This year, the stock market yanked the rug out from under a handful of new health insurance technology stocks. These insurtechs have been disappointing investors left and right this year because premium payments haven't been rising fast enough to offset soaring medical expenses.  

Just below the surface, we can see the pandemic is responsible for rising medical expenses. Also, the companies haven't had enough time to employ their care-coordinating technology which is supposed to reduce expenses over time. 

The reversion to the mean that these companies are expecting might already be underway. Here's how patient investors could come out miles ahead by stuffing these stocks into a diversified portfolio for the long term.

Health insurance customer with broken foot.

Image source: Getty Images.

Bright Health Group

Bright Health Group (BHG -0.38%) shares rose briefly after this insurtech raised a whopping $924 million in its initial public offering (IPO) this June. Investors upset with losses reported since its public debut, though, have pushed the stock 77% below its peak. 

Bright Health Group stock is tanking because the company's medical cost ratio (MCR) for the third quarter of 2021 was 103%. This means for every $1 that customers sent in as monthly premiums, the company paid out $1.03 for medical expenses.

The company reported revenue that soared 206% in the third quarter and now expects to finish the year with 700,000 members. With a dismal MCR, though, more members could simply mean more losses. Without any gross profits to pay for swelling operating expenses the company lost a terrifying $296 million in the third quarter. 

Before we assume this company is doomed, it's important to remember a special enrollment period for government-sponsored health plans ran from February through August. This is a way for people who lost health coverage along with their job to quickly sign up for a government-sponsored plan on the website.

The special enrollment period led to a lot of new members fast. Unfortunately, people eager to sign up during the special enrollment period are also more likely to have significant medical expenses to deal with. Relatively healthy Americans who are eligible for government-sponsored individual health plans are much slower to sign on.

Health insurance customers reviewing options.

Image source: Getty Images.

Clover Health Investments

Clover Health Investments (CLOV 3.07%) shares are down 65% since the company made its stock market debut this January. Unacceptable expense ratios are to blame. In the third quarter, Clover's MCR rose to 102.5% from just 86.7% in the previous year period.

It's important to point out Clover Health's MCR in the third quarter was a significant improvement over recent results. The company reported a frightening 111% MCR during the second quarter this year.

Clover Health's recent pain is largely due to spiking COVID-19-related expenses that have an outsized effect on its patient demographic. Many of the company's members are seniors in New Jersey who are enrolled in Medicare Advantage plans.

Once adjusted for the effects of COVID-19, Clover Health reported a 94.8% MCR for Medicare Advantage enrollees. Total membership rose 125% year over year in the third quarter. With fast-growing membership rolls and improving margins, this stock still has a chance to bounce back in 2022.

Doctor speaking with a patient.

Image source: Getty Images.

Oscar Health

Oscar Health (OSCR 0.59%) shares are down 69% since the company's IPO this March. Shareholders have been battering the insurtech thanks to an MCR that jumped from 82.4% in the second quarter this year to 99.7% in the third quarter. 

Unlike Clover Health, Oscar Health doesn't have many Medicare Advantage members. Oscar Health attributes its recent MCR increase to new patients signing up during the special enrollment period that ran from February through August. 

If the poor performance Oscar Health has been reporting subsides this stock could recoup its losses and keep on climbing. Direct policy premiums grew 53.1% year over year to $895 million in the third quarter.

Oscar Health lost a frightening $213 million in the third quarter and $373 million during the first nine months of 2021. The company still has some breathing room though. There was a comforting $1.66 billion cash cushion on the balance sheet at the end of September.