Bright Health Group, Inc.

Good morning or good afternoon all, and welcome to the Bright Health Group Q2 2022 earnings call. My name is Adam, and I'll be your operator today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad. I will now hand you over to Stephen Hagen to begin. So Stephen, please go ahead when you are ready.

Good morning, and welcome to Bright Health Group's second quarter 2022 earnings conference call. The question and answer session will follow Bright Health Group's prepared remarks. As a reminder, this call is being recorded. Leading the call today are Bright Health Group's President and CEO, Mike Mikan, and CFO and Chief Administrative Officer, Kathy Smith. Before we begin, we want to remind you that this call may contain forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the risk factors in our current and periodic reports we file with the SEC. Except as required by law, we undertake no obligation to revise or update any forward-looking statements or information. This call will also reference non-GAAP amounts and measures, a reconciliation process, of the non-GAAP to GAAP measures is available in the company's second quarter press release, available on the company's investor relations page at investors.brighthealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our form 8K dated August 10, 2022, which may be accessed from the investor relations page of the company's website. Before we start the call, I would like to note that Bright Health Group will be participating in the Morgan Stanley Conference on Wednesday, September 14th. With that, I'll now turn the conference over to Bright Health Group Chief Executive Officer Mike Mikas.

Thank you, Stephen. Good morning, everyone, and thank you for joining Bright Health Group's second quarter 2022 earnings call. I'll open my remarks with an update on the business, discuss the progress we've made on our strategic actions, and then I'll turn the call over to Kathy to give additional details on our second quarter results. We always start with our mission. At Bright Health Group, we are focused on making healthcare right together. Our model is built on the belief that by connecting and aligning the best local resources and healthcare delivery with the financing of care, we can deliver better outcomes at a lower cost for all consumers. In the year since we became a public company, our business has matured dramatically in scale, diversification, capabilities, and consistency in performance. We have achieved scale across some of the largest markets in the country, specifically in Florida, Texas, North Carolina, and California. We continue to demonstrate diversification across both our commercial and rapidly growing seniors business. We have significantly grown our new health business while demonstrating the differentiated performance of our fully aligned care model. And as important as that growth, we have made substantial progress on improving our underlying operating performance, developing our proprietary BIOS technology, and driving integration between our Bright Healthcare and new health businesses. These pieces together all drive key points of differentiation for Bright Health Group. In the second quarter, our team continued to deliver solid performance in the underlying business while making significant progress on our fully aligned care model and our operational improvements. We have generated strong growth in our core market while effectively managing medical costs across all of our markets. With the improved performance of our business, the cost actions we have taken and our disciplined pricing strategy for 2023, we are confident in our path to adjusted EBITDA breakeven in 2024. Furthermore, to support the growth and execution of our business, we've always planned for more capital, and we are well underway in satisfying this need. Kathy will provide additional details on our capital position in a moment. Our solid performance so far this year has led us to reiterate our key 2022 guidance metrics. We are delivering on the focused actions and operational improvements that we previously laid out. Through our medical cost management efforts, we are achieving cost savings in line with our expectations, on track for greater than $300 million in savings relative to our 2022 planned pricing changes. Additionally, we are experiencing significantly lower COVID costs so far this year. Overall, utilization across our entire business is lower and has been stable through the second quarter. And we are seeing the benefits of a higher percentage of our member base being retained members from last year. And this has resulted in an enterprise medical cost ratio that's in line with our expectations and better year over year on a restated basis. Our risk adjustment performance is meaningfully better this year due to the higher retained member base, more stable special enrollment period, and the operational investments we've made. In Florida, for example, our own data corroborated by the initial weekly national risk adjustment reporting, WINRAR, shows we are achieving a 25% improvement and risk adjustment on a per-member basis. Our member engagement efforts are much further along this year. We attributed members faster to our owned and affiliate care providers and are identifying members with complex health conditions who would benefit from care interventions earlier. Importantly, we are doing this not just for members in Medicare Advantage, but also members in our individual and family plans. Our efforts around identifying higher risk members supports our patient outreach, allowing us to better direct members to in-network care, as well as helping us accurately capture the risk of the patient population we serve. Our technology development and operational capabilities advance considerably this year. Our new PRISM and Panorama claims and care management platforms, respectively, are performing well, and we are achieving our target benchmarks for prompt pay, age claims, and appropriate denials. While the claims platform in our legacy markets continues to require additional manual work, we have made progress on claims processing in these markets, and the median age of claims has continued to come down throughout this year. Overall, we have significantly more data informing our forecasting and the predictability of our business is improving. We are also upgrading our provider-facing systems, adding more automated and electronic processes for care providers, which increases provider satisfaction, improves the efficiency of our business, and drives better site of care selection to help lower medical costs. The operational improvements we've made in 2022 set us up well as we look out to next year. We expect to continue our 2022 efforts on medical cost management, including implementing new contracts that reflect the scale of our business, driving lower medical costs for consumers. We expect further improvement in our engagement with members and accurately capturing the risk coding of these members across our markets. We also expect to benefit from the markets we entered in 2022 going into their second year. where we will have significantly more data on our members, and we expect to drive a meaningful improvement in the accuracy of risk adjustment. We've driven a strong improvement in the medical cost ratio in both our commercial and Medicare Advantage businesses this year, and expect to continue to improve our performance in 2023. We will also drive further profitability in our direct contracting business in the new ACO REACH program, building on our expected strong first year performance we view the market as being in a disciplined pricing environment into 2023 that supports the positive pricing actions we have taken these pricing actions take into account our underlying unit cost structure and our objective to move our business closer to our targeted long-term margins overall We do not expect these pricing actions to meaningfully alter our competitive positioning and are positive on the potential benefit of the APT subsidies extension in the inflation reduction act as passed in the Senate last Sunday. We will also continue to advance our fully aligned care model and drive medical cost benefits from the combined strength of our bright healthcare and new health businesses. The net results of pricing next year across both commercial and Medicare Advantage, combined with our medical cost efforts, are expected to drive a significant improvement in gross margin and allow us to move meaningfully closer to profitability in 2023, which gives us further conviction in our target of break-even adjusted EBITDA in 2024. I'll now hand it over to Kathy Smith, our CFO and Chief Administrative Officer, to go over our second quarter performance and provide some additional updates on the business.