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How the Top 4 Disruptive Insurtechs Have Evolved Since Their IPOs
In a health insurance landscape that is consolidating into a few major players, four insurtechs sought to change the system.
The insurtechs that saw the greatest success after the start of the coronavirus pandemic have faced a tumultuous path since their initial public offerings (IPOs).
In 2021, four insurtechs achieved their IPO. Their goal was to disrupt the healthcare system and introduce new ways of providing health insurance.
Since then, the companies have faced financial struggles and some teeter on the edge of being delisted from stock exchanges.
Bright Health
Founded: 2016
Went public: June 2021
Valuation in 2021: $11.2 billion
Revenue in 2022: $2.4 billion (Net loss: $1.4 billion)
Bright Health had a strong start. It raised $924.3 million in its IPO, which set a high standard for competitors at the time, and cinched a $750 million capital raise from Cigna in December of the same year.
But the rising star started falling quickly. In 2022 and 2023, the company’s finances were in a critical spot.
In April 2022, Bright Health alerted investors of plans to exit individual and family health plans in Illinois, New Mexico, Oklahoma, South Carolina, Utah, and Virginia. Then, in October of the same year, the payer announced it would exit the individual and family health plan markets in nine states and the Medicare Advantage markets in all but two states.
Slimming down to more predictable and profitable services, the payer will continue to offer its Fully Aligned Care Model, some Medicare Advantage plans, and participate in the ACO REACH Program in certain states.
Bright Health’s 2022 fourth quarter and full year earnings report warned of “a disclosure around substantial doubt of the Company’s ability to continue as a ‘going concern’.”
By June 2023, Bright Health was in the process of selling off its last Medicare Advantage plans. Its California plans went to Molina Healthcare (Molina) for $600 million and all the proceeds will go to bank lenders or will cover liabilities from its Affordable Care Act (ACA) marketplace business.
The payer entered into a provider agreement with Molina to support the company’s Medicaid and ACA marketplace populations in two states, starting in 2024.
The story may not be over for Bright Health. In the first two quarters of 2023, the company reported growing revenue and lower losses.
Oscar Health
Founded: 2012
Went public: March 2021
Valuation in 2021: $7.7 billion
Revenue in 2022: $3.9 billion (Net loss: $609.6 million)
Like Bright Health, Oscar Health (Oscar) has struggled to turn a profit since it went public. However, the payer’s net losses have decreased over time and its revenue has grown between 2021 and 2023.
The payer got a boost in 2021 enrollment due to the Biden administration’s extended special enrollment period for the ACA marketplace. Oscar’s strong presence in this market made these regulatory changes particularly impactful for the company’s membership.
There were 577,700 Americans enrolled in Oscar’s individual and small group plans at the end of 2021. Enrollment grew to over 1.08 million the following year. As of June 30, 2023, enrollment fell to 900,228 members in the individual and small group marketplaces.
Oscar pulled out of two markets, Arkansas and Colorado, in 2022 and expected to leave California’s exchange in 2024. But the payer announced intentions of reentering California at a later time and expanding its presence during a 2023 earnings call.
Revenue in 2021 totaled more than $1.8 billion, with a net loss of over $571.2 million, according to the year’s fourth quarter and full year report. At the end of 2022, the payer reported total revenue of over $3.96 million with a net loss of over $609.6 million.
Cigna partnered with Oscar starting in 2020 to provide health insurance for small businesses. Since then, the partners have expanded their footprint into new states. They also launched a virtual primary care plan.
Clover Health
Founded: 2014
Went public: January 2021
Valuation in 2021: $7 billion
Revenue in 2022: $3.47 billion (Net loss: $338.8 million)
Clover Health achieved revenue growth and diminished its losses overtime, but a single report in 2021 kept the company engaged in litigation for more than two years.
Unlike its competitors, Clover Health achieved its IPO by merging with a special purpose acquisition company (SPAC), Social Capital Hedosophia Holdings.
Although the move was unique among rising venture capital-funded health insurance organizations, it fit into a nationwide trend of companies gravitating toward SPACs for their IPOs. Over half of all new publicly listed companies in 2020 were SPACs. This avenue to an IPO can de-risk the process for companies.
Over the course of 2021, the payer’s Medicare Advantage enrollment rose 25 percent.
However, the company had a volatile first month on the stock market in 2021 after a report emerged that Clover Health failed to disclose a Department of Justice (DOJ) investigation. Clover Health acknowledged the investigation but responded that the company’s leaders did not need to disclose the regulatory investigation under the law.
The company’s shares fell 12 percent after the report. It rebounded slightly after Clover Health leaders responded.
A year later in 2022, the company’s losses diminished and its revenue jumped from almost $1.5 billion in 2021 to $3.5 billion. The company reported that its $587.8 million loss in 2021 had dropped to $338.8 million by the fourth quarter of 2022.
Despite these positive trends, the 2021 report continued to haunt Clover Health into 2023, when the payer finally settled all remaining civil litigation related to its failure to disclose the DOJ investigation. The final settlement did not involve payment except for covering legal fees, but the securities class action lawsuit, settled in April 2023, required a payment of $22 million.
Clover Health maintains that it did not commit any wrongdoing.
Alignment Healthcare
Founded: 2013
Went public: March 2021
Valuation in 2021: $3.3 billion
Revenue in 2022: $1.43 billion (Net loss: $149.5 million)
Alignment Healthcare (Alignment) nearly doubled its footprint in 2022 after a year of revenue and enrollment growth. The company also launched its virtual Medicare Advantage plan in 2021.
In 2021, Alignment reported growth in enrollment and revenue, but also growth in net losses. Its enrollment grew 26 percent year-over-year compared to 2020. Revenue increased 21.7 percent year-over-year to hit $1.16 billion, more than 28 percent of which was tied to health plan premium revenues. The company’s net loss grew from $22.9 million to almost $195.3 million.
In 2022, revenue continued to increase by 23 percent year-over-year, exceeding the company’s expectations. Its net losses dropped from almost $195.3 million to slightly over $149.5 million.
“Alignment Healthcare’s relentless focus on quality allowed us to deliver strong financial results in 2022, having exceeded or met our guidance across all four of our key performance indicators for the eighth consecutive quarter,” John Kao, founder and chief executive officer of Alignment, said in the 2022 full year and fourth quarter earnings report press release.
“As we approach the company’s 10-year anniversary, we’re confident that strategic investments in our people and technology will continue to drive meaningful improvements in the health and quality of life of all those we serve.”
By the end of the second quarter in 2023, Alignment’s membership had grown 17 percent year-over-year and crossed the 100,000-member threshold. Its revenue grew 26.2 percent, with health plan premium revenue accounting for 21 percent of that growth.
