Bright Health Group (BHG) Continues to Make Significant Progress Towards ACA Insurance Business Wind-Down
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Bright Health Group, Inc. (NYSE: BHG) today announced it continues to make progress on the wind-down of its ACA insurance business.
The Company has made significant progress paying down its medical claims obligations and is on track with prior forecasts. As of the end of August, the Company believes that its claims runout is over 98% complete.
Bright Health’s final risk adjustment obligations across its ACA insurance business markets were consistent with expectations at year-end 2022 and the end of the Second Quarter 2023. As of today, Bright Health has paid $1.5 billion to the Centers for Medicare & Medicaid Services (“CMS”), which represents 80% of its final ACA insurance business risk adjustment obligations.
Bright Health also announced that its insurance subsidiaries in Colorado, Florida, Illinois and Texas have entered into repayment agreements for a principal amount of $380 million with CMS with respect to the unpaid amount of the risk adjustment obligations. The principal amount of the repayment agreements is due in 18 months and bears interest at 11.5%. Exclusive of its obligations under the repayment agreements, Bright Health expects to have approximately $105 million in excess cash surplus in Colorado, Florida, Illinois and Texas, after reserving for expected medical costs and other anticipated wind-down expenses. The Company further expects to recover approximately $115 million in regulatory capital surplus in its other markets, subject to final claims runout and regulatory approval. Together, this results in an estimated net risk adjustment obligation of $160 million, before interest costs, after applying estimated excess cash reserves and regulatory capital surplus against the outstanding principal amount under the repayment agreements. The Company intends to use a portion of the proceeds from the pending sale of its California Medicare Advantage business to pay any remaining amounts due under the repayment agreements.
Today’s update on the ACA insurance business wind-down follows the announcement on August 7th of a $60 million credit facility with New Enterprise Associates and permanent waiver of default on the prior bank credit facility, which is expected to support the capital needs of the Company through the pending close of the California Medicare Advantage business sale.
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