Bright Health, the troubled insurtech company, faces a daunting $380 million payment to the Centers for Medicare & Medicaid Services (CMS) over the next 18 months, outlined in a recent SEC filing. The funds, if paid, will be redistributed to insurers for risk-adjustment payments. While Bright Health has tried to portray this as progress in settling its ACA obligations, experts like Ari Gottlieb express skepticism. The insurtech also grapples with a proposed $600 million sale of its California plans to Molina Healthcare and continues efforts to avoid bankruptcy.
Insurtech company Bright Health is facing significant financial challenges as it grapples with the wind-down of its Affordable Care Act (ACA) business. According to a recent filing with the Securities and Exchange Commission (SEC), Bright Health is required to pay approximately $380 million to the Centers for Medicare & Medicaid Services (CMS) within the next 18 months.
This substantial payment, if successfully made by Bright Health, will be distributed by CMS to health insurance plans in states where Bright Health operates. These funds will serve to reimburse insurers for risk-adjustment payments.
In a press release, Bright Health announced that its insurance subsidiaries in Colorado, Florida, Illinois, and Texas have entered into repayment agreements with CMS, amounting to $380 million to cover the unpaid portion of the risk adjustment obligations. Bright Health has already paid $1.5 billion to CMS, accounting for 80% of its final ACA risk obligations. However, it remains a challenging situation for the company.
Ari Gottlieb, a principal at A2 Strategy Group, expressed concern over Bright Health’s default on the federal government and highlighted the seriousness of such a situation. He also noted that the company has agreed to an 11.5% interest rate on the repayments, emphasizing the urgency of the matter.
Gottlieb further questioned Bright Health’s financial stability, especially in terms of whether the proposed sale of its California plans to Molina Healthcare for $600 million will materialize. The tentative agreement allows room for uncertainty, contingent on Bright Health’s solvency and continued operations.
Bright Health recently secured a $60 million credit facility from New Enterprise Associations to avoid bankruptcy while winding down its insurance business, specifically its Medicare Advantage plans. The company stated that, after considering estimated cash reserves and regulatory capital surplus, the net risk adjustment obligation from CMS amounts to approximately $160 million.
Gottlieb and other experts have scrutinized Bright Health’s financial decisions, particularly its allocation of over $400 million in bonuses to its officials last year amid worsening financial conditions. Gottlieb emphasized the need for a thorough analysis of Bright Health’s financial data rather than relying solely on the company’s assessments, suggesting that the company’s struggles may stem from difficulties in basic arithmetic.
