Have the upstart payers turned a corner–even if that means exiting the business? ‘Insurtech’ is the term given to the tech-enabled, health tech-friendly US payers which were supposed to deliver health insurance plans more efficiently (buy online!), more conveniently using apps and telehealth, lead in value-based care through strong networks, provider software, internal automation tools, and wrap it up with a ribbon of lower delivery cost to consumers, from those who needed individual exchange plans to Medicare Advantage. This utopian model cracked like the SPACs of Bright Health and Clover Health, and the IPO of Oscar Health, as this Editor noted last month, perhaps to the glee of traditional payers. But when survival is at stake, some surprising things can happen. All three are Not Dead Yet.
Bright Health Group succeeded last month in selling its remaining plans to ‘pure payer’ Molina Healthcare–their California Medicare Advantage plans Brand New Day and Central Health Plan. The deal: purchase 100% of the issued and outstanding capital stock of the two plans in a deal structured to be about $600 million. The Catch-22: stay solvent and absorb plan operational costs and losses (which are many) until Q1 2024 when the Molina deal will close. [TTA 6 July]
Last Friday (4 August), Bright secured a life preserver and line just as the waves started to crash–$60 million through a credit facility with an investment partnership of New Enterprise Associates (NEA). They also entered into a permanent waiver of default on its existing credit facility, which expires in February 2024. This has to refer to their prior $500 million credit facility with JP Morgan which was long overdue and now waived until the Molina close, apparently. Bright also is issuing penny warrants to NEA to purchase up to 1,656,789 shares of the Company’s common stock to the lenders under the new credit facility, approved by the board without the usual shareholder approval. This leaves an open question about who is really controlling the company. Release, Healthcare Finance, FierceHealthcare
There seems to be an even brighter (sic) picture in that their adjusted EBITDA for Q2 and H1 were actually in the black: $6.4 million for Q2 and $670,000 for H1. Even more bullishly, they project a full-year profitable adjusted EBITDA.
- Reduced Q2 and H1 net losses: Q2 was $125 million versus $284 million in prior year. For H1 2023, the losses were $312 million and $488 million respectively.
- Their other businesses in consumer care delivery, value-based care with providers in shared risk including ACO REACH (NeueHealth), and enterprise seemingly perform well. Their 2023 totals: consumer care $250-275 million, care solutions $900-925 million, and enterprise $1.15 -$1.2 billion.
- Lives covered in value-based care are up to 371,000, an increase of 214% over last year’s 118,000–excluding any covered under their now exited commercial plans. Release, Healthcare Finance
Looking at Clover Health, it was revealed this week that they survived a delisting off Nasdaq, which happens when the minimum closing share price requirement falls below $1 for at least 10 consecutive days. Now with closings for 10 days over $1, they are in Nasdaq’s good graces for now. They are exploring a reverse stock split or authorized share reduction, to be discussed at the 30 August shareholder meeting.
Clover then followed this up with a cheerful lead in their Q2 results that they had adjusted profitable EBITDA of $10 million versus last year’s $83.9 million loss. This is also remarkable as their revenue fell by over $333 million to $513.6 million due to a drop in non-insurance revenue of $384 million. Insurance plan revenue made up some of it by growing 17% to $314.4 million. In total, Clover recorded a net loss of $28.8 million. But for the year, adjusted EBITDA is projected to remain in the red between $70 and $120 million. Mobihealthnews, FierceHealthcare, release
Clover provides both Medicare Advantage (MA) plans in eight states plus a tool for practices, Clover Assistant, which assists in patient chronic care management through machine learning and aggregated data. They also entered value-based care in 2021 in the Medicare Direct Contracting (now ACO REACH) model which was a major loss generator in 2022 (Healthcare Dive) and has been cut back. Clover also survived an epically cracked SPAC out of the gate in January 2021 with the news that the Department of Justice (DOJ) had been investigating the company on investor relationships and business practices starting in fall 2020. A little over a month ago, the company finally settled seven shareholder lawsuits over its non-disclosure of the DOJ investigation at the time of the SPAC [TTA 28 June].
Now to NYC-based Oscar Health reporting its Q2, the first under its new CEO Mark Bertolini [TTA 30 March]. Their adjusted EBITDA went from red to in the black with a Q2 of $35.6 million, an improvement of $111.4 million versus prior year, and the second profitable quarter in a row with H1 adjusted EBITDA of $86.6 million, improving by $198 million from 2022. Revenue for Q2 was $1.5 billion with H1 at $3 billion. Net loss narrowed substantially to $15.4 million, an improvement of $96.7 million versus prior year, with H1 loss at $55.3 million, reduced by 70% from last year’s $187.3 million. The year will still be in the red with projected EBITDA loss of $75 to $175 million. The reasons for this gap–two profitable quarters, but an overall disappointing year–are not clear.
Bertolini touted factors such as improved medical loss ratios and rate increases. Oscar also pulled out of unprofitable Affordable Care Act marketplaces in Arkansas, Colorado, and California, as well as trimming MA plans in New York and Texas. On the earnings call, they announced that they were given state approval to resume MA enrollments in Florida and that they were relaunching +Oscar with help from ChatGPT to build automation tools in its Campaign Builder platform. In other news, their CFO is stepping down on 13 August, but remains on the board. He will be replaced internally by the chief transformation officer. Other staff are reportedly changing. Release, Healthcare Dive, FierceHealthcare
Update: you may also want to read Ari Gottlieb’s comments on these three companies on LinkedIn from the view of an expert financial analyst. Further comments on Bright’s perilous situation and Clover’s ‘legitimately good quarter’ here.
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