|
Three publicly traded startup
insurers all posted losses for the full year 2022, and one firm — Bright
Health Group, Inc. — may be on its last legs. A managed care insider tells
AIS Health that while Oscar Health, Inc. may have righted the ship, Bright is
in bad shape.
Bright faces liquidity
crisis
- Bright took in revenue of $551.4
million and posted a net loss of $188.2 million, or negative earnings
before interest, taxes, depreciation and amortization (EBITDA) of $108.5
million over 2022, with a medical loss ratio (MLR) of 93.9%.
- The firm is in
trouble. According to a Feb. 28 Securities and Exchange Commission (SEC) filing, Bright
breached a liquidity covenant administered by JPMorgan Chase Co. as part
of financing rounds disbursed in March 2021, November 2021 and November
2022.
- Barclays
analyst Steve Valiquette wrote in a March 2 note that “management
pointed to a change in revenue recognition principles for some
value-based contracts as the reason behind the downward revision.”
- Indeed, Bright
CEO George Mikan III said during the company’s March 1 earnings
call that “we have been prudent in the level of risk we
are assuming and have limited the downside across our contracts to focus
on achieving adjusted EBITDA profitability in our consumer care
segment.”
- Ari Gottlieb,
principal of A2 Strategy Group and a longtime critic of Bright’s
management, tells AIS Health that he doesn’t buy Mikan’s story. “I
cannot actually figure out” what happened to make the company lose so
much money, Gottlieb says, adding later that the company is an
“unmitigated disaster.”
- “They lost a
lot of money,” he says. “It looks like things did not go particularly
well for them in the fourth quarter, but their earnings release is so
confusing and limited in what they’re actually disclosing, it’s really
hard to figure out what’s actually going on there.” That said, “there’s
a lot of moving parts, and they disclose pieces of it. None of it is
particularly good. Somehow, Bright is worse than I thought
before.”
Oscar may reach modest
profitability
- Gottlieb is
more sanguine about Oscar, which he has not spared in the past. The
firm took in revenue
of $3.96 billion against operating expenses of $4.55 billion, posting a
net loss of more than $609 million during 2022, with an 85.3% MLR.
- “They actually
might be” on the road to sustainable cash flow, Gottlieb says. He says
that the firm has leveraged high interest rates to collect substantial
amounts from federal risk adjustment payments related to future
marketplace enrollment. In addition, Gottlieb says that, by becoming
“materially smaller” than the year before, Oscar’s expenditures will
become more manageable than they have been in the past.
- “Are they going
to be an industry leader? No,” he says. “But with interest rates staying
high, they’ll do OK. You get to break even and then make 5% on your
balance sheet. That’s not a terrible world.”
|
No comments:
Post a Comment