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Bright Health Group will end Medicare Advantage operations in Florida, further contracting its insurance business.
The insurtech announced in October it would be exiting the Affordable Care Act exchange business to focus in 2023 solely on its Medicare Advantage operations in Florida and California, and on its NeueHealth provider arm. Now, the company will only operate Medicare Advantage plans in California for 2023, Chief Financial Officer Cathy Smith said during the third-quarter earnings call Wednesday.
“We’ve got a pretty significant change in our cost structure as we exit the ACA insurance business and MA insurance business in all states except California,” Smith said. “We’re well underway with business cost restructuring year-over-year, which will help that cost come down pretty quickly.”
The insurtech took a number of actions during the quarter to stabilize its finances.
The company sold $175 million of Series B stock to support its troubled cash position. It fully withdrew from its $350 million revolving credit facility, and has committed $46 million of this cash to support its provider arm’s participation in the federal Accountable Care Organization REACH payment model. It incurred a $79 million premium deficiency reserve charge, which means it expects to eventually lose this amount on a contract it sold. The company will spend $61 million next quarter from this charge, Smith said.
It expects to recoup another $250 million once it has paid out all the claims due from its dwindling exchange and Medicare Advantage businesses over the next six to 18 months.
“We’re working with state regulators as we wind down and serve the continued members we have today. By end of Q1, we’ll be 90%-ish complete on claims,” CEO Mike Mikan said during the call. “We’ll be engaged with regulators on the release of that capital. It will be staged over time. We believe some states will be more proactive early and some will tail on for a period of time.”
The company also reportedly eliminated 99 positions from its headquarters Wednesday, according to the Star Tribune newspaper. Bright Health Group and the Minnesota Department of Employment and Economic Development did not immediately respond to interview requests about the layoffs.
The company holds approximately $2.8 billion in cash and investments. Most of its funds are tied up in its insurance subsidiaries, from which state regulators must approve withdrawals.
Outside of these arms, the company holds $221 million in cash, an increase of $138 million from the prior quarter. The company’s unregulated assets reported do not include the $175 million in stock sold last month, Smith said. With the inclusion of that sale, the company holds about $400 million in unregulated funds, she said.
“We have significantly strengthened our capital position and we are fully funded to profitability,” Smith said. The company aims to achieve profitability on an adjusted earnings before interest, taxes and depreciation basis in 2023.
Bright Health Group reported a net loss of $259.3 million during the quarter, a year-over-year improvement of $37.3 million. The company’s quarterly revenue increased 51.3% to $1.6 billion. Bright Health Group counted 1.15 million members during the quarter, the majority of whom were in the exchange markets. The insurtech counted 125,000 Medicare Advantage members across its entire book of business.
The company does not expect its exit from the Florida Medicare Advantage market to lead to a net decline in members, Mikan said.
“The net number is net-net favorable,” he said. “Over the last couple of years, we’ve grown our MA book of business by about 40% in total, so significant growth over the last several years. I would characterize us as continuing to grow and take share but nowhere near the growth in years past.”
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