Alignment Healthcare executives weighed in on the final Medicare Advantage rate notice last week, with CEO John Kao saying he expects regulators to return to plans for a new risk adjustment model in short order.
Kao said on the company's earnings call late Thursday that the Centers for Medicare & Medicaid Services was clearly responding to feedback in its decision to postpone a proposed overhaul to risk adjustment in the final version of the MA Advance Notice. The proposal would have built on the V28 risk adjustment changes, which have been on a phased rollout and have had a major impact on insurers in this space.
Despite the delay, Kao said it's clear that CMS is putting a focus on addressing risk adjustment misbehavior. Multiple analyses have suggested that insurers may increase coding intensity in a process called "upcoding" that can increase their payouts.
"I think CMS has been pretty consistent with their message of ensuring that coding is not some form of a gamified, competitive advantage for people," Kao said.
CMS did not set a timeline for it to revive the new risk adjustment model, though Kao said he does not expect them to wait long. He told investors the plan could come back in time for the next Advance Notice, with an updated model potentially beginning its rollout in 2029.
Kao said that a focus on addressing upcoding and other strategies of gaming the system works well for a company like Alignment.
"I think that's a good thing for the industry, and I think it serves us really, really well," he said. "It really puts the purest form of who's got the highest quality at the lowest price point. Those organizations should be rewarded to succeed."
Alignment posted $11.4 million in profit for the first quarter of 2026, marking a significant reversal of fortune compared to the prior-year quarter.
By comparison, the Medicare Advantage insurtech reported a $9.1 million loss in the first quarter of 2025. The company also grew its revenues year over year, reaching $1.2 billion compared to its $926.9 million haul in Q1 2025.
Alignment posted an 88.2% medical loss ratio in the first quarter, on par with its peers and reflecting a trend toward moderation in MA. Health plan membership had increased 30.9% year-over-year, reaching 284,800 people.