Several months after Molina Healthcare and Bright Health Group entered into a definitive agreement for Molina to buy Bright Health’s Medicare Advantage business, the companies have agreed to a lower purchase price, according to a December 13 filing with the Securities and Exchange Commission. Originally set at $600 million, the purchase price has been lowered to $500 million.
The amended price spells trouble for Bright Health as it works to pay off its debts, said Ari Gottlieb, principal of A2 Strategy Corp. It owes JPMorgan $308 million and the federal government $380 million in risk adjustment payments, according to Gottlieb.
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“I think we’re getting closer and closer to Bright going dark with this news,” Gottlieb said in an interview. “Their path is just increasingly narrow.”
Of the $500 million, $100 million is being put in an escrow account, in which a third party holds onto funds until certain obligations are met. The funds will be provided if there is a successful consolidation of Bright Health’s two MA plans (Brand New Day and Central Health Plan), or if Brand New Day is able to achieve at least three stars for its Part D plans from the Centers for Medicare and Medicaid Services.
Molina announced the purchase price amendment on Monday and stated that “net of certain tax benefits,” the purchase price is $425 million, down from $510 million. The $425 million account for 23% of the expected 2023 premium revenue of $1.8 billion, according to Molina.
The amendment wasn’t surprising given Bright Health’s financial troubles, Gottlieb said. To put it simply, Molina chose to negotiate down “because they could and Bright is in no position to negotiate,” he said.
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“It would have been negligent for Molina to not negotiate down,” Gottlieb added.
Bright Health reported a net loss of $1.4 billion in 2022, up from a $1.2 billion loss in 2021. By selling Brand New Day and Central Health Plan, the company is effectively getting out of insurance altogether. It stopped offering individual and family plans in October. When Bright Health announced its plan to sell its MA business, the company said it would focus on its consumer care delivery business.
Selling its MA business was Bright Health’s only option, Gottlieb previously told MedCity News.
“They were about to go bankrupt,” he said. “It’s a pretty easy answer, they desperately need capital. … The most viable way for them to get capital is by selling the one actual asset they have. So it’s a fire sale.”
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