In the case of a large withdrawal, Bright Health suspends individual health insurance coverage

Bright Health Group will end individual and family health insurance and reduce Medicare Advantage coverage to just two states, moves that will cut its revenue in half.

The moves, announced Tuesday, represent a dramatic departure for the Bloomington-based company, which has built a national presence in just five years.

After raising billions of dollars in investment capital, Bright Health’s rapid growth created the need to meet greater regulatory reserve requirements. Coupled with the payouts related to the pandemic, the company reported huge financial losses. Executives said the restructuring would ease those pressures and bring stability.

“We would expect to see much more predictability in our revenue and 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 on Tuesday it said it would no longer offer coverage at any of them starting in January, effectively freezing that business.

Bright also announced it would withdraw Medicare Advantage plan offerings in four states, leaving only California and Florida.

The company will withdraw in January from individual health insurance markets in Alabama, Arizona, Colorado, Florida, Georgia, Nebraska, North Carolina, Texas and Tennessee — extending its previously announced withdrawal from Illinois, New Mexico, Oklahoma, South Carolina, Utah and Virginia . In a footnote to the document, Bright said there is a chance to continue coverage on an individual plan in California.

It is unclear how the layoff will affect the 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 care model” that 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 percent 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 expects sales at the lower end of its previous forecast range of $6.8 billion to $7.1 billion. Mikan said executives expect revenue of at least $3 billion for 2023 after the cut.

JP Morgan downgraded Bright Health shares following the news.

“The complete reversal of BHG’s initial strategy after going public about 15 months ago does not alleviate our concerns about execution and consistency,” Lisa Gill, senior analyst at JP Morgan, wrote in a research note on Bright’s announcement.

Gill also noted that the “major strategic twist” was unexpected.

Bright Health also announced a new cash infusion, raising $175 million in “convertible preferred equity.” Executives told investors in August that there was “substantial doubt” that the company could continue without raising more capital.

The company hasn’t posted a profit and in the first six months of 2022 reported a net loss of $432 million.

“It’s a pretty significant retreat,” said Steve Parente, a health economist at the University of Minnesota. “It makes sense that they’re sticking with the Medicare marketplace in two very large states.”

Trying to break into a health insurance market dominated by a handful of large national players was never going to be easy, Parente said. “It was always going to be tough to do that,” he said.

Bright Health launched in 2015, one of many startups seeking 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 previously served as CEO of UnitedHealthcare, the nation’s largest health insurer and part of Minnetonka-based UnitedHealth Group.

As a startup, Bright Health has raised more than $1.5 billion in funding, a record among Minnesota companies. It then raised more than $900 million in a June 2021 New York Stock Exchange listing — the largest IPO by a Minnesota-based company.

But from an initial price of $18 a share, Bright Health shares have tumbled for months, hitting a new low of 91 cents on Monday.

News of Bright’s restructuring sent shares up more than 28% on Tuesday, closing at $1.17 a share.

As of June, Bright Health had about 970,000 individual enrollees and 120,000 people in Medicare Advantage plans. The company does not sell health plans in Minnesota.

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