plan members.
This has created compliance obligations for our operations. 8 Table of Contents The CCPA contains exemptions for medical information governed by the California Confidentiality of Medical Information Act, and for PHI collected by a covered entity or business associate governed by the privacy, security, and breach notification rule established pursuant to HIPAA.
We are not currently subject to any of these laws that have been adopted to date. It is possible that applicable laws may be interpreted and applied in a manner that is inconsistent with our practices and our efforts to comply with the evolving data protection rules may be unsuccessful.
It is possible that applicable laws may be interpreted and applied in a manner that is inconsistent with our practices and our efforts to comply with the evolving data protection rules may be unsuccessful. We must devote significant resources to understanding and complying with this changing landscape.
Our Clinical Model: Proactively Managing Member Care to Improve Outcomes and Reduce Cost 5 Table of Contents We engage regularly with members as part of their daily lives and proactively manage their chronic conditions to improve outcomes and reduce cost.
Our Clinical Model: Proactively Managing Member Care to Improve Outcomes and Reduce Cost We engage regularly with members as part of their daily lives and proactively manage their chronic conditions to improve outcomes and reduce cost. 4 Table of Contents Our clinical model is designed specifically for seniors and managed across multiple disciplines (medical, social, psychological, pharmaceutical and functional) and sites of care (home, inpatient, outpatient, virtual and others).
A key component of our corporate sustainability and success is learning and development. We are intentional in our efforts to provide all employees opportunities to grow. Our training and development programs for employees focus on enhancing and developing talent within the company. All of our employees can access the training of their choice on-demand through our learning and development platform.
We are intentional in our efforts to provide all employees opportunities to grow. Our training and development programs for employees focus on enhancing and developing talent within the company. All employees have access to on‑demand training through our learning and development platform, which supports scalable capability-building across functional, leadership, compliance, and digital skills.
We also refer to these members as on the “launching pad,” and by deploying our targeted care programs towards this population we work to prevent or slow their increasing acuity levels. Pre-chronic members comprise approximately 8% of our membership but account for only 1% of the institutional claims submitted.
Pre-Chronic : The typical member in the “pre-chronic category” is identified as high-risk by AVA but has yet to incur significant healthcare expenditures. We also refer to these members as on the “launching pad,” and by deploying our targeted care programs towards this population we work to prevent or slow their increasing acuity levels.
Given the prevalence of comorbidities within our chronically ill members, coordination across a multi-disciplinary care team is vital to providing a medical and behavioral care plan that drives improved outcomes. Our care delivery model creates a highly personalized experience that is unique to each member.
Our internal care teams and external providers use AVA, our proprietary technology platform, to coordinate high-quality care for members and manage the complexity of the healthcare system. Given the prevalence of comorbidities within our chronically ill members, coordination across a multi-disciplinary care team is vital to providing a medical and behavioral care plan that drives improved outcomes.
Under business support agreements between certain of our subsidiaries and associated physician-owned professional groups, these groups retain sole responsibility for all medical decisions, as well as for hiring and managing physicians and other licensed healthcare providers, developing operating policies and procedures, implementing professional standards and controls, and maintaining malpractice insurance.
Under business support agreements between certain of our subsidiaries and associated physician-owned professional groups, these groups retain sole responsibility for all medical decisions, as well as for hiring and managing physicians and other licensed healthcare providers, developing operating policies and procedures, implementing professional standards and controls, and maintaining malpractice insurance. 9 Table of Contents Recently, Oregon and California have passed laws codifying and strengthening their existing corporate practice of medicine prohibitions in ways which may require us to adjust contractual arrangements with our affiliated physician-owned professional groups, and we are aware of a number of other states considering similar legislation.
These state laws generally exempt HIPAA regulated covered entities and business associates, PHI, and/or personal information collected in the context of employment and business-to-business relationships. While the CPRA/CCPA is an example of consumer privacy law, the NAIC’s Insurance Data Security Model Law (the “Model Law”) is a different type of law focused on securing insurance licensees’ information systems.
These state laws generally exempt HIPAA regulated covered entities and business associates, PHI, and/or personal information collected in the context of employment and business-to-business relationships.
We generally contract directly with CMS as a licensed Medicare Advantage plan and receive a recurring per member per month (“PMPM”) payment in exchange for bearing the responsibility of our members’ healthcare outcomes and expenditures.
Our licensed Medicare Advantage plans contract directly with the Centers for Medicare & Medicaid Services. In exchange for a capitated, fixed monthly payment for each enrolled member (i.e., revenue per member per month or “PMPM”) , we take responsibility for coordinating and managing our members’ healthcare—both their health outcomes and the total costs of their care.
Accordingly, neither we nor our direct subsidiaries directly own any equity interests in any of our associated physician practices.
Accordingly, neither we nor our direct subsidiaries directly own any equity interests in any of our associated physician practices. Further, the enforceability of such equity transfer restriction agreements has been called into question by state courts and regulators in New Jersey, New York, California, and Oregon.
The five-year compounded growth rate through December 31, 2024 of revenue and the number of members enrolled in our HMO and PPO contracts ("Health Plan Membership") is 29% and 31%, respectively.
The five-year compounded growth rate through December 31, 2025 of our revenue and Health Plan Membership is 36% and 29%, respectively. Our Technology: AVA ® Provides Timely and Actionable Insights AVA empowers Alignment’s employees and provider partners with timely and actionable information to improve the health experience and outcomes of Alignment’s members.
We also implement rigorous employee training protocols to help ensure our teams operate with rigor, ethics and compliance in mind. We recognize that an inclusive workplace is crucial as we scale and build our high-performing team.
A key component of our corporate sustainability and success is learning and development. Each year, we conduct an employee survey and take action to further enhance employee engagement and productivity. We also implement rigorous employee training protocols to help ensure our teams operate with rigor, ethics and compliance in mind.
We aim to bring this senior-first healthcare experience to millions in the United States, become the most trusted senior healthcare brand in the country, and ultimately “do well by doing good.” Alignment’s Virtuous Cycle is a Distinct Competitive Advantage Our model is based on a flywheel concept, referred to as our “virtuous cycle,” which reflects our unique ability to manage healthcare expenditures while maintaining quality and member satisfaction — a distinct and sustainable competitive advantage.
We aim to bring this senior-first healthcare experience to millions in the United States, become the most trusted senior healthcare brand in the country, and ultimately “do well by doing good.” Business Overview Alignment is a next generation, consumer-centric and clinically focused platform designed to improve the healthcare experience for seniors enrolled in Medicare who choose a private Medicare Advantage plan.
However, a single breach incident can result in violations of multiple standards. The penalty amounts listed above are also due for inflation adjustments in 2025. HIPAA also authorizes state attorneys general to file suit on behalf of their residents for statutory damages of up to $25,000.
HIPAA also authorizes state attorneys general to file suit on behalf of their residents for violations of HIPAA.
Our aim is to continue fortifying each pillar and to operate with transparency in a way that always puts seniors first, and respects all people, communities, conditions, and environments. Employees and Human Capital Resources We are focused on building a company that is transforming health care by putting seniors first, and our employees are critical to our success.
We publish an annual Impact Report highlighting progress against these priorities. Oversight is provided through collaboration among senior leadership, the CEO, and the Board of Directors. Employees and Human Capital Resources We are focused on building a company that is transforming health care by putting seniors first, and our employees are critical to our distinctive business model.
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Our virtuous cycle, based on the principle of doing well by doing good, is highly repeatable and a core tenet of our ability to continue to expand in existing and new markets in the future.
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Our goal is to provide seniors with easier access to care, better coordination among providers, fewer gaps in care and avoidable hospital visits, and support that meets them where they are—at home, online, or in their community.
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Our Results: Predictable, Recurring Revenue Positioned for Long-Term Growth To achieve our mission of improving healthcare for one senior at a time, we have developed a business model with a predictable, recurring revenue stream that provides significant visibility into our financial growth trajectory.
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We deliver this experience through our wide variety of Medicare Advantage plans, which offer varied benefits tailored to the diverse needs, preferences, and lifestyles of seniors. We believe our plans are differentiated because of our unique ability to manage costs by delivering proactive care and manage chronic conditions through an integrated clinical and technology model.
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These contractual arrangements, combined with the fact that the majority of our net membership growth occurs effective on January 1 of a calendar year after the annual enrollment period (“AEP”), provide a higher degree of visibility to our full-year projected revenue early in the calendar year, subject to our ability to model for in-year member growth, as well as revenue PMPM, which in turn depends on member health and mortality trends.
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The PMPM payment varies based on the geography where members live, the health needs and risks of the population we serve, and the quality performance of our plans based on CMS Star Ratings. Most members enroll with Alignment for a one-year period that can be renewed annually.
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We believe that Medicare Advantage is unique in that it allows one entity to influence the entirety of a senior’s healthcare through a single, direct-to-consumer product. Our platform is designed to maximize the benefits of Medicare Advantage, with all stakeholders being rewarded as we improve the clinical outcomes and experience for our members.
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Because a large majority of our members choose to stay with Alignment after their initial selection year, this model provides meaningful visibility into our short-term financial performance and supports long-term stability and growth.
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We believe that the outcomes below clearly demonstrate the success of our unique consumer-centric platform by delivering on the promise of our virtuous cycle. Our ability to deliver lower healthcare costs while improving the consumer’s experience is a unique competitive advantage.
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We have grown Health Plan Membership, which we define as members enrolled in our health maintenance organization ("HMO") and preferred provider organization ("PPO") contracts (the "Alignment Health Plan"), from approximately 13,000 at inception to 236,300 as of December 31, 2025, representing a 30% compound annual growth rate.
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In 2024, we achieved a net promoter score (NPS) for our Care Anywhere members of greater than 78 versus the industry average of 40 and had 98% of our members enrolled in a plan with a CMS star rating of 4 stars or above.
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For the 2025 plan year, Alignment offered Medicare Advantage plans in 45 markets across California (22 markets), North Carolina (16 markets), Nevada (2 markets), Arizona (3 markets) and Texas (2 markets). These markets collectively include approximately 8.4 million Medicare-eligible seniors.
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From a clinical standpoint, we achieved a hospitalization rate of approximately 152 hospitalizations per every 1,000 at-risk members, which is approximately 39% lower than the 2019 Medicare FFS performance in our markets.
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How the Medicare Advantage Model Works Under Medicare Advantage’s capitated PMPM value-based payment model, we are responsible for delivering and coordinating all covered healthcare services for our members.
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This differentiation has led to our demonstrated ability to rapidly scale, as evidenced by the expansion 4 Table of Contents of our model to 53 markets across five states covering approximately 209,900 Health Plan Members as of January 1, 2025 and more than 83% of gross sales sourced through plan switchers from a competing Medicare Advantage plan.
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This obligation includes hospital and physician care under Medicare Parts A and B, prescription drugs under Medicare Part D (with a separate PMPM payment from CMS), the supplemental benefits, such as dental and vision, we offer under certain of our plans, and related administration costs and services.
Removed
We believe we have proven that our model is highly predictable and repeatable across different markets and will enable strong growth on a national level as we pursue our vision of becoming the most trusted senior healthcare brand in the country.
Added
Unlike the original Medicare program administered by CMS, which we refer to herein as “Traditional Medicare,” which typically pays providers separately for each service delivered (i.e., “fee-for-service”), the Medicare Advantage program rewards value rather than volume.
Removed
We anticipate further investments in our business as we expand into new markets and continue to offer additional innovative product offerings and supplemental benefits to attract new members. Our Technology: AVA ® Provides Timely and Actionable Insights AVA empowers Alignment’s employees and provider partners with timely and actionable information to improve the health experience and outcomes of Alignment’s members.
Added
By taking responsibility for the overall cost and quality of care for our members, plans like Alignment are incentivized to focus on prevention, care coordination and timely intervention.
Removed
Our clinical model is designed specifically for seniors and is managed across multiple disciplines (medical, social, psychological, pharmaceutical and functional) and sites of care (home, inpatient, outpatient, virtual and others). Our internal care teams and external providers use AVA to coordinate high-quality care for members and manage the complexity of the healthcare system.
Added
We meet this challenge by providing proactive, cross-disciplinary care 3 Table of Contents targeted at reducing avoidable emergency room visits, managing and promoting access to high-value prescription drugs and supporting care transitions after hospital stays, all of which can reduce the need for more expensive institutional treatments and services.
Removed
Healthy utilizers comprise approximately 8% of our membership base and account for 16% of the institutional claims submitted. Pre-Chronic : The typical member in the “pre-chronic category” is identified as high-risk by AVA but has yet to incur significant healthcare expenditures.
Added
The Medicare Advantage regulatory framework is designed to reward plans that achieve the triple aim of high-quality care, low costs and better experience. CMS payments to Medicare Advantage plans are allocated in each county or region based on a bidding system.
Removed
This also allows us to establish a more direct relationship with seniors, building member loyalty and brand recognition. Our Care Anywhere program has an NPS score greater than 78, underscoring the positive impact it has on our most vulnerable members. Our collective investment in our care model and technology platform has produced strong clinical outcomes for our seniors.
Added
Each year, Medicare Advantage plans submit bids based on estimated costs per enrollee for services covered under Medicare Parts A and B. CMS compares those bids to local, county-level benchmarks that reflect what it would cost Traditional Medicare to cover the same population.
Removed
In 2024, we achieved a hospitalization rate of approximately 152 hospitalizations per every 1,000 at-risk members, which is approximately 39% lower than the 2019 Medicare FFS performance in our markets.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSuch risks are discussed in more detail below, and you should read this Risk Factors section in its entirety before deciding whether to invest in our common stock. • We have a history of net losses and may be unable to achieve or maintain profitability. • Our relatively limited operating history makes it difficult to evaluate our current business and future prospects. • Our growth strategy may not prove viable and we may not realize expected results. • If we are unable to attract new members, our revenue growth will be adversely affected. • If we do not design and price our products properly and competitively, cannot develop new products and implement clinical initiatives, lower costs, and appropriately document members’ risk profile, or if our benefits expense estimates are inadequate, our profitability may be materially adversely affected. • We may not be successful in maintaining or improving our Star ratings in future years, which may have a direct and substantial adverse impact on our revenue. • If we fail to develop and maintain satisfactory relationships with care providers, our business may be adversely affected. • As a government contractor, we risk the potential loss of CMS contracts, suspension from the Medicare Advantage program, changes to premiums paid to Medicare Advantage plans, changes to provisions for risk sharing under Medicare Part D and governmental audits and investigations, among others. • If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and member satisfaction or adequately address competitive challenges. • The loss or renegotiation of certain key contracts with large independent physician associations (“IPAs”), hospitals or other provider networks, to serve our membership base could negatively impact our results. • Security breaches, loss of data and other disruptions could compromise sensitive business or member information, or prevent access to critical information and expose us to liability. • Disruptions in our disaster recovery systems or management continuity planning could limit our ability to operate our business effectively and adequately care for our members. • Our business depends on our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology platform. • We may be subject to legal proceedings and litigation, including intellectual property and privacy disputes. • Our business may be impacted if the healthcare services industry becomes more cyclical. • If we are not able to maintain, enhance and protect our reputation and brand recognition, including through the maintenance and protection of trademarks, our business and results of operations will be harmed. • If we are unable to obtain, maintain, protect and enforce sufficiently broad intellectual property protection, including for our trade secrets, know-how and other proprietary and internally developed information, the value of our technology could be adversely affected. 13 Table of Contents • Third parties may initiate legal proceedings alleging intellectual property rights violations, the outcome of which would be uncertain and could have a material adverse effect on our business. • Any restrictions on our use of, or ability to license, data, or our failure to license data and integrate third-party technologies, could have a material adverse effect on our business. • We depend on our senior management team and other key employees, and the loss of one or more of these employees or an inability to attract and retain other highly skilled employees could harm our business. • We have limited experience serving as a direct contracting entity with CMS under the ACO REACH program and may not be able to realize the expected benefits thereof. • Our plans are concentrated in a limited number of U.S. states and we may not be able to establish new geographic presences. • Competition for physicians and nurses, shortages of qualified personnel or other factors could increase our labor costs and adversely affect our revenue, profitability and cash flows. • Our records may contain inaccurate or unsupportable information regarding risk adjustment scores of members, which could cause misstatements of revenue and subject us to penalties. • Inaccurate estimates of incurred but not reported medical expense could adversely affect our results. • Negative publicity regarding our industry generally could adversely affect our results of operations or business. • Medicare Advantage funding reductions could adversely affect our results of operations. • The healthcare industry is highly competitive, and this competition may have a material adverse effect on our business operations and financial position. • If we are unable to offer new and innovative products and services or fail to keep pace with industry advances, technology and needs, our members may terminate memberships. • We are a holding company with no operations of our own, and we depend on our subsidiaries for cash. • We may be required to maintain higher statutory capital levels for our existing operations or may become subject to additional capital reserve requirements as we pursue new business opportunities. • New laws or changes in laws or their application could increase our cost of doing business. • We must adapt to changes in the healthcare industry and related regulations or our business may be harmed. • Losing the services of the physicians who own our associated physician practices could jeopardize our contractual arrangements. • Our existing indebtedness could adversely affect our business and growth prospects, particularly in an environment of rising interest rates. • Our failure to raise additional capital or generate cash flows could reduce our ability to compete successfully. • Our lead sponsor has significant control over our business activities, and their interests may conflict with ours or yours in the future. • The requirements of being a public company may strain our resources and distract our management. • Provisions of our corporate governance documents could make an acquisition of us more difficult. • The exclusive forum provision in our certificate of incorporation may have the effect of discouraging lawsuits against our directors and officers. • An active, liquid trading market for our common stock may not be sustained. • Our operating results and stock price may be volatile, including as a result of economic or industry-wide factors that are beyond our control. • A significant portion of our total outstanding shares may be sold into the market in the near future. • Future sales of substantial amounts of common stock, or the possibility of such sales, could adversely affect stock price.
Biggest changeSuch risks are discussed in more detail below, and you should read this Risk Factors section in its entirety before deciding whether to invest in our common stock. • We have a history of net losses and may be unable to achieve or maintain profitability. • Our growth strategy may not prove viable and we may not realize expected results. • If we are unable to attract new members, our revenue growth will be adversely affected. • If we do not design and price our products properly and competitively, cannot develop new products and implement clinical initiatives, lower costs, and appropriately document members’ risk profile, or if our benefits expense estimates are inadequate, our profitability may be materially adversely affected. • We may not be successful in maintaining or improving our Star ratings in future years, which may have a direct and substantial adverse impact on our revenue. • If we fail to develop and maintain satisfactory relationships with care providers, our business may be adversely affected. • As a government contractor, we risk the potential loss of CMS contracts, suspension from the Medicare Advantage program, changes to premiums paid to Medicare Advantage plans, changes to provisions for risk sharing under Medicare Part D and governmental audits and investigations, among others. • If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and member satisfaction or adequately address competitive challenges. • The loss or renegotiation of certain key contracts with large independent physician associations (“IPAs”), hospitals or other provider networks, to serve our membership base could negatively impact our results. • Cybersecurity breaches, loss of data and other disruptions could compromise sensitive business or member information, or prevent access to critical information and expose us to liability. • Our use of machine learning and artificial intelligence, including within our AVA platform, may introduce operational, regulatory and legal risks that could adversely affect our business, financial condition and results of operations. 13 Table of Contents • Disruptions in our disaster recovery systems or management continuity planning could limit our ability to operate our business effectively and adequately care for our members. • Our business depends on our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology platform. • Our business may be impacted if the healthcare services industry becomes more cyclical. • If we are not able to maintain, enhance and protect our reputation and brand recognition, including through the maintenance and protection of trademarks, our business and results of operations will be harmed. • If we are unable to obtain, maintain, protect and enforce sufficiently broad intellectual property protection, including for our trade secrets, know-how and other proprietary and internally developed information, the value of our technology could be adversely affected. • Any restrictions on our use of, or ability to license, data, or our failure to license data and integrate third-party technologies, could have a material adverse effect on our business. • We may be subject to legal proceedings and litigation, including intellectual property and privacy disputes. • We depend on our senior management team and other key employees, and the loss of one or more of these employees or an inability to attract and retain other highly skilled employees could harm our business. • Our plans are concentrated in a limited number of U.S. states and we may not be able to establish new geographic presences. • Competition for physicians and nurses, shortages of qualified personnel or other factors could increase our labor costs and adversely affect our revenue, profitability and cash flows. • Our records may contain inaccurate or unsupportable information regarding risk adjustment scores of members, which could cause misstatements of revenue and subject us to penalties. • Inaccurate estimates of incurred but not reported medical expense could adversely affect our results. • Negative publicity regarding our industry generally could adversely affect our results of operations or business. • Medicare Advantage funding reductions could adversely affect our results of operations. • The healthcare industry is highly competitive, and this competition may have a material adverse effect on our business operations and financial position. • If we are unable to offer new and innovative products and services or fail to keep pace with industry advances, technology and needs, our members may terminate memberships. • We are a holding company with no operations of our own, and we depend on our subsidiaries for cash. • We may be required to maintain higher statutory capital levels for our existing operations or may become subject to additional capital reserve requirements as we pursue new business opportunities. • New laws or changes in laws or their application could increase our cost of doing business. • We must adapt to changes in the healthcare industry and related regulations or our business may be harmed. • Losing the services of the physicians who own our associated physician practices could jeopardize our contractual arrangements. • Our existing indebtedness could adversely affect our business and growth prospects, particularly in an environment of rising interest rates. • Our failure to raise additional capital or generate cash flows could reduce our ability to compete successfully. • The requirements of being a public company may strain our resources and distract our management. • Provisions of our corporate governance documents could make an acquisition of us more difficult. • The exclusive forum provision in our certificate of incorporation may have the effect of discouraging lawsuits against our directors and officers. 14 Table of Contents • An active, liquid trading market for our common stock may not be sustained. • Our operating results and stock price may be volatile, including as a result of economic or industry-wide factors that are beyond our control. • A significant portion of our total outstanding shares may be sold into the market in the near future. • Future sales of substantial amounts of common stock, or the possibility of such sales, could adversely affect stock price.
These factors may include: • increased use of medical facilities and services; • increased cost of such services; • increased use or cost of prescription drugs, including specialty prescription drugs; • the introduction of new or costly treatments, including new technologies; • the extent to which providers in our network follow appropriate care recommendations and carry out effective care coordination and care management; • our membership mix; • the extent to which members decline to seek out appropriate preventative care or follow their physicians’ care and healthful living recommendations; • variances in actual versus estimated levels of cost associated with new products, benefits or lines of business, product changes or benefit level changes; • changes in the demographic characteristics of an account or market; • changes or reductions of our utilization management functions such as preauthorization of services, concurrent review or requirements for physician referrals; • catastrophes, including acts of terrorism, public health epidemics, or severe weather (e.g., hurricanes and earthquakes), which may increase both use and cost of medical services and cause members to delay obtaining services, affecting their long-term health; 17 Table of Contents • medical cost inflation; and • government mandated benefits, member eligibility criteria, or other legislative, judicial, or regulatory changes.
These factors may include: • increased use of medical facilities and services; • increased cost of such services; • increased use or cost of prescription drugs, including specialty prescription drugs; • the introduction of new or costly treatments, including new technologies; • the extent to which providers in our network follow appropriate care recommendations and carry out effective care coordination and care management; • our membership mix; • the extent to which members decline to seek out appropriate preventative care or follow their physicians’ care and healthful living recommendations; • variances in actual versus estimated levels of cost associated with new products, benefits or lines of business, product changes or benefit level changes; • changes in the demographic characteristics of an account or market; • changes or reductions of our utilization management functions such as preauthorization of services, concurrent review or requirements for physician referrals; 17 Table of Contents • catastrophes, including acts of terrorism, public health epidemics, or severe weather (e.g., hurricanes and earthquakes), which may increase both use and cost of medical services and cause members to delay obtaining services, affecting their long-term health; • medical cost inflation; and • government mandated benefits, member eligibility criteria, or other legislative, judicial, or regulatory changes.
Because of the sensitivity of the PHI, other PII and other sensitive information we and our service providers collect, store, transmit, and otherwise process and use, the security of our technology platform and other aspects of our services, including those provided or facilitated by our third-party service providers, are important to our operations and business strategy.
Because of the sensitivity of the PHI, PII and other sensitive information we and our service providers collect, store, transmit, and otherwise process and use, the security of our technology platform and other aspects of our services, including those provided or facilitated by our third-party service providers, are important to our operations and business strategy.
Measures taken to protect our systems, those of our contractors or third-party service providers, or the PHI, other PII, or other sensitive information we or contractors or third-party service providers process or maintain (including our requirement that our third-party service providers enter into business associate agreements or other required security agreements, if applicable), may not adequately protect us from the risks associated with the collection, storage, processing and transmission of such sensitive data and information.
Measures taken to protect our systems, those of our contractors or third-party service providers, or the PHI, PII or other sensitive information we or contractors or third-party service providers process or maintain (including our requirement that our third-party service providers enter into business associate agreements or other required security agreements, if applicable), may not adequately protect us from the risks associated with the collection, storage, processing and transmission of such sensitive data and information.
Our operating results and the trading price of our shares may fluctuate in response to various factors, including: • market conditions in our industry or the broader stock market; • actual or anticipated fluctuations in our quarterly or annual financial and operating results; • our announcement of actual results for a fiscal period that are higher or lower than revenue or earnings guidance or our announcement of revenue or earnings guidance that is higher or lower than expected; • introduction of new solutions or services by us or our competitors; • issuance of new or changed securities analysts’ reports or recommendations; • sales, or anticipated sales, of large blocks of our stock; 41 Table of Contents • additions or departures of board members, management or other key personnel; • regulatory or political developments, including those related to Medicare; • litigation and governmental investigations; • changing economic conditions; • investors’ perception of us; • events beyond our control, such as earthquakes, epidemics, weather and war; and • any default on our indebtedness.
Our operating results and the trading price of our shares may fluctuate in response to various factors, including: • market conditions in our industry or the broader stock market; • actual or anticipated fluctuations in our quarterly or annual financial and operating results; • our announcement of actual results for a fiscal period that are higher or lower than revenue or earnings guidance or our announcement of revenue or earnings guidance that is higher or lower than expected; • introduction of new solutions or services by us or our competitors; • issuance of new or changed securities analysts’ reports or recommendations; • sales, or anticipated sales, of large blocks of our stock; • additions or departures of board members, management or other key personnel; • regulatory or political developments, including those related to Medicare; • litigation and governmental investigations; • changing economic conditions; • investors’ perception of us; • events beyond our control, such as earthquakes, epidemics, weather and war; and 42 Table of Contents • any default on our indebtedness.
Among these state laws, which we describe in more detail below, we are most substantially affected by the California Consumer Privacy Act, which uniquely among general consumer privacy laws did not exempt employee information, business contact information, and only maintains narrow exemptions for data subject to HIPAA or the Gramm-Leach-Bliley Act.
Among these state laws, which we describe in more detail below, we are most substantially affected by the California Consumer Privacy Act ("CCPA"), which uniquely among general consumer privacy laws did not exempt employee information, business contact information, and only maintains narrow exemptions for data subject to HIPAA or the Gramm-Leach-Bliley Act.
In addition, on November 3, 2020, California voters approved amendments to the CCPA, known as the CPRA, which significantly modifies the CCPA, including by expanding consumers’ rights with respect to certain personal information and creating a state agency, the California Privacy Protection Agency (“CPPA”), to oversee implementation and enforcement efforts.
In addition, on November 3, 2020, California voters approved amendments to the CCPA, known as the California Privacy Rights Act ("CPRA"), which significantly modifies the CCPA, including by expanding consumers’ rights with respect to certain personal information and creating a state agency, the California Privacy Protection Agency (“CPPA”), to oversee implementation and enforcement efforts.
While the CPRA/CCPA is an example of consumer privacy law, the NAIC’s Model Insurance Data Security Law (the "Model law") is a different type of law focused on securing insurance licensees’ information systems. Versions of this Model Law have been passed in many states and are expected to be passed in more states in the coming years.
While the CCPA is an example of consumer privacy law, the NAIC’s Model Insurance Data Security Law (the "Model law") is a different type of law focused on securing insurance licensees’ information systems. Versions of this Model Law have been passed in many states and are expected to be passed in more states in the coming years.
The functions performed by our major vendors include, but are not limited to, information technology support, claims processing, pharmaceutical benefit management, supplemental benefits (e.g., our "black card" benefit, vision benefits, transportation benefits) and other business process outsourcing.
The functions performed by our major vendors include, but are not limited to, information technology support, claims processing, pharmaceutical benefit management, supplemental benefits (e.g., our "black card" benefit, vision benefits, dental benefits and transportation benefits) and other business process outsourcing.
Since contract year 2024, DHCS will only contract with new D-SNPs that are affiliated with a Medi-Cal managed care plan. Furthermore, beginning in contract year 2025, existing D-SNPs without such affiliations will be prohibited from enrolling new members.
Since contract year 2024, DHCS will only contract with new D-SNPs that are affiliated with a Medi-Cal managed care plan. Furthermore, beginning in contract year 2025, existing D-SNPs without such affiliations are prohibited from enrolling new members.
Security breaches of this infrastructure, including physical or electronic break-ins, computer viruses, ransomware, attacks by hackers and other malicious actors and similar breaches, and employee or contractor error, negligence or malfeasance, can create system disruptions, shutdowns or unauthorized disclosure or modifications of such sensitive data or information, causing PHI or other PII to be accessed or acquired without authorization or to become publicly available.
Cybersecurity breaches of this infrastructure, including electronic break-ins, computer viruses, ransomware, attacks by hackers and other malicious actors and similar breaches, physical break-ins and employee or contractor error, negligence or malfeasance, can create system disruptions, shutdowns or unauthorized disclosure or modifications of such sensitive data or information, causing PHI or other PII to be accessed or acquired without authorization or to become publicly available.
Changes implemented by CMS with respect to the Five Star Quality Rating System have, in the past, and could, in the future, negatively impact our Star ratings. For example, in rating year 2024, CMS removed performance outliers from the calculation of non-Consumer Assessment of Healthcare Providers and Systems (“non-CAHPS data”) measure rating cut points using the Tukey outlier deletion method.
Changes implemented by CMS with respect to the Five Star Quality Rating System have, in the past, and could, in the future, negatively impact our Star ratings. For example, in rating year 2024, CMS removed performance outliers from the calculation of non-Consumer Assessment of Healthcare Providers and Systems (“non-CAHPS data”) measure rating cut points using the Turkey outlier deletion method.
Negative publicity regarding the managed healthcare industry generally, or the Medicare Advantage program in particular, may result in increased regulation and legislative review of industry practices that further increase our costs of doing business and adversely affect our results of operations or business by: • requiring us to change our products and services; • increasing the regulatory, including compliance, burdens under which we operate which, in turn, may negatively impact the manner in which we provide products and services and increase our costs of providing products and services; • adversely affecting our ability to market our products or services through the imposition of further regulatory restrictions regarding the manner in which plans and providers market to and communicate with Medicare Advantage enrollees; or • adversely affecting our ability to attract and retain members.
Negative publicity regarding the managed healthcare industry generally, or the Medicare Advantage program in particular, may result in increased regulation and legislative review of industry practices that further increase our costs of doing business and adversely affect our results of operations or business by: • requiring us to change our products and services; • increasing the regulatory, including compliance, burdens under which we operate which, in turn, may negatively impact the manner in which we provide products and services and increase our costs of providing products and services; • adversely affecting our ability to market our products or services through the imposition of further regulatory restrictions regarding the manner in which plans and providers market to and communicate with Medicare Advantage enrollees; or 30 Table of Contents • adversely affecting our ability to attract and retain members.
HIPAA specifies that such notifications must be made without unreasonable delay and in no case later than 60 calendar days after discovery of the breach. If a breach affects 500 patients or more, it must be reported to HHS without unreasonable delay, and HHS will post the name of the breaching entity on its public website.
HIPAA specifies that such notifications must be made without unreasonable delay and in no case later than 60 calendar days after discovery of the breach. If a breach affects 500 individuals or more, it must be reported to HHS without unreasonable delay, and HHS will post the name of the breaching entity on its public website.
Dividends from our non-insurance companies are generally not restricted by departments of insurance. 37 Table of Contents If any of our plans or operations are found to violate these or other applicable government laws or regulations, we could suffer severe consequences that would have a material adverse effect on our business, results of operations, financial condition, cash flows, reputation and stock price, including: • suspension or termination of one or more of our plans; • refunds of amounts received in violation of law or applicable payment program requirements dating back to the applicable statute of limitation periods; • loss of our required government certifications; • loss of our licenses required to operate our clinics and in-house care delivery programs; • criminal or civil liability, fines, damages or monetary penalties for violations of healthcare fraud and abuse laws, including the federal Anti-Kickback Statute, Stark Law and FCA, or other failures to meet regulatory requirements; • enforcement actions by governmental agencies and/or state law claims for monetary damages by members who believe their PHI has been used, disclosed or not properly safeguarded in violation of federal or state patient privacy laws, including HIPAA and the Privacy Act of 1974; • mandated changes to our practices or procedures that significantly increase operating expenses; • imposition of and compliance with corporate integrity agreements that could subject us to ongoing audits and reporting requirements as well as increased scrutiny of our billing and business practices which could lead to potential fines, among other things; • termination of various relationships and/or contracts related to our business, including joint venture arrangements, medical director agreements, real estate leases and consulting agreements with physicians; and • harm to our reputation which could negatively impact our business relationships, affect our ability to attract and retain members and physicians, affect our ability to obtain financing and decrease access to new business opportunities, our ability to develop relationships with providers, among other things.
If any of our plans or operations are found to violate these or other applicable government laws or regulations, we could suffer severe consequences that would have a material adverse effect on our business, results of operations, financial condition, cash flows, reputation and stock price, including: • suspension or termination of one or more of our plans; • refunds of amounts received in violation of law or applicable payment program requirements dating back to the applicable statute of limitation periods; • loss of our required government certifications; • loss of our licenses required to operate our clinics and in-house care delivery programs; • criminal or civil liability, fines, damages or monetary penalties for violations of healthcare fraud and abuse laws, including the federal Anti-Kickback Statute, Stark Law and FCA, or other failures to meet regulatory requirements; • enforcement actions by governmental agencies and/or state law claims for monetary damages by members who believe their PHI has been used, disclosed or not properly safeguarded in violation of federal or state patient privacy laws, including HIPAA and the Privacy Act of 1974; • mandated changes to our practices or procedures that significantly increase operating expenses; • imposition of and compliance with corporate integrity agreements that could subject us to ongoing audits and reporting requirements as well as increased scrutiny of our billing and business practices which could lead to potential fines, among other things; • termination of various relationships and/or contracts related to our business, including joint venture arrangements, medical director agreements, real estate leases and consulting agreements with physicians; and 37 Table of Contents • harm to our reputation which could negatively impact our business relationships, affect our ability to attract and retain members and physicians, affect our ability to obtain financing and decrease access to new business opportunities, our ability to develop relationships with providers, among other things.
We refer to the process of accounting for errors in fee-for-service claims as the “FFS Adjuster.” This comparison of RADV audit results to the FFS error rate is necessary to 22 Table of Contents determine the economic impact, if any, of RADV audit results because the government used the traditional fee-for-service Medicare program data set, including any attendant errors that are present in that data set, to estimate the costs of various health status conditions and to set the resulting adjustments to Medicare Advantage plans’ payment rates in order to establish actuarial equivalence in payment rates as required under the Medicare statute.
We refer to the process of accounting for errors in fee-for-service claims as the “FFS Adjuster.” This comparison of RADV audit results to the FFS error rate is necessary to determine the economic impact, if any, of RADV audit results because the government used the traditional fee-for-service Medicare program data set, including any attendant errors that are present in that data set, to estimate the costs of various health status conditions and to set the resulting adjustments to Medicare Advantage plans’ payment rates in order to establish actuarial equivalence in payment rates as required under the Medicare statute.
For example, we may be required to expend significant capital and other resources, such as in the performance of ongoing risk assessments of our and our third-party service providers’ information systems, to protect against security breaches or to alleviate problems caused by security breaches.
For example, we may be required to expend significant capital and other resources, such as in the performance of ongoing risk assessments of our and our third-party service providers’ information systems, to protect against cybersecurity breaches or to alleviate problems caused by cybersecurity breaches.
As a government contractor, we are exposed to risks that may materially adversely affect our business, including the potential loss of CMS contracts, significant changes to the Medicare Advantage and/or Part D programs, potential suspension from participating in 21 Table of Contents the Medicare Advantage program, changes to the risk-adjustment model used to determine the premiums paid to Medicare Advantage plans, changes to provisions for risk sharing under Medicare Part D and risks related to governmental audits and investigations, among others.
As a government contractor, we are exposed to risks that may materially adversely affect our business, including the potential loss of CMS contracts, significant changes to the Medicare Advantage and/or Part D programs, potential suspension from participating in the Medicare Advantage program, changes to the risk-adjustment model used to determine the premiums paid to Medicare Advantage plans, changes to provisions for risk sharing under Medicare Part D and risks related to governmental audits and investigations, among others.
Natural disasters or widespread civic disruptions could also cause our third-party data center hosting facilities and cloud computing platform providers, which are critical to our infrastructure, to shut down their business, experience security incidents that impact our business, delay or disrupt performance or delivery of services, or experience interference with the supply chain of hardware required by their systems and services, any of which could materially adversely affect our business.
Natural disasters or widespread civic disruptions could also cause our third-party data center hosting facilities and cloud computing platform providers, which are critical to our infrastructure, to shut down their business, experience security incidents that impact our business, delay or disrupt performance or delivery of services, or experience interference with the supply chain of hardware required by 26 Table of Contents their systems and services, any of which could materially adversely affect our business.
Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture and our business may be harmed. We believe that our culture has been and will continue to be a critical contributor to our success.
Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture and our business may be harmed. We believe that our culture has been and will continue to be a critical contributor to our differentiated model.
Under this model, amounts paid to Medicare Advantage organizations are based, in part, on actuarially determined bids, which include a process whereby our prospective payments are based on our estimated cost of providing standard Medicare-covered benefits to an enrollee with a “national average risk profile.” That baseline payment amount is adjusted to reflect the health status of our enrolled membership.
Under this model, amounts paid to Medicare Advantage organizations are based, in part, on actuarially determined bids, which include a process whereby our 22 Table of Contents prospective payments are based on our estimated cost of providing standard Medicare-covered benefits to an enrollee with a “national average risk profile.” That baseline payment amount is adjusted to reflect the health status of our enrolled membership.
Pursuant to our certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our shareholders, (3) any action asserting a claim against us arising pursuant to any provision of the DGCL, our certificate of incorporation or our bylaws or (4) any other action asserting a claim against us that is governed by the internal affairs doctrine; provided that for the avoidance of doubt, the forum selection provision that identifies the Court of Chancery of the State of Delaware as the exclusive forum for certain 44 Table of Contents litigation, including any “derivative action”, will not apply to suits to enforce a duty or liability created by the Securities Act, the Exchange Act or any other claim for which there is exclusive federal or concurrent federal and state jurisdiction.
Pursuant to our certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our shareholders, (3) any action asserting a claim against us arising pursuant to any provision of the DGCL, our certificate of incorporation or our bylaws or (4) any other action asserting a claim against us that is governed by the internal affairs doctrine; provided that for the avoidance of doubt, the forum selection provision that identifies the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation, including any “derivative action,” will not apply to suits to enforce a duty or liability created by the Securities Act, the Exchange Act or any other claim for which there is exclusive federal or concurrent federal and state jurisdiction.
There may be additional CMS restrictions on D-SNP plans and their enrollment, as CMS recently finalized a policy that would, among other things, lower the threshold to seventy percent (70%) in 2025 and sixty percent (60%) in 2026. Additionally, the California Department of Healthcare Services has adopted regulatory changes limiting the availability of D-SNP contracts.
There may be additional CMS restrictions on D-SNP plans and their enrollment, as CMS recently finalized a policy that would, among other things, lower the threshold to seventy percent (70%) in 2025 and sixty percent (60%) in 2026. Additionally, the 38 Table of Contents California Department of Healthcare Services has adopted regulatory changes limiting the availability of D-SNP contracts.
Our indebtedness under the Convertible Notes and any other indebtedness we may incur, and the cash flow needed to satisfy our debt, have other important consequences, including: • limiting funds otherwise available for financing our capital expenditures by requiring us to dedicate a portion of our cash flows from operations to the repayment of debt and the interest on this debt; • placing us at a competitive disadvantage to our competitors that are not as highly leveraged; and • making us more vulnerable in the event of a downturn in our business.
Our indebtedness under the Convertible Notes and any other indebtedness we may incur under the Revolving Credit Facility or otherwise, and the cash flow needed to satisfy our debt, have other important consequences, including: • limiting funds otherwise available for financing our capital expenditures by requiring us to dedicate a portion of our cash flows from operations to the repayment of debt and the interest on this debt; • placing us at a competitive disadvantage to our competitors that are not as highly leveraged; and • making us more vulnerable in the event of a downturn in our business.
These changes are expected to have a material impact on Medicare Advantage organizations, including us. In November 2024, CMS announced it had initiated the payment year 2018 RADV audits, and it expects to begin issuing the audit findings in mid-calendar year 2026, including instructions on how the overpayments will be collected as part of the audit.
These changes would be expected to have a material impact on Medicare Advantage organizations, including us. In November 2024, CMS announced it had initiated the payment year 2018 RADV audits, and it expected to begin issuing the audit findings in mid-calendar year 2026, including instructions on how the overpayments will be collected as part of the audit.
Enforcing a claim that a third party illegally disclosed or obtained and is using any of our internally developed information or technology is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets, know-how and other proprietary information.
Enforcing a claim that a third party illegally disclosed or obtained and is using any of our internally developed information or technology is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing 27 Table of Contents to protect trade secrets, know-how and other proprietary information.
These additional obligations could have a material adverse effect on our business, financial condition and results of operations. 45 Table of Contents In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming.
These additional obligations could have a material adverse effect on our business, financial condition and results of operations. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming.
We utilize a third-party operated 24x7 security operations center that continuously monitors the security and privacy posture of our systems and have implemented the HITRUST Alliance's Common Security Framework as part of our certification by HITRUST; however, we cannot provide assurance that these measures will protect us from all cybersecurity threats and risks.
We utilize a 20 Table of Contents third-party operated 24x7 security operations center that continuously monitors the security and privacy posture of our systems and have implemented the HITRUST Alliance's Common Security Framework as part of our certification by HITRUST; however, we cannot provide assurance that these measures will protect us from all cybersecurity threats and risks.
A security breach or privacy violation that leads to disclosure or unauthorized use or modification of, or that prevents access to or otherwise impacts the confidentiality, security, or availability of, member information, including PHI or other PII, or other sensitive information we or our contractors or third-party service providers maintain or otherwise process, could harm our reputation and brand, compel us to comply with breach notification laws, and cause us to incur significant costs for remediation, fines, penalties, providing notification to individuals.
A cybersecurity breach or other breach or privacy violation that leads to disclosure or unauthorized use or modification of, or that prevents access to or otherwise impacts the confidentiality, security, integrity or availability of, member information, including PHI, PII or other sensitive information we or our contractors or third-party service providers maintain or otherwise process, could harm our reputation and brand, compel us to comply with breach notification laws, and cause us to incur significant costs for remediation, fines, penalties, providing notification to individuals and civil claims.
Accordingly, such proceedings could harm our reputation, business, financial condition, results of operations and the market price of our common stock. 24 Table of Contents Although we maintain third-party professional liability insurance coverage and managed care errors and omissions policies, it is possible that claims against us may exceed the coverage limits of our insurance policies.
Accordingly, such proceedings could harm our reputation, business, financial condition, results of operations and the market price of our common stock. Although we maintain third-party professional liability insurance coverage and managed care errors and omissions policies, it is possible that claims against us may exceed the coverage limits of our insurance policies.
See “ Risk Factors — Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or our members, or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation .” Corporate Practice of Medicine and Other Laws As a corporate entity, we are not licensed to practice medicine.
See “ Risk Factors —Cybers ecurity breaches, loss of data and other disruptions could compromise sensitive information related to our business or our members, or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation .” Corporate Practice of Medicine and Other Laws As a corporate entity, we are not licensed to practice medicine.
The Convertible Notes are senior, unsecured obligations of the Company, and interest will be 39 Table of Contents payable semi-annually in arrears at a rate of 4.25% per annum beginning on May 15, 2025. The Convertible Notes will mature on November 15, 2029, unless earlier repurchased, redeemed or converted in accordance with their terms.
The Convertible Notes are senior, unsecured obligations of the Company, and interest will be payable semi-annually in arrears at a rate of 4.25% per annum beginning on May 15, 2025. The Convertible Notes will mature on November 15, 2029, unless earlier repurchased, redeemed or converted in accordance with their terms.
If our cash provided by operating activities, together with our existing cash, cash equivalents, and investments, and existing sources of financing, are inadequate to satisfy these obligations, we will need to obtain third-party financing, which may not be available to us on commercially reasonable terms or at all, to meet these payment obligations.
If our cash provided by operating activities, together with our existing cash, cash equivalents, and investments, and existing sources of financing, are inadequate to satisfy these obligations, we will need to obtain third-party financing, which may not be available to us on 40 Table of Contents commercially reasonable terms or at all, to meet these payment obligations.
Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or our members, or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.
Cybersecurity breaches, loss of data and other disruptions could compromise sensitive information related to our business or our members, or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.
In addition, security breaches and other inappropriate access to, or acquisition or processing of, information can be difficult to detect, and any delay in identifying such incidents or in providing any notification of such incidents may lead to increased harm.
In addition, cybersecurity breaches and other inappropriate access to, or acquisition or processing of, information can be difficult to detect, and any delay in identifying such incidents or in providing any notification of such incidents may lead to increased harm.
These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause us to take other corporate actions they desire, including actions that they may deem advantageous, or negatively affect the trading price of our common stock.
These provisions could also 44 Table of Contents discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause us to take other corporate actions they desire, including actions that they may deem advantageous, or negatively affect the trading price of our common stock.
In addition, if our data suppliers choose to discontinue support of the licensed technology in the future, we might not be able to modify or adapt our own solutions. 27 Table of Contents Our use of “open-source” software could adversely affect our ability to offer our products and services and subject us to possible litigation.
In addition, if our data suppliers choose to discontinue support of the licensed technology in the future, we might not be able to modify or adapt our own solutions. Our use of “open-source” software could adversely affect our ability to offer our products and services and subject us to possible litigation.
Our health plans may be randomly selected or targeted for review by CMS and the outcome of such a review may result in a material adjustment in our revenue and profitability. 29 Table of Contents A failure to accurately estimate incurred but not reported medical expense could adversely affect our results of operations.
Our health plans may be randomly selected or targeted for review by CMS and the outcome of such a review may result in a material adjustment in our revenue and profitability. A failure to accurately estimate incurred but not reported medical expense could adversely affect our results of operations.
If we are not able to continue to provide high quality products, benefits and medical care with high levels of member satisfaction, our reputation, as well as our business, results of operations and financial condition could be adversely affected. 19 Table of Contents The healthcare industry is highly competitive.
If we are not able to continue to provide high quality products, benefits and medical care with high levels of member satisfaction, our reputation, as well as our business, results of operations and financial condition could be adversely affected. The healthcare industry is highly competitive.
In addition, if we elect to settle our conversion obligation in shares of our common stock (or a combination of cash and shares), any sales in the public market of our shares issuable upon such conversion could adversely affect prevailing market prices of our common stock. Our outstanding convertible notes may impact the trading price of our common stock.
In addition, if we elect to settle our conversion obligation in shares of our common stock (or a combination of cash and shares), any sales in the public market of our shares issuable upon such conversion could adversely affect prevailing market prices of our common stock. 43 Table of Contents Our outstanding convertible notes may impact the trading price of our common stock.
CMS released a final rule on January 30, 2023, which changes both the use of extrapolation and the application of the FFS Adjuster. Specifically, CMS will not extrapolate audit results for any audits covering payment years prior to 2018. Additionally, CMS will not apply any FFS Adjuster in RADV audits.
CMS released a final rule on January 30, 2023, which changes both the use of extrapolation and the application of the FFS Adjuster. Specifically, under the final rule CMS would not extrapolate audit results for any audits covering payment years prior to 2018. Additionally, CMS would not apply any FFS Adjuster in RADV audits.
Violations of HIPAA or applicable federal or state laws or regulations could subject us to significant criminal or civil penalties, including significant monetary penalties. We cannot yet fully determine the impact these or future laws, rules, regulations and industry standards may have on our business or operations.
State statutes and regulations vary from state to state. Violations of HIPAA or applicable federal or state laws or regulations could subject us to significant criminal or civil penalties, including significant monetary penalties. We cannot yet fully determine the impact these or future laws, rules, regulations and industry standards may have on our business or operations.
In addition, most states have statutes, regulations, or professional codes that restrict a physician from accepting various kinds of remuneration in exchange for making referrals. These laws vary from state to state and have seldom been interpreted by the courts or regulatory agencies.
In addition, most states have statutes, regulations, or professional codes that restrict a physician from accepting various kinds of remuneration in exchange for making referrals. These laws 36 Table of Contents vary from state to state and have seldom been interpreted by the courts or regulatory agencies.
A significant portion of our revenue relates, directly or indirectly, to the Medicare Advantage program, which accounted for substantially all of our total revenue for the year ended December 31, 2024.
A significant portion of our revenue relates, directly or indirectly, to the Medicare Advantage program, which accounted for substantially all of our total revenue for the year ended December 31, 2025.
Also, some of our services rely on technologies and software developed 26 Table of Contents by or licensed from third parties, and we may not be able to maintain our relationships with such third parties or enter into similar relationships in the future on reasonable terms or at all.
Also, some of our services rely on technologies and software developed by or licensed from third parties, and we may not be able to maintain our relationships with such third parties or enter into similar relationships in the future on reasonable terms or at all.
As our third-party service providers 20 Table of Contents manage important aspects of the collection, storage, processing and transmission of employee, user and member information, and other confidential and sensitive information, we rely on them to perform functions that have material cybersecurity risks.
As our third-party service providers manage important aspects of the collection, storage, processing and transmission of employee, user and member information, and other confidential and sensitive information, we rely on them to perform functions that have material cybersecurity risks.
A data breach could result in incorrect or delayed medical recommendations and prescriptions, missed alerts and missed opportunities to intervene for our members on a timely basis.
A cybersecurity breach could result in incorrect or delayed medical recommendations and prescriptions, missed alerts and missed opportunities to intervene for our members on a timely basis.
Our anticipated headcount growth and our transition from a private company to a public company may result in a change to our corporate culture, which could harm our business. The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business.
Our anticipated headcount growth and our transition from a private company to a public company may result in a change to our corporate culture, which could harm our business. 45 Table of Contents The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business.
Our operations are conducted almost entirely through our subsidiaries, and our ability to generate cash to meet our obligations or to pay dividends is highly dependent on the earnings of, and receipt of funds from, our subsidiaries through dividends, administrative expenses or intercompany loans.
Our operations are conducted almost entirely through our subsidiaries, and our ability to generate cash to meet our obligations or to pay dividends is highly dependent on the earnings of, and receipt of funds from, our subsidiaries through dividends, 31 Table of Contents administrative expenses or intercompany loans.
These and future adjustments to the Star rating methodology may have a negative impact on our Star ratings. In addition, audits of our performance for past or future periods may result in downgrades to our Star ratings.
These changes, if finalized, and future adjustments to the Star rating methodology may have a negative impact on our Star ratings. In addition, audits of our performance for past or future periods may result in downgrades to our Star ratings.
Under the terms of the Convertible Notes, we also have the option to settle the amount of our conversion obligation in cash, shares of our common stock or a combination of cash and shares, at our 40 Table of Contents election.
Under the terms of the Convertible Notes, we also have the option to settle the amount of our conversion obligation in cash, shares of our common stock or a combination of cash and shares, at our election.
Disputes arising from contractual disagreements, service-level disputes or changes in vendor terms and conditions may impact our ability to maintain stable and cost-effective relationships with third-party vendors. Our reliance on third-party vendors may directly and adversely impact our health plan membership.
Disputes arising from contractual disagreements, service-level disputes or changes in vendor terms and conditions may impact our ability to maintain stable and cost-effective relationships with third-party vendors. 32 Table of Contents Our reliance on third-party vendors may directly and adversely impact our health plan membership.
Accordingly, our plans may receive a lower Star rating and may not be eligible for full level quality bonus payments, which could adversely affect the benefits we can offer, reduce membership and/or reduce profit margins.
Accordingly, our plans may receive a lower Star rating and may not be eligible for full level 18 Table of Contents quality bonus payments, which could adversely affect the benefits we can offer, reduce membership and/or reduce profit margins.
Many states in which we operate through our subsidiaries limit the practice of medicine to licensed individuals or professional organizations comprised of licensed individuals, and business corporations generally may not exercise control over the medical decisions of physicians.
Many states in which we operate through our subsidiaries limit the practice of medicine to licensed individuals or professional organizations exclusively owned and comprised of licensed individuals, and business corporations generally may not exercise control over the medical decisions of licensed physicians or other licensed clinicians.
As of January 1, 2025, approximately 98% of our members are enrolled in rated plans that have a 4.0 Star rating or greater for the 2025 rating year / 2026 payment year. However, we may not be able to maintain or improve upon these Star ratings in future years.
As of January 1, 2026, approximately 100% of our members are enrolled in plans that have a 4.0 Star rating or greater for the 2026 rating year / 2027 payment year. However, we may not be able to maintain or improve upon these Star ratings in future years.
A substantial portion of our revenue is driven by CMS payments in connection with our health plans in California, North Carolina, Nevada, Arizona and Texas, with over 94% of our members concentrated in California as of December 31, 2024. As a result, our exposure to many of the risks described herein is not mitigated by a diversification of geographic focus.
A substantial portion of our revenue is driven by CMS payments in connection with our health plans in California, North Carolina, Nevada, Arizona and Texas, with approximately 84% of our members concentrated in California as of December 31, 2025. As a result, our exposure to many of the risks described herein is not mitigated by a diversification of geographic focus.
Among other things, these provisions: • provide that any amendment, alteration, rescission or repeal of our certificate of incorporation or our bylaws by our stockholders will require the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class; • allow us to authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without shareholder approval, and which may include supermajority voting, special approval, dividend, or other rights or preferences superior to the rights of stockholders; • provide for a classified board of directors with staggered three-year terms; • prohibit stockholder action by written consent; and • establish advance notice requirements for nominations for elections to our Board or for proposing matters that can be acted upon by stockholders at stockholder meetings, provided, however, that at any time the Lead Sponsor beneficially own, in the aggregate, at least 40% of our common stock then outstanding, such advance notice provision will not apply to the Lead Sponsor.
Among other things, these provisions: • provide that any amendment, alteration, rescission or repeal of our certificate of incorporation or our bylaws by our stockholders will require the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class; • allow us to authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without shareholder approval, and which may include supermajority voting, special approval, dividend, or other rights or preferences superior to the rights of stockholders; • provide for a classified board of directors with staggered three-year terms; • prohibit stockholder action by written consent; and • establish advance notice requirements for nominations for elections to our Board or for proposing matters that can be acted upon by stockholders at stockholder meetings.
As our member base continues to grow, we will need to expand our product and service offerings and our network of partners to provide personalized member service.
As our member base continues to grow, we will need to expand our product and service offerings and our network of partners to provide 19 Table of Contents personalized member service.
Participating in the Medicare Advantage program exposes us to various risks, as described further below. • As of January 1, 2025, under our contracts with CMS, we provided health insurance coverage to approximately 209,900 individual Medicare Advantage members. Our continued participation in the Medicare Advantage program through these and other contracts is not guaranteed.
Participating in the Medicare Advantage program exposes us to various risks, as described further below. • As of January 1, 2026, under our contracts with CMS, we provided health insurance coverage to approximately 275,300 individual Medicare Advantage members. Our continued participation in the Medicare Advantage program through these and other contracts is not guaranteed.
Responding to subpoenas, investigations and other lawsuits, claims and legal proceedings as well as defending ourselves in such matters would divert management’s attention and cause us to 23 Table of Contents incur significant legal expense.
Responding to subpoenas, investigations and other lawsuits, claims and legal proceedings as well as defending ourselves in such matters would divert management’s attention and cause us to incur significant legal expense.
Some of these changes impact us and other entities that offer Medicate Advantage plans.
Some of these changes impact us and other entities that offer Medicare Advantage plans.
We may need to change the way we create, receive, maintain or transmit PII to comply with these state laws. HIPAA includes administrative provisions directed at simplifying electronic data interchange through standardizing transactions, establishing uniform healthcare provider, payer, and employer identifiers, and establishing regulations aimed at protecting confidentiality and security of patient and member data.
We are required to comply with these laws in the way we create, receive, maintain or transmit PII. HIPAA includes administrative provisions directed at simplifying electronic data interchange through standardizing transactions, establishing uniform healthcare provider, payer, and employer identifiers, and establishing regulations aimed at protecting confidentiality and security of patient and member data.
For example, CCPA, which came into effect on January 1, 2020, requires companies that process information on California residents to make disclosures to consumers about their data collection, use and sharing practices, allow consumers to opt out of certain data sharing with third parties and provides a cause of action for data breaches.
For example, CCPA, which came into effect on January 1, 2020, requires companies that process personal information of California residents to make disclosures to consumers about their data collection, use and sharing practices, allow consumers to exercise certain rights with respect to their data, including the right to opt out of certain data sharing with third parties and provides a cause of action for data breaches.
Furthermore, beginning in 2025, Part D plans must offer enrollees the option to pay out-of-pocket prescription drug costs in the form of capped monthly payments instead of all at once at the pharmacy. This may increase administrative burdens for plans by requiring new payment tracking systems and risk management strategies.
Furthermore, Part D plans must offer enrollees the option to pay out-of-pocket prescription drug costs in the form of capped monthly payments through the Medicare Prescription Payment Plan instead of all at once at the pharmacy. 24 Table of Contents This may increase administrative burdens for plans by requiring new payment tracking systems and risk management strategies.
This change increased cut points overall, making it more difficult to achieve and maintain high Star ratings. In the 2025 Star ratings, only seven MA-Part D contracts earned a 5-star rating, a significant decrease from 31 in 2024, 57 in 2023, and 74 in 2022.
This change increased cut points overall, making it more difficult to achieve and maintain high Star ratings. In the 2026 Star ratings, only 18 MA-Part D contracts earned a 5-star rating, an increase from seven in 2025 but a significant decrease from 31 in 2024 and 57 in 2023.
Other actions that could affect membership levels include our possible exit from or entrance into markets, or the termination of a large contract.
Other actions that could affect membership levels include our possible exit from or entrance into markets or the entering into or termination of a key network contract.
This competition may intensify due to the ongoing consolidation in the healthcare industry, which may increase our costs to pursue such opportunities; • we may not be able to maintain and improve the satisfaction levels of our members, which could lead to decreased ratings for some of our plans in the Five Star Quality Rating System and consequently to loss of the economic incentives associated with high Star ratings, which could negatively impact our revenues; 15 Table of Contents • we may not be able to enroll or retain a sufficient number of new members to execute our growth strategy, and we may incur substantial costs to enroll new members but may be unable to enroll a sufficient number of new members to offset those costs; • we may not be able to realize the value of our AVA technology platform; • we may not be able to hire or otherwise engage sufficient numbers of physicians and other staff and may fail to integrate our employees, particularly our medical personnel, into our in-house care model; • we may not be successful in maintaining our reputation and brand in our existing markets or in establishing our reputation and brand with new members or into new markets; • we may be unsuccessful in identifying or in executing key strategic joint ventures or other arrangements to facilitate our entry into new markets; • when expanding our business into new states, we may be required to comply with laws and regulations that may differ from states in which we currently operate; • when expanding into new markets, we may face competition with greater knowledge of such local markets; • expansion into new offerings or new markets, or the acquisition of complementary businesses or assets, may require us to raise additional capital, which may not be available on desirable terms or at all; and • depending upon the nature of the local market, we may not be able to implement our business model in every local market that we enter, which could negatively impact our revenues and financial condition.
This competition may intensify due to the ongoing consolidation in the healthcare industry, which may increase our costs to pursue such opportunities; • we may not be able to maintain and improve the satisfaction levels of our members, which could lead to decreased ratings for some of our plans in the Five Star Quality Rating System and consequently to loss of the economic incentives associated with high Star ratings, which could negatively impact our revenues; 15 Table of Contents • we may be unsuccessful in entering new markets, including by identifying and executing key strategic joint ventures or other arrangements to facilitate such entry; • we may not be able to realize the value of our AVA technology platform; • we may not be able to hire or otherwise engage sufficient numbers of physicians and other staff and may fail to integrate our employees, particularly our medical personnel, into our in-house care model; • we may not be successful in maintaining our reputation and brand in our existing markets or in establishing our reputation and brand with new members or into new markets; • when expanding our business into new states, we may be required to comply with laws and regulations that may differ from states in which we currently operate; • when expanding into new markets, we may face competition with greater knowledge of such local markets; and • expansion into new offerings or new markets, or the acquisition of complementary businesses or assets, may require us to raise additional capital, which may not be available on desirable terms or at all.
Part D plans must now also implement a cap on member out-of-pocket spending of $2,000. These changes have the potential to increase the financial responsibility of Part D plan sponsors.
For 2026, Part D plans must also implement a cap on member out-of-pocket spending of $2,100. These changes have the potential to increase the financial responsibility of Part D plan sponsors.
This could also cause the market price of our common stock to drop significantly, even if our business is doing well. As of December 31, 2024, we had 191,778,639 outstanding shares of common stock. We also had $330 million in aggregate principal amount of convertible notes outstanding that could be converted into additional shares of common stock.
This could also cause the market price of our common stock to drop significantly, even if our business is doing well. As of December 31, 2025, we had 204,153,619 outstanding shares of common stock. We also had $330 million in aggregate principal amount of convertible notes outstanding that could be converted into additional shares of common stock.
Our plans encourage or require our customers to use these contracted providers. A key component of our integrated care delivery strategy is to increase the number of providers who share medical cost risk with us or have financial incentives to deliver high quality medical services in a cost-effective manner.
A key component of our integrated care delivery strategy is to increase the number of providers who share medical cost risk with us or have financial incentives to deliver high quality medical services in a cost-effective manner.
If we are unable to successfully address these risks and challenges as we encounter them, our business, results of operations and financial condition would be adversely affected. Our failure to achieve or maintain profitability could negatively impact the value of our common stock.
If we are unable to successfully address these risks and challenges as we encounter them, our business, results of operations and financial condition would be adversely affected. Our failure to achieve or maintain profitability could negatively impact the value of our common stock. Our growth strategy may not prove viable and we may not realize expected results.
Our certificate of incorporation authorizes us to issue one or more series of preferred stock. Our Board has the authority to determine the preferences, limitations and relative rights of the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our shareholders.
Our Board has the authority to determine the preferences, limitations and relative rights of the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our shareholders.
Third parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on our business, financial condition and results of operations.
Any such action could negatively affect our results of operations and cash flows. 46 Table of Contents Third parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on our business, financial condition and results of operations.
As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of additional personnel. Any such action could negatively affect our results of operations and cash flows.
As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of additional personnel.
These provisions, certain of which are described below, affect our ultimate payments from CMS. Our losses or gains are limited by risk corridor provisions which compare costs targeted in our annual bids to our allowable costs under the plan, limited to actual costs that were incurred for the standard coverage as defined by CMS.
Our losses or gains are limited by risk corridor provisions which compare costs targeted in our annual bids to our allowable costs under the plan, limited to actual costs that were incurred for the standard coverage as defined by CMS.
Because low quality ratings can potentially lead to the termination of one or more of our contracts we may not be able to prevent the potential termination of a plan or a shift of members to other plans based upon quality issues, which could, in turn, have a material adverse effect on our business, results of operations, financial condition and cash flows. 18 Table of Contents If we fail to develop and maintain satisfactory relationships with care providers to service our members, our business may be adversely affected.
Because low quality ratings can potentially lead to the termination of one or more of our contracts we may not be able to prevent the potential termination of a plan or a shift of members to other plans based upon quality issues, which could, in turn, have a material adverse effect on our business, results of operations, financial condition and cash flows.
Our growth strategy may not prove viable and we may not realize expected results. Our business strategy is to grow rapidly by expanding our service offerings through an array of non-traditional benefits and continuing to build out and attract network relationships in our existing markets.
Our business strategy is to grow rapidly by expanding our service offerings through an array of non-traditional benefits and continuing to build out and attract network relationships in our existing markets.
Such proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.
However, this patchwork of state laws may still add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.
As of December 31, 2024, we had an accumulated deficit of $1,008.3 million. 14 Table of Contents We expect our aggregate costs will increase substantially in the foreseeable future as we expect to invest heavily in increasing our member base, growing our provider networks, expanding our operations geographically, engaging in expanded marketing and outreach efforts, enhancing our technology, hiring additional employees, operating as a public company and acquiring companies or assets complementary to our business.
We expect our aggregate costs will increase substantially in the foreseeable future as we expect to invest heavily in increasing our member base, growing our provider networks, expanding our operations geographically, engaging in expanded marketing and outreach efforts, enhancing our technology, hiring additional employees, operating as a public company and acquiring companies or assets complementary to our business.
Our growth strategy involves a number of risks and uncertainties, including that: • we may not be able to successfully enter into contracts with local providers in existing or new markets on terms favorable to us or at all.
Our growth strategy involves a number of risks and uncertainties, including that: • we may not be able to enroll or retain a sufficient number of new members to execute our growth strategy, and we may incur substantial costs to enroll new members but may be unable to enroll a sufficient number of new members to offset those costs; • we may not be able to successfully enter into contracts with local providers in existing or new markets on terms favorable to us or at all.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeSee “Risk Factors” beginning on page 13 of this Form 10-K. 47 Table of Contents Engagement of Third Parties Our information security program is under nearly constant third-party review as part of Sarbanes-Oxley compliance and the HITRUST certification process, including independent third-party penetration testing of all information technology assets at least annually and assessment of our vulnerability to ransomware.
Biggest changeSee “Risk Factors” beginning on page 1 of this Form 10-K. Engagement of Third Parties Our information security program is under nearly constant third-party review as part of Sarbanes-Oxley compliance and the HITRUST certification process, including independent third-party penetration testing of all information technology assets at least annually and assessment of our vulnerability to ransomware.
Our information security program considers how attackers are using emerging technologies (such as artificial intelligence) to help inform our defensive tactics. Our team also regularly reviews emerging product technology to improve our capabilities. In 2021, we received the externally validated HITRUST certification, the gold standard compliance framework in the health care industry.
Our information security program considers how attackers are using emerging 47 Table of Contents technologies (such as artificial intelligence) to help inform our defensive tactics. Our team also regularly reviews emerging product technology to improve our capabilities. In 2021, we received the externally validated HITRUST certification, the gold standard compliance framework in the health care industry.
Alignment’s cybersecurity organization is led by David MacLeod, our Chief Information Security Officer, who is responsible for the prevention, detection, mitigation, and remediation of cybersecurity incidents and reports to Robert Scavo, our Chief Information Officer, as well as to the Audit Committee. Mr.
Alignment’s cybersecurity organization is led by David MacLeod, our Chief Information Security Officer, who is responsible for the prevention, detection, mitigation, and remediation of cybersecurity incidents and reports to our Chief Digital Officer, as well as to the Audit Committee. Mr.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also have offices located in Raleigh, North Carolina; Las Vegas and Reno, Nevada; El Paso, Texas; Sahuarita, and Tucson, Arizona; and Tampa, Florida. We also have small clinics located in Milpitas, Modesto and Downey, California; and Raleigh, North Carolina. We believe that our properties are generally suitable to meet our needs for the foreseeable future.
Biggest changeWe also have offices located in New York, New York; Las Vegas, Nevada; El Paso, Texas; Sahuarita, and Tucson, Arizona; and Venice, Florida. We also have small clinics located in Milpitas, Modesto and Downey, California; and Raleigh, North Carolina. We believe that our properties are generally suitable to meet 48 Table of Contents our needs for the foreseeable future.
Item 2. Properties. Our corporate office is located in Orange, California at 1100 W. Town and Country Rd, Suite 1600, where we lease approximately 47,321 square feet of office space under a lease that terminates in March 2030.
Item 2. Properties. Our corporate headquarters are located in Orange, California at 1100 W. Town and Country Rd, Suite 1600, where we lease approximately 47,321 square feet of office space under a lease that terminates in May 2030.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor a discussion of our material legal actions, including those not in the ordinary course of business, see "Legal Proceedings" in Note 14 to the audited Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data. 48 Table of Contents Item 4. Mine Safety Disclosures. Not applicable. 49 Table of Contents PART II
Biggest changeFor a discussion of our material legal actions, including those not in the ordinary course of business, see "Legal Proceedings" in Note 14 to the audited Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data. Item 4. Mine Safety Disclosures. Not applicable. 49 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(ALHC) $ 100.00 $ 135.01 $ 81.22 $ 81.15 $ 83.64 $ 48.89 $ 73.21 $ 90.82 $ 130.66 Nasdaq Healthcare Index 100.00 109.16 98.09 72.42 80.10 103.86 107.24 102.98 99.77 S&P 500 100.00 108.52 121.18 80.04 81.87 116.88 126.26 115.29 125.00 Recent Sales of Unregistered Securities None.
Biggest change(ALHC) $ 100.00 $ 81.22 $ 83.64 $ 73.21 $ 130.66 $ 175.56 Nasdaq Healthcare Index 100.00 98.09 80.10 107.24 99.77 123.78 S&P 500 100.00 121.18 81.87 126.26 125.00 117.86 Recent Sales of Unregistered Securities None. Purchase of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] 51 Table of Contents
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, 2024, 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, 2025, with the cumulative total return of (a) the Nasdaq Healthcare Index and (b) the S&P 500, over the same period.
Additionally, because we are a holding company, our ability to pay dividends on our common stock may be limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions to us.
Additionally, because we are a holding company, our ability to pay dividends on our common stock may be limited by restrictions on the ability of our regulated insurance subsidiaries to pay dividends or make distributions to us.
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. 3/26/2021 6/30/2021 12/31/2021 6/30/2022 12/31/2022 6/30/2023 12/31/2023 6/30/2024 12/31/2024 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. 3/26/2021 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 Alignment Healthcare, Inc.
As of February 20, 2025, there were approximately 54 holders of record of our common stock. Dividend Policy We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and to potentially repay any indebtedness and, therefore, we do not anticipate paying any cash dividends in the foreseeable future.
As o f February 24, 2026, there were approximately 44 holders of record of our common stock. Dividend Policy We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and to potentially repay any indebtedness and, therefore, we do not anticipate paying any cash dividends in the foreseeable future.
Removed
Use of Proceeds from Public Offering of Common Stock On March 25, 2021, our Registration Statement on Form S-1 (SEC File No. 333-253824) for the initial public offering of 27,200,000 shares of common stock was declared effective by the Securities and Exchange Commission.
Removed
Our common stock began trading on March 26, 2021 on Nasdaq under the ticker symbol “ALHC.” The IPO closed on March 30, 2021, with us selling 21,700,000 shares of common stock and certain selling stockholders selling 5,500,000 shares of common stock, in each case at a price to the public of $18.00 per share.
Removed
On April 6, 2021, pursuant to a partial exercise of the underwriters’ over-allotment option, certain selling stockholders sold an additional 3,314,216 shares of common stock at the IPO price.
Removed
In the aggregate, the IPO generated approximately $361.6 million in net proceeds for the Company, which amount is net of approximately $24.4 million in underwriters’ discounts and commissions and offering costs of approximately $4.6 million. The IPO commenced on March 25, 2021 and terminated upon the partial exercise of the underwriters’ over-allotment options as described above.
Removed
The representatives of the several underwriters of the IPO were Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC. There has been no material change in the use of proceeds described in the final IPO prospectus filed with the SEC on March 29, 2021.
Removed
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. Item 6. [Reserved] 51 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAdjusted EBITDA is reconciled as follows: Year Ended December 31, 2024 2023 (dollars in thousands) Net loss $ (128,071) $ (148,173) Less: Net loss attributable to noncontrolling interest 36 156 Adjustments: Interest expense 23,547 21,231 Depreciation and amortization (1) 27,062 21,668 Income tax expense (benefit) 21 (22) Equity-based compensation (2) 71,132 66,835 Acquisition expenses (3) 26 977 Litigation costs (4) 2,069 2,298 (Gain) loss on ROU assets (5) 143 (289) Gain on sale of property and equipment (9) — Restructuring costs (6) 2,363 — Loss on extinguishment of debt 3,020 — Adjusted EBITDA $ 1,339 $ (35,319) (1) Includes $0.6 million in impairment expense related to intangible assets that were written off during the year (2) Represents equity-based compensation related to grants made in the applicable year, as well as equity-based compensation related to the timing of the IPO, which includes previously issued stock appreciation rights ("SARs") liability awards, modifications related to transaction vesting units, and grants made in conjunction with the IPO (3) Represents acquisition-related fees, such as legal and advisory fees, that are non-capitalizable (4) Represents certain litigation costs considered outside of the ordinary course of business based on the following considerations which we assess regularly: (i) the frequency of similar cases that have been brought to date, or are expected to be brought within two years, (ii) complexity of the case, (iii) nature of the remedies sought, (iv) litigation posture of the Company, (v) counterparty involved, and (vi) the Company's overall litigation strategy (5) Represents gains or losses related to ROU assets that were terminated or subleased in the respective period (6) Represents severance and related costs incurred as part of a corporate restructuring, that took place during 2024, designed to streamline our organizational structure and drive operational efficiencies Results of Operations We operate and manage our business as a single reporting and operating segment, which is to provide healthcare services to our seniors.
Biggest change(2) Represents equity-based compensation related to grants made in the applicable year (3) Represents acquisition-related fees, such as legal and advisory fees, that are non-capitalizable 55 Table of Contents (4) Represents litigation costs considered outside of the ordinary course of business based on the following considerations which we assess regularly: (i) the frequency of similar cases that have been brought to date, or are expected to be brought within two years, (ii) complexity of the case, (iii) nature of the remedies sought, (iv) litigation posture of the Company, (v) counterparty involved, and (vi) the Company's overall litigation strategy (5) Represents gains or losses related to ROU assets that were terminated or subleased in the respective period (6) Represents severance and related costs incurred as part of a corporate restructuring designed to streamline our organizational structure and drive operational efficiencies Results of Operations We operate and manage our business as a single reporting and operating segment, which is to provide healthcare services to our seniors.
Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that we define as net loss before interest expense, income taxes, depreciation and amortization expense, acquisition expenses, certain litigation costs, gains or losses on right of use ("ROU") assets, gains or losses on sale of property and equipment, restructuring costs, equity-based compensation expense and loss on extinguishment of debt.
Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) before interest expense, income taxes, depreciation and amortization expense, acquisition expenses, certain litigation costs, gains or losses on right of use ("ROU") assets, gains or losses on sale of property and equipment, restructuring costs, equity-based compensation expense, and loss on extinguishment of debt.
Medical Expenses Payable Medical expenses payable includes estimates of our obligations for medical care services that have been rendered on behalf of our members and the members of third-party payors, but for which claims have either not yet been received or processed, loss adjustment expense reserve for the expected costs of settling these claims, and for liabilities related to physician, hospital and other medical cost disputes. 63 Table of Contents 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.
Medical Expenses Payable Medical expenses payable includes estimates of our obligations for medical care services that have been rendered on behalf of our members and the members of third-party payors, but for which claims have either not yet been received or processed, loss adjustment expense reserve for the expected costs of settling these claims, and for liabilities related to physician, hospital and other medical cost disputes. 62 Table of Contents 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.
There are a number of limitations related to the use of adjusted gross profit in lieu of loss from operations, which is the most directly comparable financial measure calculated in accordance with GAAP.
There are a number of limitations related to the use of adjusted gross profit in lieu of income (loss) from operations, which is the most directly comparable financial measure calculated in accordance with GAAP.
As the year progresses, our per-member revenue often declines as new members join us, typically with less complete or accurate documentation (and therefore lower risk-adjustment scores), and senior mortality disproportionately impacts our higher-acuity (and therefore greater revenue) members. Medical costs will vary seasonally depending on a number of factors, but most significantly the weather.
As the year progresses, our per-member revenue often declines as new members join us, typically with less complete or accurate documentation (and therefore lower risk-adjustment scores), and senior mortality disproportionately impacts our higher-acuity (and therefore greater revenue) members. Medical costs will vary seasonally depending on a number of factors, but most significantly the seasons.
We routinely take market share from large established players in highly competitive markets, a key source of our health plan membership growth in excess of the industry average. We believe that there are still significant opportunities for future growth even in our most mature markets where we have a 10-30% market share.
We routinely take market share from large established players in highly competitive markets, a key source of our health plan membership growth in excess of the industry average. We believe that there are still significant opportunities for future growth even in some of our most mature markets where we have approximately 10-30% market share.
We believe our MBR is an indicator of our gross profit for our Medicare Advantage plans and demonstrates the ability of our clinical model to produce superior outcomes by identifying and providing targeted care to our high-risk members resulting in improved member health and reduced total population medical expenses.
We believe our MBR is an indicator of our gross profit for our Medicare Advantage plans and demonstrates the ability of our clinical model to produce differentiated outcomes by identifying and providing targeted care to our high-risk members resulting in improved member health and reduced total population medical expenses.
The Company 61 Table of Contents has used the proceeds from the sale of the Notes to repay in full the $215.0 million aggregate principal amount, accrued interest and fees related to the Oxford term loans, as well as certain fees and expenses incurred in connection with the transaction.
The Company 60 Table of Contents has used the proceeds from the sale of the Notes to repay in full the $215.0 million aggregate principal amount, accrued interest and fees related to the Oxford term loans, as well as certain fees and expenses incurred in connection with the transaction.
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. 64 Table of Contents 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. 63 Table of Contents In many situations, the claims amount ultimately settled will be different than the estimate that satisfies the Actuarial Standards of Practice.
We combine a proprietary technology platform and a high-touch clinical model that enhances our members’ lifestyles and health outcomes while simultaneously controlling costs, which allows us to reinvest savings back into our platform and products to directly benefit the senior consumer.
We combine a proprietary technology platform and a high-touch clinical model that enhances our members’ lifestyles and health outcomes while simultaneously controlling costs, which allows us to reinvest savings back into our platform and products to directly benefit the senior consumers.
In addition, in order to maintain a differentiated value proposition for our members, we continue to invest in innovative product offerings and supplementary benefits to meet the evolving needs of the senior consumer.
In addition, in order to maintain a differentiated value proposition for our members, we continue to invest in innovative product offerings and supplemental benefits to meet the evolving needs of the senior consumer.
These incentives impact financial performance in the year following the CMS Rating Year (for example, CMS’s announcement of the 2025 Ratings occurred in the second half of 2024 and will impact our financial performance in 2026).
These incentives impact financial performance in the year following the CMS Rating Year (for example, CMS’s announcement of the 2026 Ratings occurred in the second half of 2025 and will impact our financial performance in 2027).
Our actual results could vary because of, and our future capital requirements will depend on, many factors, including our growth rate, the timing and extent of spending to expand our presence in existing markets, expand into new markets, increase our sales and marketing activities and develop our technology.
Our actual results could vary because of, and our future capital requirements will depend 59 Table of Contents on, many factors, including our growth rate, the timing and extent of spending to expand our presence in existing markets, expand into new markets, increase our sales and marketing activities and develop our technology.
To combat the healthcare cost increases that typically result, we proactively look to (i) connect with our population early in their enrollment with Alignment to assess 53 Table of Contents their care needs, (ii) develop care plans and engage those members with more chronic, complex health challenges in our clinical model, and (iii) continue to monitor and evaluate our healthier members in a preventative fashion over time.
To combat the healthcare cost increases that typically result, we proactively look to (i) connect with our population early in their enrollment with Alignment to assess their care needs, (ii) develop care plans and engage those members with more chronic, complex health challenges in our clinical model, and (iii) continue to monitor and evaluate our healthier members in a preventative fashion over time.
"Management's Discussion and Analysis of Financial Condition and Results of Operations" found in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 27, 2024. Overview Alignment is a next generation, consumer-centric platform designed to improve the healthcare experience for seniors.
"Management's Discussion and Analysis of Financial Condition and Results of Operations" found in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 27, 2025. Overview Alignment is a next generation, consumer-centric and clinically focused platform designed to improve the healthcare experience for seniors.
For discussion of 2022 items and year-over-year comparisons between 2023 and 2022 that are not included in this Form 10-K, refer to Item 7.
For discussion of 2023 items and year-over-year comparisons between 2024 and 2023 that are not included in this Form 10-K, refer to Item 7.
Additionally, the California HMO plan has achieved a 4 star or greater rating for seven consecutive years. • Effectively Manage the Quality of Care to Improve Member Outcomes: Our care delivery model is based on a clinical continuum through which we have created a highly personalized experience that is unique to each member depending on their personal health and circumstances.
The California HMO plan has achieved a 4 star or greater rating for nine consecutive years. 52 Table of Contents • Effectively Manage the Quality of Care to Improve Member Outcomes: Our care delivery model is based on a clinical continuum through which we have created a highly personalized experience that is unique to each member depending on their personal health and circumstances.
On June 14, 2024, we borrowed $50,000 in aggregate principal amount of the Delayed Draw Term Loans prior to the expiration date for such amount of the Delayed Draw Term Loans of June 30, 2024.
On June 14, 2024, we borrowed $50.0 million in aggregate principal amount of the Delayed Draw Term Loans prior to the expiration date for such amount of the Delayed Draw Term Loans of June 30, 2024.
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, 2024: Medical Cost PMPM Quarterly Trend Increase (Decrease) in Medical Expenses Payable Increase (Decrease) in Factors (in thousands) (3)% $ (6,300) (2) (4,200) (1) (2,100) 1 2,100 2 4,200 3 6,300 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, 2025: Medical Cost PMPM Quarterly Trend Increase (Decrease) in Medical Expenses Payable Increase (Decrease) in Factors (in thousands) (3)% $ (9,000) (2) (6,000) (1) (3,000) 1 3,000 2 6,000 3 9,000 Each period, we re-examine previously established IBNR estimates based on actual claim submissions and other changes in facts and circumstances.
We are ultimately responsible for the entirety of the cost of healthcare services related to our member population, in addition to supplemental benefits that we provide to our seniors. Capitation-related expenses are recorded on an accrual basis during the coverage period. Expenses related to fee-for-service contracts are recorded in the period in which the related services are dispensed.
We are ultimately responsible for the entirety of the cost of healthcare services related to our member population, in addition to supplemental benefits that we provide to our seniors. Capitation-related expenses are recorded on an accrual basis during the coverage period.
The following table illustrates the sensitivity of these factors and the estimated potential impact on our medical expenses payable estimates for those periods as of December 31, 2024: Completion Factors Increase (Decrease) in Medical Expenses Payable Increase (Decrease) in Factors (in thousands) (3)% $ 24,600 (2) 16,400 (1) 8,200 1 (8,200) 2 (16,400) 3 (24,600) Medical Cost Per Member Per Month Trend Factors .
The following table illustrates the sensitivity of these factors and the estimated potential impact on our medical expenses payable estimates for those periods as of December 31, 2025: Completion Factors Increase (Decrease) in Medical Expenses Payable Increase (Decrease) in Factors (in thousands) (3)% $ 33,600 (2) 22,400 (1) 11,200 1 (11,200) 2 (22,400) 3 (33,600) Medical Cost Per Member Per Month Trend Factors .
We anticipate that, starting in 2025, the benefit redesign under the Inflation Reduction Act will result in much more moderate seasonality than we have experienced in past years. Members will still pass through the benefit phases, but our share of the total liability will be more consistent through each phase than it has been in the past.
Starting in 2025, the benefit redesign under the Inflation Reduction Act resulted in more moderate seasonality than we have experienced in past years. Members still pass through the benefit phases, but our share of the total liability is more consistent through each phase than it has been in the past.
The amounts payable under this provision were immaterial at December 31, 2024 and December 31, 2023. 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, 2025 and December 31, 2024. The premium and capitation payments we receive monthly 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.
According to CMS data, our approximately 209,900 Health Plan Members represent only 5% market share of Medicare Advantage enrollees in our markets. • Drive Growth and Consistent Outcomes Through New Market Expansion: As part of our long-term growth strategy, we may enter new markets with the goal of building brand awareness across our key stakeholders to achieve meaningful market share over time.
As of January 1, 2026, we have approximately 275,300 Health Plan Members, which, according to CMS data, represent only 6% market share of Medicare Advantage enrollees in our markets. • Drive Growth and Consistent Outcomes Through New Market Expansion: As part of our long-term growth strategy, we may enter new markets with the goal of building brand awareness across our key stakeholders to achieve meaningful market share over time.
Interest on the Term Loans was a variable rate equal to (i) the secured overnight financing rate administered by the Federal Reserve Bank of New York for a one-month tenor, subject to a floor of 1.00%, plus (ii) an applicable margin of 6.50%. The interest rate applied during the year ended December 31, 2024 ranged from 11.35% to 11.84%.
Interest on the Term Loans was a variable rate equal to (i) the secured overnight financing rate administered by the Federal Reserve Bank of New York for a one-month tenor, subject to a floor of 1.00%, plus (ii) an applicable margin of 6.50%.
The adjustments are estimated by projecting the ultimate annual premium and are recognized ratably during the year, with adjustments in each period to the amount of revenue recognized to reflect changes in the estimated ultimate premium.
The adjustments are estimated by projecting the ultimate annual premium and are recognized ratably during the year, with adjustments in each period to the amount of revenue recognized to reflect changes in the estimated ultimate premium. Premiums are also recorded net of estimated uncollectible amounts and retroactive membership adjustments.
Depreciation and amortization expense was $26.9 million and $21.4 million for the years ended December 31, 2024 and 2023, respectively, an increase of $5.5 million, or 25.5%. The increase was primarily due to the amount and timing of our capital expenditures and the associated depreciation relative to 2023.
Depreciation and amortization expense was $30.4 million and $26.9 million for the years ended December 31, 2025 and 2024, respectively, an increase of $3.5 million, or 13.1%. The increase was primarily due to the amount and timing of our capital expenditures and the associated depreciation relative to 2024. Other Expenses Interest expense.
In aggregate, more than 98% of our health plan members are enrolled in plans rated 4 stars and above, meaning the vast majority of members consistently receive a high-quality care experience, as defined under CMS star measurement criteria.
One hundred percent of our health plan members are enrolled in plans rated 4 stars and above, meaning our members consistently receive a high-quality care experience, as defined under CMS star measurement criteria.
Selling, general, and administrative expenses grew at a slower rate than revenue for the year ended December 31, 2024 compared to the year ended December 31, 2023 due to economies of scale gained from Alignment's 2024 membership growth. Depreciation and Amortization.
Selling, general, and administrative expenses as a percentage of revenue decreased for the year ended December 31, 2025 compared to the year ended December 31, 2024 due to economies of scale gained from Alignment's membership growth. Depreciation and Amortization.
Pharmacy costs represent payments for members’ prescription drug benefits, net of rebates from drug manufacturers. Receivables for such manufacturer rebates are included in accounts receivable in the consolidated balance sheet. Selling, General and Administrative Expenses.
Expenses related to fee-for-service contracts are recorded in the period in which the related services are dispensed. 56 Table of Contents Pharmacy costs represent payments for members’ prescription drug benefits, net of rebates from drug manufacturers. Receivables for such manufacturer rebates are included in accounts receivable in the consolidated balance sheet. Selling, General and Administrative Expenses.
Depreciation and amortization expenses are primarily attributable to our capital investment and consist of fixed asset depreciation, amortization of intangibles considered to have definite lives and amortization of capitalized internal-use software costs. Other Expense Interest Expense.
Depreciation and amortization expenses are primarily attributable to our capital investment and consist of fixed asset depreciation, amortization of intangibles considered to have definite lives and amortization of capitalized internal-use software costs. Other Expense Interest Expense. Interest expense consists primarily of interest payments related to the convertible notes that were issued in November 2024.
Overall, medical expenses for the year ended December 31, 2024 grew at a slightly higher rate than earned premium revenues compared to the year ended December 31, 2023, primarily due to 2024 having a higher percentage of new members relative to returning members, richer member benefits and increases in unit costs.
Overall, medical expenses for the year ended December 31, 2025 grew at a lower rate than earned premium revenues compared to the year ended December 31, 2024, primarily due to a higher percentage of new members relative to returning members in 2024 compared to 2025. The increase was offset by increases in unit costs. Selling, General and Administrative Expenses.
Adjusted EBITDA should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA in lieu of net loss, which is the most directly comparable financial measure calculated in accordance with GAAP.
There are a number of limitations related to the use of Adjusted EBITDA in lieu of net income (loss), which is the most directly comparable financial measure calculated in accordance with GAAP.
Other states in which our health plans or risk bearing entities operate have chosen not to adopt the RBC rules, but instead have designed and implemented their own rules regarding capital adequacy. As of December 31, 2024, our health plans or risk-bearing entities were in compliance with the minimum capital requirements.
Other states in which our health plans or risk bearing entities operate have chosen not to adopt the RBC rules, but instead have designed and implemented their own rules regarding capital adequacy, such as the tangible net equity ("TNE") requirements for our health plans in California.
Year Ended December 31, (dollars in thousands) 2024 2023 Net cash provided by (used in) operating activities $ 34,770 $ (59,187) Net cash provided by (used in) investing activities 39,191 (147,263) Net cash provided by financing activities 156,028 105 Net change in cash 229,989 (206,345) Cash, cash equivalents and restricted cash at beginning of period 204,954 411,299 Cash, cash equivalents and restricted cash at end of period $ 434,943 $ 204,954 Operating Activities For the year ended December 31, 2024, net cash provided by operating activities was $34.8 million, an increase of $94.0 million compared to net cash used in operating activities of $59.2 million for the year ended December 31, 2023.
Year Ended December 31, (dollars in thousands) 2025 2024 Net cash provided by operating activities $ 139,927 $ 34,770 Net cash provided by (used in) investing activities (14,974) 39,191 Net cash provided by financing activities 18,041 156,028 Net change in cash 142,994 229,989 Cash, cash equivalents and restricted cash at beginning of period 434,943 204,954 Cash, cash equivalents and restricted cash at end of period $ 577,937 $ 434,943 Operating Activities For the year ended December 31, 2025, net cash provided by operating activities was $139.9 million, an increase of $105.2 million compared to net cash provided by operating activities of $34.8 million for the year ended December 31, 2024.
It also excludes approximately 8,300 and 7,300 ACO REACH members as of December 31, 2024 and December 31, 2023, respectively. Adjusted Gross Profit and Medical Benefits Ratio 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, clinical restructuring costs and selling, general, and administrative expenses.
We discontinued our participation in the ACO REACH model as of December 31, 2025. Adjusted Gross Profit and Medical Benefits Ratio Adjusted gross profit is a non-GAAP financial measure that we define as income (loss) from operations before depreciation and amortization, medical equity-based compensation expense, clinical restructuring costs and selling, general, and administrative expenses.
Key Business Metrics In addition to our financial information in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), we review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
GAAP”), we review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
Earned premium revenues were $2,671.9 million and $1,800.9 million for the years ended December 31, 2024 and 2023, respectively, an increase of $871.0 million or 48.4%. The increase was primarily driven by growth in our Health Plan membership, which increased 58.6% between December 31, 2024 and December 31, 2023.
Earned premium revenues were $3,911.7 million and $2,671.9 million for the years ended December 31, 2025 and 2024, respectively, an increase of $1,239.8 million or 46.4%. The increase was primarily driven by growth in our Health Plan membership, which increased 25.0% between December 31, 2025 and December 31, 2024 and higher revenue per member per month.
Given our intent to continue to invest in our 55 Table of Contents platform and the scalability of our business in the short to medium-term, we believe Adjusted EBITDA over the long term will be an important indicator of value creation.
Given our intent to continue to invest in our platform and the scalability of our business in the short to medium-term, we believe Adjusted EBITDA over the long term will be an important indicator of value creation. Adjusted EBITDA should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP.
Financing Activities For the year ended December 31, 2024, net cash provided by financing activities was $156.0 million, an increase of $155.9 million compared to net cash provided by financing activities of $0.1 million for the year ended December 31, 2023.
Financing Activities For the year ended December 31, 2025, net cash provided by financing activities was $18.0 million, a decrease of $138.0 million compared to net cash provided by financing activities of $156.0 million for the year ended December 31, 2024.
Investing Activities For the year ended December 31, 2024, net cash provided by investing activities was $39.2 million, an increase of $186.5 million compared to net cash used in investing activities of $147.3 million for the year ended December 31, 2023.
Investing Activities For the year ended December 31, 2025, net cash used in investing activities was $15.0 million, a decrease of $54.2 million compared to net cash provided by investing activities of $39.2 million for the year ended December 31, 2024.
As of December 31, 2024, our operating parent company (an indirect wholly owned subsidiary of our parent company) had $212.3 million in cash, cash equivalents and short-term investments. 60 Table of Contents We may incur operating losses in the future due to the investments we intend to continue to make in expanding our operations and sales and marketing, in further developing our technology and due to the general and administrative costs we expect to incur in connection with continuing to operate as a public company.
We may incur operating losses in the future due to the investments we intend to continue to make in expanding our operations and sales and marketing, in further developing our technology and due to the general and administrative costs we expect to incur in connection with continuing to operate as a public company.
Prior to the repayment of the Oxford term loans, the average interest rate during 2024 was 11.77% compared to an average interest rate of 11.35% during the year ended December 31, 2023. The convertible notes have an interest rate of 4.25%. Other (income) expenses, net .
The convertible notes have an interest rate of 4.25%, compared to our prior term loans which had an average interest rate of 11.77% for the year ended December 31, 2024.
This was offset by the repayment of $215.0 million related to the Oxford term loans, as discussed above. 62 Table of Contents Material cash requirements from known contractual and other obligations Our principal commitments consist of repayments of long-term debt, operating leases and certain purchase obligations.
This decrease was offset by $18.1 million in proceeds from the exercise of stock options. 61 Table of Contents Material cash requirements from known contractual and other obligations Our principal commitments consist of repayments of long-term debt, operating leases and certain purchase obligations.
Premiums are also recorded net of estimated uncollectible amounts and retroactive membership adjustments. 56 Table of Contents Our recognized premium revenue for the Alignment Health Plans is subject to a minimum annual medical loss ratio (“MLR”) of 85%. The MLR represents medical costs as a percentage of premium revenue.
Our recognized premium revenue for the Alignment Health Plan is subject to a minimum annual medical loss ratio (“MLR”) of 85%. The MLR represents medical costs as a percentage of premium revenue.
Other (income) expenses consist primarily of gains or losses on the disposition of assets, as well as gains and losses related to subleased ROU assets. 57 Table of Contents The following table sets forth our consolidated statements of operations data for the periods indicated: Year Ended December 31, 2024 2023 (dollars in thousands) Revenues: Earned premiums $ 2,671,931 $ 1,800,933 Other 31,630 22,697 Total revenues 2,703,561 1,823,630 Expenses: Medical expenses 2,406,870 1,622,600 Selling, general, and administrative expenses 371,374 307,433 Depreciation and amortization 26,872 21,414 Total expenses 2,805,116 1,951,447 Loss from operations (101,555) (127,817) Other expenses: Interest expense 23,547 21,231 Other (income) expenses, net (72) (853) Loss on extinguishment of debt 3,020 — Total other expenses 26,495 20,378 Loss before income taxes (128,050) (148,195) Provision for income tax expense (benefit) 21 (22) Net loss $ (128,071) $ (148,173) Less: Net loss attributable to noncontrolling interest 36 156 Net loss attributable to Alignment Healthcare, Inc. $ (128,035) $ (148,017) 58 Table of Contents The following table sets forth our consolidated statements of operations data expressed as a percentage of total revenues for the periods indicated: Year Ended December 31, 2024 2023 (% of revenue) Revenues: Earned premiums 99 % 99 % Other 1 1 Total revenues 100 100 Expenses: Medical expenses 89 89 Selling, general and administrative expenses 14 17 Depreciation and amortization 1 1 Total expenses 104 107 Loss from operations (4) (7) Other expenses: Interest expense 1 1 Other (income) expenses, net — — Loss on extinguishment of debt — — Total other expenses 1 1 Loss before income taxes (5) (8) Provision for income taxes — — Net loss (5) (8) Less: Net loss attributable to noncontrolling interest — — Net loss attributable to Alignment Healthcare, Inc.
The following table sets forth our consolidated statements of operations data for the periods indicated: Year Ended December 31, 2025 2024 (dollars in thousands) Revenues: Earned premiums $ 3,911,718 $ 2,671,931 Other 37,001 31,630 Total revenues 3,948,719 2,703,561 Expenses: Medical expenses 3,460,156 2,406,870 Selling, general, and administrative expenses 443,407 371,374 Depreciation and amortization 30,404 26,872 Total expenses 3,933,967 2,805,116 Income (loss) from operations 14,752 (101,555) Other expenses: Interest expense 15,799 23,547 Other income, net (89) (72) Loss on extinguishment of debt — 3,020 Total other expenses 15,710 26,495 Loss before income taxes (958) (128,050) Provision for income tax expense 20 21 Net loss $ (978) $ (128,071) Less: Net loss attributable to noncontrolling interest (254) (36) Net loss attributable to Alignment Healthcare, Inc. $ (724) $ (128,035) 57 Table of Contents The following table sets forth our consolidated statements of operations data expressed as a percentage of total revenues for the periods indicated: Year Ended December 31, 2025 2024 (% of revenue) Revenues: Earned premiums 99.1 % 98.8 % Other 0.9 1.2 Total revenues 100.0 100.0 Expenses: Medical expenses 87.6 89.0 Selling, general, and administrative expenses 11.2 13.7 Depreciation and amortization 0.8 1.0 Total expenses 99.6 103.7 Income (loss) from operations 0.4 (3.7) Other expenses: Interest expense 0.4 0.9 Other income, net — — Loss on extinguishment of debt — 0.1 Total other expenses 0.4 1.0 Loss before income taxes — (4.7) Provision for income tax expense — — Net loss — (4.7) Less: Net loss attributable to noncontrolling interest — — Net loss attributable to Alignment Healthcare, Inc. — % (4.7) % Revenues Year Ended December 31, Change 2025 2024 $ % (dollars in thousands) Revenues: Earned premiums $ 3,911,718 $ 2,671,931 $ 1,239,787 46.4 % Other 37,001 31,630 5,371 17.0 % Total revenues $ 3,948,719 $ 2,703,561 $ 1,245,158 46.1 % Earned Premiums.
Due to the timing of many of these investments, including our primary sales and marketing season, we typically incur a greater level of investment in the second half of the year relative to the first half of the year.
Due to the timing of many of these investments, including our primary sales and marketing season, we typically incur a greater level of investment in the second half of the year relative to the first half of the year. 53 Table of Contents Key Business Metrics In addition to our financial information in accordance with accounting principles generally accepted in the United States of America (“U.S.
AVA’s unified platform, analytical tools and data across the healthcare ecosystem enable us to produce consistent outcomes, unit economics and support new member growth.
AVA’s data insights, combined with the clinical control of our care model, enable us to personalize and manage our member relationships, care quality, and to coordinate and manage risk with our provider partners. AVA’s unified platform, analytical tools and data across the healthcare ecosystem enable us to produce consistent outcomes, unit economics and support new member growth.
The third-party is responsible for arranging and controlling the health care services provided to the ACO members, and for providing certain management and support services with respect to ACO operations. The third-party also assumes specified upside and downside financial risk relative to the ACO’s performance.
In 2024, we entered into a management services and risk management agreement with a third-party healthcare company. The third-party is responsible for arranging and controlling the health care services provided to the ACO members, and for providing certain management and support services with respect to ACO operations.
Adjusted gross profit is reconciled as follows: Year Ended December 31, 2024 2023 (dollars in thousands) Loss from operations $ (101,555) $ (127,817) Add back: Equity-based compensation (medical expenses) 4,930 7,541 Depreciation (medical expenses) 190 254 Restructuring costs (medical expenses) (1) 796 — Depreciation and amortization (2) 26,872 21,414 Selling, general, and administrative expenses 371,374 307,433 Total add back 404,162 336,642 Adjusted gross profit $ 302,607 $ 208,825 (1) Represents severance and related costs incurred as part of a corporate restructuring, that took place during 2024, designed to streamline our organizational structure and drive operational efficiencies (2) Includes $0.6 million in impairment expense related to intangible assets that were written off during the year We calculate our MBR by dividing total medical expenses, excluding depreciation, equity-based compensation and clinical restructuring costs, by total revenues in a given period.
Adjusted gross profit is reconciled as follows: Year Ended December 31, 2025 2024 (dollars in thousands) Income (loss) from operations $ 14,752 $ (101,555) Add back: Equity-based compensation (medical expenses) 6,134 4,930 Depreciation (medical expenses) 78 190 Restructuring costs (medical expenses) (1) — 796 Depreciation and amortization (2) 30,404 26,872 Selling, general, and administrative expenses 443,407 371,374 Total add back 480,023 404,162 Adjusted gross profit $ 494,775 302,607 (1) Represents severance and related costs incurred as part of a corporate restructuring designed to streamline our organizational structure and drive operational efficiencies 54 Table of Contents (2) Amortization expense for the year ended December 31, 2025 includes $0.6 million in impairment expense related to the remeasurement of goodwill associated with one of our subsidiaries.
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 Estimates — Revenue” below .
We recognize premium or capitation revenue for providing this insurance coverage in the month that members are entitled to receive health care services and any premium or capitation collected in advance is deferred. Our CMS payment related to Medicare Part D is subject to risk sharing through the Medicare Part D risk corridor provisions.
Liquidity and Capital Resources General To date, we have financed our operations principally through our IPO, private placements of our equity securities, revenues, certain term loans and convertible notes (described below). As of December 31, 2024, we had $470.7 million in cash, cash equivalents and short-term investments. We operate as a holding company in a highly regulated industry.
Other income was $0.1 million and $0.1 million for the years ended December 31, 2025 and 2024. Liquidity and Capital Resources General To date, we have financed our operations principally through our IPO, private placements of our equity securities, revenues, certain term loans and convertible notes (described below).
As a result of this arrangement, revenue is recorded on a net basis within other revenue on the consolidated statement of operations for the year ended December 31, 2024. Expenses Medical Expenses.
The third-party also assumes specified upside and downside financial risks relative to the ACO’s performance. As a result of this arrangement, revenue is recorded on a net basis within other revenue on the consolidated statement of operations for the years ended December 31, 2025 and 2024.
The following table summarizes our contractual and other obligations as of December 31, 2024: Payments due by Period Total Less than 1 year 1-3 year 3-5 years More than 5 years (dollars in thousands) Long term debt obligations (1) $ 330,000 $ — $ — $ 330,000 $ — Operating lease obligations 9,047 1,212 3,525 4,310 — Purchase obligations (2) 50,069 14,695 19,536 13,533 2,305 Other obligations — — — — — Total $ 389,116 $ 15,907 $ 23,061 $ 347,843 $ 2,305 (1) Represents the estimated full cash repayment upon maturity of the Convertible Senior Notes in November 2029.
The following table summarizes our contractual and other obligations as of December 31, 2025: Payments due by Period Total Less than 1 year 1-3 year 3-5 years More than 5 years (dollars in thousands) Long term debt obligations (1) $ 330,000 $ — $ — $ 330,000 $ — Operating lease obligations 8,155 1,873 3,664 2,618 — Purchase obligations (2) 49,354 14,253 26,560 8,541 — Other obligations 270 85 181 4 — Total $ 387,779 $ 16,211 $ 30,405 $ 341,163 $ — (1) Represents the estimated full cash repayment upon maturity of the Convertible Senior Notes in November 2029.
Year Ended December 31, (dollars in '000's, except percentages) 2024 2023 % Change Health plan membership (at period end) 189,100 119,200 58.6 % Medical benefits ratio 88.8 % 88.5 % 0.3 % Revenues $ 2,703,561 $ 1,823,630 48.3 % Loss from Operations $ (101,555) $ (127,817) 20.5 % Net loss $ (128,071) $ (148,173) 13.6 % Adjusted EBITDA (1) $ 1,339 $ (35,319) 103.8 % Adjusted gross profit (1) $ 302,607 $ 208,825 44.9 % (1) See "Adjusted EBITDA" and "Adjusted Gross Profit" below for reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures. 54 Table of Contents Health Plan Membership We define Health Plan Membership as the number of members enrolled in our HMO and PPO contracts as of the end of a reporting period.
Year Ended December 31, (dollars in '000's, except percentages) 2025 2024 % Change Health plan membership (at period end) 236,300 189,100 25.0 % Medical benefits ratio 87.5 % 88.8 % (1.3) % Revenues $ 3,948,719 $ 2,703,561 46.1 % Income (loss) from operations $ 14,752 $ (101,555) 114.5 % Net loss $ (978) $ (128,071) 99.2 % Adjusted EBITDA (1) $ 109,944 $ 1,339 8111.1 % Adjusted gross profit (1) $ 494,775 $ 302,607 63.5 % (1) See "Adjusted EBITDA" and "Adjusted Gross Profit" below for reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.
The increase was primarily due to an increase in ongoing investments and expenditures in network development, operations and sales and marketing to drive the growth of Alignment's Health Plan membership.
Selling, general and administrative expenses were $443.4 million and $371.4 million for the years ended December 31, 2025 and 2024, respectively, an increase of $72.0 million, or 19.4%. The increase was primarily due to an increase in ongoing investments and expenditures in operations, network development and sales and marketing to support the growth of Alignment's Health Plan membership.
The following tables provide information about incurred and paid claims development as of December 31, 2024: Cumulative Incurred Claims, net of reinsurance for the Years Ended December 31, 2022 2023 2024 Claims Incurred Year (in thousands) 2022 400,939 385,746 383,865 2023 492,315 484,951 2024 832,819 Total $ 1,701,635 Cumulative Claims paid, net of reinsurance for the Years Ended December 31, Cumulative Number of Paid Claims (1) 2022 2023 2024 Claims Incurred Year (in thousands) 2022 315,187 383,419 382,467 389,689 2023 400,465 481,827 537,129 2024 670,471 909,451 Total $ 1,534,765 (1) Cumulative number of paid claims are presented in whole amounts Substantially all of the claims incurred but not paid balance as of December 31, 2024 relate to the current year.
The following tables provide information about incurred and paid claims development as of December 31, 2025: Cumulative Incurred Claims, net of reinsurance for the Years Ended December 31, 2023 2024 2025 Claims Incurred Year (in thousands) 2022 492,315 482,279 480,412 2023 832,819 809,297 2024 1,136,448 Total $ 2,426,157 Cumulative Claims paid, net of reinsurance for the Years Ended December 31, Cumulative Number of Paid Claims (1) 2023 2024 2025 Claims Incurred Year (in thousands) 2022 400,465 479,148 478,999 540,426 2023 670,471 804,462 1,036,274 2024 848,206 1,268,147 Total $ 2,131,667 (1) Cumulative number of paid claims are presented in whole amounts Substantially all of the claims incurred but not paid balance as of December 31, 2025 relate to the current year.
Alignment Healthcare, Inc., our parent company, is dependent upon dividends and administrative expense reimbursements from our subsidiaries, most of which are subject to regulatory restrictions. We maintain significant levels of aggregate excess statutory capital and surplus in our state-regulated operating subsidiaries.
As of December 31, 2025, we had $604.2 million in cash, cash equivalents and short-term investments. We operate as a holding company in a highly regulated industry. Alignment Healthcare, Inc., our parent company, is dependent upon dividends and administrative expense reimbursements from our subsidiaries, most of which are subject to regulatory restrictions.
Medical expenses were $2,406.9 million and $1,622.6 million for the years ended December 31, 2024 and 2023, respectively, an increase of $784.3 million, or 48.3%. The increase was driven primarily by the growth in Alignment Health Plan membership, which increased 58.6% between December 31, 2024 and December 31, 2023.
Medical expenses were $3,460.2 million and $2,406.9 million for the years ended December 31, 2025 and 2024, respectively, an increase of $1,053.3 million, or 43.8%.
Additionally, for the year ended December 31, 2024, we recorded amortization expense of $0.6 million related to the impairment of intangible assets associated with an inactive Medicare license that was terminated during the period. Other Expenses Interest expense.
Amortization expense for the year ended December 31, 2024 includes $0.6 million in impairment expense related to intangible assets that were written off during the year.
Factors Affecting Our Performance Our proprietary technology platform, AVA, is a key element of our business with capabilities that we expect to impact our future performance. AVA enables us to personalize and manage our member relationships, care quality and experience, and to coordinate and manage risk with our provider partners.
Factors Affecting Our Performance Our unique clinical model, led by employed clinical teams known as Care Anywhere, acts upon insights derived from our proprietary technology platform, AVA. This integration between our technology and employed care model is a key element of our business with capabilities that we expect to impact our future performance.
We believe this is an important metric to assess growth of our underlying business, which is indicative of our ability to consistently offer a superior value proposition to seniors. This metric excludes third-party payor members with respect to which we are at-risk for managing their healthcare expenditures, which represented 400 members as of December 31, 2024 and December 31, 2023.
Health Plan Membership We define Health Plan Membership as the number of members enrolled in our HMO and PPO contracts as of the end of a reporting period. We believe this is an important metric to assess growth of our underlying business, which is indicative of our ability to consistently offer a superior value proposition to seniors.
The increase primarily relates to purchases of short-term treasury securities which were $379.1 million during the year ended December 31, 2023 compared to $82.2 million during the year ended December 31, 2024, a decrease of 296.9 million. The increase was partially offset by a decrease in maturities of short-term investments.
The increase in cash used primarily relates to reduced investment maturities during the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease in investment maturities was offset by a decrease in capital expenditures, which decreased $14.6 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 .
Interest expense was $23.5 million and $21.2 million for the years ended December 31, 2024 and 2023, respectively, an increase of $2.3 million or 10.8%. The increase in interest expense was partially due to an increase in the debt balance as a result of the $50.0 million drawdown of the Oxford Delayed Draw term loan in June 2024.
Interest expense was $15.8 million and $23.5 million for the years ended December 31, 2025 and 2024, respectively, a decrease of $7.7 million or 32.8%. The decrease in interest expense was mainly attributable to a decrease in the interest rate on our debt following refinancing in November 2024.
Other revenues increased $8.9 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase is mainly attributable to an increase in the interest rate of our interest earning cash balances.
The decrease in interest rate was offset by an increase in our average long-term debt balance which was $330.0 million for the year ended December 31, 2025 compared to an average balance of $247.5 million for the year ended December 31, 2024. Other income, net .
Additionally, the change from gross to net revenue treatment for ACO REACH increased other revenues by $2.3 million. 59 Table of Contents Expenses Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Expenses: Medical expenses $ 2,406,870 $ 1,622,600 $ 784,270 48.3 % Selling, general and administrative expenses 371,374 307,433 63,941 20.8 % Depreciation and amortization 26,872 21,414 5,458 25.5 % Total expenses $ 2,805,116 $ 1,951,447 $ 853,669 43.7 % Medical Expenses.
Cash and cash equivalents, and other current investments were $604.2 million as of December 31, 2025 compared to $470.7 million as of December 31, 2024. 58 Table of Contents Expenses Year Ended December 31, Change 2025 2024 $ % (dollars in thousands) Expenses: Medical expenses $ 3,460,156 $ 2,406,870 $ 1,053,286 43.8 % Selling, general and administrative expenses 443,407 371,374 72,033 19.4 % Depreciation and amortization 30,404 26,872 3,532 13.1 % Total expenses $ 3,933,967 $ 2,805,116 $ 1,128,851 40.2 % Medical Expenses.
Removed
Our model is based on a flywheel concept, referred to as our “virtuous cycle,” which reflects our unique ability to manage healthcare expenditures while maintaining quality and member satisfaction — a distinct and sustainable competitive advantage. To execute upon this concept, we start by ingesting medical and demographic data through our proprietary AVA technology platform.
Added
We have grown Health Plan Membership, which we define as members enrolled in our health maintenance organization ("HMO") and preferred provider organization ("PPO") contracts (the "Alignment Health Plan"), from approximately 13,000 at inception to 236,300 as of December 31, 2025, representing a 30% compound annual growth rate across 45 markets and 5 states.
Removed
AVA’s predictive algorithms provide unique insights into each member and identify those most at risk of an acute event. Our information-enabled care model is then combined with clinical engagement by our employed clinical teams known as Care Anywhere to improve healthcare outcomes for our members.
Added
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.
Removed
For example, our high-touch clinical model proactively manages chronic conditions and assists with post-discharge care navigation to reduce unnecessary hospital admissions and readmissions, which in turn improves health outcomes and quality while lowering overall costs. We then reinvest medical cost savings into richer coverage and benefits, which propels growth in revenue and membership while maintaining margin discipline.
Added
For the 2025 plan year, Alignment offered plans in 45 markets across California (22 markets), North Carolina (16 markets), Nevada (2 markets), Arizona (3 markets) and Texas (2 markets). There are approximately 8.4 million Medicare-eligible seniors in our current markets.
Removed
The strength of our model is further reinforced by delivering a premium member experience. Our concierge and a clinical service hotline is available 24/7 at no additional cost to our members and our state-of-the-art in-house call centers provide us with more consistency and control over member-facing functions.
Added
This metric excludes third-party payor members which we are at-risk for managing their healthcare expenditures, which represented approximately 300 and 400 members as of December 31, 2025 and December 31, 2024, respectively. It also excludes approximately 6,400 and 8,300 ACO REACH members as of December 31, 2025 and December 31, 2024, respectively.
Removed
Our virtuous cycle, based on the principle of doing well by doing good, is highly repeatable and a core tenet of our ability to continue to expand in existing and new markets in the future.
Added
Amortization expense for the year ended December 31, 2024 includes $0.6 million in impairment expense related to intangible assets that were written off during the year. We calculate our MBR by dividing total medical expenses, excluding depreciation, medical equity-based compensation and clinical restructuring costs, by total revenues in a given period.
Removed
The five-year compounded growth rate through December 31, 2024 of revenue and the number of members enrolled in our HMO and PPO contracts ("Health Plan Membership") is 29% and 31% respectively.
Added
Adjusted EBITDA is reconciled as follows: Year Ended December 31, 2025 2024 (dollars in thousands) Net loss $ (978) $ (128,071) Less: Net loss attributable to noncontrolling interest (254) (36) Adjustments: Interest expense 15,799 23,547 Depreciation and amortization (1) 30,482 27,062 Income tax expense 20 21 Equity-based compensation (2) 62,082 71,132 Acquisition expenses (3) — 26 Litigation costs (4) 2,357 2,069 (Gain) loss on ROU assets (5) — 143 Gain on sale of property and equipment (72) (9) Restructuring costs (6) — 2,363 Loss on extinguishment of debt — 3,020 Adjusted EBITDA $ 109,944 $ 1,339 (1) Amortization expense for the year ended December 31, 2025 includes $0.6 million in impairment expense related to the remeasurement of goodwill associated with one of our subsidiaries.
Removed
Medicare Advantage Background Today, seniors are confronted with a healthcare landscape that is fragmented across disparate point solutions, tools and vendors, without an accessible, coordinated approach to comprehensive care delivery. Under the traditional Medicare fee-for-service ("FFS") model, seniors receive access to hospital insurance benefits (“Part A”) and outpatient services (“Part B”) directly from CMS.
Added
Under the Medicare Part D program, our members and the members of the third-party payors receive standard drug benefits. We may also provide enhanced benefits at our own expense.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed4 unchanged
Biggest changeNonetheless, if our costs were to become subject to 65 Table of Contents 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. 66 Table of Contents
Biggest changeNonetheless, 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. 64 Table of Contents
Interest Rate Risk As of December 31, 2024, we had $71.1 million of U.S. Treasury bills which were classified as held to maturity and had maturities less than twelve months.
Interest Rate Risk As of December 31, 2024, we had $29.5 million of U.S. Treasury bills which were classified as held to maturity and had maturities less than twelve months.

Other ALHC 10-K year-over-year comparisons