Bright Health Inc. announced a massive $500 million Series E funding round with new investors first Tiger Global Management, T. Rowe Price Associates and Blackstone. Just last year, Bright Health closed a Series D raise of $635 million. Total funding to date is $1.5 billion since 2016. To be clear, this is another health insurance company, but it’s different in its ability to leverage technology insights and ability to scale. Let’s dig a little deeper.
"By aligning with our Care Partners, we have created a more personalized, affordable and convenient end-to-end health care experience for consumers. This funding allows us to continue to scale our transformative model and fulfill our purpose of lowering health care costs while improving outcomes, experience and access." said G. Mike Mikan, Bright Health's CEO. G. Mike Mikan recently became CEO on April 30th taking over from Bob Sheehy who not only is a co-founder of Bright Health and current Executive Partner of Flare capital but also former CEO of UnitedHealthcare with 20+ years of experience.
Bright Health already operates in 43 markets in 13 states with $1.2 billion in revenue from only 200,000 insurance members and 120,000 patients. It offers products in the ACA marketplace and Medicare Advantage. In 2021, fueled by a significant equity raise, it plans to begin offering small group and employer-based plans.
Why is it different? Bright Health is an insurance company. However, it figured out an innovative approach to providing integrated care. It has long been known that integrating a payor and provider can reduce overall costs by up to 20% and significantly improve the customer or patient experience. Payors and Insurance companies today are fragmented multi-billion-dollar companies with a few exceptions here and there of integrated health systems. While technically offering services in two or more distinct markets is considered ‘integrated’ care, the majority are what business students would call ‘horizontal integrations’. Becker’s put a list of 100 integrated health systems, the bulk of which are horizontally integrated. While there are potential cost savings, the purpose of horizontal integration is essentially to cross-sell products so the customer lifetime value is increased such as offering rehab services to a trauma patient discharged from a hospital owned by the same health system or to offer more products in the same industry to diversify the source of revenue. Now, ‘vertical integration’ is where the cost-savings come from.
Bright Health partnered with 30 provider groups called care partners with whom they share insights from its technology platform that is also used by a layer of concierge or personalized service called care navigation. For Medicare Advantage members, their plans offer telehealth services, free transportation, free post-hospitalization meals, and even prescription home delivery among other low-cost preventative benefits. We can begin to see that Bright Health knows exactly the levers to pull to reduce costs. They essentially are creating what looks like a ‘virtually’ integrated care with a narrow network, a data-driven benefit design, and seamless care navigation to make sure members optimize their health journeys. Amazon Care is a few steps behind in that its putting as many virtual benefits as it can together but it’s missing retail providers on the front end and a robust health insurance financing in the backend which we expect them to partner first and then build themselves with time. We’ll be following closely as these new innovative health insurance companies grow large enough to take on the legacy plans.