Georgia places troubled insurtech Friday Health Plans into receivership, forcing 40,000 patients to seek new coverage

Officials in Georgia placed the insurtech Friday Health Plans into receivership in an effort to shield members from possible fallout from the company’s insolvency and inability to raise funds from outside investors.

The troubled insurtech had been placed under administrative supervision in Georgia on March 8 because the company didn’t have enough funding. “During this period of enhanced supervision our office has closely monitored the company and determined that continued operation of Friday Health Plans was not possible without putting policyholders at risk, so we are acting to protect them,” according to a press release issued by Georgia’s Office of Commissioner of Insurance and Fire Safety. 

Friday Health Plans sold benefits packages in the Affordable Care Act (ACA) marketplace. Georgia officials said that Friday policyholders should expect their coverage to end July 31, 2023.

“To ensure Friday Health Plans policyholders have an opportunity to replace their current exchange coverage before it is terminated, effective August 1, 2023, our office coordinated with the federal office known as the Center for Consumer Information and Insurance Oversight to implement a special enrollment period for members to select another exchange health insurance plan,” the press release stated.

This means that about 40,000 Georgians will need to find a new insurer this summer, Ari Gottlieb, principal at A2 Strategy Group, told Fierce Healthcare in an email.

“In the process, it is likely that some/many will fall off as it may not be top of mind,” Gottlieb said.

On the other hand, if they’d been enrolled by a broker, it’s likely the broker will find a new plan for the individuals to ensure that commissions continue.

“In the case of some, other coverage may come with higher premiums they will have to pay, and it is an open question as to what happens to mid-year deductibles and the like,” Gottlieb said. “And some may have to change providers if networks vary.”

The company voluntarily pulled out of New Mexico last year and agreed with regulators in Texas to cease operations there. In late March, the Texas Department of Insurance seized and liquidated the company's operations in that state. As of May 9, Friday Health Plans will not accept any new enrollments in Colorado. 

Friday Health Plans is currently under state supervision in Oklahoma due to its financial situation.

Gottlieb, a nationally known healthcare strategist who’s kept close tabs on the insurtech industry, said that the plight of Friday Health Plans coincides with the plight of much of the insurtech industry.

“This is just another example of the failed premise that a health insurer can chase individual market growth by underpricing premiums, without a cost or capital structure to support it,” Gottlieb said. “Between Friday, Bright Health, and Oscar Health, start-up individual-focused insurers have now lost over $5 billion, a staggering amount.”

Friday and Bright are in the process of exiting the health insurance market altogether, said Gottlieb, and Oscar recently announced that it plans to exit California’s ACA exchange in 2024. Gottlieb said that it’s possible Oscar will be “able to ride the tailwind of interest rate increases with a large risk adjustment payable balance to subsidize the loss-making insurance operation.”

Gottlieb had been critical of state insurance officials for not taking action fast enough, but after speaking to many of them, he’s come to appreciate the administrative hurdles officials face when it comes to overseeing insurance plans. It’s not like the banking industry, Gottlieb said, where the Federal Deposit Insurance Corporation can take over a troubled institution overnight.

Gottlieb said that Georgia officials “should be commended for actively managing the Friday situation and stepping in when it became clear they did not have the ability to raise more capital. This contrasts with Oklahoma, for instance, where Friday is in even worse financial shape and the regulator seems to be very late in taking even the most basic actions.”