Bright Health Group said Tuesday it will no longer offer individual and family health insurance plans or Medicare Advantage plans outside of California and Florida in 2023, eliminating options for patients in nine states.
The affected states are Alabama, Arizona, Colorado, Florida, Georgia, Nebraska, North Carolina, Texas and Tennessee. Bright Health, which in April announced plans to exit six other markets, said the move will reduce costs and free up about $250 million after settling medical liabilities. The insurtech company has sought to exit expensive markets as the COVID-19 pandemic drove up medical costs for members gained during the special enrollment period.
The decision is also part of Bright Health’s larger shift to a "fully aligned care model," which doubles down on provider practices that serve aging and/or underserved patients.
“The changes announced today give Bright Health a strong and stable platform for profitable growth at much lower risk. This is one more strategic step to building a differentiated and profitable business at scale,” Mike Mikan, the company's president and CEO, said in a news release.
Bright Health also said it is raising $175 million with a deal expected to close in the coming weeks. In August, Mikan said outside capital would be necessary to stabilize the business.
In 2021, Bright Health suffered a $1.17 billion net loss, in part driven by a claims processing backlog that delayed payments to providers. The Colorado Division of Insurance issued a $1 million fine to the insurtech in April for failing to make and process timely payments and for poor communication with customers. Bright Health's insurance arm also laid off about 5% of its employees in March.
The financial woes come despite a $750 million infusion from Cigna and venture capital firm New Enterprise Associates in 2021. Bright Health, initially valued at $12 billion, went public last year with shares trading at $17.25 each. Since then, shares have plummeted by 95%, closing at 90 cents per share on Monday. Bright Health's market cap is now at about $765 million, according to Yahoo Finance.
Ari Gottlieb, a principal at A2 Strategy Group, said this latest decision is a "save the company act." He said it is possible insurance regulators in the affected states decided to stop business with Bright Health when they recognized the company did not have the capital to operate.
"This is clearly a dramatic decision to cut off 90% of your company," Gottlieb said. "This is a massive destruction of value. Likely they lost upwards of $2 billion in their forays into these individual markets. ... It's an acknowledgment, I think, that the business model did not work, and so they're left with the pieces that actually had some value."
Gottlieb said Bright Health's operations in California remain the most stable. The company acquired Central Health Plan of California in 2021, increasing its Medicare Advantage business to 110,000 customers. Bright Health also acquired Brand New Day Health Plan in California in 2020.