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The private health insurance market for seniors has been a brutal business recently, with rising medical costs, changes to government reimbursements and warnings from some insurers that they’ll exit counties and pare back benefits.
And yet, the startup Devoted Health seems to be faring well — with one big caveat. The Medicare Advantage insurer, backed by more than $2 billion in venture funding, reported huge gains in membership and revenue in 2023 while keeping losses relatively minimal, according to an Endpoints News analysis of state filings for about 30 health plan subsidiaries.
But the filings provide only a partial picture of the private company’s finances. They don’t show, for example, the full company’s consolidated profits or losses, instead focusing on regulated health plan businesses.
Devoted’s health plan revenue hit $1.9 billion in 2023, an increase of 76% over the year before, as it grew membership to about 143,000, up 74%, according to Endpoints’ analysis. State filings show that Devoted’s membership has since jumped to more than 212,000 as of March 31.
The startup has never turned a profit and that didn’t change last year, according to Endpoints’ review. Devoted’s operating loss widened to $55.4 million, up from a loss of $35.3 in 2022, as it spent more on medical care and administrative expenses. The company spent about 89% of its revenue on claims, down from 94% in 2022. (Most insurers shoot for a percentage of around 85%)
Meanwhile, its net loss, which factors in investment income and taxes, remained relatively flat at $33.7 million compared with $32.2 million the year before, for a margin of -1.75%. Considering how much it’s expanding, its losses, at least for its regulated health plans, are “relatively nominal,” said Ari Gottlieb, a consultant for health plans.
Devoted confirmed the accuracy of the financials in this analysis but declined to comment on its losses. It didn’t say when it expects to turn a profit.
“Like many new companies, we are building toward profitability even as we maintain our growth mindset. Our focus is (and will always be) on providing the best possible care to as many people as possible, and we are currently focusing on and working highly effectively on doing that,” a company spokesperson said in an email.
Devoted, based in Waltham, MA, combines a health plan with a virtual and in-home medical group serving seniors in 13 states, with most members located in Texas, Florida and Ohio, state filings show. It’s drawn attention because of its high-profile founders, Todd Park, a former US chief technology officer and Athenahealth co-founder, and his brother Ed Park, a former Athenahealth executive.
The startup, founded in 2017, is backed by venture firms including Andreessen Horowitz, General Catalyst, F-Prime Capital and a slew of others. Its last raise announced in December bumped its valuation to $12.9 billion.
Some of Devoted’s competitors, which went public in 2021, have struggled with worsening losses and put the brakes on growth. Though their financial results aren’t directly comparable to Devoted’s because the public companies report through a different accounting method preferred by public investors, Clover, another Medicare Advantage insurer, reported a net loss of $213.4 million in 2023 when it had roughly 132,000 members. Medicare Advantage insurer Alignment Healthcare’s net loss was $148.2 million with about 119,200 members last year. Meanwhile, Oscar, which reported losses of $270.6 million in 2023, quit Medicare Advantage, and Bright Health exited the insurance business entirely.
The state filings used for Endpoints’ analysis provide an incomplete picture of Devoted’s financial performance. The company is required only to report its earnings for regulated health plan businesses. There might be other expenses, such as investments in technology or broker costs, recorded at its unregulated parent company or other subsidiaries, like its medical group, that don’t show up in these filings, Gottlieb said.
Devoted declined to comment on how its overall financial results compared to those in the state filings.
Endpoints also reviewed Devoted’s filings for the first quarter of 2024. Its revenue grew 62% to $760.5 million over the same period a year ago. It reported net income of $11 million, compared with a loss of $8.9 million in the first quarter of 2023.
Correction: This story has been updated to reflect that Ed Park is the brother of Todd Park, not his broker.