- Molina Healthcare has agreed to buy struggling insurtech Bright Health’s Medicare Advantage business in California for approximately $510 million, net of certain tax benefits, the company announced Friday.
- The deal, which Molina expects to close in the first quarter of 2024, will completely exit Bright from the insurance business, allowing it to focus on consumer care products. Bright’s California plans, Brand New Day and Central Health Plan, operate in 23 counties and serve about 125,000 members.
- Molina expects the purchase will add $1.00 per share to new store embedded earnings. The insurer said the acquired plans have a 60% overlap with its Medicaid footprint in California, and are a “strong strategic fit” with its dually-eligible plan ambitions in the state.
Bright went public and raised billions alongside a rash of healthcare technology companies in 2021, but has since been shedding its insurance products and other assets as it looked to improve its flagging finances.
The company posted a net loss of $94.8 million in the first quarter of this year. In March, Bright said it had spent the $350 million available in its credit facility, violating its agreement with lenders, but that the bank had agreed to give it more time to return to minimum liquidity. Along with the sale announcement on Friday, Bright said it had once again received an extension on that time limit through the end of August.
In a statement, the insurtech said divesting its California MA plans will “significantly strengthen” its capital position, allowing it to satisfy obligations to bank lenders and use remaining funds toward liabilities in its ended Affordable Care Act marketplace business.
As part of the purchase, Bright is also entering a provider agreement with Molina to work with Medicaid and marketplace beneficiaries in Florida and Texas.
Meanwhile, Molina is facing upheaval in its Medicaid business as redeterminations continue, ending a period of continuous enrollment in the public insurance program during the COVID-19 public health emergency.
In April, the insurer said it expects half of the approximately 800,000 Medicaid enrollees it gained since the start of the pandemic will lose eligibility. CEO Joseph Zubretsky expects much of the impact will be felt in 2024.
Molina executives have said that winning or acquiring new contracts could offset losses from Medicaid redeterminations.
Molina already negotiated an expanded contract with California’s Medicaid program for 2024, and, Molina noted, the Bright deal accelerates the payer’s growth initiatives for dual special needs plans in the state.