Bright Health-Molina $600 Million Medicare Advantage Deal

Financially-troubled InsureTech announced Friday that Bright Health Group will sell its last insurance asset, Molina Healthcare, for up to $600 million in cash.

radiant health need to ink A proposed sale agreement by Friday for its Medicare Advantage business in California to avoid bankruptcy terminated its $350 million revolving credit facility earlier this year. The company has extended its agreement with lenders and will need to raise an undisclosed amount of additional capital to complete it during the year, Bright Health wrote in a Securities and Exchange Commission filing submitted Friday.

If the sale goes according to plan, it will be flagged The end of Bright Health’s insurance ambitions, after banging Initial Public Offering in 2021The uncertain future of the company entirely depends on it NewHealth Primary Care Clinic in Florida and Texas. Bright Health previously sold Medicare Advantage, health insurance exchanges, and employer-sponsored insurance policies in 15 states, but widespread financial problems attracted regulatory scrutiny and eventually forced the company to wind down its insurance operations.

The new deal comes just in time for Bright Health, which needed to raise at least $300 million by Friday to satisfy its creditors. The company extended and modified its credit arrangement through the end of August, it told the SEC. Under the new terms, Bright Health must have at least $35 million in capital and is limited in what assets it can sell and how much money it can borrow. It is also subject to cash flow, cash balance and other reporting requirements. In addition, Bright Health has until July 17 to notify creditors how it plans to raise additional equity or debt financing.

According to a news release, Molina Healthcare values ​​the purchase at $510 million, including a $90 million tax benefit, and will finance the acquisition with existing capital. The insurer expects the deal to increase its share price by $1. As part of the acquisition, Molina has agreed to direct its individual and Medicaid members to the NuHealth clinics beginning next year.

bright health was Least Profitable Health Insurer during the first quarter, when it recorded Net loss of $94.7 million on $756.3 million in revenue. the company completed a reverse stock split To avoid being delisted, raising its share prices to the minimum of $1 on the New York Stock Exchange in May.

Bright Health stock opened Friday at $12.34, up 12.7% from the previous day’s close. Shares of Molina started trading at $296.94 on Friday, up 7.4% from Thursday.

The parties anticipate that the transaction will close in early 2024. Regulators will have to approve the deal, which is subject to a number of other conditions. Bright Health intends to use the proceeds to reimburse and pay off lenders Former Commercial Insurance Member’ medical claims, the company said in the news release.

Bright Health and Molina Healthcare did not respond to interview requests.

Bright Health paid a combined $533.8 million in cash and stock to acquire Medicare insurers Brand New Day and Central Health Plan ahead of its IPO. The plans posted a net loss of $60 million last year, according to state regulatory filings.

Molina would need Brand New Day and Central Health Plan to achieve at least a three out of five star rating this year, according to an SEC filing. Sales also depend on Bright Health’s ability to survive. According to an SEC filing, if Bright Health is unable to meet these conditions, it will pay an $18 million termination fee to Molina.

Central Health Plan and Brand New Day have 125,000 Medicare Advantage enrollees, most of whom are dual-eligible for Medicare and Medicaid. Bright Health told the SEC that if membership falls below 105,000 by the time the deal closes, Molina may reduce the purchase price proportionately by at least $300 million. Molina will have to pay less than $600 million if Bright Health fails to maintain the required reserves.

Bright Health told the SEC that Medicare Advantage plans must seek Medicaid contracts and file them with federal and California regulators by Monday. California is in the process of closing “Look-Alike” Dual Eligible Special Needs Plans And participating in Medicaid will require a Medicare Advantage special needs plan carrier, which is called Medi-Cal in the Golden State.

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