Hi everyone, thanks for joining. My name's Jess Tassan, I cover our managed care and healthcare IT at Piper. I'm really excited to be here with Alignment CEO, Chairman, and Co-Founder John Kao, and CFO, Jim Head. John and Jim, thank you guys so much for joining us. Thanks for having us. Okay, so Alignment's a Medicare Advantage organization that lives up to the program's potential. With over 230,000 members across five states, Alignment's growing 46% and expanding margins 250 basis points in 2025 by focusing on quality and care delivery to improve clinical outcomes, lower costs, and enhance the healthcare experience for members. With about five days left, 2026 AEP is almost over, but hoping to kind of start back where it began. Alignment typically designs and prices Medicare Advantage bids to achieve a balance between growth and margin. 2025 bids favored margin. In 2026, what did Alignment optimize for? It was more balanced. I would say in 2024 we were clearly geared toward growth. That resulted in 60% membership growth. 2025, as you said, ended in something like 30-something%. High 20s. High 20%. We're happy about that, and I think heading into 2026, we expect to be between 20% and 30%. Our retention rates are performing better than expected, and so that might pick up the net growth rate a little bit above 30%. Excuse me, so we're really happy about our performance. Okay, that's helpful. What are kind of some key product or positioning decisions that you think impacted the 2026 growth rate or just what are their intended effects? So what are some key ways that you changed products and positioning into 2026, and how are those decisions impacting margins and membership? Yeah, there's two things. One is we've had one more year of maturation of our large influx of members in 2024, and so that cohort of membership has one more year of maturity. That embedded earnings that's hidden in the company is really starting to show up. That's a big deal. What I mean by that is over time, your proportion of members that have been with you longer than just one or two years is going to produce better margins, so the more of that cohort that you have, the stronger the earnings engine is, and that's a function of just really compliant coding, not too aggressive coding, but compliant coding, and the adoption of the care model, so I think we're really happy about that. And then I'd say with respect to the actual products designed in 2026, that's been a function of a lot of market-by-market competitive analysis. We look at what are hospitals doing in the market? How are we working with the hospitals? How are we working with the IPAs, the providers in the market? What do we think the competition's going to be doing given their Star Ratings, given how their ability to manage V28 actually is going to be good or bad? And we found out that a lot of the larger players are going to be retrenching, exiting markets, etc. That leads to, okay, how is the broker dynamic affected in a particular market? And do we have strong relationships with those brokers or less strong relationships with brokers? I think you're finding out not only in California, but all through our markets, you're going to have opportunities for growth, and it gives us the opportunity for smart growth where we have strong delivery systems that can manage that risk. We have strong infrastructure on our clinical teams that can manage that risk, so again, mix of product, mix of delivery system in specific geographies, again, gives us a lot of confidence as to where the growth is. Okay, that's really helpful. I just want to come back to the comment about slightly better than anticipated or potentially better than anticipated AEP retention. I think historically you guys have talked about 6%-7% churn during AEP. Is the better than relative to that 6%-7%? Yeah, yeah. For this particular year, it's going to be in that range. I think the industry is something like 16% churn, something like that. Much higher. Is it higher? During AEP? The industry is much higher than ours on terms of one-to-one churn. Yeah. And so we've just done a very good job of that. And we're a couple of points better than we were budgeting. And I think that's what could lead us to kind of the 30% each range. Got it. So then within gross adds, should we expect kind of the 80% switchers, 20% new to MA mix that you guys have historically seen? Yes. Okay. Yep, yep. Got it. And then just any change to the kind of year-zero membership MLRs in 2026? It's a little too early to say, but I think. From a product design perspective. What's interesting is I think we're seeing that some of the newbie RAF scores we think may be coming in a tick higher. If I had to expect, when we look at the new incoming class, you'd be in the 0.93-0.95 RAF score range, which is kind of consistent with what we've had in the past. Got it. Okay, that's helpful. So then within California specifically, just where 84% of Alignment membership resides, how are you thinking about market growth in California and the competitive landscape for 2026? And I guess just how much of what ultimately transpired did you anticipate when you were designing and planning this? Yeah, we just finished a three-year plan. Jim led that initiative. A three-year plan really centered around what happens if you grow 20%. And as part of that plan, we looked at every single county that we currently are doing business in, and we grossed it up by 20% to see if we bumped into any kind of market share ceiling. Because in some markets, we're bumping up already against 30%-40% market share. So we did that analysis for every single county, and I still think we feel very comfortable that our overall market position of 5% relative to what's out there in Northern California, we have a lot of headroom to grow. There's maybe one or two counties, you know, we're going to bump up to 40% market share, so we may need to be able to grow a little less there. But generally speaking, I think the ability for us to grow from where we are now and double in California still represents a very small portion of the overall book of business that's out there in California. I think ex-California, you're going to see a doubling, as what's happened this year, a doubling of growth outside of California. I've always said it's going to be a lot easier for us to get from 10,000 members to 50,000 members in a new market than it is to get from zero to 10,000, and that's proving out in Nevada, Texas, Arizona, and North Carolina. I think you'll be very happy when those numbers come out, and all the performance in those markets are going well. The efficacy of the care model is taking root. Broker engagement is better. All of that, of course, is helped by the fact that we have two five-star plans in both North Carolina and Nevada. Got it. That's helpful. So just to be clear, ex-California, I think you guys are around 35,000 members in 2025. We should expect that to double year over year in 2026. I would just say high growth. Okay, got it. That's helpful. And then just any thoughts on the overall MA market? Is it growing, contracting, flat year over year in 2026? I think it's going to be relatively flat. You know, I think with all the product exits, geography exits, plan exits, I think it's going to be relatively flat. I think, you know, when you get into one of these cycles of some of our larger competitors, it goes like, okay, do we want to grow this year? Well, they ramp up the growth. A couple of, won't name names, a couple of them that you know did that last year. They can't manage it because they don't have the medical management infrastructure. It's a core competency that we have, actually manage the risk. And so MLRs go up, and people think of it as mispricing. I'm not sure it's mispricing as much as they just don't have the ability to manage it. But for the dependable two that have been global capitation, which is no longer going to be viable, and prior auth, i.e., denying care, that's not going to be acceptable either. So what do these guys do? They start cutting costs. You see that cycle, and some of them are doing it really well, but it doesn't prove to build a reliable growth model until they get to the next cycle and they go want to grow and they grow again and then they crash that. It's the cycle that's predicated on high RAF scores, global capitation, and prior auth. I do not think the future of this business can be relied upon on those levers. Fundamentally, this is a care delivery business. So if you don't speak care delivery and you don't have the capabilities of a plan, I think you're at this inflection point of you got to change your model. The other thing I would say is we're dedicated. All we do is serving MA. That's all we do. We don't have to worry about ACA. We don't have to worry about Medicaid. I don't worry about commercial. All those systems distractions don't impact us. We're just focusing on MA, so everything we do is around MA. That's helpful, and I want to get into the care delivery model because I think you guys have announced some recent updates or iteration initiatives for 2026 and beyond, but first, I want to hit two more on 2026 AEP. Any difference between early AEP versus back half of AEP just from a competitive perspective? Like anything you've observed in the market in terms of a competitor's actions that maybe transpired halfway through or later in AEP? And then just any final comments on 2026 AEP before we move on? No, I mean, I think we've heard a little bit more about people taking action because they're growing too fast, and broker actions is really all you can do to manage that, but we just haven't seen that, and as many of you know, a lot of the actions in the last seven days, the big chunk of the membership, so I'll just comment, you know, as the newest member of the senior leadership team, I joined when we were going through the bids, and the bids for us are pretty darned important in terms of setting ourselves up. I think there was just an enormous amount of discipline in that, so what matters most is the bids, and then obviously making sure the brokers are motivated, but set yourself up for growth in the right way. We didn't chase it. I think that's a discipline that we really hold dear, make sure that we're not getting ahead of ourselves. As a steward of the risk profile of the company, it's really important to get it right. Okay. That's helpful. So moving on kind of to the model, membership's nearly doubled, obviously, from 119,000 in 2023. It's 234 at the midpoint of 2025 guidance. But 2025 MA MBR is essentially flat versus 2023 ex-ACO REACH. John, maybe can you just describe how Alignment combines quality, care delivery, member experience to make that happen? And what exactly do you do to improve new member MLR from 90% at enrollment to low 80s over time? Yeah, sure. We have basically doubled every two years since we IPOed. I think we're a little bit under $1 billion revenue. So then we get to $2 billion. Now we're going to be at $4 billion. Next year, I guess we can't talk about next year, but it's going to be really good also next year in terms of growth. The infrastructure in place that we made investments back in 2023 is why we're able to manage the scale, and the first thing we did was manage and put systems in place to retain membership. We knew we were going to grow in 2024, so we had to make sure all the retention pieces, member services, appeals, grievances, all that stuff was highly functioning and working well. I think that's also what's yielded this reality that we're in now, where our disenrollment rates are very low. People are generally happy with where we are, so that's the first thing. The second thing we did last year was really invested in the provider relationships to ensure that there was depth and durability to the network. We did that by deploying more of our tools into their IPAs so they had more visibility and transparency, such that we could work together to create even more efficiency in the delivery of care that resulted in surpluses in the way we contract, that we shared those surpluses with the delivery systems, which made them happy. Going forward now, we are also in the back of that. We have designed the company to scale. A lot of the core systems have been implemented. We've implemented a new EHR, implemented Workday for our human capital. We implemented claims adjudication applications, TriZetto Facets applications. All this stuff is going on the back end to get the company to be industrially scaled. This coming year, we're going to even be zeroing in on clinical efficacy. It makes even the clinical outcomes and the quality associated with those clinical initiatives be much more visible. We did a really good job of lowering admissions per thousand, of acute admissions per thousand, without materially jacking up ops rates. So that's really good care. We lowered overall admissions very consistently across the board in each market. We implemented a transition care program on a post-discharge basis to ensure that a member that's being discharged from a hospital actually is going into a preferred skilled nursing or rehab facility. I don't know if you've gone through this without this kind of advocacy. If one of your parents have gone through this, it is not a pleasant thing to go through. So we really doubled down and made sure that that transition of care, somebody could hold their hand and say, "We're going to go into this SNF." And this SNF has been pre-qualified, and we have our nurses in that SNF taking care of you. All of these things are what's causing us to have a high degree of confidence that the care delivery is repeatable. And it's in California and in every single other market. That's really helpful. So the transitions of care initiative, did that just roll out in 2025? And are we seeing the full impact in 2025? What's coming? It started in the early part of 2025. We piloted in a couple of markets, and we're going to get that deployed. I would expect all of it to be deployed in 2026. I think that's what gives me some confidence that there's some even more upside in terms of our MLR efficacy. You know, I think our goal is to get the 11% readmission rates from SNFs. We don't want people that are then going to the SNF to give back and be readmitted. That's not a good thing. We're working on those things. End of life and palliative care. You know, CMS's fee-for-service benchmark is 65% of people that are near end of life are in some form of hospice. We should look at that marker, have these conversations earlier with families. But what's interesting with us is even if they transition to hospice, our nurse through this advocacy program will still see that patient even if they're in hospice. Which is, again, it's creating continuity of care to get somebody comfort, you know, and ensure that there's smooth transition in the hospice. All these clinical programs I expect to be deployed in 2026, and I think that will help us increase member satisfaction. It's really interesting. Yeah, it's really helpful. So historically, about a third of your membership has been capitated at MLRs above Alignment's at-risk tenured membership. Recently, Alignment has described delegation. Can you just help us understand what is delegation and what is the impact of that on quality, care delivery, and the P&L? Sure. In California, I think this is a California unique thing. IPAs have been around, independent physician associations as differentiated from fully integrated tax ID medical groups, have different flavors of contracting with health plans. I think the most aggressive is this notion of global capitation. So they're taking the full professional risk for the doctors, hospitals, as well as the full institutional risk. And so they take both of those. They have to get a Knox-Keene license. They have to provide risk-based capital to the state. And they typically charge, you know, somewhere between 85%-90%-ish of premium dollars. And they basically are a health plan, unregulated health plan. And so another contracting methodology is if they call it professional risk, right? So the IPA will take about 35% of the premium dollar and cover the doctor's cost, primary care, and specialty costs. But typically what happens with those is there's on top of that something called an institutional risk pool. Okay? And so if the threshold for the institutional risk pool is 85%, the plan and the IPA work together such that if the overall MLR is 85% or below, there's a sharing of that benefit from the plan to the IPA. And there's our expectation that that flows directly down to the individual practice. Okay? That doesn't happen all the time. And so in those two constructs, the IPAs have traditionally wanted the administrative competency to do the utilization management, the prior authorization. Not necessarily the claims payment, but then our view up until last year was if you as an IPA do a good job and meet our operating metrics to facilitate i.e., you're not denying care and you're accessing care and you're getting people into the right delivery systems and you're doing it fast, you're not making people wait three months before they get to see somebody. No problem. Not a religious issue. If you don't meet our operating standards of quality, we're going to end up taking it back from you so that we'll do it. I mean, the analogy is if you've hired a subcontractor to help build your roof and they do a good job of building your roof, you keep them, right? Good square deal. If they're not doing a good job of building your roof, why would you keep them? You don't. So what we've done is we've gone through and all the different IPAs and medical groups we've worked with in California, which is, you know, albeit like a religious holy war. We have taken, de-delegated certain functions away from certain IPAs. What's really interesting is since we have taken it over, the admissions per thousand have actually come down. And what happens when it comes down? The risk pool starts surplusing where these guys can make more money. And so now the feedback after fast forward a year is, gee, you guys were right. You have done a better job than what we could have done. Let's keep doing this now. And we say, thank you, that's good because we're going to need to grow and grow more into your IPA. Ergo, alignment. We actually have alignment. They have much more visibility into our data and our analytics, which is also something that they like. Okay. That's very, very helpful context. So I want to look forward a little bit to 2027. We know, obviously, the 2027 MA and Part D proposed rule came out that speaks to abandon the Health Equity Index reward factor for 2027 stars in favor of the historical reward factor, and then also remove 12 stars measures for 2027 measurement year, 2029 stars Star Rating here. Can you just comment on the impacts of those two things for Alignment specifically? You know, how does the elimination of the HEI reward factor impact you all for 2027 and then the removal of the 12 measures? Yeah, I think if they get rid of the HEI reward factor, you know, our strong recommendation is to do that in a time frame consistent with the elimination of the 12 other measures, i.e., 29. I think it'd be premature to do it like in the middle of the year in which it's being calculated, which is right now in 2025. That would be our first comment. We have shared in the past that if this gets implemented, it is a tailwind for us. And so to the extent that it is eliminated, we would lose that tailwind. Doesn't mean we're going to be compromised on our ability to still hit four stars. We have lots of levers we're going to be pulling on that. But I think it sets us back a bit with our ability to get to four and a half stars. Okay. So, you know, but I think the key thing is really just the timing of it. And I would just advocate that it be consistent and operational, consistent with the other 12. Okay. Yeah, I think that would make sense. And then just to be very clear, so 3815, your four-star performance was not predicated on the HEI reward factor for 2027. That's correct? It's more the difference between four and four and a half. Yeah. No, I told our team even before last week's announcement, run all the numerators and denominators without relying on the 3.815 HEI. Okay. Got it. And then maybe in our last, you know, 30 seconds, I'm interested to know what you all expect trend to look like in 2026 and then where you expect the advance notice to shake out? Advance notice, I mean, everything I've heard is high single digits. I've heard in one case low double digits. Before any kind of skin substitute reduction that I've also heard ranges from 2%-4%. So, you know, I would guess mid-ish high single digits after skin substitutes. That would be a guess. But, you know, even with that, you still got to factor in the third phase of V28 for 2026. You say that's for 2026 or 2027? 2027. Oh, 2027. Yeah. So 2027. Oh, okay. Middle to high single digits. Is that? There's going to be some normalization on coding and things like that. It'll offset some of it. Yeah, well, but the question was also, and we've talked about RADV, you know, where does RADV actually show up on this, and you know, I'm getting a sense that that's not going away, and in lieu of that, will there be any kind of coding intensity increases? That's yet another unknown. Got it. All right. I think we'll wrap it there. Thank you so much, John and Jim. This was awesome. Thanks, Jess. Thanks, everyone.