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1、Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549_FORM 10-K_(Mark One)xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2024ORoTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
2、 EXCHANGE ACT OF 1934 FOR THETRANSITION PERIOD FROM TO Commission File Number:001-40295_ALIGNMENT HEALTHCARE,INC.(Exact name of Registrant as specified in its Charter)_Delaware46-5596242(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification No.)1100 W.Town and Cou
3、ntry Road,Suite 1600Orange,California92868(Address of principal executive offices)(Zip Code)Registrants telephone number,including area code:(844)310-2247_Securities registered pursuant to Section 12(b)of the Act:Title of each class TradingSymbol(s)Name of each exchange on which registeredCommon Sto
4、ck,par value$0.001 per share ALHC The Nasdaq Stock Market LLCSecurities registered pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the Registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes x No oIndicate by check mark if the Registrant is not r
5、equired to file reports pursuant to Section 13 or 15(d)of the Act.Yes o No xIndicate by check mark whether the Registrant:(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during thepreceding 12 months(or for such shorter period that the Regis
6、trant was required to file such reports),and(2)has been subject to such filing requirements for thepast 90 days.Yes x No oIndicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T(232.405 of t
7、his chapter)during the preceding 12 months(or for such shorter period that the Registrant was required to submit such files).Yes x No oIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,smaller reporting company,or an emerginggrowt
8、h company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2of the Exchange Act.Large accelerated filerxAccelerated fileroNon-accelerated fileroSmaller reporting companyoEmerging growth companyo If an emerging gro
9、wth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a)of the Exchange Act.oIndicate by check mark whether the registrant has filed a report on an
10、d attestation to its managements assessment of the effectiveness of its internal control overfinancial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its auditreport.If securities are registered pursuant to Sec
11、tion 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in the filing reflectthe correction of an error to previously issued financial statements.2025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-2024123
12、1.htm1/133Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any ofthe registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).oIndicate by check mark whether
13、 the Registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes o No The aggregate market value of voting shares held by non-affiliates of the Registrant was$973,520,748 as of June 30,2024,the last business day of the Registrantsmost recently completed second fiscal quarter(base
14、d on a closing price of$7.97 per share).This determination of affiliate status is not necessarily a conclusivedetermination for other purposes.The registrant has no non-voting common stock.As of February 24,2025,the registrant had 191,832,332 shares of common stock,$0.001 par value per share,outstan
15、ding.DOCUMENTS INCORPORATED BY REFERENCEThe information required by Part III of this Annual Report,to the extent not set forth herein,is incorporated herein by reference from the registrants definitiveproxy statement relating to the Annual Meeting of Shareholders to be held in 2025,which definitive
16、proxy statement shall be filed with the Securities and ExchangeCommission within 120 days after the end of the fiscal year to which this Annual Report relates.2025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm2/133Table of ContentsTable of
17、 Contents PagePART I Item 1.Business4Item 1A.Risk Factors13Item 1B.Unresolved Staff Comments47Item 1C.Cybersecurity47Item 2.Properties48Item 3.Legal Proceedings48Item 4.Mine Safety Disclosures49 PART II Item 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of E
18、quity Securities50Item 6.Reserved51Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations52Item 7A.Quantitative and Qualitative Disclosures About Market Risk65Item 8.Financial Statements and Supplementary Data67Item 9.Changes in and Disagreements with Accountants
19、 on Accounting and Financial Disclosure98Item 9A.Controls and Procedures98Item 9B.Other Information99Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections100 PART III Item 10.Directors,Executive Officers and Corporate Governance101Item 11.Executive Compensation101Item 12.Securi
20、ty Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters101Item 13.Certain Relationships and Related Transactions,and Director Independence101Item 14.Principal Accounting Fees and Services101 PART IV Item 15.Exhibits,Financial Statement Schedules102Item 16.Form 10-K S
21、ummary103 Signatures104i2025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm3/133Table of ContentsFORWARD-LOOKING STATEMENTSThroughout this annual report on Form 10-K(this“Annual Report”),we make“forward-looking statements”within the meaning
22、 of the U.S.Private Securities Litigation Reform Act of 1995.All statements other than statements of historical fact included in this Annual Report areforward-looking statements.Forward-looking statements give our current expectations relating to our financial condition,results of operations,plans,o
23、bjectives,future performance and business.You can identify forward-looking statements by the fact that they do not relate strictly tohistorical or current facts.These statements may include words such as“anticipate,”“estimate,”“expect,”“project,”“plan,”“intend,”“believe,”“may,”“will,”“should,”“can h
24、ave,”“likely”and other words and terms of similar meaning.The forward-looking statements contained in thisAnnual Report are generally located in the material set forth under the heading“Managements Discussion and Analysis of Financial Conditionand Results of Operations”but may be found in other loca
25、tions as well.These statements are based upon managements current expectations,assumptions and estimates and are not guarantees of timing,future results or performance.All forward-looking statements are subject to risks anduncertainties that may cause actual results to differ materially from those t
26、hat we expected,including:our history of net losses,and our ability to achieve or maintain profitability in an environment of increasingexpenses;the effect of our relatively limited operating history on investors ability to evaluate our current business andfuture prospects;the viability of our growt
27、h strategy and our ability to realize expected results;our ability to attract new members and to successfully enter into new markets;the quality and pricing of our products and services;our ability to maintain a high rating for our plans on the Five Star Quality Rating System;our ability to develop
28、and maintain satisfactory relationships with care providers that service our members;our ability to manage our growth effectively,execute our business plan,maintain high levels of service andmember satisfaction or adequately address competitive challenges;our ability to compete in the healthcare ind
29、ustry;the impact on our business of security breaches,loss of data or other disruptions causing the compromise ofsensitive information or preventing us from accessing critical information;the impact on our business of disruptions in our disaster recovery systems or management continuity planning;the
30、 cost of legal proceedings and litigation,including intellectual property and privacy disputes;our dependence on reimbursements by the Centers for Medicare and Medicaid Services(CMS)and premiumpayments by individuals;other risks associated with being a government contractor;the impact on our busines
31、s of the healthcare services industry becoming more cyclical;our ability to manage acquisitions,divestitures and other significant transactions successfully;our ability to maintain,enhance and protect our reputation and brand recognition;our ability to effectively invest in,implement improvements to
32、 and properly maintain the uninterruptedoperation and data integrity of our information technology and other business systems;our ability to obtain,maintain,protect and enforce intellectual property protection for our technology;the potential adverse impact of claims by third parties that we are inf
33、ringing on,misappropriating or otherwiseviolating their intellectual property rights;the impact of any restrictions on our use of or ability to license data or our failure to license data and integratethird-party technologies;our dependence on our senior management team and other key employees;the c
34、oncentration of our health plans in a limited number of U.S.states;our management teams limited experience managing a public company;our ability to generate sufficient cash flow to service all of our indebtedness and the potential impact of certainaffirmative and negative covenants in our term loan
35、agreement on our business;the impact of shortages of qualified personnel and related increases in our labor costs;12025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm4/133Table of Contentsthe risk that our records may contain inaccurate or
36、unsupportable information regarding risk adjustment scoresof members;our ability to accurately estimate incurred but not reported medical expenses;the impact of negative publicity regarding the managed healthcare industry;the impact of weather and other factors beyond our control on our clinics,the
37、centers out of which our externalproviders operate,and the facilities that host our AVA platform(as defined below);the impact on our business of renegotiation,non-renewal or termination of risk agreements with hospitals,physicians,nurses,pharmacists and medical support staff;risks associated with es
38、timating the amount of liabilities that we recognize under our risk agreements withproviders;our ability to respond to general economic conditions,including but not limited to,increased inflation andhigher interest rates;risks associated with an economic downturn,including pressure on governmental b
39、udgets and reducedspending for health and human service programs;our ability to develop and maintain proper and effective internal control over financial reporting;the impact of state and federal efforts to reduce Medicare spending;our ability to comply with applicable federal,state and local rules
40、and regulations,including those relating todata privacy and security;andother factors disclosed in the section entitled“Risk Factors”and elsewhere in this Annual Report.We derive many of our forward-looking statements from our operating budgets and forecasts,which are based on many detailed assumpti
41、ons.While we believe that our assumptions are reasonable,we caution that it is very difficult to predict the impact of known factors,and it isimpossible for us to anticipate all factors that could affect our actual results.Important factors that could cause actual results to differ materiallyfrom ou
42、r expectations,or cautionary statements,are disclosed under the sections entitled“Risk Factors”and“Managements Discussion andAnalysis of Financial Condition and Results of Operations”in this Annual Report.All written and oral forward-looking statements attributable to us,or persons acting on our beh
43、alf,are expressly qualified in their entirety by thesecautionary statements as well as other cautionary statements that are made from time to time in our other SEC filings and public communications.You should evaluate all forward-looking statements made in this Annual Report in the context of these
44、risks and uncertainties.We caution you that the important factors referenced above may not contain all of the factors that are important to you.In addition,we cannotassure you that we will realize the results or developments we expect or anticipate or,even if substantially realized,that they will re
45、sult in theconsequences or affect us or our operations in the way we expect.The forward-looking statements included in this Annual Report are made onlyas of the date hereof.We undertake no obligation to update or revise any forward-looking statement as a result of new information,future eventsor oth
46、erwise,except as otherwise required by law.MARKET AND INDUSTRY DATAUnless otherwise indicated,information in this Annual Report concerning economic conditions,our industry,our markets and our competitiveposition is based on a variety of sources,including information from independent industry analyst
47、s and publications,as well as our own estimatesand research.This information involves a number of assumptions and limitations,and you are cautioned not to give undue weight to suchestimates.While we believe the information presented in this Annual Report is generally reliable,forecasts,assumptions,e
48、xpectations,beliefs,estimates and projects involve risk and uncertainties and are subject to change based on various factors,including those described under“Forward-Looking Statements”and“Risk Factors.”Throughout this Annual Report,all references to“Net Promoter Score”or“NPS”are to a measure of sati
49、sfaction widely used in the healthcareindustry.We calculate NPS based on responses to member surveys,conducted by a third-party administrator(either telephonically or online)thatselects a random sample of members to participate.The surveys ask the consumer to rank,on a scale of one to 10,how likely
50、the member wouldbe to recommend Alignment to a friend or relative.We assign the designation of“Promoter”to respondents who provide a score of 9 or 10,thedesignation of“Neutral”to respondents who provide a score of 7 or 8,and the designation of“Detractor”to respondents who provide a score of 0to 6.We
51、 then subtract the percentage of Detractors from Promoters to determine our overall Net Promoter Score.We believe that this method ofcalculation aligns with industry standards and that this metric is meaningful for investors because of the correlation between Net Promoter Scoreand consumer satisfact
52、ion.Throughout this Annual Report,all references to the“Five-Star Rating System”or“Star rating”are to a measure used by the CMS to rate theperformance of Medicare Advantage and Part D plans.Although subject to change,Medicare Advantage Plans are currently rated on how wellthey perform in five differ
53、ent categories:(1)staying healthy:screenings,tests,and vaccines,(2)managing chronic(long-term)conditions,(3)member experience with health plan,(4)member complaints and changes in the health plans performance,22025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/0001628280250087
54、30/alhc-20241231.htm5/1332025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm6/133Table of Contentsand(5)health plan customer service.Similarly,Part D plans are currently rated on how well they perform in four different categories:(1)drugpla
55、n customer service,(2)member complaints and changes in the drug plans performance,(3)member experience with the drug plan,and(4)drug safety and accuracy of drug pricing.Ratings range from one to five stars,with five being the highest and one being the lowest.Plans arerated in each individual measure
56、 within the categories noted above and also at the category level.Medicare also assigns Medicare Advantageplans one summary star rating to summarize the plans performance on the Medicare Advantage measures,and assigns Part D plans a similarsummary star rating.Medicare Advantage-Part D combined plans
57、 are also given an overall rating,which combines performance all measures.Allratings are reported at the contract level.BASIS OF PRESENTATIONWe historically operated as a Delaware limited liability company under the name Alignment Healthcare Holdings,LLC.On March 17,2021,Alignment Healthcare Holding
58、s,LLC converted into a Delaware corporation pursuant to a statutory conversion and changed its name toAlignment Healthcare,Inc.As a result of this conversion,Alignment Healthcare Partners,LP,a Delaware limited partnership(“AlignmentPartners”)and the sole unitholder of Alignment Healthcare Holdings,L
59、LC,became the sole holder of shares of common stock of AlignmentHealthcare,Inc.(the“Corporate Conversion”).Prior to the closing of our initial public offering(“IPO”),(i)Alignment Healthcare,Inc.effected an approximately 1 for 260 split of its commonstock(the“Stock Split”)and(ii)Alignment Partners me
60、rged with and into Alignment Healthcare,Inc.,with Alignment Healthcare,Inc.survivingthe merger(the“Company Merger”).Pursuant to the Company Merger,the partners of Alignment Partners received all of the then-outstandingshares of common stock of Alignment Healthcare,Inc.in exchange for their units in
61、Alignment Partners.The Stock Split and Company Mergerare collectively referred to herein as the“Corporate Reorganization.”Except as disclosed in this Annual Report,the consolidated financialstatements and selected historical consolidated financial data and other financial information included in thi
62、s Annual Report are those ofAlignment Healthcare,Inc.and its subsidiaries and give effect to the Corporate Conversion and the Corporate Reorganization.Unless the context otherwise requires,the terms“Alignment,”the“Company,”“our company,”“we,”“us”and“our”in this annual report refer toAlignment Health
63、care Holdings,LLC,its consolidated subsidiaries and its affiliated medical groups,for all periods prior to the CorporateConversion and to Alignment Healthcare,Inc.,its consolidated subsidiaries and its affiliated medical groups,for all periods following theCorporate Conversion.We are a holding compa
64、ny and our sole asset is the capital stock of our wholly owned subsidiaries,including Alignment Healthcare USA,LLC.32025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm7/133Table of ContentsPART IItem 1.Business.Our Mission:Improve Healthcar
65、e,One Senior at a TimeAlignment Healthcare was founded in 2013 with one mission:improve healthcare,one senior at a time.We pursue this mission by focusing onour core values:always put the senior first;support the doctor;use data and technology to revolutionize care;andact with a serving heart.We cre
66、ated Alignment after our own families faced frustrating experiences within the fragmented healthcare system.Without an advocate tocreate an integrated,high quality healthcare experience for them,our loved ones were left to navigate a care delivery and insurance landscapefraught with confusion and co
67、mplexity.Seniors across the country are systemically and disproportionately impacted by the lack of carecoordination,transparency and clear information.Furthermore,they are disadvantaged by misaligned incentives that dominate todays healthcaresystem.As one of our most vulnerable populations,seniors
68、across America need and deserve better.We put our combined decades of healthcareexperience to work to create the Alignment model,incorporating best practices learned over our years serving seniors.Through the combinationof this experienced,mission-driven team with purpose-built technology,we have fo
69、und a way to address the unmet health and wellness needs ofseniors.We aim to bring this senior-first healthcare experience to millions in the United States,become the most trusted senior healthcare brand inthe country,and ultimately“do well by doing good.”Alignments Virtuous Cycle is a Distinct Comp
70、etitive AdvantageOur model is based on a flywheel concept,referred to as our“virtuous cycle,”which reflects our unique ability to manage healthcare expenditureswhile maintaining quality and member satisfaction a distinct and sustainable competitive advantage.To execute upon this concept,we start by
71、ingesting medical and demographic data through our proprietary AVA technology platform.AVAspredictive algorithms provide unique insights into each member and identify those most at risk of an acute event.Our information-enabled caremodel is then combined with clinical engagement by our employed clin
72、ical teams known as Care Anywhere to improve healthcare outcomes forour members.For example,our high-touch clinical model proactively manages chronic conditions and assists with post-discharge care navigationto reduce unnecessary hospital admissions and readmissions,which in turn improves health out
73、comes 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 maintainingmargin discipline.The strength of our model is further reinforced by delivering a premium member experience.Our conci
74、erge and a clinicalservice 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 moreconsistency and control over member-facing functions.Our virtuous cycle,based on the principle of doing well by doing good,is highly repeatable
75、 and a core tenet of our ability to continue to expandin existing and new markets in the future.The five-year compounded growth rate through December 31,2024 of revenue and the number ofmembers enrolled in our HMO and PPO contracts(Health Plan Membership)is 29%and 31%,respectively.Our Results:Predic
76、table,Recurring Revenue Positioned for Long-Term GrowthTo achieve our mission of improving healthcare for one senior at a time,we have developed a business model with a predictable,recurringrevenue stream that provides significant visibility into our financial growth trajectory.We generally contract
77、 directly with CMS as a licensedMedicare Advantage plan and receive a recurring per member per month(“PMPM”)payment in exchange for bearing the responsibility of ourmembers healthcare outcomes and expenditures.These contractual arrangements,combined with the fact that the majority of our net members
78、hipgrowth occurs effective on January 1 of a calendar year after the annual enrollment period(“AEP”),provide a higher degree of visibility to ourfull-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 depe
79、nds on member health and mortality trends.We believe that Medicare Advantage is unique in that it allows one entity to influence the entirety of a seniors healthcare through a single,direct-to-consumer product.Our platform is designed to maximize the benefits of Medicare Advantage,with all stakehold
80、ers being rewarded as weimprove the clinical outcomes and experience for our members.We believe that the outcomes below clearly demonstrate the success of ourunique consumer-centric platform by delivering on the promise of our virtuous cycle.Our ability to deliver lower healthcare costs while improv
81、ing the consumers experience is a unique competitive advantage.In 2024,we achieveda net promoter score(NPS)for our Care Anywhere members of greater than 78 versus the industry average of 40 and had 98%of our membersenrolled in a plan with a CMS star rating of 4 stars or above.From a clinical standpo
82、int,we achieved a hospitalization rate of approximately 1522025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm8/133hospitalizations per every 1,000 at-risk members,which is approximately 39%lower than the 2019 Medicare FFS performance in ou
83、r markets.This differentiation has led to our demonstrated ability to rapidly scale,as evidenced by the expansion42025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm9/133Table of Contentsof our model to 53 markets across five states coverin
84、g approximately 209,900 Health Plan Members as of January 1,2025 and more than 83%ofgross sales sourced through plan switchers from a competing Medicare Advantage plan.We believe we have proven that our model is highlypredictable and repeatable across different markets and will enable strong growth
85、on a national level as we pursue our vision of becoming themost trusted senior healthcare brand in the country.We anticipate further investments in our business as we expand into new markets and continue to offer additional innovative product offeringsand supplemental benefits to attract new members
86、.Our Technology:AVA Provides Timely and Actionable InsightsAVA empowers Alignments employees and provider partners with timely and actionable information to improve the health experience andoutcomes of Alignments members.Our position in the healthcare ecosystem as a Medicare Advantage plan affords u
87、s differentiated access to large amounts of member data.Weapplied our clinical and technical expertise to build AVA,a proprietary platform that forms the backbone of our care delivery efforts,whetherdone through provider partners or directly through our care teams.AVA is a highly sophisticated engin
88、e that ingests longitudinal data from morethan 200 sources to provide an accurate assessment of each member and actionable information to care teams in real time.When triggered byrelevant data,AVA delivers prescriptive insights that guide providers workflows to deliver personalized care to members.E
89、xamples of workflowsinclude ordering a prescription,alerting a caregiver,transferring information from a lab to a doctor,and developing a treatment plan.We and our provider partners use this data every day to power care interventions that may be missed in traditional healthcare relationships.AVAimpr
90、oves the care outcomes and care experience of our members,while also providing everyone in their ecosystem from doctors to nurses real-time data and operational indicators to deliver the right care,to the right member at the right time.AVA incorporates high security controls around member data,and i
91、t is subject to regular vulnerability tests and strict authorization protocols.Italso uses machine learning and artificial intelligence to help predict various scenarios such as hospital admission and re-admission risk,membersatisfaction,disenrollment risk and various disease propensity scores and h
92、ow to best intervene.These models are based on hundreds of thousandsof historical outcomes,which have shaped their predictions and accuracy,and are constantly updated with new data sets,enabling them to getsmarter and more effective.Additional details on AVAs capabilities include:Consumer Experience
93、:AVA offers a digital ecosystem that enables our members and their support system to get the information andcare they need,when and how they need it.With their AVA-powered member portal and mobile app,seniors have many self-servicecapabilities and can get 24/7 care,send secure messages to their conc
94、ierge and care teams,check their rewards and ACCESS On-Demand Concierge Card balance,and view their health history,including medical claims history,pharmacy,and benefits data.Internal Care Delivery:Our ability to efficiently and effectively deliver care via our internal care teams is critical to imp
95、rovingoutcomes and managing costs.AVA is vital in our ability to identify and manage our highest risk,most complex members,and to ensurethat every intervention opportunity is optimized by the most relevant and effective data available.External Providers:AVA transforms care delivery by shifting the p
96、aradigm from“silos of care”to physicians and payors workingtogether as partners through technology-enablement.Medical group leaders,doctors and front-line administrative staff are providedcomprehensive information to streamline and support the coordination of member care.AVA provider applications dr
97、ive workflows andaction lists to improve member outcomes at a lower cost and lower visit frequency.Providers are given access to AVA applications totrack utilization,gaps in clinical care,and health risk assessments.This data is utilized to prioritize which members to see,and whichmembers may benefi
98、t from various health engagement strategies.Health Plan Operations:By leveraging a single source of accurate information,we foster improved cross-functional communicationand execution across our key value drivers.With the support of AVA our operational leaders can make faster,data-driven decisions,w
99、hich leads to improved outcomes and greater efficiencies as we grow our membership base.Growth Operations:We are able to create greater brand differentiation in the market with our external brokers and our internal salesteam by providing them best-in-class digital solutions such as the AVA Broker Po
100、rtal and mobile app.These tools streamline applicationsubmission and management,client management,commission tracking,and a variety of self-service capabilities specifically forMedicare Advantage.When paired with our operational expertise,we believe AVA is integral to our ability to drive our operat
101、ions and business outcomes consistentlyacross markets.AVA provides us with the flexibility to adapt our operating models to meet the needs of local communities and providers,whileachieving high-quality,low-cost care in each market.From driving workflows to enabling smarter interventions,we believe A
102、VA is a significantcompetitive advantage that allows us to deliver information-enabled healthcare at scale.Our Clinical Model:Proactively Managing Member Care to Improve Outcomes and Reduce Cost2025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-2024123
103、1.htm10/13352025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm11/133Table of ContentsWe engage regularly with members as part of their daily lives and proactively manage their chronic conditions to improve outcomes and reducecost.Our clini
104、cal model is designed specifically for seniors and is managed across multiple disciplines(medical,social,psychological,pharmaceuticaland functional)and sites of care(home,inpatient,outpatient,virtual and others).Our internal care teams and external providers use AVA tocoordinate high-quality care fo
105、r members and manage the complexity of the healthcare system.Given the prevalence of comorbidities within ourchronically ill members,coordination across a multi-disciplinary care team is vital to providing a medical and behavioral care plan that drivesimproved outcomes.Our care delivery model create
106、s a highly personalized experience that is unique to each member.Using insights from AVA,we organize membersinto four categories to provide optimized care:healthy,healthy utilizer,pre-chronic and chronic.The data below represents a sample of ourpopulation stratification from 2024.Healthy:The typical
107、 member in the“healthy”category requires low levels of medical care.Healthy members comprise approximately 71%ofour 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
108、 had isolated or unexpected healthchallenges requiring significant medical care.Healthy utilizers comprise approximately 8%of our membership base and account for 16%of theinstitutional claims submitted.Pre-Chronic:The typical member in the“pre-chronic category”is identified as high-risk by AVA but h
109、as yet to incur significant healthcareexpenditures.We also refer to these members as on the“launching pad,”and by deploying our targeted care programs towards this population wework to prevent or slow their increasing acuity levels.Pre-chronic members comprise approximately 8%of our membership but a
110、ccount for only1%of the institutional claims submitted.Our active approach to monitoring gaps in care and acting before emerging health problems worsen isreflective of the culture of care embedded in our organization,and our focus on being a persistent advocate for our members.Chronic:The typical me
111、mber 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.Care Anywhere:Proactive,Coordinated Care Delivers ResultsWhile t
112、he majority of healthy and healthy utilizer members care needs are managed by our network of local community providers in conjunctionwith our support and oversight,our pre-chronic and chronic members are in our Care Anywhere program.Care Anywhere is an advancedclinician-driven model of care that is
113、staffed by Alignment-employed physicians,advanced practice clinicians,case managers,social workers andbehavioral health coaches to assure execution of cross-functional care plans.Unlike many managed care plans,we have built these services in-house to provide valuable,high-quality care to members for
114、 free,which complement the care provided by our provider partners for their mostchallenging and resource-intensive patients.Key features of the Care Anywhere program include proactive outreach;24/7 access;highly detailed personalized care plans;and enhancedcoordination of care and social needs.Stand
115、ardized care programs are targeted to seniors based on their underlying conditions,such as chronicheart failure or chronic obstructive pulmonary disorder,which are then personally tailored based on each individuals underlying circumstances.We proactively engage with this high-risk group of seniors b
116、ased on their preferences for care delivery,which is typically in their homes orthrough telephonic and video consultations.We believe,based on data gathered and analyzed using AVA,that our Care Anywhere program creates several benefits for our high-risk,complexmembers:improved quality of life,high p
117、atient satisfaction,reductions in unnecessary emergency room visits and inpatient care,and lower re-admission rates.This also allows us to establish a more direct relationship with seniors,building member loyalty and brand recognition.Our CareAnywhere program has an NPS score greater than 78,undersc
118、oring 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.In 2024,we achieveda hospitalization rate of approximately 152 hospitalizations per every 1,000 at-risk members,wh
119、ich is approximately 39%lower than the 2019Medicare FFS performance in our markets.Further,we have achieved approximately 152-159 inpatient admissions per thousand on our at-riskmembership for the last seven years in a row,despite our significant membership growth over that period of time.Regulation
120、Our operations and those of our affiliated entities are subject to extensive federal,state and local governmental laws and regulations.These lawsand regulations require us to meet various standards relating to,among other things,reports to CMS,personnel qualifications,maintenance ofproper records an
121、d quality assurance programs and patient care.The majority of our regulation and oversight comes from CMS,which regulatesalmost every aspect of our business,including our provider network,benefits,member enrollment,risk adjustment program,plan offerings,claims payments,quality improvement programs,a
122、nd appeals and grievances.We2025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm12/13362025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm13/133Table of Contentshave entered into st
123、andard form agreements with CMS pursuant to Sections 1851 through 1859 and Sections 1860D-1 through 1860D-43 of theSocial Security Act(SSA),pursuant to which we have agreed to operate our plans in accordance with applicable laws and regulations and CMShas agreed to make payments to us under the SSA.
124、Each CMS contract has a one-year term expiring on December 31 of the applicable calendaryear and is subject to annual one-year renewal terms.Under the contracts we are obligated to provide our members basic benefits and servicescovered by Part A and Part B of the original Medicare Program,any applic
125、able supplemental benefits we elect to provide in our final benefit andprice bid proposals approved by CMS,and prescription drugs.The CMS contracts further require us to develop our annual benefit and price bidproposals and submit to CMS all related information on premiums,benefits and cost sharing
126、by no later than the first Monday in June prior to thecommencement of the subsequent calendar year to which they apply,in accordance with the CMS regulations.Each CMS contract may beterminated by mutual consent or by CMS or by us for cause.We are required to accept new enrollments,make enrollments e
127、ffective,processvoluntary disenrollments and limit involuntary disenrollments in accordance with the CMS regulations.Generally,to enroll or remain enrolled inone of our Medicare Advantage plans,an individual must be a U.S.citizen or lawfully present in the United States,be entitled to Medicare under
128、Part A and enrolled in Part B,reside in the service area covered by the plan,complete and sign the required election forms to enroll and agree toabide by the rules of the Medicare Advantage plan into which he or she is enrolled or intends to enroll.Such agreements also provide for memberand provider
129、 protections and marketing requirements,as well as recordkeeping and reporting requirements,all with reference to applicable lawsand regulations.If any of our operations or those of our affiliated professional medical corporations are found to violate applicable laws orregulations,or if we otherwise
130、 fail to adhere to our contracts with CMS,we could suffer severe consequences that would have a material adverseeffect on our business,results of operations,financial condition,cash flows,reputation and stock price,including:termination of one or more of our Medicare Advantage plans or contracts;sus
131、pension of our marketing of and/or enrollment into our Medicare Advantage plans;civil monetary penalties;refunds of amounts received in violation of law or applicable Medicare Advantage requirements dating back to the applicable statute oflimitation periods;loss of our required government certificat
132、ions;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 StarkLaw,the Anti-Kickback Statute,the FCA and the Civil Monetary Penalties La
133、w and/or state analogs to these federal enforcementauthorities,or other regulatory requirements;enforcement actions by governmental agencies and/or state law claims for monetary damages by patients who believe their healthinformation has been used,disclosed or not properly safeguarded in violation o
134、f federal or state patient privacy laws,including theHealth Insurance Portability and Accountability Act of 1996,as amended by the Health Information Technology for Economic andClinical Health Act of 2009(the“HITECH Act”),and their implementing regulations(collectively known as“HIPAA”)mandated chang
135、es to our practices or procedures that significantly increase operating expenses or decrease our revenue;imposition of and compliance with corporate integrity agreements that could subject us to ongoing audits and reporting requirements,aswell as increased scrutiny of our business practices which co
136、uld lead to potential fines,among other things;termination of various relationships and/or contracts related to our business,including provider arrangements;changes in and reinterpretation of rules and laws by a regulatory agency or court,such as state corporate practice of medicine laws,thatcould a
137、ffect the structure and management of our business and our affiliated physician-owned professional medical groups;negative adjustments to government payment models including,but not limited to,Parts A,B and D benefits;andharm to our reputation,which could negatively impact our business relationships
138、,our ability to attract and retain patients andphysicians,our ability to obtain financing and our access to new business opportunities,among other things.We expect that our industry will continue to be subject to substantial regulation,the scope and effect of which are difficult to predict.See“RiskF
139、actorsRisks 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 ProtectionWe are subject to data privacy and protectio
140、n and breach notification laws and regulations that apply to the collection,transmission,storage anduse of protected health information(“PHI”),and other types of personal data or personally identifiable information(“PII”),which among otherthings,impose certain requirements relating to the privacy an
141、d security of such PII.The legislative and regulatory landscape for privacy and dataprotection continues to evolve,and there has been an increasing focus on privacy and data protection issues with the potential to affect ourbusiness.Failure to comply with any of these laws and regulations could resu
142、lt in enforcement action against us,including fines,public censure,claims for damages by affected individuals,damage to our reputation and loss of72025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm14/133Table of Contentsgoodwill.Ongoing ef
143、forts 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 changedfrequently by legislatio
144、n or administrative interpretation.Various state laws address the use and maintenance of individually identifiable healthinformation.HIPAA includes administrative provisions directed at simplifying electronic data interchange through standardizing transactions,establishing uniform healthcare provide
145、r,payer,and employer identifiers,and establishing regulations aimed at protecting confidentiality andsecurity of patient and member data.The rules preempt all inconsistent state laws unless the state law is more privacy-protective.Theseregulations,in addition to other state laws,set standards for th
146、e security of electronic health information,including requirements that insurersprovide customers with notice regarding how their individually identifiable health information is used.The US Department of Health and Human Services,Office for Civil Rights announced on December 27,2024,and published in
147、 the FederalRegister 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 businessassociat
148、es.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 thesame standard
149、 in a single calendar year.However,a single breach incident can result in violations of multiple standards.The penalty amountslisted 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 u
150、p to$25,000.While HIPAA doesnot create a private right of action allowing individuals to sue in civil court for violations of HIPAA,its standards have been used as the basis forduty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.In addition,t
151、he HITECH Act mandates that the Secretary of the Department of Health and Human Services(“HHS”)conduct periodic complianceaudits of HIPAA-regulated covered entities and business associates for compliance with HIPAAs privacy and security standards.It also tasksHHS with establishing a methodology wher
152、eby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentageof any civil monetary penalty fine paid by the violator.HIPAA further requires that members be notified of any unauthorized acquisition,access,use or disclosure of their unsecured PHI thatcompromises the
153、 privacy or security of such information,with certain exceptions related to unintentional or inadvertent use or disclosure byemployees or authorized individuals.HIPAA specifies that such notifications must be made without unreasonable delay and in no case later than60 calendar days after discovery o
154、f 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.Breaches affecting more than 500 patients in the same state orjurisdiction must also be reported to the local media.If
155、a breach involves fewer than 500 people,the covered entity must record it in a log andnotify HHS at least annually.We also publish statements to our members and partners that describe how we handle and protect PHI.If federal or state regulatory authorities orprivate litigants consider any portion of
156、 these statements to be untrue,we may be subject to claims of deceptive practices,which could lead tosignificant liabilities and consequences,including,without limitation,costs of responding to investigations,defending against litigation,settlingclaims,and complying with regulatory or court orders.D
157、ata privacy and security at the state level remains an evolving landscape.For example,Californias California Consumer Privacy Act of 2018(“CCPA”),which came into effect on January 1,2020,has since been amended by the California Privacy Rights Act(“CPRA”),which becameeffective on January 1,2023 and b
158、egan enforcement on July 1,2023.The CCPA,as amended by the CPRA,expands on the existing rightsprovided to California residents and will include rights to know,delete,correct,personal information;limit the use of sensitive personalinformation;and opt out of the sale of personal information or the sha
159、ring of personal information with third parties for purposes of cross-contextbehavioral advertising.There are also requirements for data processing and cybersecurity assessments,and contracting requirements for serviceproviders,third parties,and contractors who receive and process information from t
160、he regulated“business.”The CPRA amendment created a stateagency,the California Privacy Protection Agency(“CPPA”),to enforce and implement the law.This agency will be able to finance operationsthrough penalties issued and,with the CPRAs removal of the mandatory cure period from the CCPA,we will have
161、less warning beforecompliance risk results in legal action.Additionally,the CCPAs exemption for personal information of personnel(including employees,jobapplicants,officers,and directors)and business-to-business contacts has been allowed to sunset.As a result,beginning on January 1,2023,personal inf
162、ormation of California resident personnel and business contacts became subject to the CCPA.This has created compliance obligationsfor our operations.The CCPA and CPRA contain exemptions for medical information governed by the California Confidentiality of Medical Information Act,and forPHI collected
163、 by a covered entity or business associate governed by the privacy,security,and breach notification rule established pursuant toHIPAA.This exempts much of the data we process with respect to patients and plan members.The CCPA has prompted a number of proposals for new federal and state-level privacy
164、 legislation.Such proposed legislation,if enacted,may addadditional complexity,variation in requirements,restrictions and potential legal risk,require additional investment of resources in complianceprograms,impact strategies and the availability of previously useful data and could result in increas
165、ed compliance costs2025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm15/13382025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm16/133Table of Contentsand/or changes in business pr
166、actices and policies.For example,the Virginia Consumer Data Protection Act,which became effective January 1,2023,gives Virginia residents expanded rights to access and creates additional obligations on companies covered by the legislation and theNevada Privacy Law,which became effective on October 1
167、,2019,requires businesses to give website users the option to opt-out of the sale oftheir data.State privacy laws also became effective in 2024 in Kentucky,Maryland,Minnesota,Montana,Nebraska,New Hampshire,NewJersey,Oregon,Rhode Island,and Texas and have or will become effective in 2025 in Delaware,
168、Iowa,Nebraska,New Hampshire,New Jersey,Tennessee,Minnesota,and Maryland.These state laws generally exempt HIPAA regulated covered entities and business associates,PHI,and/orpersonal information collected in the context of employment and business-to-business relationships.While the CPRA/CCPA is an ex
169、ample of consumer privacy law,the NAICs Insurance Data Security Model Law(the“Model Law”)is a differenttype of law focused on securing insurance licensees information systems.Versions of this Model Law have been passed in many states and areexpected to be passed in more states in the coming years.Si
170、milar 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 ModelLaws are typically enforced by state insurance regulators.We are not currently subject to a
171、ny 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 withthe evolving data protection rules may be unsuccessful.We must devote significant resources to understa
172、nding and complying with this changinglandscape.Failure to comply with laws regarding privacy and security of PHI and other PII could expose us to penalties under such laws.Anysuch failure to comply with data protection and privacy laws could result in government-imposed fines or orders requiring th
173、at we change ourpractices,claims for damages or other liabilities,regulatory investigations and enforcement action,litigation and significant costs for remediation.As indicated above,there are numerous federal and state laws and regulations addressing patient and consumer privacy concerns,includingn
174、otification requirements in the event of unauthorized access or theft of personal information.State statutes and regulations vary from state tostate.Substantially all of our relevant member data is maintained on our technology platform,AVA,which aggregates and provides us with accessto extensive mem
175、ber datasets,including individually identifiable PHI.Violations of HIPAA or applicable federal or state laws or regulations couldsubject us to significant criminal or civil penalties,including significant monetary penalties.Compliance with HIPAA and other privacyregulations requires significant and
176、ongoing systems enhancements,training and administrative effort.See“Risk FactorsSecurity breaches,lossof data and other disruptions could compromise sensitive information related to our business or our members,or prevent us from accessingcritical information and expose us to liability,which could ad
177、versely 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 t
178、echnologies tocommunicate with wireless telephone subscribers or communications services consumers generally and the CAN-SPAM Act,which regulates thetransmission of marketing emails.In addition,certain of our businesses are also subject to the Payment Card Industry Data Security Standard(“PCI DSS”),
179、which is a multifaceted industry security standard that is designed to protect credit card account data as mandated by paymentbrands and acquiring banks.The Health Care Reform Law and Other Current or Future Legislative,Judicial or Regulatory ChangesThe Patient Protection and Affordable Care Act and
180、 The Health Care and Education Reconciliation Act of 2010(which we collectively refer to asthe“Health Care Reform Law”)enacted significant reforms to various aspects of the U.S.health insurance industry.Certain significant provisionsof the Health Care Reform Law include,among others,mandated coverag
181、e requirements,mandated benefits and guarantee issuance associatedwith commercial medical insurance,rebates to policyholders based on minimum benefit ratios,adjustments to Medicare Advantage premiums,theestablishment of federally facilitated or state-based exchanges coupled with programs designed to
182、 spread risk among insurers,and theintroduction of plan designs based on set actuarial values.Some of these changes impact us and other entities that offer Medicare Advantageplans.In addition,the Health Care Reform Law established insurance industry assessments,including the Comparative Effectivenes
183、s ResearchFee to fund the Patient-Centered Outcomes Research Institute.Corporate Practice of Medicine and Other LawsAs a corporate entity,we are not licensed to practice medicine.Many states in which we operate through our subsidiaries limit the practice ofmedicine to licensed individuals or profess
184、ional organizations comprised of licensed individuals,and business corporations generally may notexercise control over the medical decisions of physicians.Statutes,regulations and court decisions relating to the practice of medicine,fee-splitting between physicians and referral sources,and similar i
185、ssues vary widely from state to state.The laws and regulations in these areas arecomplex,changing,and often subject to varying interpretations.The interpretation and enforcement of these laws vary significantly from state tostate.Under business support agreements between certain of our subsidiaries
186、and associated physician-owned professional groups,these groupsretain 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
187、maintaining malpractice insurance.We,our in-house and externally engaged physicians and the facilities in which they operate are subject to various federal,state and local licensingand certification laws and regulations and accreditation standards and other laws,relating to,among other things,the ad
188、equacy of medical care,equipment,privacy of member information,physician relationships,personnel and operating policies and procedures.92025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm17/133Table of ContentsFailure to comply with these l
189、icensing,certification and accreditation laws,regulations and standards could result in prior payments being subjectto recoupment,requirements to make significant changes to our operations and can give rise to civil or,in extreme cases,criminal penalties.Weroutinely take the steps we believe are nec
190、essary to retain or obtain all requisite licensure and operating authorities.In jurisdictions where the corporate practice of medicine is prohibited,we have historically operated by maintaining long-term business supportservices contracts with multiple associated professional medical entities that a
191、re wholly owned by physicians and,in turn,employ or contract withphysicians to provide those professional medical services required by our members.Under these business support services agreements,ourprimary operating subsidiary performs only non-medical business support services,does not represent t
192、hat it offers medical services and does notexercise influence or control over the practice of medicine by the physicians or the associated physician groups.In addition to the above businesssupport services arrangements,we have certain contractual rights relating to the orderly transfer of equity int
193、erests in our associated physicianpractices through succession agreements and other arrangements with their physician equity holders.Such equity interests cannot,however,betransferred to or held by us or by any non-professional medical entity.Accordingly,neither we nor our direct subsidiaries direct
194、ly own any equityinterests in any of our associated physician practices.Anti-Kickback,Physician Self-Referral and Other Fraud and Abuse LawsA federal law commonly referred to as the“Anti-Kickback Statute”prohibits the offer,payment,solicitation,or receipt of any form ofremuneration to induce,or in r
195、eturn for,the referral of Medicare or other governmental health program patients or patient care opportunities,or inreturn for the purchase,lease or order of items or services that are covered by Medicare or other federal governmental health programs.Becausethe prohibitions contained in the Anti-Kic
196、kback Statute apply to the furnishing of items or services for which payment is made in“whole or inpart,”the Anti-Kickback Statute could be implicated if any portion of an item or service we provide is covered by any of the state or federalhealth benefit programs described above.Violation of these p
197、rovisions constitutes a felony criminal offense and applicable sanctions couldinclude exclusion from the Medicare and Medicaid programs.Section 1877 of the Social Security Act,commonly known as the“Stark Law,”prohibits physicians,subject to certain exceptions describedbelow,from referring Medicare o
198、r Medicaid patients to an entity providing“designated health services”in which the physician,or an immediatefamily member,has an ownership or investment interest or with which the physician,or an immediate family member,has entered into acompensation arrangement.These prohibitions,contained in the O
199、mnibus Budget Reconciliation Act of 1993,commonly known as“Stark II,”amended prior federal physician self-referral legislation known as“Stark I”by expanding the list of designated health services to a total of 11categories.The professional groups with which we are contracted or affiliated provide on
200、e or more of these designated health services.Persons orentities found to be in violation of the Stark Law are subject to denial of payment for services furnished pursuant to an improper referral,civilmonetary penalties,and exclusion from the Medicare and Medicaid programs.A federal law commonly ref
201、erred to as the“False Claims Act”prohibits the submission of a false or fraudulent claim to the government forpayment or approval.Qui tam relators and/or the government may take the position that we submit certain data or information that could form thebasis of a claim for payment,thus subjecting us
202、 to allegations under the False Claims Act.In such events,we could be subject to treble damagesand per-claim penalties.Many states also have enacted laws similar in scope and purpose to the Anti-Kickback Statute and,in more limited instances,the Stark Law,thatare not limited to services for which Me
203、dicare or Medicaid payment is made.In addition,most states have statutes,regulations,or professionalcodes that restrict a physician from accepting various kinds of remuneration in exchange for making referrals.These laws vary from state to stateand have seldom been interpreted by the courts or regul
204、atory agencies.In states that have enacted these statutes,we believe that regulatoryauthorities and state courts interpreting these statutes may regard federal law under the Anti-Kickback Statute and the Stark Law as persuasive.State Regulation of Insurance-Related ProductsLaws in each of the states
205、 in which we operate our business license and regulate entities that offer health plans to residents of that state.Theproducts we offer are sold under licenses issued by the applicable insurance regulators.However,for entities offering Medicare Advantage plans,federal law preempts all state laws and
206、 regulations except those relating to licensing and financial solvency.Certain of our licensed insurance subsidiaries are also subject to regulation under state insurance holding company regulations.These regulationsgenerally require,among other things,prior approval and/or notice of new products,ra
207、tes,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.The amount of dividends that may be paid to us by these insurance subsidiaries,without prior approval by
208、state regulatory authorities,or ordinarydividends,is limited based on the entitys level of statutory income and statutory capital and surplus.Actual dividends paid may vary due toconsideration of excess statutory capital and surplus and expected future surplus requirements.We continue to maintain ou
209、r levels of aggregateexcess statutory capital and surplus in our state-regulated operating subsidiaries.Dividends from our non-insurance companies are generally notrestricted by departments of insurance.See“Risk FactorsRisks Related to RegulationState Regulation of Insurance-Related Products.”102025
210、/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm18/133Table of ContentsIntellectual PropertyWe believe that our intellectual property rights are valuable and critical to our business stability and growth.We rely on a combination oftrademarks
211、,copyrights,trade secrets,know-how license agreements and confidentiality procedures,non-disclosure agreements,employeedisclosure and invention assignment agreements and other contractual rights to establish and protect our proprietary rights.We do not have any issued patents with respect to our AVA
212、 platform,and we are not currently pursuing any patent applications.We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective.CompetitionThe U.S.healthcare insurance industry is highly competitive.Our competitors vary by local
213、market and include other managed care companies,national insurance companies,HMOs and PPOs.Many of our competitors have a larger membership base and/or greater financial resources thanwe do.In addition,other companies may enter our markets in the future,including emerging competitors in the Medicare
214、 Advantage program orcompetitors in the delivery of healthcare services.We believe that barriers to entry in our markets are not substantial,so the addition of newcompetitors can occur relatively easily,and customers enjoy significant flexibility in moving between competitors.Contracts for the sale
215、of ourproducts are generally tied to an annual bidding process with CMS.While health plans compete on the basis of many factors,including serviceand the quality and depth of provider networks,we expect that price and Star ratings will continue to be significant bases of competition.Inaddition to the
216、 challenge of controlling healthcare costs,we face intense competitive pressure to contain premium prices.Factors such as businessconsolidations,strategic alliances,legislative reform and marketing practices create pressure to contain premium price increases,despite beingfaced with increasing medica
217、l costs.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,particul
218、arly 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 empl
219、oyees and clinicians;brand identity and reputation;andregulatory complianceEnvironmental,Social and Governance and Human CapitalEnvironmental,Social and GovernanceWe are committed to implementing meaningful environmental,social,and governance(“ESG”)practices.Our goal is to drive sustainablebusiness
220、growth while balancing our responsibilities to shareholders,employees,members,and the greater community.The three pillars to ourESG approach are the following:Serving People Our employees are our most valuable asset,and we are dedicated to providing them with a safe,diverse,and inclusiveworkplace.Se
221、e“Employees and Human Capital Resources”below.We are also dedicated to serving our members with the utmostcare and concern for their safety and health and strive to support our health care providers with the tools and resources needed toprovide the best care.Serving the Environment Our company is fo
222、cused on reducing its carbon footprint by implementing energy-efficient practices,reducing water and waste,and exploring renewable energy sources.Serving Responsibly We are committed to maintaining a high level of transparency and accountability across our operations.OurBoard of Directors includes a
223、 strong and diverse mix of experienced business leaders and is committed to providing effective oversightof the Companys activities.2025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm19/133112025/5/19 11:46alhc-20241231https:/www.sec.gov/Ar
224、chives/edgar/data/1832466/000162828025008730/alhc-20241231.htm20/133Table of ContentsIn 2022,we released our inaugural ESG report and created an ESG Steering Committee comprised of cross-functional leaders representing everydepartment within the Company.Our aim is to continue fortifying each pillar
225、and to operate with transparency in a way that always puts seniorsfirst,and respects all people,communities,conditions,and environments.Employees and Human Capital ResourcesWe are focused on building a company that is transforming health care by putting seniors first,and our employees are critical t
226、o our success.OurHuman Capital strategy focuses on meeting business objectives by attracting,developing,engaging,and retaining a high-performing,diverseworkforce.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 co
227、nduct an employee survey to further enhance employee engagement and productivity.We also implement rigorous employeetraining 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-performi
228、ng team.All aspects of our inclusive culture continueto be embedded in each aspect of our processes,programs,and structures that drive our talent lifecycle:attraction,recruitment,onboarding,development,and retention efforts.Our efforts to recruit for excellence are reflected in the composition of ou
229、r current employee workforce andBoard of Directors,which are comprised of a diverse group of highly qualified individuals that represent top talent in the industry.As ofDecember 31,2024:74%of our employees were female;65%of our employees were ethnically diverse;20%of our executive team was ethnicall
230、y diverse;10%of our executive team was female;22%of our Board of Directors was ethnically diverse;and44%of our Board of Directors was female.The future success of our company will depend,in part,on our continued ability to attract,develop and retain the best talent as we grow and scalethe organizati
231、on.Our talent acquisition and management strategies are designed to ensure that we create and develop a pipeline of outstandingphysicians,clinical employees,and business leaders.A key component of our corporate sustainability and success is learning and development.We are intentional in our efforts
232、to provide all employees opportunities to grow.Our training and development programs for employees focus onenhancing and developing talent within the company.All of our employees can access the training of their choice on-demand through our learningand development platform.We are currently designing
233、 additional training programs and resources for both new hires and longer-tenuredemployees that will educate them on critical functional areas of within the organization.Our compensation and incentive plans are designed to attract,retain,and reward employees by granting cash-based performance and st
234、ock-basedawards.By motivating individuals to achieve business objectives and perform to the best of their abilities,they support the success of thecompany and the increase of stockholder value.We also provide comprehensive medical benefits,a positive work/life balance,generous paid timeoff,and healt
235、h and wellness programs.We regularly evaluate each aspect of compensation and benefits to ensure they align with the market andour peers.Our current workforce model embraces working in a hybrid-remote fashion.Our workforce strategy enhances our ability to attract the best talentnationally,allowing u
236、s to serve our members where they live and continue to provide our employees with a healthy work-life balance.Our board of directors believes that human capital management is an essential component of our continued growth and success.Managementregularly reports to our board for input on important de
237、cisions related to human capital,including corporate culture,safety,compliance,talentmanagement,organizational development,compensation,and benefits.Corporate InformationWe were originally formed as a Delaware limited liability company under the name Alignment Healthcare Holdings,LLC in 2013.In Marc
238、h2021,we completed the Corporate Conversion and Corporate Reorganization and changed our name to Alignment Healthcare,Inc.During thesame 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
239、 office is located at 1100 W.Town&Country Rd.,Suite 1600,Orange,CA 92868 and our phone number is(844)310-2247.Our website address is .The information contained on,or that can be accessed through,our website is notincorporated by reference into this filing and you should not consider any information
240、contained on,or that can be2025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm21/133122025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm22/133Table of Contentsaccessed through,our
241、 website as part of this filing.We are a holding company and all of our business operations are conducted through oursubsidiaries and affiliated medical groups.Our annual reports on Form 10-K,quarterly reports on Form 10-Q,current reports on Form 8-K and,if applicable,amendments to those reportsfile
242、d or furnished pursuant to Section 13(a)of the Securities Exchange Act of 1934,as amended(the“Exchange Act”),are available free ofcharge on or through our website,https:/,as soon as reasonably practicable after we electronically file such materialwith,or furnish it to,the Securities and Exchange Com
243、mission,or the SEC.The SECs website,https:/www.sec.gov,contains reports,proxy andinformation statements,and other information regarding issuers that file electronically with the SEC.Item 1A.Risk Factors.Our business involves a high degree of risk.You should carefully consider the risks and uncertain
244、ties described below,together with all of theother information contained in this Annual Report on Form 10-K,including our consolidated financial statements and the related notes thereto,before making a decision to invest in our common stock.The risks and uncertainties described below are not the onl
245、y ones we face.Additionalrisks and uncertainties that we are unaware of,or that we currently believe are not material,may also become important factors that affect us.Ifany of the following risks occur,our business,financial condition,operating results and prospectus could be materially and adversel
246、y affected.Inthat event,the price of our common stock could decline,and you could lose all or part of your investment.Risk Factors SummaryThe following are the principal risks that are applicable to our business and the shares of our common stock.Such risks are discussed in moredetail below,and you
247、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 p
248、rospects.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 clinicalinit
249、iatives,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 andsubstantial
250、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 Med
251、icare Advantage plans,changes to provisions for risk sharing under Medicare Part D andgovernmental 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 serviceand member satisfaction or adequately add
252、ress competitive challenges.The loss or renegotiation of certain key contracts with large independent physician associations(“IPAs”),hospitals or otherprovider networks,to serve our membership base could negatively impact our results.Security breaches,loss of data and other disruptions could comprom
253、ise sensitive business or member information,or preventaccess to critical information and expose us to liability.Disruptions in our disaster recovery systems or management continuity planning could limit our ability to operate ourbusiness effectively and adequately care for our members.Our business
254、depends on our ability to effectively invest in,implement improvements to and properly maintain theuninterrupted 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
255、 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 maintenanceand protection of trademarks,our business and results of operations will be harmed.If we are unable to o
256、btain,maintain,protect and enforce sufficiently broad intellectual property protection,including for ourtrade secrets,know-how and other proprietary and internally developed information,the value of our technology could beadversely affected.132025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/e
257、dgar/data/1832466/000162828025008730/alhc-20241231.htm23/133Table of ContentsThird parties may initiate legal proceedings alleging intellectual property rights violations,the outcome of which would beuncertain and could have a material adverse effect on our business.Any restrictions on our use of,or
258、 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 aninability to attract and retain othe
259、r 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 beable 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
260、 establish new geographic presences.Competition for physicians and nurses,shortages of qualified personnel or other factors could increase our labor costs andadversely affect our revenue,profitability and cash flows.Our records may contain inaccurate or unsupportable information regarding risk adjus
261、tment scores of members,which couldcause 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 b
262、usiness.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 businessoperations and financial position.If we are unable to offer new and innovative products
263、and services or fail to keep pace with industry advances,technologyand 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 operati
264、ons or may become subject to additionalcapital 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 ha
265、rmed.Losing the services of the physicians who own our associated physician practices could jeopardize our contractualarrangements.Our existing indebtedness could adversely affect our business and growth prospects,particularly in an environment of risinginterest rates.Our failure to raise additional
266、 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 thefuture.The requirements of being a public company may strain our resources and distract our
267、 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 ourdirectors and officers.An active,liquid trading market for our common
268、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 arebeyond our control.A significant portion of our total outstanding shares may be sold into the market in the near future.Future sales of substantial amou
269、nts of common stock,or the possibility of such sales,could adversely affect stock price.Risks Related to Our BusinessWe have a history of net losses,we anticipate increasing expenses in the future,and we may not be able to achieve or maintain profitability.We have incurred net losses on an annual ba
270、sis since our inception,including a net loss of$128.1 million and$148.2 million for the years endedDecember 31,2024 and December 31,2023.As of December 31,2024,we had an accumulated deficit of$1,008.3 million.142025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/00016282802500
271、8730/alhc-20241231.htm24/133Table of ContentsWe 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 outre
272、ach efforts,enhancing ourtechnology,hiring additional employees,operating as a public company and acquiring companies or assets complementary to our business.Theseefforts may prove more expensive than we currently anticipate,and we may not succeed in increasing our revenue sufficiently to offset the
273、sehigher expenses.In addition,even if we are successful in increasing our membership and consequently increasing our total revenues frompremiums earned,we may not successfully and effectively predict,price and manage the medical costs of our members.To date,we havefinanced our operations principally
274、 from the sale of our equity,revenue from the CMS and the incurrence of indebtedness.We may not generatepositive cash flow from operations or profitability in the future.We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly c
275、hangingindustries,including increasing expenses as we continue to grow our business.In addition to the expected costs to grow our business,we alsoexpect to incur additional legal,accounting and other expenses as we continue to operate as a public company.Moreover,the investments weintend to make int
276、o growing our company may be more costly than we expect,and if we do not achieve the benefits anticipated from theseinvestments,or if the realization of these benefits is delayed,they may not result in increased revenue or growth in our business.If our growthrate were to decline significantly or bec
277、ome negative,it could adversely affect our financial condition and results of operations.Furthermore,even if we achieve profitability in the future,we may not be able to sustain profitability in subsequent periods.If we are not able to maintainpositive cash flow in the long term,we may require addit
278、ional financing,which may not be available on favorable terms or at all and/or whichwould be dilutive to our stockholders.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.Ou
279、r failure to achieve or maintain profitability could negatively impactthe value of our common stock.Our relatively limited operating history makes it difficult to evaluate our current business and future prospects and increases the risk of yourinvestment.Our relatively limited operating history make
280、s it difficult to evaluate our current business and prospectus and plan for our future growth.We werefounded in 2013,with most of our growth occurring in recent years.We have encountered and will continue to encounter significant risks anduncertainties frequently experienced by new and growing compa
281、nies in heavily regulated and rapidly changing industries,such as determiningappropriate investments for our limited resources,scaling our model and technology platform,attracting and retaining members,efficientlynavigating and complying with evolving regulations,hiring,integrating,training and reta
282、ining skilled personnel,identifying and reachingagreements with reliable healthcare service providers,competing against more established competitors,unforeseen expenses and challenges inforecasting accuracy.Although we have successfully expanded our footprint outside of California and intend to cont
283、inue to expand into newmarkets,new plans we provide or new markets we enter may not prove successful.If we are unable to increase our member enrollment,scale ourplatform,maintain a low cost structure,identify,reach and successfully maintain agreements with reliable healthcare service providers,succe
284、ssfully manage our third-party medical costs or successfully expand the range of services and benefits we offer to members,our revenue andour ability to achieve and sustain profitability would be impaired.Additional risks include our ability to effectively manage growth,process,store,protect and use
285、 personal data in compliance with governmental regulation,contractual obligations and other legal obligations related to privacyand security and manage our obligations as a healthcare plan.If our assumptions regarding these and other similar risks and uncertainties,whichwe use to plan our business,a
286、re incorrect or change as we gain more experience operating our business or due to changes in our industry,or if wedo not address these challenges successfully,our operating and financial results could differ materially from our expectations and our businesscould suffer.Our growth strategy may not p
287、rove 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 buildout and attract network relationships in our existing markets.We also intend to expand into new markets,
288、leveraging our AVA technologyplatform,which has been designed to scale and allow us to provide a predictable and replicable member experience across new markets.Ourstrategy hinges on our ability to satisfy our members in our existing markets,achieve and maintain high Star ratings for our plans,submi
289、tsuccessful bids to CMS for new plans and/or in new markets,attract new members,form alliances with primary care providers,and hirephysicians,nurses and other medical support staff for our in-house care delivery programs,among other factors.We also seek growthopportunities through strategic acquisit
290、ions and vertical integration,as well as through joint ventures or other strategic arrangements.We cannotguarantee that we will be successful in pursuing our growth strategy.If we fail to evaluate and execute new business opportunities properly,wemay not achieve anticipated benefits and may incur in
291、creased costs.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 tous or at all.In addition,we compete for provider relationships with many other he
292、alth care plans,some of whom may havegreater resources than we do.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,whi
293、ch could lead to decreased ratingsfor some of our plans in the Five Star Quality Rating System and consequently to loss of the economic incentives associatedwith high Star ratings,which could negatively impact our revenues;152025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/
294、000162828025008730/alhc-20241231.htm25/133Table of Contentswe may not be able to enroll or retain a sufficient number of new members to execute our growth strategy,and we may incursubstantial costs to enroll new members but may be unable to enroll a sufficient number of new members to offset thoseco
295、sts;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 ouremployees,particularly our medical personnel,into our in-house care model;we may not be successful i
296、n maintaining our reputation and brand in our existing markets or in establishing our reputationand 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 ourentry into new markets;when expandi
297、ng our business into new states,we may be required to comply with laws and regulations that may differ fromstates 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 acqu
298、isition of complementary businesses or assets,may require us toraise additional capital,which may not be available on desirable terms or at all;anddepending upon the nature of the local market,we may not be able to implement our business model in every local marketthat we enter,which could negativel
299、y impact our revenues and financial condition.Pursuing our growth strategy requires significant capital expenditures,the allocation of valuable management resources,and the hiring ofadditional personnel,and may strain our operations,and our financial and management controls and reporting systems and
300、 procedures.For avariety of reasons,we may not succeed in achieving scale,improving our operating efficiency or gaining operating leverage.Moreover,we haveexperienced and may in the future continue to experience attrition,which may further exacerbate these challenges.If we are unable to effectivelye
301、xecute our growth strategy and manage our growth,our results of operations and financial condition could be materially and adversely affected.If we are unable to attract new members,our revenue growth will be adversely affected.We currently derive substantially all of our revenue from CMS contracts
302、related to our Medicare Advantage health plans.To increase our revenue,we must grow by expanding the number of members under our plans in the markets in which we currently operate and in the new markets that weintend to enter.In order to support such growth,we must continue to enroll and retain a su
303、fficient number of new members.We have experiencedsignificant member growth since we commenced operations;however,we may not be able to maintain this growth,and our member base coulddecrease rapidly or shrink over time.Even if we are successful in achieving and maintaining growth,doing so may be mor
304、e costly than weanticipate,and if we are not able to manage our costs,our results could be materially adversely affected.We are focused on the Medicare-eligible population and face competition from other plans in the enrollment of Medicare-eligible potentialmembers.If we are unable to obtain CMS con
305、tracts for new plans or in new markets and convince the Medicare-eligible population of thebenefits of our plans,or if potential or existing members prefer a plan offered by one of our competitors,we may not be able to effectivelyimplement our growth strategy.Our ability to attract new members will
306、depend on a variety of factors,including the following:our ability to create new plans and/or ancillary benefits;our ability to achieve and maintain high Star ratings for each of our plans;our ability to effectively promote our plans in our existing markets and the new markets we intend to enter;our
307、 allocation of management and financial resources toward efforts to grow our membership in certain markets;the extent to which eligible beneficiaries shop for MA plans in the markets we enter;our ability to establish relationships with provider groups and other key market constituencies;our competit
308、ors products and pricing strategies;our ability to establish and grow our reputation and brand in new and existing markets;the extent to which the overall pool of MA-eligible beneficiaries continues to grow and the extent to which the historicaltrend of increased MA market penetration continues;if o
309、ur strategic partners terminate or fail to renew our current contracts or we fail to enter into contracts with new strategicpartners;andregulatory changes affecting the overall pool of MA-eligible beneficiaries and our ability to navigate the applicableregulatory requirements.162025/5/19 11:46alhc-2
310、0241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm26/133Table of ContentsIn addition,our growth strategy is partially dependent on beneficiaries electing to move from fee-for-service to one of our Medicare Advantageplans,or electing to move from their current
311、Medicare Advantage plan and selecting us as their Medicare Advantage plan.In certain instances,original Medicare or other insurers MA plans may be more attractive to a consumer than our MA plans.For example,though our PPO membersare enrolled in plans that enable them to visit any doctor participatin
312、g in Medicare who will see them,our HMO plans have restrictions on thenetwork of doctors that HMO members can see,and in some markets other providers participating in Medicare may choose to see no MAmembers or only MA members participating in specific plans.It is also possible that original Medicare
313、 or other insurers MA plans may offerbroader physician networks in particular markets or highly competitive benefits,in which case those plans may be more attractive to someconsumers than our MA plans.When the time to choose an MA plan comes,newly Medicare-eligible consumers may also choose to conti
314、nuewith their current insurer which was offered by their employer instead of transitioning to one of our plans.For a majority of individuals,plan enrollment selections for Medicare Advantage are made during an annual enrollment period from October intoDecember of each year;therefore,our ability to g
315、row our member population is dependent in substantial part on our ability to successfully enrollmembers during the annual enrollment period and to convince such individuals not to subsequently change that election.If our ability to marketand sell our MA plans is constrained during an enrollment peri
316、od for any reason,such as technology failures,reduced allocation of resources,anyinability to timely employ,license,train,certify and retain employees and contractors and agents to sell plans,interruptions in the operation of ourwebsite or systems,or disruptions caused by other external factors,such
317、 as natural disasters or civic disorder,we could acquire fewer newmembers than expected or suffer a reduction in the number of our existing members.Our inability to enroll new members and retain existing members would harm our ability to execute our growth strategy and may have a materialadverse eff
318、ect on our business operations and financial position.If we do not design and price our products properly and competitively,if we are unable to develop new products and implement clinicalinitiatives to provide a better healthcare experience for our members,lower costs,and appropriately document the
319、risk profile of our members,or if our estimates of benefits expense are inadequate,our profitability may be materially adversely affected.We use a substantial portion of our revenues to pay the costs of healthcare services delivered to our members by third-party providers.These costsinclude claims p
320、ayments,capitation payments to providers(predetermined amounts paid to cover services),administrative costs and various othercosts incurred to provide health insurance coverage to our members.These costs also include estimates of future payments to hospitals and otherproviders for medical care provi
321、ded to our members.Generally,premiums in the healthcare business are fixed for one-year periods and we arerequired by federal law to spend a fixed amount of these premiums on healthcare services,covered benefits and quality improvement efforts.Accordingly,costs we incur in excess of our benefit cost
322、 projections generally are not recovered in the contract year through higher premiums andour ability to enhance the profitability of our plans depends in significant part on our ability to estimate the costs of our future benefit claims andother expenses.We make these estimates using actuarial metho
323、ds and assumptions based upon claim payment patterns,medical inflation,historical developments,including claim inventory levels and claim receipt patterns,and other relevant factors.We also record benefits payablefor future payments.We continually review estimates of future payments relating to bene
324、fit claims costs for services incurred in the current andprior periods and make necessary adjustments to our reserves,including premium deficiency reserves where appropriate.However,theseestimates involve extensive judgment and have considerable inherent variability that is sensitive to claim paymen
325、t patterns and medical costtrends.Many factors may and often do cause actual healthcare costs to exceed what was estimated and used to set our premiums.These factorsmay include:increased use of medical facilities and services;increased cost of such services;increased use or cost of prescription drug
326、s,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 carecoordination and care management;our membership mix;the extent to which me
327、mbers decline to seek out appropriate preventative care or follow their physicians care and healthfulliving recommendations;variances in actual versus estimated levels of cost associated with new products,benefits or lines of business,productchanges or benefit level changes;changes in the demographi
328、c characteristics of an account or market;changes or reductions of our utilization management functions such as preauthorization of services,concurrent review orrequirements for physician referrals;catastrophes,including acts of terrorism,public health epidemics,or severe weather(e.g.,hurricanes and
329、 earthquakes),which may increase both use and cost of medical services and cause members to delay obtaining services,affecting theirlong-term health;172025/5/19 11:46alhc-20241231https:/www.sec.gov/Archives/edgar/data/1832466/000162828025008730/alhc-20241231.htm27/133Table of Contentsmedical cost in
330、flation;andgovernment mandated benefits,member eligibility criteria,or other legislative,judicial,or regulatory changes.Key to our operational strategy is the implementation of clinical initiatives that we believe provide a better healthcare experience for ourmembers,lower the cost of healthcare ser
331、vices delivered to our members,and appropriately document the risk profile of our members.Ourprofitability and competitiveness depend in large part on our ability to leverage our technology platform,AVA,to optimize and appropriatelymanage healthcare costs by,among other things,proactively managing m
332、ember care.Increases or decreases in staff and provider-related expenses,any costs associated with exiting products,additional investment in new productsand in the expansion of clinical and technological capabilities as part of our integrated care delivery model,investments in health and well-beingp
333、roduct offerings,acquisitions,new taxes and assessments,and implementation of regulatory requirements may increase our operating expenses.Any failure to adequately price our products or estimate sufficient benefits payable or effectively manage our operating expenses may result in amaterial adverse effect on our results of operations,financial position,and cash flows.Premium increases,introduction
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