Insolvency and a refusal of investors to throw more money at a failing business model forced troubled insurtech Friday Health Plans to shut down, the company confirmed in a statement on its website.
“Unfortunately, Friday has been unable to scale our financial infrastructure to match the pace of our growth and secure the additional capital required to run our business,” the statement said. “While we are deeply disappointed, we agree with the decision of our state regulators that it is necessary to wind down Friday’s business operations over time in accordance with the regulations in the states where we are operating.”
Just how Friday shuts down operations in states where it has or had a foothold might be problematic, one expert said.
Wednesday, Georgia officials revealed that they put Friday into receivership because of the company’s financial problems and told about 40,000 policyholders that they must find another insurance plan by Aug. 1. Thursday, Nevada officials announced that they too are placing the insurtech into receivership, forcing the 2,805 enrollees in that state to look for alternative coverage as well. Friday sells insurance plans on the Affordable Care Act (ACA) marketplace.
Nevada Insurance Commissioner Scott Kipper said in the statement that “the primary responsibility of the Division of Insurance is to protect the consumers of the state. Through this receivership, we can further evaluate the health of the company and determine how to best serve the interests of Nevadans.”
State insurance regulators in Colorado, Georgia, Nevada, New Mexico, North Carolina, Oklahoma and Texas—states where Friday Health Plans operate—barred the insurtech from taking on additional members, citing the company’s financial woes.
Those state decisions may have been enough for Friday executives to finally say “enough.” In its statement, Friday said the company's "top priority is to ensure that your access to benefits is uninterrupted during this process.” It’s offering policyholders information for each state on its website.
Just how state insurance officials shut down Friday Health Plans could impact other health insurance companies operating in the states in which Friday has a foothold as well as force the insurtech’s approximately 125,000 remaining policyholders to pay deductibles twice in one year, Ari Gottlieb, principal at A2 Strategy Group, told Fierce Healthcare. Some ACA plans can have deductibles as high as $7,000, although the average deductible seems to be about $1,400.
Not every state will take the same approach to handle Friday’s closing, and that might present some problems, says Gottlieb, a nationally recognized healthcare strategist who’s kept a close eye on the insurtech industry.
Some state insurance commissioners appear to be following similar approaches. “They clearly coordinate so it’s not surprising that Nevada and Georgia took action within 24 hours,” said Gottlieb.
He thinks that the insurance commissioners in each state should follow that example and place Friday into receivership.
Although even with Georgia and Nevada, there appear to be nuances to ending Friday’s operations. Georgia told the approximately 40,000 policyholders in that state that they need to find a new plan by Aug. 1. Nevada didn’t deliver a similar message, and Gottlieb noted that, as of now, it’s unclear what it will require Nevada policyholders to do.
Meanwhile, health insurance overseers in Colorado issued a statement yesterday saying that it will take until the end of the year to wind down Friday’s presence in that state, saying that the insurtech “has sufficient capital to continue for the remainder of 2023.”
Gottlieb doubts that Friday has sufficient capital and doesn’t see how this could work, especially with a significantly diminished scale if other states shut down the plan. He says that “the right thing for Colorado to do would be to follow Georgia’s example and take over the plan and then shut it down. They are basically hoping the math works and vendors continue to service the plan, even when they are potentially not getting paid.”
Meanwhile, Friday's Texas plan owes about $400 million, and that financial burden will most likely be taken up by the insurance companies that do not receive expected risk adjustment payments from Friday for 2022. Texas liquidated Friday Health Plans in March.
Gottlieb noted that if Oklahoma (9,400 members) and North Carolina (39,000 members) seize the insurtech's plans, Friday will be left with only 35,000 members in Colorado, and that situation is not sustainable.
"They can’t scale up. They can’t add new members. The fixed overhead cost gets allocated across a smaller base. It just becomes untenable. Colorado regulators are trying to make it work for members in the state, but it is hard to see how ultimately that decision will end well," Gottlieb said.