Molina Healthcare has announced its agreement to acquire Bright Health's struggling Medicare Advantage business in California for approximately $510 million, after factoring in certain tax benefits. The deal, expected to close in the first quarter of 2024, will enable Bright Health to completely exit the insurance business and refocus its efforts on consumer care products. Bright's California plans, Brand New Day and Central Health Plan, currently operate in 23 counties and cater to approximately 125,000 members.
Molina anticipates that the acquisition will contribute $1.00 per share to its new store embedded earnings. The insurer highlights that the purchased plans have a 60% overlap with its existing Medicaid footprint in California, aligning well with its strategic goals for dually-eligible plans in the state.
Bright Health, like many healthcare technology companies in 2021, went public and raised significant funds but faced financial challenges that led to divestment of its insurance products and other assets. In the first quarter of this year, the company reported a net loss of $94.8 million. Despite encountering liquidity issues and breaching its credit facility agreement, Bright secured an extension on its time limit through the end of August.
By divesting its California Medicare Advantage plans, Bright expects to strengthen its capital position considerably. This will enable the company to meet its obligations to bank lenders and allocate remaining funds toward liabilities in its concluded Affordable Care Act marketplace business. As part of the acquisition, Bright will also enter into a provider agreement with Molina to serve Medicaid and marketplace beneficiaries in Florida and Texas.
Meanwhile, Molina faces challenges in its Medicaid business as redeterminations continue, signifying the end of the continuous enrollment period during the COVID-19 public health emergency. The insurer expects that around half of the approximately 800,000 Medicaid enrollees gained since the pandemic's onset will lose eligibility, with the majority of the impact expected in 2024. Molina aims to offset these losses by securing new contracts or making strategic acquisitions.
Molina has already negotiated an expanded contract with California's Medicaid program for 2024, and the acquisition of Bright's business accelerates the insurer's growth initiatives for dual special needs plans in the state.
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