Bright Health paid executives $3.77 million in bonuses as the business foundered

Bright Health paid its CEO and other top executives $3.77 million in cash bonuses last year, even as the Bloomington-based health insurer surrendered most of its core health insurance business in a sea of red ink.

Chief Executive Mike Mikan received $1.3 million in salary plus $1.69 million in bonus for 2022, according to a regulatory filing last week. His total compensation of nearly $3.5 million included his personal use of the company's leased aircraft, a perk valued at $121,507.

The company also paid nearly $2.1 million in bonuses split among four other executives, including one who received $765,000 after joining the company in May and leaving in December.

The bonuses "are inherently at odds with our collective sense of fairness, of right and wrong," Ari Gottlieb, a health care strategist who has followed the company, wrote Sunday in a LinkedIn posting. Gottlieb dubbed the payments "pay-for-failure."

In a statement, Bright Health said it tries to connect compensation to performance by providing the "vast majority" of pay in the form of "equity-based performance incentives that are directly tied to the company's stock price."

Bright Health Group was funded in June 2021 with the largest-ever initial public offering of stock for a Minnesota company. But it stumbled badly in the market for selling health plans for individuals. The company struggled to accurately pay claims and calculate risk adjustment payments.

Its shares last week closed at 28 cents — down from $18 at the IPO — and the stock in 2022 had a total return of -81.1%. In December, Bright Health disclosed that it could be de-listed from the New York Stock Exchange.

In the regulatory filing, Bright Health said it could've paid its executives even more under terms of its incentives package — based on its gross revenue, adjusted earnings, medical costs, technology milestones and the company's strategic shift.

"Although performance against the metrics as a whole suggested a performance factor of 130% of target, in light of the company's significant transition in 2022, its failure to meet certain performance metrics, and the need to continue to implement our restructuring plan and align expenses with our updated business model, the compensation committee approved a performance factor of 100% of target," the company reported in the filing.

The company made an urgent push last year to raise more capital. Earlier this month, Bright Health disclosed to investors it again must raise money after breaching the minimum liquidity covenant on a financing agreement. The company entered into a waiver and amendment with a lender that reduced the minimum liquidity requirement until April 30.

Bright Health Group's division in Florida was placed under confidential administrative supervision by regulators last year and again in January — oversight that the state's Office of Insurance Regulation made public and extended with an order dated March 1.

The supervision means the company can't spend more than $10,000 without the prior written consent of regulators. Bright Health may make claims payments to health care providers and people covered by the company's insurance policies for up to $100,000, the order states, but the office "may retrospectively review such payments."

"Bright Health shall not increase any officer's or director's compensation above the level they were at as of March 1, 2023, or pay bonuses to any officer, director or employee without the prior written approval of the office," the order states.

In January, Bright Health exited health exchange markets — the business where it saw its meteoric rise — in 15 states. The company has scaled back to selling Medicare Advantage coverage in one state plus running clinics as part of "value-based care" agreements with health insurers.

Since November, Bright Health has publicly disclosed two rounds of job cuts. Mikan and other executives were granted additional awards of equity-based compensation in November.

"Irrationally pricing individual health insurance in a commoditized market to fuel growth was never going to work," wrote Gottlieb, the health care strategist who follows several health insurance startups.

"I've said for a year the company needed vast amounts of additional capital; Bright's CEO and CFO denied it only to later acknowledge the need. Bright's leadership has frequently omitted materially relevant information from investors."

Staff writer Patrick Kennedy contributed to this report.