Future looks bright for startup insurer Bright Health

The growth story continues at Minneapolis-based Bright Health, as the startup health insurer saw enrollment double during the first quarter and is showing signs of a possible expansion into three more states.

Launched in 2016, Bright Health last year started selling health insurance policies that comply with the federal Affordable Care Act (ACA) to individual buyers in Colorado.

After big ACA changes began in 2014, the individual market was a sea of red ink for insurers who guessed wrong on the cost of medical care for enrollees. But a report out Thursday from the California-based Kaiser Family Foundation is the latest to suggest that the financial performance for carriers improved significantly last year.

"I think our timing was good, and our model is good," said Bob Sheehy, chief executive at Bright Health. "In a model like the Affordable Care Act, where you're actually giving people health care without asking them to fill out a qualifying form, it's really a good opportunity to use a model that's much more integrated with the actual care that people receive."

The individual market primarily serves people under age 65 who are self-employed or don't get coverage from their employer. Among other things, the ACA struck down insurance company rules that denied coverage to people with pre-existing conditions.

Sheehy is a former CEO with Minnetonka-based UnitedHealthcare, the nation's largest health insurer, and his company has been backed thus far with $240 million from investors. 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.

For the first quarter, Bright Health's business in Colorado posted net income of $1.38 million on $26.5 million of revenue, according to a regulatory filing this week. Membership at the end of the first quarter in Colorado was 23,560 people, up from 10,791 people at the end of December.

"You really have to look at the full-year performance," he said. "Particularly with plans that have the ACA deductibles, the first quarter is better than the rest of the year."

For 2017, Bright Health posted a loss of $17.5 million on $36.2 million of revenue. The loss stemmed from startup costs, Sheehy said, rather than the cost of medical care for subscribers.

Starting this year, Bright Health expanded into the market for Medicare Advantage health plans in Alabama, Arizona and Colorado. With the health plans, Medicare beneficiaries receive their government insurance benefits via a private insurer.

The regulatory filing this week includes an organizational chart for Bright Health with boxes for businesses in New York, Ohio and Tennessee. The company's website currently lists job openings in all three states as well.

Sheehy declined to discuss particulars about where Bright Health might grow in the future but said: "We have pretty aggressive expansion plans for 2019."

While surprisingly high medical costs in the individual market have prompted many large insurers including UnitedHealthcare to pull back on the ACA business, the report Thursday from the Kaiser Family Foundation found that recent premium hikes mean that carriers overall were covering the cost of medical bills.

The report noted uncertainty due to efforts by the Trump administration to promote alternatives to ACA coverage, plus tax legislation signed into law by President Donald Trump that in 2019 will eliminate the health law's tax penalty for people who lack coverage.

Even so, the report said the 2017 numbers "suggest the individual market was stabilizing and insurers in this market were regaining profitability."