CMS Just Killed Clover Health…

…and the entire insurtech industry along with It. Clover and insurtech could be extinct within two years. Here's why.

The original picture was generated by DALL-E.

It's April Fools' Day, but there's no joking matter for Clover Health and the American digital health industry.

In this original research, I explore an extraordinary journey of a company once hailed as the most innovative startup in digital health to its current state, marred by alleged fraud.

Most experts don’t realize the kinds of devastating changes forthcoming in insurtech and in American healthcare in general in 2025. 

Policy, not innovation, drives American healthcare. And policy is dictated by corporate interests. Emotionally and psychologically, this is a hard pill to swallow for most of us in the digital health. But this is the unfortunate reality.

Most experts don’t realize the kinds of devastating changes forthcoming in insurtech and in American healthcare in general in 2025. Replace “Clover” with any insurtech innovator out there - Oscar, Bright, GoHealth, Sidecar - and it’s the exact same sad story of an inevitable failure. Brace yourself. It’s a wrecking ball.

It’s not their fault. It’s a systemic failure of the American healthcare industry. The game of American healthcare is rigged against innovators.

You would certainly not hear these facts from venture capitalists who pour money into these failing digital health startups. Instead of doing their homework and facing the facts, they put on a frown and continue on with their magical “grand vision.” VCs understand that their job only makes sense if the “charade” of bullsh*t narratives never stops.

I have been laughed at and ridiculed by the VC community for my statement that there hasn’t been a major innovation in digital health in like… ever. I was cursed at and named names on social media. Social media, Twitter/X in particular, seemingly operates like a pack of hyenas: Once one member of the pack proclaims you’re a bad guy, that statement is going to be taken viral by the pack. Whatever you rebut is irrelevant to the pack. Not many are interested in a discussion and difference of opinions. It’s all about confirmation bias.

I never said there are no innovators in digital health. There are some. And my statement regarding those innovators was that you may have the greatest invention ever, but at some point, you’re going to hit the wall because that’s how the American healthcare system is set up.

To understand why major innovation is impossible under the current healthcare system in America, one must carefully examine policy implications, government actions, reasons for the lack of antitrust enforcement, and how a few players have been able to keep the whole industry (and the government) hostage. I touch on some, but not all, of these issues in this article. As previously mentioned, the scope of research required to thoroughly analyze these issues could easily fill an entire book.

The combination of the ‘champagne and cocaine’ of venture capital, CMS’s new rules that make it exponentially harder for newcomers to survive, and recent regulations out of Washington that strengthen the already outrageous oligopoly of a handful of corporate giants - all these make our healthcare worse. Much worse.

I have some ideas on how to solve this crisis, but unfortunately, it's beyond the scope of this article.

As for Clover, experimenting with risk adjustment models and other things would have been super important in a normal world. However, in a world where the game is fixed from the get-go, it’s not only purposeless but also irresponsible. Playing with shareholders' money is wrong. Kicking the can down the road means not being honest with your shareholders.

In the end, the CMS and insurance conglomerates are suffocating innovation and killing health insurance industry newcomers such as Clover, Oscar, GoHealth, Bright, and Sidecar.

For those reluctant to subscribe to my newsletter, 'AI Health Uncut' (what are you waiting for? 😊), here is a summary of my analysis in one slide. However, I honestly think it’s important to understand the full story of why the American healthcare system is “rigged”.

If you’re in a situation like Clover, you’re playing against a casino, which coincidentally, UnitedHealth is currently building (in addition to its current Optum empire, which includes Optum Health, Optum Insight, Optum Rx, Optum Ventures, Optum Financial, and Optum Bank). 😉

In this research article, I will touch on what will happen in the American healthcare insurance industry over the next two years and why the odds are heavily against insurtech innovators such as Clover, Oscar, GoHealth, Bright Health, and Sidecar Health. I have looked into and researched the following topics: the upcoming CMS rules, venture capital, the SPAC market, the stock market, the credit market, liquidity and volatility, and how VCs and SPAC operators have enriched themselves at the expense of ordinary retail investors in a "pump & dump" scheme that should be illegal.

I also offer Clover Health’s management 15 steps on how to survive in this cutthroat business. The odds are heavily against you, no matter what you do. But they are not zero.

Having said that, no matter how painful it is to admit, the right and noble thing to do for Clover is to pay down its debt and pay out a special dividend to its shareholders equal to its net asset value, then close down while you still have the money. $400 million is better than zero. Cutting your losses short goes against any entrepreneur's instinct. However, it's the right thing to do for your shareholders.

As for the rest of us in digital health, especially in insurtech, once we all come to terms with the fact that those of us trying to succeed as health insurance innovators are basically screwed, let’s consider our options and what we can do about it.

Here is the outline of the article:

1. Good News First: Clover's Fundamentals Have Improved Since 2021

2. Clover’s History & Business Model

3. Clover Assistant: From Innovation to Alleged Fraud

4. Clover Financing Rounds: Total of $2.825 billion!

5. How VCs and the “SPAC King” Screwed Clover’s Shareholders Through a “Pump & Dump” Scheme

6. The “Champagne and Cocaine” of the IPO Party

7. The SEC Takes Action Against SPACs’ ‘Fishy’ Practices: Too Little, Too Late

8. How Clover Became Reddit's ‘Meme’ Stock: CLOV Reaches Its Highest Valuation on Record on June 9, 2021: $11.8 Billion!

9. Clover’s Stock Becomes Less Liquid and More Volatile: Signs of a Troubled Company

10. Nasdaq Delisting and the “Reverse Split” Game

11. Clover’s Notable Board Members

11.1. Chelsea Clinton

11.2. Lee Shapiro

12. Clover’s Mistakes

13. Major Upcoming Changes in CMS Rulings in 2024-2025

13.1. CMS Has Made It More Difficult for Insurance Companies to Reject Claims.

13.2. Enforcement of the "Two Midnight" Rule

13.3. CMS's Goal is to Reduce MA Plans' Profitability

13.4. Revamping Prior Authorization Process

13.5. The U.S. Government's Crackdown on Shady "Risk Adjustment" Practices

13.6. Higher Audit and Enforcement Costs

14. The Inflation Reduction Act Has Greatly Solidified the Power of PBMs and Killed Insurtech. Thank you, Congress! 👏

15. Insurtech Survival Guide: 15 Steps. One Shot, No Redos!

16. My Take

Let the story of how CMS killed Clover Health and insurtech begin…