Texas has placed Bright Health's subsidiary in the state into receivership and ordered its assets liquidated, according to a court order issued Nov. 29.
According to the Texas Department of Insurance, the court found Bright HealthCare Texas financially insolvent and that the subsidiary did not have assets equal to its liabilities or enough capital to meet Texas regulatory requirements.
Bright Health exited the ACA exchange market in Texas and all of the other states it operated in at the end of 2022. In October, CMS said the company owes $380 million in risk-adjustment payments, including $89.6 million in Texas. Bright has entered an interest-only repayment agreement with CMS for the $380 million.
In the ACA market, payers must pay in risk adjustment payments to CMS, designed to even out financial risk between payers with higher- and lower-risk enrollees in each market.
Ari Gottlieb, a consultant at his firm A2 Strategy Corp, told Becker's the liquidation puts Texas "at the back of the line" to receive the risk-adjustment payments from Bright Health. Other states have not moved to liquidate Bright's subsidiaries, though Florida and Tennessee have placed the company under financial supervision.
The liquidation order prevents other entities from collecting debts from Bright Health's Texas subsidiary, complicating CMS' path to collecting the risk adjustment payments, Mr. Gottlieb said.
"Bright just defaulted on this debt to CMS, but CMS can't collect it," he said.
Bright Health is planning to sell its California Medicare Advantage business, its last insurance offering, to Molina Healthcare. The deal is expected to close in the first quarter of 2024.
The company is also facing a $1 million fine from Nebraska, after a state investigation found Bright Health violated state law more than 21,000 times over a period of two years.
The biggest impact of the liquidation in Texas will be felt by other health plans, including small, local nonprofit plans and some larger payers that were expecting risk adjustment payments from Bright, Mr. Gottlieb said.
"This is their $90 million. Maybe they were hopeful they were going to get it in 18 months, as part of the repayment agreement. That's unlikely at this point," Mr. Gottlieb said.
The liquidation does not affect Bright Health Group's capital position or operations outside of Texas, a spokesperson said in a statement shared with Becker's.
"The company remains focused on the long-term sustainable growth of its continuing business, Consumer Care," a Bright Health spokesperson said. "Bright Health continues to work toward the approval of the sale of the company’s California Medicare Advantage business, and the company expects to close the transaction by the first quarter of 2024."