Bright Health Group has entered into an agreement with the Centers for Medicare and Medicaid Services to pay down a $380 million shortfall the company owes through the Affordable Care Act's risk-adjustment program.
Through this program, exchange insurers that cover healthier customers must transfer funds to carriers that insure sicker, more costly enrollees. Marketplace carriers are expected to pay $9.24 billion in risk-adjustment funds this year.
Related: Insurance companies on the hook for record risk-adjustment payment
Bright Health, which is in the process of selling its final insurance product, agreed to pay federal regulators the overdue sum over an 18-month period with an 11.5% annual interest rate, the embattled insurance company announced in a news release Tuesday. Federal regulators will then distribute the funds to carriers in Alabama, Colorado, Florida, Illinois, Oklahoma, Texas, Utah and Virginia. Bright Health has paid $1.5 billion to the program so far this year, according to the release.
The company is banking on recouping funds through its former commercial insurance business and its sale of its California Medicare Advantage plans to Molina Healthcare to make good on its risk-adjustment shortfall.
Bright Health said it has paid down 98% of remaining claims from its former exchange customers across 14 states. The company said it anticipates recouping $220 million from its shuttered exchange business after it is done paying off previous enrollees' medical bills and will use those funds to pay its risk-adjustment sum.
The insurer estimates it will then hold a risk-adjustment liability of $160 million, according to the news release. Bright Health intends to use the $600 million from its pending sale of its California Medicare Advantage plans to Molina Healthcare to pay the remaining risk-adjustment amount, the news release said.
Bright Health and CMS did not immediately respond to interview requests.
The company last month received a $60 million credit lifeline from investor New Enterprise Associates. It also entered a permanent waiver of default on its $350 million revolving credit facility with lenders. At the time, Bright Health said the cash infusion and a renegotiated agreement with its creditors would be enough to sustain the business. In addition to operating Medicare Advantage plans in California, Bright Health also runs a chain of primary care clinics in Florida and Texas.
