Alignment Healthcare reported first quarter net income of more than $11 million as costs of care for older adults in its Medicare Advantage plans eased amid industry struggles with high medical expenses.

Alignment Healthcare

Alignment Healthcare Thursday reported net income of more than $11 million as costs of care for older adults in its Medicare Advantage plans eased amid industry struggles with high medical expenses.

Like many of its rival health insurers, particularly those in the Medicare Advantage business, Alignment has been battling rising medical expenses from customers in its health plans. Thursday’s Alignment first quarter earnings report reflected costs that are still high but the company’s medical benefit ratio, which is the percentage of premium revenue that goes toward medical costs, was down to 88%.

“Medical benefits ratio based on adjusted gross profit was 88.2%, an improvement of 25 basis points year-over-year,” the company said in its earnings report.

Medicare Advantage plans contract with the federal government to provide traditional coverage available in traditional Medicare plus extra benefits and services to seniors, such as disease management and nurse help hotlines with some also offering vision, dental care and wellness programs.

Medical loss ratios have risen to 90% and above for several health insurance companies as claims pile up from doctors and hospitals seeing an influx of patients with a pent-up demand for medical care, particularly in the Medicare Advantage business. The industry would prefer such ratios to be below 90% and into the mid 80s, where the industry was less than two years ago. Alignment’s medical benefits ratio was 87.7% in the fourth quarter of last year and 88.4% in the year-ago quarter.

The stabilizing of costs helped Alignment swing to a profit of $11.4 million, or 5 cents a share, compared to the year-ago quarter when the company lost $9.3 million, or 5 cents a share.

Alignment’s total revenue was up more than 33% to $1.2 billion in the first quarter compared to the year-ago quarter thanks to big growth in Medicare Advantage plan membership. The health plan ended the first quarter with 284,800 members, which was up 31% compared to last year.

Alignment’s growth comes as larger health insurers have retreated from markets they deem unprofitable. More than half of older adults eligible for Medicare are enrolled in privatized Medicare Advantage, which has come under fire in the last year as some plans leave markets and force older adults into different plans, sometimes at a higher cost.

But Alignment executives said the quarter reflects a business focused on “consistency and execution” as as the company begins its fifth year as a publicly-traded company.

“Our first-quarter performance demonstrates that Alignment continues to grow with discipline,” said Alignment’s founder and chief executive officer, John Kao. "We expanded our profitability by executing across sales, clinical operations and cost management, even as the Medicare Advantage environment continues to change. We delivered strength within our results even while we are investing in our people, processes and technologies. The improvements we are making across each of these areas will position us to scale the business and achieve our embedded earnings potential.”