How does Bright Health make money?

The company makes its money from revenue made by selling its premiums to individuals and to CMS

If there was any space that needed disrupting, that it was health insurance: in the 10 years from 2008 and 2018, premiums for employer-sponsored insurance plans went up by 55 percent, which is twice as fast as workers’ earnings, which rose by 26 percent. At the same time, the average health insurance deductible for covered workers rose by 212 percent.

It's those conditions that have led a number of companies to begin looking at ways to bring those costs down by infusing technology and fostering a better experience for members. That includes Oscar and Clover Health, both of which went public earlier this year, followed by Bright HealthCare, which offers "Care Partner Health Plans," which can include individual, family and Medicare Advantage plans.

If 2021 does indeed turn out to be the year of the healthtech IPO, insurance will one of the spaces that will have seen the most activity.

Bright Health says its plans are more affordable, and give patients a better experience, due to its business model of only working exclusively with one health system per market, thereby driving customers to those systems that are already providing better care at a lower cost. This also allows the company drive a greater amount of market share to that one system, rather than having patients go a variety of health systems within that geography.

"Bright Health was founded in 2015 to transform healthcare. Our mission of Making Healthcare Right. Together. is built upon the belief that by connecting and aligning the best local resources in healthcare delivery with the financing of care, we can drive a superior consumer experience, reduce systemic waste, lower costs, and optimize clinical outcomes," the company wrote in its S-1 filing with the SEC.

"At its core, Bright Health is a healthcare company. We are founded and led by industry veterans intimately familiar with the challenges that have plagued U.S. healthcare for decades. We believe that to drive meaningful change, we must leverage technology and bring together the financing and delivery of care, while strengthening healthcare’s strongest relationship: that between the consumer and their primary care physician."

Bright Healthcare and NeueHealth

Bright HealthCare actually consists of two businesses: in addition to its core platform, which currently aggregates and delivers healthcare benefits to roughly 623,000 consumers through its various offerings, in 14 states and 99 markets, the company also runs NeueHealth, its healthcare enablement and technology business. This segment was created in 2020 through its acquisition of AMD in December 2019, and the establishment of the Bright Health Network service, an ecosystem of Care Partners that BrightHealth has contracts with.

NeueHealth connect payors to high-performing providers who are excelling under risk-based payment models so they can deliver accessible and more affordable care to patients.

"NeueHealth significantly reduces the friction and current lack of coordination between payors and providers to enable a truly consumer-centric healthcare experience," the company wrote in its S-1. 

"Providers are looking for solutions that will enable them to perform in a value-based world and focus on what matters most: their patients’ health. Payors are looking for systems of high-performing providers who can partner with them to deliver the best care locally. Consumers want personalized, easy-to-access care, regardless of who is paying for it. NeueHealth brings this together through a combination of technology and services that is scaled centrally and deployed locally."

As of April, NeueHealth was working with over 200,000 care provider partners and operating 28 clinics within its care delivery system. Through those clinics, it facilitates 75,000 unique patient relationships.

Revenue segments

Bright HealthCare breaks its revenue down into three separate segments: premium revenue, service revenue, and investment income.

• Premium revenue 

Premium revenue includes commercial premium revenue, which primarily comes from Individual and Family Plan (IFP) products sold via Bright HealthCare. These are comprised of advanced premium tax credits, which are a tax credit a person can take in advance to lower their monthly health insurance payment.

This stream also consists of Medicare Advantage premium revenue, also sold via Bright HealthCare. This money is made through the sale of Medicare Part C premiums related to consumers’ medical benefit coverage, and Part D premiums related to consumers’ prescription drug benefit coverage. Premium revenue from CMS was 40% of the company's total consolidated revenue in 2020, up from 13% in 2019.

In addition, the company also makes premium revenue through NeueHealth.

"NeueHealth premium revenue represents revenue under value-based arrangements entered into by NeueHealth’s Value Services Organization and affiliated medical groups in which the responsibility for control of an attributed patient’s medical care is transferred, in part or wholly, to such medical groups," the company wrote.

"Such revenue include capitation payments, as well as quality incentive payments, and shared savings distributions payable upon achievement of certain financial and quality metrics. Value-based revenue shifts responsibility for control over the medical care delivered to attributed patients to the Company and aligns incentives around the overall well-being of the payor’s consumers."

In all, premium revenue is the company's largest revenue stream: in $1.18 billion in 2020, or almost 98% of the $1.2 billion the company saw in total revenue in 2020.

When broken down, $1.17 billion of that came from via Bright HealthCare, and $7.8 million, or just percent 0.66 percent, came from NeueHealth.

• Service revenue

Service revenue mostly comes from fee-for-service payments received by NeueHealth’s affiliated medical groups. These include patient copayments and deductibles collected directly from patients, as well as payments from private and government payors.

This segment took in $18.5 million in 2020, or 1.5 percent of total revenue

• Investment income

Investment income comes from interest income and realized gains and losses derived from the company’s investment portfolio, which is comprised of debt securities of the U.S. government and other government agencies, corporate investment grade, money market funds and various other securities. 

This is a very segment for Bright Healthcare, as it took in a total of $8.5 million in 2020, or 0.7 percent of total revenue.  

In 2020, only 2.2% of the company total revenue was generated by its NeueHealth business.

IPO

Bright Health went public in June, raising $924 million in its IPO, valuing it at $11.23 billion. It now trades under the symbol BHG, is currently trading at $10.32 a share, down 43% down from its $18 IPO price. 

Before going public, the company had raised over $1.5 billion in venture funding, including a $500 million round in September 2020. Investors included Tiger Global Management, T. Rowe Price Associates and Blackstone, NEA, Bessemer Venture Partners and Greenspring Associates.

(Image source: sec.gov)