Bloomington-based health insurer projects exiting small markets will help save $100 million in expenses and capital needs
Bright Health Group says it is getting better at paying claims on time and estimating how much money it owes other carriers in risk adjustment payments — both problems that plagued the health insurer's financial results last year.
The Bloomington-based company reported the improvements on its first quarter results Wednesday. Executives also said they expect to save $100 million in operating expenses and reduced capital needs, due in part to an April decision to exit certain health insurance markets across six states next year.
The commentary cheered investors who've seen the company's share price plummet since Bright Health went public last summer in the state's largest ever initial public offering of stock.
At 10:20 a.m., the stock was trading up about 27% at $2.13 per share.
"Overall, we're off to a solid start for 2022," said Mike Mikan, the company's chief executive, during a call with shareholders.
Bright Health Group sells health insurance coverage to individuals under the age of 65 as well as seniors who opt to receive their government insurance benefits through private Medicare Advantage health plans.
Since its founding in 2015, the company has quickly grown health plan membership. As of March, Bright Health had a little more than 1 million individual market enrollees and 120,000 people in Medicare Advantage plans. But fast growth in 2021 was difficult for the young company to manage, leading to the troubles with claims processing and risk adjustment.
In March, the company announced it would cut about 150 jobs to curtail expenses. The following month Bright Health announced a geographic downsizing in where it would offer individual market coverage.
With the pullbacks, Mikan said Wednesday the insurer now can focus on its remaining 10 states for individual market coverage including Florida, Texas and North Carolina. He added that Bright Health will discontinue its small business unit that provides coverage for employer groups.
Significant enrollment growth during 2021, particularly in Florida, meant Bright Health struggled to load data for new health care providers into its claims processing system. That led to a backlog of unpaid claims, many of which wound up getting paid during the fourth quarter.
After the company disclosed the problem in March during an earnings report, the stock dropped 20% that day.
The insurer made additional progress reducing the backlog during the first quarter, said chief financial officer Cathy Smith. The number of claims that are more than 60 days past due declined by 13%, she said.
Technology improvements let the company "meaningfully improve our prompt-pay performance and decrease the average age of claims in our pending claims cue," Smith told investors.
Claims processing troubles were part of an investigation by Colorado insurance regulators that culminated last month with a $1 million fine against Bright Health.
Risk adjustment problems emerged when the company reported third quarter results, but the situation is getting better, Mikan said Wednesday.
In the new year, the company has a higher percentage of returning enrollees, which helps in forecasting risk adjustment payables. In addition, Bright Health says it's having more success this year connecting new enrollees with medical groups, which should help develop accurate risk scores.
In the individual market, carriers must score the risk of health plan enrollees for the purposes of a market-wide risk adjustment system, a complex calculation where some insurers pay into the system while others are compensated for covering riskier patients.
Amid the challenges, Bright Health in December announced a $750 million fundraising package including a strategic investment from health insurance giant Cigna.
On Wednesday, Smith told investors that "based on our growth and our performance, we do believe we have enough capital to support the business for the next year."
During the first quarter, Bright Health Group reported a net loss of $180.6 million on $1.8 billion of revenue. The company's lost $24.5 million on $874.6 million of revenue during the previous year's first quarter.
For the year, Bright Health expects revenue of $6.8 billion to $7.1 billion. Before accounting for interest, taxes, depreciation and amortization, the company expects an adjusted loss of between $500 million and $800 million.
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