The last remnant of Bright Health Group’s health insurance operation is up for sale as the company negotiates with lenders to avoid bankruptcy, the company announced Friday.
The insurtech must find a buyer for its California Medicare Advantage business by the end of May to qualify for a credit extension through June, Bright Health notified investors in a filing to the Securities and Exchange Commission. Under the terms of the amended credit facility, the company would have to maintain $50 million in cash, down from $85 million under the current agreement.
Bright Health needs the credit to avoid bankruptcy: The company overdrew its $300 million line of credit last month and had until next Monday to reach the minimum threshold to maintain access to lenders.
Bright Health did not immediately respond to an interview request.
If the company sells its Medicare Advantage line in California, it would mark the end of the insurance company's insurance business. Bright Health previously participated in the Medicare Advantage, health insurance exchange and employer-sponsored health plan markets in 15 states. The company has 125,000 Medicare-Medicaid dual-eligible members in the Golden State, where it lost $40.8 million last year, according to regulatory filings.
Going forward, Bright Health will focus solely on its NeueHealth primary care business, which comprises 74 clinics in Florida and Texas that serve 375,000 patients, the company said in a news release Friday.
The credit agreement announced Friday requires Bright Health executives to attend weekly meetings with creditors about the Medicare Advantage sale and biweekly meetings about its finances. Bright Health is barred from taking on new debt or investments.
If insurance regulators in Texas or Florida place the company under receivership or under additional supervision, lenders have the right to dissolve the credit agreement. Bright Health reported a $163 million shortfall in those two states at the end of 2022. Florida has already placed the company under administrative supervision.
“The banks did this because they want their money, and they realize this is their best chance to get it,” said Ari Gottlieb, an independent healthcare consultant at A2 Strategy Group. “This may be a race between regulators and bankers with the selling of their California [Medicare Advantage] plan, to see who gets the money."
Bright Health shares opened at 18 cents on the New York Stock Exchange Friday. The company was worth $17.25 per share at the time of its initial public offering in 2021.