A Bright Health IPO is coming. The company recently announced it filed with the SEC. Now, investors want to know if Bright Health stock is a good investment opportunity. Here’s what we know…

Bright Health IPO: The Business

Bob Sheehy founded Bright Health in 2015. Bright Health is a health insurance company. Its headquarters are in Minneapolis, Minnesota. Sheehy served as CEO until he stepped down in 2020 to serve as Executive Chairman of the Board. Bright Health’s current CEO is George Lawrence Mikan III.

Bright Health’s NeueHealth business has 28 primary care clinics that care for almost 75,000 unique patients as of April 2021. About 30,000 of those patients are served through value-based arrangements, with a Net Promoter Score of 78. NeueHealth also manages care for an additional 33 clinics through the company’s Value Services Organization.

Bright HealthCare, the company’s other business, serves 623,000 customers. This includes 515,000 commercial customers and 108,000 Medicare Advantages customers. Bright Health is present in 14 states and defines 99 core-based markets.

At its founding, Bright Health was made to concentrate on the Affordable Care Act for individual plans. Since then, the company says it has expanded its offerings, including Medicare Advantages plans. And since the world is just starting to fully come out of the COVID-19 pandemic, it’s not surprising Bright Health and its competitors are offerings IPOs.

Bright Health Stock: The Market

Challenges

Unsustainably High Costs: The Bright Health IPO prospectus cites that U.S. healthcare spending will reach $4.2 trillion in 2021. This is about $12,641 per person, and it’s a greater per capita healthcare spend than any other country in the world. When comparing cost and life expectancy to OECD countries, Bright Health estimates U.S. healthcare wasted spending ranges from $760 billion to $935 billion, or about 25% of total spend.

Negative Consumer Experience: Bright Health claims that focusing on employer-centric models creates a lack of personalization. This makes PPO networks expensive and inefficient.

Misaligned Incentives: According to the prospectus, only 2.9% of U.S. healthcare spending went towards preventative care in 2018. Bright Health believes the traditional fee-for-service (FFS) reimbursement model rewards reactive instead of proactive health approaches.

Lack of Access to Affordable Quality Care: The Bright Health IPO prospectus cites Commonwealth Fund. It claims 45% of U.S. adults who are uninsured said they had a medical problem but didn’t see a doctor due to cost concerns.

Opportunity

Growing Retail Markets: Bright Health estimates the Medicare Advantage market will grow 10% over a five-year period from 2019 to 2024. This will be a growth of $170 billion over the time frame. Additionally, the Medicare market will exceed $1 trillion by 2023. And finally, Bright Health says the IFP market is stable between 11 million and 12 million individuals covered since 2015. The company, however, expects this to grow.

Shifting Employer Markets: The company claims the employer segment is changing to a more consumer-direct approach. One product Bright Health thinks will help with this shift is individual coverage health reimbursement arrangements (ICHRAs). Another thing is administrative services only (ASO) models. Bright Health says that ICHRAs and ASO models can help focus on the individual while creating more flexible network options. This should help manage costs while also increasing the quality of care.

Government and Innovation: As costs continue to increase, both the federal and state governments have tried to introduce new plans to manage risk. The Centers for Medicare & Medicaid Services announced a Direct Contracting model to begin in 2021. This will create value-based payment arrangements. Bright Health expects the Medicare FFS market to be a $30 billion opportunity in 2021. The company also adds that states are using Managed Medicaid programs to drive better outcomes at lower costs.

But although it’s important to understand a company’s market, that’s not the only thing investors interested in Bright Health stock should look at.

The Financial Data

When a company files to go public, it must provide certain key information. And the financial data is a big one. The Bright Health IPO prospectus gives insight into the company’s financial history since 2018.

Bright Health lists three sources for revenue: premium, service and investment. In 2018, Bright Health’s total revenue was $130.6 million. It grew to $272.3 million in 2019 for a growth of 108%. And the trend continued into 2020 with total revenue of close to $1.18 billion. That’s a growth rate of 333%. Investors see this from 2020 to 2021 as well. Although Bright Health only reported on the first three months ended March 31, 2021, it’s compared to the same time period in 2020. The company notes it went from $190.7 million in total revenue for 2020 to $860.6 million in 2021.

But growing revenue isn’t the only thing Bright Health has. The company also has growing net loss. From 2018 to 2019, net loss went from $62.6 million to $125.3 million. It grew to $248.4 million in 2020. And for the three months ended March 31, net loss grew from $7.3 million to $21.5 million in 2020 and 2021, respectively.

On Bright Health’s balance sheet, the company shows cash and cash equivalents of $975.9 million. This number will likely increase after the Bright Health IPO. But the company also has $200 million in debt. In the prospectus under “Use of Proceeds,” Bright Health states…

We intend to use the net proceeds received by us from this offering to repay all outstanding borrowings under the Credit Agreement and the remainder for working capital and other general corporate purposes, including continued investments in the growth of our business. We may also use a portion of our net proceeds to acquire or invest in complementary businesses, products, services or technologies.

So, for those interested in Bright Health stock, here’s the information you need to know.

Bright Health IPO Details

Bright Health filed to go public on May 19, 2021. The company has a $100 million placeholder for deal size as the exact offering details are unknown. There is no confirmed Bright Health IPO date, price range or share number. Upon completion of the offering, Bright Health stock will trade on the NYSE under the ticker symbol BHG.

Are you looking for the latest investment opportunities? Then sign up for our free Liberty Through Wealth e-letter! It’s full of helpful tips and research from our investing experts. And if IPO investing interests you, check out our Top Recent IPOs and our IPO Calendar to stay up-to-date on the market’s latest offerings. As the health insurance market continues to gain attention post-pandemic, investors may want to keep an eye on the Bright Health IPO.