Health insurance company Bright Health launched in 2016 with a cool $80 million in venture funding and a leadership team headed by CEO Bob Sheehy featuring an impressive pedigree in healthcare.
Now, the Minneapolis, Minnesota-based company has added another $300 million in an oversubscribed Series C round from new investors Declaration Partners and Meritech Capital, as well as existing investors including New Enterprise Associates, Bessemer Venture Partners and Andy Slavitt’s Town Hall Ventures. All told the company has raised around $440 million.
Bright, which initially launched in Colorado, currently offers individual and family health plans, as well as Medicare Advantage plans in three markets across Colorado, Arizona and Alabama. In 2019, the company is hoping to triple their presence by entering nine new markets including metropolitan areas in Ohio, Tennessee and New York.
The new funding will go towards accelerating Bright’s growth plans as it looks to build out a larger geographic footprint across the country.
“We’re in the process of developing our roadmap, and we’ve received interest from over 40 health systems around the country,” Sheehy said in a phone interview. “It’s a combination of having a delivery system in the right market and also tracking where we are in the regulatory process. What we’ve found through is that there’s great trajectory for growth and a tremendous appetite for the provider to get closer to the consumer through Bright.”
The new crop of insurance startups that have been founded in the wake of the passage of the Affordable Care Act have been on a race to find new partners and capital. In this year alone, Bright Health competitors Devoted Health and Oscar Health raised $300 million and $539 million, respectively.
Bright and its competitors are largely pursing a similar narrow network strategy that relies on close partnerships and integrations with providers in a particular market. In Bright’s case, the company works exclusively with one health system per market and offers a co-branded insurance product to patients.
“Our co-branded product is really indicative of the relationship and partnership we have with our delivery system and how we bring value with our integrated data capabilities,” Sheehy said.
Sheehy said the most important criteria in determining a healthcare partner is a strong strategic alignment along with a wide clinical base and geographic presence.
So far, the strategy has been paying off, with the company reporting re-enrollment figures in the mid 70 percent range and projecting revenues of around $150 million for 2018.
Sheehy also noted that the Bright is focusing on keeping its medical-loss ratio in the mid-80s which said he believes can create “a sustainable, long-term pricing position.”
While the company is growing its Medicare Advantage offerings, its core business is in the individual market where Sheehy said customers are often starved for choice. Moving forward, Sheehy also implied that Bright would strongly look at the small group and employer market as another potential avenue to reach consumers.
The small group market represents a large growth opportunity for companies like Bright. Oscar Health has started to offer insurance plans to small businesses in New York and Nashville after launching its small group product last year.
Sheehy, the former chief executive of insurance giant UnitedHealthcare, founded Bright to meet what he saw as changing consumer demands about their health plans.
In his eyes, those trends have been accelerating, driven by the desire for a better consumer experience in healthcare and an understanding that healthcare delivery needs to be overhauled to improve care coordination.
Large traditional carriers also responding through vertical integrations like the CVS acquisition of Aetna and the build-out of care delivery capabilities like UnitedHealth Group’s OptumCare.
The winners, according to Sheehy, will be the companies that are best able to meet those consumer demands by fulfilling the promise of creating a more efficient, convenient and financially aligned healthcare system.
“I think the broader marketplace will look more like Medicare Advantage and individual markets with consumers more focused on choosing the specific type of healthcare rather than a general health plan,” Sheehy said.
“That means closer integration of the payer community with healthcare delivery so the consumer can get better value. With Bright Health, hospitals and doctors can get additional revenue for lowering the cost of care, it’s a cycle that happens in all other areas of the American economy.”