Bright Health last week was quietly fined $1 million by the Colorado Division of Insurance for systemic operational problems.
Why it matters: This kind of fine appears to be relatively unusual (but correct us if we’re wrong). But it’s representative of the challenges faced by health tech startups that are scaling fast.
- Bright is part of the new public company cohort trying to do things differently — poking at the broken parts of health care’s legacy system and attempting to challenge industry incumbents.
- The Tiger Global-backed insurtech startup went public in June 2021 at a more than $11 billion valuation, but shares have plummeted almost 90% since that time, with Bright posting a $1 billion-plus loss last year.
- And on Friday, announced it will discontinue offerings in six states next year.
zoom in: The DOI says it has received over 100 consumer and health care provider complaints about Bright, indicating systemic operational concerns in four core categories:
- Failure to pay provider claims according to Colorado law. (At least 850 in 2021 and 50 so far this year.)
- Failure to communicate with their members. (At least 30 consumer complaints.)
- Inability to accurately process consumer payments and accounts. (At least 25 consumer complaints.)
- Untimely processing of claims for physical and behavioral health coverage. (At least 60 consumer complaints.)
The other side: The company tells Sarah the failure to pay those claims resulted from its unprecedented growth over the past few years, and the agreement cites COVID-19-related obstacles.
- “That growth, along with the unique market factors we experienced in 2020 and 2021, caused challenges to our operating platform,” the company wrote in an email to Axios.
What they’re saying: As one industry insider sees it: “I suppose it’s not surprising. It’s a highly, highly regulated industry, and experience matters. So the upstarts will have bumps and bruises along the way.”
- “It definitely shows growing pains,” but fine like this do happen sometimes, even for the big plans, another source says.
Context: Bright currently has over 50,000 IFP (individual & family plan) members in Colorado, the company tells Sarah.
- Bright reflects 11.51% of Colorado’s individual plan market, the state agency adds.
separately, last Friday Bright said that starting in 2023 it will discontinue offering IFPs in Illinois, New Mexico, Oklahoma, South Carolina, Utah and Virginia.
- Its largest IFP memberships are in Florida and Texas, and it will also continue to operate in eight other markets including Colorado.
- In March, it laid off 5% of its workforce.
What’s next: Bright has agreed to address the issues raised, which as requested, includes immediately paying $500,000 of the $1 million fine.
- “Throughout the assessment, we actively collaborated with the CO DOI, and most importantly, we have made and continue to make meaningful improvements in our operations,” Bright says.
- Bright is poised to report Q1 earnings on May 4, and we’ll be watching.