Bright Health Terminates Insurance and Medicare Advantage Plans in 9 States
On Tuesday, Bright Health Group said it will no longer offer individual and family health plans or Medicare Advantage plans outside of California and Florida in 2023, excluding 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 pull out of six other markets, said the move would cut costs and free up about $250 million after paying off medical liabilities. insurtech has been looking to withdraw from expensive markets as the COVID-19 pandemic has increased medical costs for members acquired during the special enrollment period.
The decision is also part of Bright Health’s larger transition to a “fully aligned care model” that doubles down on the practice of providers serving aging and/or underserved patients.
“The changes announced today give Bright Health a solid and stable platform for profitable growth at much lower risk. This is another strategic step towards building a differentiated and profitable business at scale,” said Mike Mikan, President and CEO, in a press release.
Bright Health also said it is raising $175 million and the deal is expected to close in the coming weeks. Mikan said in August that outside capital would be needed to stabilize the business.
Bright Health posted a net loss of $1.17 billion in 2021, in part due to claims processing delays that delayed payments to providers. In April, Colorado’s insurance division fined an insurance company $1 million for delays in making and processing payments and poor customer communication. Bright Health’s insurance division also laid off about 5% of its employees in March.
Financial troubles arise despite a $750 million injection from Cigna and venture capital firm New Enterprise Associates in 2021. Bright Health, originally valued at $12 billion, went public last year and shares are trading at $17.25 a share. The stock has since fallen 95%, closing at 90 cents a share on Monday. Bright Health now has a market cap of around $765 million, according to Yahoo Finance.
Ari Gottlieb, director of A2 Strategy Group, said the latest decision is “an act of saving the company.” He said it may be that insurance regulators in the affected states decided to end business with Bright Health when they admitted the company did not have the capital to operate.
“It’s clearly a dramatic decision to cut off 90% of your company,” Gottlieb said. “This is massive destruction of value. They probably lost over $2 billion in their forays into these individual markets…I think it’s an admission that the business model didn’t work and so they were left with pieces that did have some value.”
Gottlieb said Bright Health’s operations in California remain the most stable. The company acquired Central Health Plan of California in 2021, growing its Medicare Advantage business to 110,000 customers. Bright Health also acquired Brand New Day Health Plan in California in 2020.