Bright, Friday could cost other payers $1B in risk adjustment payments, expert says

The collapse of insurtechs Bright Health and Friday Health Plans might mean that legacy health insurers in states where Bright and Friday operated will not receive over $1 billion worth of expected risk adjustment transfer payments, according to an expert who follows the insurtech industry.

That spells trouble for health plans such as Florida Blue, Health Care Service Corporation, Medica, Centene and Molina Healthcare, who might very well have to pay the price for Bright and Friday’s overreach, Ari Gottlieb told Fierce Healthcare.

“We are continuing to see the impact of the reckless growth-at-all-costs approach of venture-backed plans Bright and Friday,” said Gottlieb, a principal at A2 Strategy Group. “Already members have been forced to pick new coverage and investors have lost billions, but now other health plans are likely to not receive over $1 billion of expected risk adjustment transfer payments, including large plans and more importantly, since the impacts could be catastrophic, small local community plans in Texas and other states.”

Both Bright and Friday have been forced to exit their individual insurance markets. Under the Affordable Care Act, risk adjustment in individual plans is transferred to other plans at the end of every year, the idea being that financially better off insurers can help struggling insurers who may have a larger population of sicker members.

“While Bright is telling states that they will ultimately pay, given the company’s track record of accurately forecasting capital availability, other health plans should treat it with a high degree of skepticism,” Gottlieb said. “Friday, on the other hand, has shut down completely and recovery of the hundreds of millions they will owe will be impossible.”

Gottlieb cites a recent filing (PDF) in Texas courts by Friday saying that the insurtech will not pay any of its approximately $640 million risk adjustment payable to that state this month. Bright said in its most recent Securities and Exchange Commission earnings report that it also does not plan to pay its entire risk adjustment liability.

“I am still highly skeptical things will work out well for Bright,” Gottlieb wrote in a LinkedIn post.

Bright announced in June that Molina Healthcare, which operates Medicare and Medicaid plans, will buy Bright’s California plans for $600 million, thereby providing a lifeline.

“I don’t believe that Molina Healthcare will actually pay $600 million for [Bright’s] California MA plans,” Gottlieb wrote. “The Molina team is smart and, I think, bid above what the plan is worth knowing they wouldn’t pay full price.”

He said that the Bright plans lost $16 million, and Brand New Day, its Medicare Advantage Part D plan, sits at $15 million below required capital levels. “And given seasonality, it is unlikely the plan will turn profitable in the second half of 2023," he said.

What ultimately darkens Bright’s future is unpaid provider claims, Gottlieb wrote on LinkedIn in a seperate post.

“I learned from a public request in North Carolina that in November, Novant Health complained to the North Carolina Department of Insurance that they were owed $60 million from Bright,” Gottlieb wrote. “Another provider complained about $6 million of unpaid claims. And providers continue to complain in other states, even as recently as last month in Illinois and Texas.”

Oklahoma, for its part, has not accepted Bright’s trying to back away from its risk-adjustment obligation.

“What will other states do?” Gottlieb wrote. “Will the Florida Office of Insurance Regulation … and Texas Department of Insurance try and recover the $250 million owed by NeueHealth? What will CMS do to protect seniors as Bright’s ACO REACH continues to receive hundreds of millions as they default on CMS?”