Bright Health Group said Tuesday it will no longer offer individual and family health plans or Medicare Advantage plans outside of California and Florida by 2023, removing options for patients in nine states.
Affected states are Alabama, Arizona, Colorado, Florida, Georgia, Nebraska, North Carolina, Texas and Tennessee. Bright Health, which in April announced plans to exit six other markets, said the move would reduce costs and free up about $250 million in medical debt settlement. The insurtech company has sought to escape expensive markets as the COVID-19 pandemic has increased medical costs for members during special enrollment periods.
The decision is also part of Bright Health’s larger shift to a “fully tailored model of care,” doubling down on provider practices serving elderly and/or non-aged patients. served.
“The changes announced today give Bright Health a stable and robust platform for profitable growth with much lower risk. This is another strategic step towards building a differentiated and profitable business at scale,” said Mike Mikan, the company’s president and chief executive officer, in a press release.
Bright Health also said it is raising $175 million with a deal expected to close in the coming weeks. In August, Mikan said external funding would be needed to stabilize the business.
In 2021, Bright Health suffered a net loss of $1.17 billion, due in part to processing backlogs that delayed payments to providers. The Colorado Department of Insurance fined the insurer $1 million in April for its failure to make and process timely payments and poor communication with customers. Insurer Bright Health also laid off about 5% of employees in March.
The financial crisis comes despite a $750 million investment from Cigna and venture capital firm New Enterprise Associates in 2021. Bright Health, which was initially valued at $12 billion, went public last year trading shares at $17.25 per share. Since then, the stock has plummeted 95%, closing at 90 cents per share on Monday. Bright Health’s market capitalization is currently around $765 million, according to Yahoo Finance.
Ari Gottlieb, a principal at A2 Strategy Group, said the latest decision was an “act of saving the company.” He said it is possible that insurance regulators in the affected states decided to stop doing business with Bright Health when they realized the company did not have the capital to operate.
“This is obviously an impressive decision to cut off 90% of your company,” Gottlieb said. “This is a massive value destruction. It’s likely that they lost up to $2 billion getting into these individual markets. … I think it’s an admission that the business model is. didn’t work, and so they left behind parts that actually had some value.”
Gottlieb said Bright Health’s operations in California remain the most stable. The company acquired California’s Central Health Plan in 2021, bringing its Medicare Advantage business to 110,000 customers. Bright Health also acquired a brand new Day Health Plan in California in 2020.
