Bright Health Group, Inc.

Hello and welcome to the Bright Health Group fourth quarter 2022 earnings call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star one on your telephone keypad. If you'd like to withdraw your question, you may press star two. I'll now hand over to our host, Stephen Hagen, Investor Relations Director. Please go ahead.

Good morning and welcome to Bright Health Group's fourth 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 law. 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 of the non-GAAP to GAAP measures is available in the company's fourth 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 in our Form 8K dated March 1, 2023, which may be accessed from the investor relations page of the company's website. With that, I'll now turn this conference over to Bright Health Group Chief Executive Officer Mike Mykin.

Thank you, Stephen. Good morning, everyone, and thank you for joining Bright Health Group's fourth quarter 2022 earnings call. I'll start with a few comments on our continuing business and share why we are confident that the company is well positioned for the future. I will then briefly discuss our ongoing efforts to exit the ACA marketplace insurance business before turning the call over to Kathy to go over our fourth quarter and full year 2022 results. 2023 marks a year of significant transition for our business. And I'm pleased to report that our continuing business is off to a strong start. As you may recall, in January, we provided an overview of the strategic focus for the continuing business and how it is built for success in value-driven care. Importantly, When we speak of value-driven care, what we are focused on is the value layer of healthcare, the common set of value-additive capabilities across managed care and care delivery that drive consumer satisfaction and better health outcomes at a lower cost of care. With that, I'll discuss why we're confident in and enthusiastic about our continuing business and our future. As a reminder, our continuing business consists of two segments. consumer care, which includes our value-driven care delivery business, and Bright Healthcare, which is our delegated senior managed care business. Importantly, we believe in our model, and as we continue to execute on our efforts to right-size the business, we expect adjusted EBITDA to be profitable in both segments and at the enterprise level in 2023. Importantly, we have a business with greater predictability in its range of outcomes with significant less volatility. In our consumer care segment, our value-driven care model has demonstrated differentiated results. And because of that, it has attracted significant commitments from payers in each of our core markets. We expect to manage 275,000 to 300,000 value-based consumers by the end of 2023. Approximately 65,000 of those lives are attributable to our ACO REACH business, with the balance being a mix of value-based care contracts with our payer partners, including Marketplace, Medicare Advantage, and Medicaid consumers. In the first year of these contracts, we have been prudent in the level of risk we are assuming and have limited the downside across our contracts to focus on achieving adjusted EBITDA profitability in our consumer care segment. However, consistent with our belief in value-driven care, we will continue to move these contracts to greater risk-sharing and fully capitated models over time. Our expectations for the consumer care segment have not changed, but due to a revised revenue recognition accounting treatment, which Kathy will explain further, we now expect revenue of $1.1 billion or greater in our consumer care segment. The revised revenue accounting does not impact adjusted EBITDA or the number of value-based care lives served in the segment. We have been building strong relationships with our payer partners in our consumer care segment, and because of our aligned model, have been able to quickly attribute lives this year and engage with our members. This segment is well-positioned for capital-efficient, long-term growth and we continue to build a strong foundation serving aging and underserved consumers that have unmet clinical needs through our fully aligned care model. Our delegated senior managed care business and our bright healthcare segment continues to build on its strong performance with our delegated provider partners. This segment is well positioned in the fast-growing California Medicare Advantage market with significant opportunity for long-term profitable growth. We continue to focus on integrating the business, executing operational improvements, and driving towards segment profitability in 2023 on an adjusted EBITDA basis. In addition, we had strong performance in the annual enrollment period and started the year with over 120,000 Medicare Advantage consumers, resulting in positive net consumer growth in California. And as a reminder, given our strong positioning in special needs plans, We expect to grow within the year and are forecasting ending the year with over 125,000 Medicare Advantage consumers. We expect this segment to generate over $1.8 billion in revenue and meaningfully contribute to overall enterprise adjusted EBITDA profitability with a target medical cost ratio of 86% to 88%. As we discussed in October, we have exited the Affordable Care Act marketplace. as an insurance carrier, ceasing coverage at the end of 2022. As Kathy will discuss in a moment, there are several elements that impacted our financials related to the discontinued business, specifically one-time and exit-related wind-down costs. However, if you exclude such costs, we met the 2022 annual guidance range for medical cost ratio and adjusted EBITDA that we set last March. The costs associated with our discontinued operations caused us to fall below the $200 million minimum liquidity covenant in our $350 million credit facility. We have been working cooperatively with our bank group, and we are pleased to report that we have entered into a waiver and amendment as described in our SEC filings, which reduced our minimum liquidity requirement through April 30th. We are actively engaged with our board of directors and outside advisors to find the best long-term capital structure based on our size and financial expectations. While we cannot speculate on the outcomes of those discussions and resolutions, I am confident that we are taking and will continue to take the actions that are in the best interest of our shareholders. I'll now hand it over to Kathy to go over our fourth quarter performance and our updated outlook.