NeueHealth, formerly known as Bright Health, could receive as much as $150 million from Hercules Capital in a debt financing round.
The hard-pressed insurtech will receive an initial loan of $30 million, but the rest of the funds are conditioned upon meeting requirements.
In November, $25 million is available once NeueHealth receives funds from Molina Healthcare, as part of Molina acquiring its Medicare Advantage business for $500 million in December.
Starting in February 2025, NeueHealth can access $45 million if the company fulfills obligations to Centers for Medicare & Medicaid Services (CMS) and the ACO REACH Model.
CMS has required NeueHealth to pay $380 million through a risk adjustment repayment agreement at an interest rate of 11.5%.
Senator Elizabeth Warren wrote a letter to CMS in 2022, warning the agency that the ACO REACH program may be used by insurers like Bright Health to take advantage of the Medicare system. She cited a $1 million fine the company received after more than 100 consumer and provider complaints in Colorado.
By June 2027 up to $50 million will be available to NeueHealth, if approved by the Hercules’ investment committee, with the loan to mature in June 2028.
The new funding leaves many unanswered questions about NeueHealth’s governance decisions, said healthcare strategist Ari Gottlieb.
“There may be some pressure from regulators, but that’s not entirely clear," he said
In April, the company increased the loan commitment on its amended credit facility by $30 million from its primary investor, New Enterprise Associates. NeueHealth said they immediately needed the funds, allowing the company to sidestep requirements mandating shareholder approval, in exchange for equity.
The deal with Hercules Capital is seemingly more favorable for NeueHealth than the one it cut with NEA, added Gottlieb. The interest rate on this loan is 9.65%, plus another 2.5% added on top.
NeueHealth squeaked out a positive adjusted EBITDA last quarter, though recorded 18% less revenue year-over-year.