In Major Retreat, Bright Health Halts Individual Health Insurance Coverage

Bright Health Group will end individual and family health insurance and reduce Medicare Advantage coverage to just two states, cutting revenue in half.

The move, announced Tuesday, is a blow to the Bloomington, Minnesota-based company, which has only been establishing a presence in the country for five years.

Having raised billions of dollars in investment capital, BrightHealth's rapid growth has necessitated compliance with strict regulatory reserve requirements. In addition to complaints related to the pandemic, the company reported huge financial losses. Executives say the restructuring will ease those pressures and bring stability.

"We will see more predictability in our earnings and growth rate," CEO Mike Mikan told investors on a conference call.

Bright Health currently sells coverage on public exchanges in 15 states. But he said that starting in January, he will no longer offer insurance to any of them, effectively affecting that line of business.

Bright also announced that it will stop offering Medicare Advantage plans in four states, leaving only California and Florida.

In January, the company will exit the private health insurance market in Alabama, Arizona, Colorado, Florida, Georgia, Nebraska, North Carolina, Texas and Tennessee, expanding its previously announced exits from Illinois, New Mexico, Oklahoma, South Carolina, Utah and Virginia. . . In a statement, Bright said there is scope for continued private package coverage in California.

It is unclear how the layoffs will affect the number of employees. The company did not respond to a request for comment.

Bright Health said it will now focus on the non-insurance business. The company operates a medical clinic that will be part of a "fully coordinated care model" that integrates data and analytics. The model aims to provide greater value to elderly and low-income patients in the company's largest markets, California, Florida and Texas, which make up 26% of the nation's elderly population.

The company's NeueHealth division, which operates more than 75 primary care clinics, is profitable.

By 2022, the company expects sales to be below its previously estimated range of $6.8 billion to $7.1 billion. After the deduction, executives expect revenue to be at least $3 billion by 2023, Mikan said.

JP Morgan downgraded Bright Health shares following the news.

"BHG's complete abandonment of its core strategy after going public nearly 15 months ago does not diminish our execution and continuity concerns," JPMorgan senior analyst Lisa Gill said in an analyst note about Bright's filing.

Gill also noted that the "key strategic moment" was unexpected.

Bright Health also announced a fresh cash injection, raising $175 million in "convertible preferred stock." In August, executives told investors there were "serious doubts" the company could operate without raising capital.

For the first six months of 2022, the company reported no earnings and posted a net loss of $432 million.

"It's a pretty significant setback," said Steve Parente, a health economist at the University of Minnesota. "It makes sense for them to stick with the Medicare market in the two big states."

Breaking into the health insurance market, which is dominated by a handful of large national players, will never be easy, Parente said. "It will always be a heavy burden," he said.

Launched in 2015, Bright Health is one of many startups looking to lead the centralized health insurance industry. In 2017, he launched his first plan in Colorado. Original co-founder and CEO Bob Sheehy was previously CEO of UnitedHealthcare, the nation's largest health insurance company and a unit of UnitedHealth Group.

How a BrightHealth Startup Raised $1.5 Billion. It then went public on the New York Stock Exchange in June 2021, raising more than $900 million, making it the largest IPO by a Minnesota company.

But from an opening price of $18 a share, BrightHealth shares fell to 91 cents on Monday in a matter of months.

News of Bright's restructuring pushed its shares up more than 28% to close at $1.17 a share on Tuesday. Shares fell to $1.02 on Wednesday afternoon.

As of June, BrightHealth had about 970,000 individual marketers and 120,000 people in Medicare Advantage plans.

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Excerpt : Bright Health Halts Private Health Insurance (October 13, 2022) Accessed October 13, 2022 at https://medicalxpress.com/news/2022-10-major-retreat-bright-health-halts.html.

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