Troubled insurtech Bright Health focused on sale of California MA plans, execs say

Officials with the financially troubled insurtech Bright Health did not take questions at the end of their earnings call Tuesday, citing the company's efforts to find a buyer for its California Medicare Advantage (MA) plans.

Selling off the last of its insurance business is critical to staving off bankruptcy. The company secured an extension to its credit facility through June 30. According to a company spokesperson, “Bright must deliver an initial draft purchase agreement with respect to the proposed sale of the California Medicare Advantage business to one or more interested buyers no later than May 31, 2023.”

The company overdrew its credit facility and needs to raise about $300 million to avoid going under.

Bright’s CEO Mike Mikan said that the sale of Bright’s MA business would “substantially bolster the company’s financial standing and position our consumer care delivery business well for future growth in the attractive value-based care delivery market.”

Mikan said the extension adds “flexibility as we evaluate the strategic alternatives for the Medicare Advantage business and work through the timing of capital needs and the statutory capital releases from the wind-down of our ACA marketplace insurance business.”

Chief Financial Officer Cathy Smith, who will depart the company later this week, told investors that Bright’s board of directors “is exploring strategic alternatives for our California Medicare Advantage business with a focus on a potential sale of the business."

"While we cannot make any assurances around the potential outcome of the board review, a sale of the business would allow it to meaningfully strengthen our balance sheet and would provide a solid capital base to support the long-term growth of our value-driven consumer care delivery business," Smith said.

Ari Gottlieb, a principal at A2 Strategy Group, keeps a close watch on the insurtech industry and recently took Bright’s top executives to task for awarding themselves more than $4 million in bonuses last year even as the company floundered.  

“California MA assets are always valuable and in demand,” Gottlieb told Fierce Healthcare. “Bright’s plans have grown 30% since they purchased them for $500 million, however, financial performance has suffered and the future outlook given CMS payment changes and Medi-Cal rule changes has worsened.”

Nonetheless, Gottlieb said he thinks that several MA players, including national health insurance plans, see potential in Bright’s MA assets.

“Ultimately, though, Bright is an effectively forced seller and may not receive the sales price they (and creditors) are hoping,” said Gottlieb.

Bright Health posted a loss of $186.9 million in the first quarter of 2023, slimming its losses from $204.2 million in the prior-year quarter. Revenues in the quarter were $756.3 million, up from $613.3 million in the first quarter of 2022.

The company reported 123,000 members in its California plans, on par with how many members it reported a year ago, or 120,000. The number of patient visits at its NeueHealth clinics declined to 373,000 from 530,000, though the segment was in the black for the quarter, reporting $4.3 million in profit.

One year ago, NeueHealth posted a $70.1 million loss.

Gottlieb said that Bright’s stock is doing a 1-for-80 reverse split, meaning that a shareholder with 80 shares gets credit for having only one. This prevents delisting from the stock market, which the NYSE has threatened.

“At today's stock price, even doing a 1-for-80 reverse split will mean the stock will still be well below the IPO price of less than two years ago,” Gottlieb said.