Molina Healthcare will purchase Bright Health Group's California Medicare Advantage business for $600 million, the two businesses said June 30.
The sale marks Bright Health's exit from the insurance business. The company, which has faced several financial challenges in the past year, ended all of its insurance offerings outside of California at the end of 2022.
Bright Health will use the proceeds from the sale to pay off its debts and pay liabilities remaining from its shuttered individual insurance business, the company said in a news release. The company breached its minimum liquidity requirements in the first quarter of 2023.
"The sale allows us to focus on driving differentiation and sustainable growth through our Consumer Care Delivery business," CEO Mike Mikan said.
Molina Healthcare will acquire 125,000 members in 23 California counties in the deal. The coverage area overlaps with around 60 percent of Molina's current Medicaid footprint in the state.
The deal is a "strong strategic fit" with the company's expanded Medi-Cal contracts, which begin in 2024, the company said.
"These additions fit perfectly with our strategy of serving high-acuity, low-income members and represent a textbook execution of our growth playbook. We acquire viable assets at attractive valuations, then deploy our proven team of operators to deliver improved financial results," Molina Healthcare CEO Joseph Zubretsky said. "We are pleased to continue our meaningful growth in California as the latest realization of our national growth strategy."
The deal will significantly expand Molina Healthcare's Medicare membership. The company had 161,000 Medicare members at the end of the first quarter of 2023, according to its earnings report.
As part of the agreement, Bright Health will provide care delivery services for Molina's Medicaid and individual members in Texas and Florida.
Molina will finance the deal with cash on hand. The sale, subject to regulatory approval, is expected to close in the first quarter of 2024.