Bright Health Group’s financial picture continues to be dark, new revelations from the struggling health insurer reveal.
Insurtech has reported a shortfall of $12.9 million in its state-regulated insurance divisions since December 31, according to an annual report filed with the Securities and Exchange Commission on Wednesday. Year.
Bright Health also says its top executives are getting more money. This month, CEO Mike Mikan received a $1.69 million bonus and CFO Cathy Smith received $585,000. The company also awarded Mikan and Smith additional equity grants and limited stock units. Their base salary has not changed.
As in previous reports, Bright Health made a disclosure that without the ability to raise additional capital, it could go bankrupt. Executives said last month that insurtech needed to raise about $300 million to stay afloat.
States require insurers to maintain minimum reserves to cover unpaid claims, and Bright Health is not following the rule in many states, the company said in the filing. Specifically, the company reported deficits in Florida, Texas, and Illinois. Florida regulators placed Bright Health under scrutiny last year and more recently said they have the power to put it under takeover.
Insurtech continues to have difficulty paying claims from 2021 and admits in its filing that this represents a “serious weakness” in its ability to provide accurate financial information to companies. shareholder. Two years ago, a third-party claims processor failed to properly pay providers in accordance with their contract and fee schedules, and failed to reassess claims, Bright Health stated in the file. At the time, the insurer blamed a technology failure that forced them to review all claims manually and possibly lead to overpayments.
In response, Bright Health implemented a new claims handling system. But after announcing its withdrawal from the health insurance exchange business, the company “reduced its focus on exercising certain controls” regarding exchange revenue, membership , registration and eligibility, claims processing, reserves, risk adjustment and brokerage commissions, the filing said. According to the company, this may have caused additional overpayments.
Bright Health’s financial difficulties may have a negative impact on other insurers. Under the Affordable Care Act’s risk-adjusted program, insurers in the marketplace with relatively healthy policyholders must pass money on to those with sicker members.
In June, the Centers for Medicare and Medicaid Services will finalize risk-adjusted payments for last year. Bright Health is expected to owe $1.9 billion, which is likely to represent a significant portion of the total risk-adjusted proceeds that CMS collects from insurers. That would jeopardize the ability of other service providers to recover funds through the program.
Bright Health also disclosed that it settled a shareholder class action lawsuit in the fourth quarter of 2022. The plaintiffs allege that the company’s agreement with Cigna and New Enterprise Associates violated the company’s fiduciary obligations. company. Cigna and New Enterprise invested $750 million in Bright Health in 2021. Bright Health set aside $800,000 to settle the case.
