Bright Health Group is eliminating 99 jobs at its Bloomington headquarters amid a dramatic retreat from its fast-growing health insurance business, a strategy shift first announced in October.
Company executives also indicated Wednesday the pull-back will expand to include the their Medicare Advantage business in Florida.
Word of the job cuts came in a notice from the Minnesota Department of Employment and Economic Development that employee separations would be permanent and occur in early January.
The downsizing was not explicitly described during the company's call Wednesday with investors to discuss third-quarter financial results, although executives talked generally about plans for cutting expenses.
"We have begun implementing the restructuring plans to adjust our cost structure in order to achieve our 2023 gross margin and operating expense targets including impacts to many of our employees," Chief Executive Mike Mikan said during the conference call.
Mikan said the company next year will sell its Medicare Advantage health plans only in California. Previously, Bright Health said its Medicare business would continue in Florida, where federal data show about 3,200 seniors are enrolled in coverage.
"As was noted on this morning's earnings call, Bright HealthCare will no longer offer ... Medicare Advantage health plans outside of California," the company said in a statement to the Star Tribune.
"We are working closely with [the federal government] and state regulatory bodies to ensure we communicate with members and consumers through the proper channels."
In October, Bright Health said it would stop selling individual and family health health plans in 2023 while reducing its Medicare coverage — moves that will cut revenue in half and enrollment by about 1 million people.
Currently, the insurer sells health plans for individuals in 16 states through health exchanges launched by the federal Affordable Care Act. Bright Health sells Medicare Advantage health plans in six states.
With October's announcement, the company said it would adopt a strategy focused on running more than 75 medical clinics it owns and, to a lesser extent, selling Medicare health plans. Bright Health also has a contract with the federal government to serve as an accountable care organization for some seniors in the original Medicare program.
The changes followed a Bright Health disclosure in August that acknowledged "substantial doubt" that the company could continue in business without raising more capital. Exiting the individual market is expected to free up about $250 million while investors pledged an additional $175 million as part of the changes announced last month.
In June 2021, Bright Health was backed by $924 million raised in Minnesota's largest ever public offering of stock. The company's share price has plunged since.
Investors didn't expect Bright Health would start making money immediately, but losses during the second half of 2021 swelled far beyond expectations due to problems with claims processing and risk adjustment payments.
In March, a Bright Health Group official said the company employed about 3,000 people before it eliminated about 150 jobs this spring following the poor financial performance.
During the third quarter, the company reported a loss of $259.4 million on revenue of $1.63 billion. Bright Health Group shares closed down nearly 9% on Wednesday.
While revenue fell short of expectations, the overall results in the quarter were "better than expected," Lisa Gill, an analyst with J.P. Morgan, wrote in a note to investors Wednesday. Gill stressed particularly strong numbers on medical cost trends and adjusted earnings before interest, taxes, depreciation and amortization.
Bright Health's medical practices are operated by a division called NeueHealth that has developed significant expertise in operating under "value-based care" contracts, Mikan said. These are arrangements with health insurers where health care providers take varying degrees of financial risk for patient outcomes in terms of cost and quality.
"We are focusing on serving aging and underserved consumers that have unmet clinical needs through our fully aligned care model in Florida, Texas and California — some of the largest markets in health care where 26% of the U.S. aging population call home," he said. "In NeueHealth, we are confident that the business's ability to manage costs in value-based arrangements."
Bright Health expects about $6.8 billion in revenue for 2022. Its sales target for next year is significantly lower — more than $3 billion — given the company's shrinking market footprint.
