Clover Health, a San Francisco-based health insurance company that serves Medicare Advantage (MA) beneficiaries in New Jersey, lost $34.6 million in 2016 – seven times more than it lost in 2015, Axios reports.
The financial loss came despite upwards $300 million it raised in venture capital and the $184 million it received from the MA program.
The company said “higher-than-expected medical expenses” is the reason for the loss.
Clover isn’t the first technology startup in health insurance to suffer losses. Another startup, Oscar, lost $128 million in the first three quarters of 2016. In response, Oscar, which offers health plans in New York, Texas and California, pulled out of the Dallas and New Jersey Affordable Care Act exchanges this year, though it may expand into the San Francisco area. Oscar recently partnered with Mount Sinai Health System to open a full-service primary care center in Brooklyn, NY and it is eyeing a chain of clinics, possibly worksite clinics.
How Clover will respond to the 2016 loss isn’t known yet. Investors will need to decide whether to keep pumping money into the company and their decision could have a significant influence over its financial stability. Yet the MA market is expect to substantially increase given the country's aging population. Clover reported having 20,600 MA members in New Jersey in 2016, which was a huge jump from the 7,200 members it had the previous year.
Earlier this month, the CMS announced a 2.95% hike in MA rates. However, Cathryn Donaldson, director of communications for America’s Health Insurance Plans, said the increase “really doesn’t move the need that much."