Start-up health insurer led by former UnitedHealthcare CEO off to a good start

Bright Health, a start-up backed by $ 240 million in venture financing, thinks it has figured out how to make money in the complex world of health insurance.

The real surprise: Its medical loss ratio for 2017 was 87 percent, meaning that the insurer paid out 13 percent less on medical claims than it collected in premiums. That is an achievement, and not just in comparison to other start-up plans. Investor Steve Kraus of Bessemer Venture Partners, who sits on the company’s board, says the performance also stands out among plans from big traditional health insurers.

Bright’s overall losses amounted to about $ 18 million, with revenues from premiums totaling $ 36 million.

Bright CEO Bob Sheehy, the former CEO of health system giant UnitedHealthcare, chalks up its losses to typical start-up costs, like engineering and marketing, which he claims will come down as the company scales to “multiple markets and products.”

Kraus said revenues are projected to end the year at between $ 140 and $ 150 million, representing a 300 percent jump.

The company sells its plan on the individual market in Colorado, including via the state exchange created through the Affordable Care Act.

Its Minneapolis-based team is also planning to expand into other states and into the burgeoning market for Medicare Advantage in the coming months.

Sheehy told CNBC he saw an opportunity to sell individual health insurance under Obamacare, as his former company pulled out of multiple states, reportedly to stem losses. In Colorado, both UnitedHealth Group and Humana announced plans to stop selling individual plans in 2016.

“I started the company with a vision to catalyze the individual marketplace,” he said. “My vision was to improve health affordability, and the health care experience.”

Bright’s secret sauce involves working in tight partnership with a single health system within a region, in this case Centura Health, which gives it better window into physician cost and quality.

Bright is just one of a handful of venture-backed health insurance plans that have emerged in the past decade. Its counterparts Oscar Health (individual market), Clover Health (Medicare Advantage), and Devoted Health (Medicare Advantage) have collectively raised more than $ 1.6 billion in capital.

In contrast to Bright’s medical loss ratio, Oscar Health’s was more than 94 percent in 2014, its first year (although it’s worth noting that it was a very different time for insurers selling on the individual market).

But some health experts say that it’s not yet time for Bright Health to pop the proverbial champagne, at least not yet.

“It’s a better result than most start-up insurance plans, but not yet something to celebrate until it can reach efficiency with scale,” said Ari Gottlieb, a strategy consultant focusing on health insurance with A2 Strategy Group.

Let’s block ads! (Why?)

Health Care