Bright Health Group will end individual and family health insurance coverage and cut its Medicare Advantage coverage to just two states, moves that will cut its revenue in half.
The moves, announced Tuesday, represent a dramatic setback for the Bloomington-based company which has built a national presence in just five years.
After attracting billions of dollars in investment capital, Bright Health’s rapid growth created the need to meet greater regulatory reserve requirements. Coupled with pandemic-related payouts, the company reported huge financial losses. Leaders said the restructuring would ease those pressures and bring stability.
“We expect to see more predictability in our revenue and our growth margins,” Mike Mikan, the company’s chief executive, told investors on a conference call Tuesday morning.
Bright Health currently sells coverage on government-run exchanges in 15 states. But it said on Tuesday that it would no longer offer cover in any of them from January, effectively silencing the line of business.
Bright also announced that it would withdraw Medicare Advantage plan offers in four states, leaving only California and Florida.
The company will exit the individual health insurance markets of Alabama, Arizona, Colorado, Florida, Georgia, Nebraska, North Carolina, Texas and Tennessee in January, extending the previously announced withdrawal of Illinois, New Mexico, Oklahoma, South Carolina, Utah and Virginia. . In a footnote to the document, Bright said there was a chance he would continue to cover some individual plans in California.
It’s unclear how the downsizing will affect its employee base. The company did not respond to a request for comment.
Bright Health said it will now focus on its non-insurance business. The company operates medical clinics that will be part of its “fully aligned model of care,” which integrates data and analytics. This model aims to provide better value for aging and underserved patients in the company’s largest markets – California, Florida and Texas – where 26% of the nation’s seniors live.
The company’s NeueHealth division, which operates more than 75 primary care clinics, is profitable.
For 2022, the company forecasts sales at the lower end of its previously forecast range of $6.8 billion to $7.1 billion. Mikan said executives expect revenue of at least $3 billion for 2023 after spending cuts.
JP Morgan downgraded shares of Bright Health after the news.
“A complete reversal of BHG’s original strategy since its IPO some 15 months ago does not alleviate our concerns about execution and consistency,” Lisa Gill, senior analyst at JP Morgan, wrote in a note. search on Bright’s announcement.
Gill also noted that the “major strategic pivot” was unexpected.
Bright Health also announced a new cash injection, raising $175 million in “preferred convertible capital”. Executives told investors in August there was “substantial doubt” the company could continue without raising more capital.
The company did not record a profit and in the first six months of 2022 posted a net loss of $432 million.
“It’s a pretty substantial retirement,” said Steve Parente, a health economist at the University of Minnesota. “It makes sense that they stick to the health insurance market in two very large states.”
Trying to break into a health insurance market dominated by a handful of big national players was never going to be easy, Parente said. “It was always going to be a heavy burden to do that,” he said.
Bright Health was launched in 2015, one of many startups looking to gain a foothold in the concentrated health insurance industry. It began offering its first plans in Colorado in 2017. Co-founder and original CEO Bob Sheehy was previously CEO of UnitedHealthcare, the nation’s largest health insurer and a branch of the Minnetonka-based UnitedHealth Group. .
As a startup, Bright Health has raised over $1.5 billion in funding, a record among Minnesota companies. It then raised more than $900 million in a listing on the New York Stock Exchange in June 2021 – the biggest ever IPO of a Minnesota-based company.
But from an initial price of $18 a share, shares of Bright Health have been falling for months, landing at a new low of 91 cents on Monday.
News of Bright’s restructuring sent its stock up more than 28% on Tuesday, closing at $1.17 per share.
As of June, Bright Health had about 970,000 enrollees in the individual market and 120,000 people in Medicare Advantage plans. The company does not sell health plans in Minnesota.