Bright Health Group will close its Medicare Advantage business in Florida to further contract its insurance business.
The insurtech announced in October that it would exit the Affordable Care Act exchange business and focus next year solely on its Medicare Advantage business in Florida and California, and its NeueHealth provider division. Now, the company will only operate the Medicare Advantage plan in California in 2023, Chief Financial Officer Cathy Smith said on Wednesday’s third-quarter earnings call.
“Our cost structure has changed considerably as we exited ACA insurance business and MA insurance business in all states except California,” Smith said. “We are restructuring our business costs year by year, which will help to reduce costs quickly.”
The insurtech company took several steps during the quarter to stabilize its financial position.
The company sold $175 million in Series B stock to bolster its struggling cash position. It has fully exited its $350 million revolving credit facility and has committed to use $46 million of that cash to support its supplier division’s participation in the federal Responsible Care organization’s REACH payment model. It incurred $79 million in under-premium provisioning charges, meaning it expects to end up losing that sum on the contracts it sells. Smith said the company will take $61 million from the charge next quarter.
Once it pays all claims from its dwindling Exchange and Medicare Advantage businesses over the next 6 to 18 months, it expects to recover another $250 million.
“We are working with state regulators as we wind down and serve the continuing members we have today. We will be about 90% complete by the end of Q1 claims,” Chief Executive Officer Mike Mikan said on a conference call. “We’re going to be engaging with regulators about releasing that funding. It’s going to play out over time. We believe some states will be more proactive early on, while others will be more proactive for a while.
On Wednesday, the company also cut 99 positions from its Minneapolis-area headquarters, the Minnesota Department of Employment and Economic Development said. The Star Tribune newspaper was the first to report the layoffs. Bright Health Group declined to comment on whether it would cut jobs.
The company holds approximately $2.8 billion in cash and investments. Much of its money is tied up in its insurance subsidiaries, from which state regulators must approve withdrawals.
Outside of these weapons, the company held $221 million in cash, an increase of $138 million from the previous quarter. Smith said the company’s reported unregulated assets did not include the $175 million worth of stock it sold last month. Including that sale, the firm held about $400 million in unregulated funds, she said.
“We have strengthened our capital position significantly and we have sufficient capital to be profitable,” Smith said. The company aims to become profitable on an adjusted EBITDA basis in 2023.
Bright Health Group reported a net loss of US$259.3 million for the quarter, a year-on-year increase of US$37.3 million. The company’s quarterly
revenue rose 51.3% to $1.6 billion. Bright Health Group had 1.15 million members in the quarter, most of them in the exchange market. The insurtech company counted 125,000 Medicare Advantage members across its business.
The company does not expect to see a net decline in membership due to exiting the Florida Medicare Advantage market, Mikan said.
“The net worth is very favorable,” he said. “We’ve grown our total MA business by about 40% over the past few years, so much growth over the past few years. I would describe us as continuing to grow and share, but nowhere near the growth we’ve seen over the past few years.”
UPDATE: This article has been updated to include information from the Minnesota Department of Employment and Economic Development.