The hits keep coming for embattled insurtech Bright Health.
Earlier this month, the company's agreement to sell its Medicare Advantage business to Molina Healthcare was amended to lower to the purchase price, according to a filing with the Securities and Exchange Commission. The original deal was up to $600 million in cash, and the new agreement lowers that price to $500 million.
In addition, $100 million of the proceeds will be put into an escrow account, according to the filing. Those funds will be released either when Molina is able to successfully consolidate the plans, which operate as Brand New Day and Central Health Plan, or if Brand New Day secures at least three stars from the Centers for Medicare & Medicaid Services for its Part D plans.
Molina announced the amendment on Monday, saying it expects the deal to close on or near Jan. 1. Net of "certain tax benefits," the sale is now valued at $425 million, or about 23% of the total expected premium revenue for 2023, which is $1.8 billion.
Ari Gottlieb, principal at A2 Strategy Group, told Fierce Healthcare that such a move was expected.
"This is the least surprising thing that I've seen all year," he said.
Gottlieb, who keeps a close watch on the insurtech space, said he was surprised, though, that Molina did not seek an even lower purchase price, but said it's probable that the company was unable to, given the volume of outstanding debts that Bright is facing. That includes significant repayments for missed risk adjustment payments under the Affordable Care Act, as well as money owed to lenders like JPMorgan Chase after it overdrew its credit facility.
The sale of its Medicare Advantage business was central to repaying those debts, and now that the sale price has decreased, they may come up short. Gottlieb said it will be important to watch if, and how, state regulators respond in this situation.
"It doesn't leave Bright in a great place," he said.
This is the second piece of bad news for the company in this month alone. At the beginning of December, a Texas court granted the state's Department of Insurance the power to seize Bright's assets and force the company into liquidation. Gottlieb told Fierce Healthcare then that it's unclear why the state took this step, and they've been tight-lipped about their reasoning in the weeks since.