NeueHealth is in desperate need of capital. That didn't stop the insurtech from giving its CEO a $2M bonus

Despite being compelled to pay $380 million in risk adjustment payments to health plans, selling its Medicare Advantage business for less than expected, being put into receivership in Texas, finalizing a reverse stock split to avoid delisting from the New York Stock Exchange, posting a net loss of $1.3 billion last year and laying off staff, the insurtech formerly known as Bright Health gave out a $1.95 million cash bonus to CEO Mike Mikan in 2023.

The bonus was an increase over the $1.69 million bonus he earned in 2022.

"It's just sort of outrageous," said Ari Gottlieb, a healthcare strategist for A2 Strategy Corp.

Once factoring in the base salary of $1.3 million and all other compensation, the CEO earned nearly $10 million in total compensation last year. That is virtually the same amount as 2022.

"We provide our executive officers with a mix of pay that reflects our belief that executive compensation should be tied to an appropriate balance of both short and long-term performance," the company said in a recent proxy filing.

Chief Financial Officer Jay Matushak and Executive Vice President of Consumer Care Tomas Orozco received approximately $873,000 collectively in cash bonuses last year.

Yet the long-term prospects of NeueHealth are questionable.

"Although we raised capital in 2023, based on our projected cash flows and absent any other action, we will require additional capital, which might not be available on acceptable terms, if at all," NeueHealth's latest 10-K filing said. "We believe that the existing cash on hand and investments will not be sufficient to satisfy our anticipated cash requirements for the next twelve months."

Under a relatively new executive pay table designed to track change in pay over time, as required by the Securities and Exchange Commission, the compensation actually paid to Mikan was a loss of $633,000 after factoring in equity value, whereas average compensation for other executive officers was a gain of $83,000.

Mikan was once named the top paid U.S. fintech CEO in 2021 by SP Global when his total compensation surged to $181 million in 2021, largely from stock incentives and option awards as part of the company's $924 million initial public offering.

His total compensation decreased to nearly $10 million in 2022, though the compensation actually paid figure declined to a loss of $35 million. His cash bonuses, however, have increased each year from 2021 to 2023.

NeueHealth execs received scrutiny for bonus payouts last year when the management team was awarded more than $4 million in bonuses. The company has been littered with reports of layoffs since its IPO, most recently 68 employees at its Bloomington, Minnesota, headquarters, the Star Tribune reports.

"If you're able to perform, you should get paid," said Gottlieb, noting that better-performing companies in the space do not give such large bonuses. "I have no problem with that. This is just offensive. One of my clients [a nonprofit health plan] is still waiting on money from Bright that they owe them from risk adjustment payments."

NEA and CalSTRS involvement

The bonuses were approved by the company's compensation committee. It includes Chair Jeff Immelt and members Mohamad Makhzoumi and Manuel Kadre.

Immelt, a self-described math nerd, is the former CEO of General Electric from 2001 to 2017 and board chair of athenahealth from 2018 to 2019. Both Immelt and Makhzoumi are tied in various roles to New Enterprise Associates (NEA), a venture capital firm and majority shareholder of NeueHealth.

The California State Teachers Retirement System (CalSTRS), a large investor in NEA and a pension fund with a large portfolio, has co-invested alongside NEA in NeueHealth over the years. CalSTRS loaned NeueHealth $6.4 million in October at 15% interest, just months after NeueHealth entered into a $60 million agreement with NEA.

It's unclear the full scope of CalSTRS' involvement in NeueHealth. NEA and CalSTRS did not immediately reply for a request to comment.

Given NeueHealth's need for additional capital to stay afloat, the company said it is engaged with the board of directors and outside advisors to find more financing routes.

"The suspicion is when Bright says they are actively engaged in raising money, it means they're talking to NEA," said Gottlieb. "They're the only ones foolish enough to give them more money. They're choosing to give dollars to management, for some reason. I can't even begin to speculate as to why."

NeueHealth has paid $1.5 billion of its 2022 risk adjustment obligations in September 2023, though it still is engaged in repayment agreement with the Centers for Medicare & Medicaid Services (CMS) to the tune of $380 million at a 11.5% interest rate. The Texas side of the insurance business was put into liquidation, leaving $291 million of the risk obligation due by March 2025.

Gottlieb estimates the company is approximately $1.4 billion in debt after accounting for risk adjustment payments and money outstanding to investors like NEA, CalSTRS and other investors like Cigna Ventures.

He also wonders why CMS, when it agreed to the interest-only payment agreement, would not include protections against cash bonuses. And if NeueHealth goes bankrupt, only CMS has to gain from the repayment agreement, since the feds collect the interest but no money goes to the health plans wrapped up in NeueHealth's mess.

Former CMS Acting Administrator Andy Slavitt sits on the board of NeueHealth. He is not on the three-person compensation committee.

CMS did not immediately return a request for comment. The state of Texas has a FAQ page dedicated to Bright Health claims, while Florida put Bright Health under administrative supervision in September 2022. That supervision was extended (PDF) until June.

"My theory has always been that the best case scenario for Bright is that they get to March 2025, the day before these payments are due to the federal government, and they file for bankruptcy protections," said Gottlieb.