Bright Health Group’s financial headaches were worse than previously known, when Florida regulators revealed that the company had been under surveillance for six months and could not spend the money without their approval. permission of the State of Sunshine.
Florida placed Bright Health under scrutiny in September—requiring the company to obtain permission for transactions exceeding $10,000—but first went public on March 1 while renewing the order. until May 1 and add restrictions on executive salaries.
Through the new order, Florida also reserves the right to place the company in a receiving position. The insurer’s subsidiary in the state faces a $130 million funding shortfall by the end of 2022, according to financial information sent to Florida officials.
“This agreement does not prohibit Bright Health from engaging in discussions with persons regarding potential business or financial proposals,” said the March 1 order from the Florida Office of Insurance Regulation. “However, Bright Health and any person acting on behalf of Bright Health must obtain the written consent of the deputy supervisor or the office before entering into such an agreement.”
Bright Health must pay local regulatory agencies to hire an independent supervisor to oversee its operations, enable the supervisor to maintain a physical presence in its office, and provide access to access to any required documents. The insurtech ban increases executives’ compensation and says that executives cannot perform tasks outside of their day-to-day functions without approval.
A company spokesperson wrote in an email that Bright Health will continue to work closely with regulators as they pull out of the Medicare Advantage and health insurance exchange markets outside of California.
The Florida Office of Insurance Regulation did not respond to requests for interview.
Ari Gottlieb, an independent healthcare consultant at A2 Strategy Group, said other states may have placed the company under administrative scrutiny because of financial troubles outside of Florida. “Regulators have acted, but they may not have acted fast enough,” Gottlieb said. “Bright’s financial position will worsen as it realizes the investment losses and costs of dissolving these entities.”
Gottlieb said that if Florida considers Bright Health to be insolvent in the state, regulators will seize the subsidiary and sell its assets. These assets do not include the NeueHealth primary care clinics, which were incorporated under a separate subsidiary.
bankruptcy risk
Bright Health operates insurance subsidiaries in each of the 13 states where it previously sold exchange, employer and Medicare Advantage plans. States require insurance companies to maintain minimum reserves to ensure they can pay claims. Bright Health violated these policies in Florida, Texas, and Illinois, where it reported shortfalls of $130 million, $33 million, and $646,200, respectively, according to its filings with the agencies. government.
The Texas Department of Insurance declined to comment and the Illinois Department of Insurance did not respond to a request for an interview.
Bright Health reported holding $2.8 billion in state subsidiaries at the end of last year.
“A lot of their cash will be locked up in their various insurance subsidiaries,” said Wesley Sanders, health insurance specialist at EvenSun Consulting and former chief financial officer of Alliant Health Plans. “They have very little flexibility.”
Sanders said states would have to authorize Bright Health to withdraw funds from these funds and were unable to do so, which created problems for the cash-strapped company.
Insurtech recently overdrawn its credit base and reportedly holds $150 million in unregulated funds. During an earnings call last month, executives said Bright Health must raise about $300 million to stay afloat.
Sanders said Bright Health’s dire capital situation could force it into bankruptcy, which could affect other insurers operating in its former markets. If Bright is unable to meet its financial obligations following bankruptcy, he said, regulators will have to prioritize the payment of Bright Health’s risk-adjusted payments or its claims. It.
Insurtech estimates it will owe rival carriers more than $1 billion through the Affordable Care Act’s risk-adjusted program for 2022. The Centers for Medicare and Medicaid Services will summarize the amount by end of June and payment due in August. CMS will likely promote the use of Bright Health assets to pay this amount while states will likely prioritize claims, Sanders speak.
The Georgia Office of Insurance is closely monitoring Bright Health’s local subsidiary and its overall situation, a spokesperson wrote in an email. The company is fully capitalized and not subject to Peach State oversight, the spokesperson wrote.
The California Department of Insurance and the California Department of Managed Health Care both assert that they have no regulatory authority over Bright Health and have referred Modern Healthcare to each other. Regulators in Alabama, Arizona, Colorado, New York, North Carolina, Ohio, South Carolina and Tennessee did not respond to requests for interviews.
