After a few years of success, Bright Health, Oscar and Clover Health are leaving some markets.
This boom appears to be unprecedented for many publicly traded insurance companies, which are reducing their presence in the market as they aim for profitability.
Late last year, Bright Health Group announced that it would no longer offer ACA plans and scale back its Medicare business, so it would focus solely on California in 2023. Oscar Health, meanwhile, is shedding MA. market, and Clover Health is reducing its Medicaid participation.
Although each company’s situation is different, those that see themselves as insurance-technology hybrids — and, by extension, “insurtechs” — have entered a fiercely competitive market without a clear sense of the type of strategy current market leaders are using, says Tom Cassells, MPP, president. and CEO of Rock Health, an investment fund that invests in digital health.
New entrants have entered the ACA or MA markets, Cassells says, believing that “people will choose the lower price option.” “The problem with subscribing to a new health plan is that your losses add up to your gains.”
Although all three had competitive pricing and a focus on technology, they all “transformed fairly quickly” to pursue other areas of business, notes Peter Manoogian, director of ZS, a technology and management consulting firm. “There were a lot of distractions and distractions for these companies.”
Not very bright
Perhaps the most dramatic decline comes from Bright Health, which was founded in 2015 by a group that included Bob Sheehy, the former CEO of health insurance giant United Health Care. Bright focused on the ACA and MA markets. The company, which is headquartered in suburban Minneapolis, went public in 2021 and brought in $924 million in its initial public offering.
In its 2021 earnings, Bright Health reported a loss of nearly $1.2 billion, while its membership jumped to more than 1 million, compared to more than 200,000 in 2020. In December 2022, it received a warning from the New York Stock Exchange that its shares could be delisted because they They were trading for less than $1.
Last year, Bright announced that it was withdrawing from the 2023 ACA market and has significantly reduced its presence in the MBA field to offer only Florida and California. Weeks later, Bright announced it was pulling out of the Florida MA market.
In an October press release, Bright said it would focus on a “fully aligned care model in partnership with external payers and care providers (which) is a faster path to profitability, has greater predictability, and is more capital efficient.” Bright operates NeueHealth, which provides value-based care to more than 500,000 patients in more than 3,000 clinics. The company says on its website that it “aligns[providers]with providers, payers, and patients and gives them the technology, ideas, and processes they need to work more closely together.”
Oscar leaves MA
Meanwhile, Oscar Health left the MA market after it struggled to sign up a small number of policyholders. Instead, the company plans to focus on the ACA market, where it has seen success.
The New York-based company, Insurtech, opened its doors for business in 2012. Joshua Kushner—brother of former President Donald Trump’s son-in-law Jared Kushner—was one of the founders. The company went public in 2021, and has pulled out
$1.2 billion. Last year, it recorded a net loss of $573 million, an increase of $166 million over the $407 million losses in 2020, and served nearly 600,000 members, up nearly 50% over that period.
On the company’s third-quarter 2022 earnings call, CEO Mario Schlosser said the focus for next year will be on profitability over growth. As part of this push, Oscar is pausing the expansion of its Oscar+ technology platform, designed to help healthcare customers improve growth, efficiency, and engagement with members and patients. “We have come to the solution of the question, how do we sell Oscar + in a more effective and efficient way. And how do we implement Oscar + in a more effective and efficient way with third parties, ”said Schlosser.
While withdrawing from the MA market, Schlosser said, “The single ACA market appears to us closer to the future of a competitive American health care system than any other health insurance markets.” The company expects to have about 1 million members this year.
Not in alfalfa
Clover Health, founded in 2014 and focused on the MA and Medicare markets, will go public in 2021 in a $3.7 billion deal with Special Purpose Acquisition Company (SPAC) Social Capital Hedosophia Holdings Corp. III. It is one of the six SPACs founded by billionaire Chamath Palihapitiya.
The company, which is headquartered in Franklin, Tennessee, reported a net loss of $588 million for 2021. In early 2022, CEO Vincent Gariballi made optimistic statements about Equity Health and Clover’s “allowing doctors to provide great health care for everyone, not particularly those in underserved communities.” But in the third quarter of 2022, Clover announced it would cut its participation in CMS’s Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH) program by up to two-thirds in an effort to turn a profit. As of early December, its share price was a fifth of what it was in early 2022.
Senior leaders from other insurance companies were contracted to run these insurance companies. In Manoogian’s view, this leadership choice can lead to “individuals who want to make their mark and lead their own strategy.” He adds that this could lead to diversification of business models in a very short period. Some of the bigger issues also affect new entrants, Manoogian says: “As the macro markets get a little tighter, I think investors might be a little less patient.”
Insurtech is a relatively new coin that might make these companies look exciting. Castles is not convinced. He says he views them as “just unprofitable health plans that have technology. They are not built to be technology companies.” He asserts that they gave their core business of health insurance a short while in order to “get into their side business, which is technology.”
Newcomers to health insurance may not expect some problems because they are relatively young. For example, most health insurers outsource part of their claims process, but newer plans “don’t have enough volume to get reasonable rates from outside outsourcers,” says Cassells.
This can lead to deficiencies in claims processing issues. In 2022, Bright Health was fined $1 million by the Colorado Department of Insurance for issues with paying provider claims, inaccurate consumer payment processing, and failure to communicate with members.
Manougian says there have also been complaints from providers and members about the inadequacy of the provider network. Having “too many off-network encounters hurts Bright”.
But Manougian says Oscar has a good partnership with Cigna to offer small group plans. “Range is important to be able to compete against the established.” Manoogian also says the ACA, which is in Oscar’s wheelhouse, is “here to stay,” especially after Congress extended increased market benefits, the number of people enrolled in ACA plans has skyrocketed and enrollment is expected to reach new highs for 2023.
Manoogian and Cassells are skeptical that insurance companies will be takeover targets anytime soon.
“It wouldn’t be unreasonable to think that these companies might spend more time trying to change their current books of business to become more profitable and scalable,” says Manoogian.
Cassells sees the future differently: “We bet they will need a very different business model than the one they have today.”
Susan Ladica is a freelance journalist in Tampa, Florida, covering healthcare and business.