Minneapolis-based Bright Health said Thursday it has raised $160 million to fund expansion plans that include selling health plans to seniors who get their Medicare benefits through private insurers.
Bob Sheehy, former UnitedHealthcare chief executive, launched Bright Health in 2016, and the insurer currently is providing coverage to more than 11,000 individuals who buy coverage through the health insurance exchange in Colorado.
Bright Health tries to hold down costs while improving patient outcomes by working closely with health systems in “narrow network” arrangements that steer subscribers to certain doctors and hospitals in hopes of better care coordination.
“We decided to raise additional capital so that we can support our growth into additional markets for 2018,” Sheehy said in an interview.
Given uncertainty about the future of the individual market under the federal Affordable Care Act (ACA), the company sees Medicare health plans as “an important opportunity for us,” Sheehy said.
Bright Health is one of several new names in health insurance created to capitalize on the chance for growth with the ACA. Many of the start-ups have since gone out of business.
UnitedHealthcare, for example, launched a stand-alone division called Harken Health to compete on the health law’s new insurance exchanges, which promised to help grow the market via federal tax credits for shoppers. But UnitedHealthcare announced last month it would shut down the start-up for 2018.
During the first quarter, Bright Health posted an operating loss of $3.7 million on revenue of $6.4 million. Sheehy said he was pleased with the performance, saying the loss primarily reflects start-up costs.
Through the first three months of the year, Bright Health didn’t report the troubles seen by other carriers in recent years, where the cost of medical care for subscribers exceeded premium revenue.
“The overall financial performance in terms of premiums covering health care costs, we’re pleased with,” Sheehy said.
The individual market serves self-employed people and those who don’t get coverage from their employer. The federal health law has brought big changes to the individual market by eliminating pre-existing condition exclusions that insurers previously used to control costs.
Republicans in Congress have pledged to repeal and replace the Affordable Care Act. Uncertainty around the future of the current law, or what its replacement might look like, means that Sheehy isn’t yet saying whether Bright Health will remain in Colorado’s individual market for 2018 or expand to other states.
Bright Health has applied to sell Medicare Advantage plans in multiple states, Sheehy said, without being specific. A regulatory filing shows that Bright Health in the past seven months has created subsidiaries in Alabama, Arizona and New York.
The fundraising round announced Thursday was led by Greenspring Associates and joined by new investors Greycroft Partners, Redpoint Ventures and Cross Creek Advisors. It also included existing lead investor New Enterprise Associates, as well as Bessemer Venture Partners and Flare Capital Partners.
Sheehy launched the company last year with $80 million from investors.