State regulators are monitoring Bright Health Group’s finances after the insurer was required to transfer nearly $150 million at the last minute to remain in compliance with capital requirements for health insurance companies.
Bright Health Group's second-quarter filings in Georgia, Texas, Colorado and Illinois show it transferred funds into its insurance arms in those states just before the filings were due. In a Securities and Exchange Commission filing Aug. 15, the company said it was working with regulators in three unnamed states to resolve "potential instances of noncompliance."
“As we filed the 10-Q prior to filing our quarterly statutory reports, we noted the potential for certain states to be in non-compliance, as we were waiting for approval of specific capital infusions, which have all occurred,” a Bright Health Group spokesperson wrote in an email. The company’s regulatory disclosure and cash flow follow normal and accepted accounting practices, the spokesperson said.
“Bright is currently in compliance with all state regulatory capital requirements,” the spokesperson said.
The spokesperson did not respond to questions regarding Bright Health's compliance in individual states.
Bright Health Group lost $431.9 million during the first six months of 2022.
The special enrollment periods President Joe Biden’s administration implemented as part of the COVID-19 relief effort led the insurtech’s membership to balloon to 1.09 million members as of June 30, up 65% from the prior-year period. The additional enrollment periods opened the door for sicker, more costly patients than Bright Healthcare expected to sign up for the company's health insurance plans. Bright Healthcare also struggled to collect information about these new members' conditions, which led federal regulators to fine the company more than $1 million for purportedly insuring healthier individuals than competitors.
Bright Health Group’s increase in membership meant the company had to set aside more reserve funds in each state where it operates. States require health insurance companies to hold a specific portion of their revenue relative to the size of their local membership to ensure they can pay claims. Each state has different capital requirements for insurers.
The company’s losses could inspire state regulators to deny the insurtech’s bids to market local plans for the coming year, said Ari Gottlieb, a principal at A2 Strategy Group. Open enrollment for Medicare and exchange coverage starts as soon as Oct. 15.
“It’s an open question if they’ll allow members to sign up for plans for 2023 for a company that has publicly disclosed that without additional financing they cannot operate for all of 2023,” Gottlieb said.
Bright Health Group transferred $13 million to its local reserves in Georgia on Aug. 12 to partially offset a net loss of $14 million, Weston Burleson, director of communications and legislative affairs for the state’s Office of the Commissioner of Insurance, Safety and Fire, wrote in an email. The insurer is in compliance with state premium reserve laws, Burleson said.
“Bright Health has been a topic of discussion among state departments for the past several months,” Burleson said. “The company’s trajectory and access to additional capital support are topics of ongoing concern. We are monitoring the situation closely and will act should the need arise.”
The Georgia Life and Health Guaranty Association would cover local policyholders if the company defaults on its financial commitments, Burleson said.
Bright Health Group transferred $125 million on Aug. 12 to its Texas insurance arm to ensure it met the state’s regulatory standards. The Texas Department of Insurance declined to comment on Bright Health Group’s operations.
Additionally, the insurtech transferred $9 million to its Colorado operation on Aug. 15. The insurer meets the state’s capital requirements and the Colorado Department of Regulatory Affairs is in “constant communication with the company,” a department spokesperson wrote in an email.
“We will continue to closely monitor Bright’s ability to meet its financial obligations,” the spokesperson said.
Bright Health Group transferred $1.2 million on Aug. 12 to its Illinois insurance arm. The Illinois Department of Insurance is reviewing the insurer’s quarterly statement to make sure the company holds the necessary cash reserves. The agency said it will engage in discussions about Bright Healthcare with Florida regulators, which is “the lead state for the company holding group," said a spokesperson for the Illinois Department of Insurance.
Regulators from Florida, North Carolina, New Mexico, Tennessee, Virginia, Ohio and Arizona said that Bright Healthcare holds the necessary minimum in its state accounts. Officials said they are regularly monitoring the company for solvency. South Carolina regulators declined to comment on Bright Health Group’s finances.