UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40537

BRIGHT HEALTH GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware			47-4991296
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

8000 Norman Center Drive, Suite ~~1200~~900, Minneapolis, MN			55437
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (612) 238-1321

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, $0.0001 par value

BHG

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	ox
Non-accelerated filer	xo	Smaller reporting company	o
Emerging growth company	o		o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of May ~~3, 2022~~2, 2023, the registrant had ~~629,245,760~~636,146,133 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents


PART I.	FINANCIAL INFORMATION	2

Item 1.	Financial Statements	2

	Condensed Consolidated Balance Sheets (Unaudited)	2

	Condensed Consolidated Statements of Income (Loss) (Unaudited)	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	4

	Condensed Consolidated Statements of Changes in Redeemable Preferred Stock and Shareholders’ Equity (Deficit) (Unaudited)	5

	Condensed Consolidated Statements of Cash Flows (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2831

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4042

Item 4.	Controls and Procedures	4043

PART II.	OTHER INFORMATION	4144

Item 1.	Legal Proceedings	4144

Item 1A.	Risk Factors	4144

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	4144

Item 3.	Defaults upon Senior Securities	4144

Item 4.	Mine Safety Disclosures	4144

Item 5.	Other Information	4144

Item 6.	Exhibits	4246

Table of Contents

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended ~~(“the Exchange~~(the “Exchange Act”). Statements made in this Quarterly Report that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements, and should be evaluated as such. Forward-looking statements include any statement or information concerning possible or assumed future results of operations, our business plan and strategies, and our operational and financial outlook, estimates, projections, and guidance. These statements often include words such as “anticipate,” “expect,” “plan,” “believe,” “intend,” “project,” “forecast,” “estimates,” “projections,” “should,” “might,” “may,” ~~“will”~~“will,” “ensure” and other similar expressions. Such forward-looking statements are subject to various risks, uncertainties and assumptions. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Factors that might materially affect such forward-looking statements include: our ability to raise capital and continue as a going concern; our ability to comply with the terms of our credit facility, including financial covenants, both during and after any waiver period, and/or obtain any additional waivers of any terms of our credit facility to the extent required; our ability to sell our Medicare Advantage business in California on acceptable terms, including our ability to receive the proceeds thereof in a manner that would alleviate our current financial position; our ability to quickly and efficiently wind down our Individual and Family Plan (“IFP”) businesses and Medicare Advantage (“MA”) businesses outside of California; potential disruptions to our business due to our corporate restructuring and resulting headcount reduction; our ability to accurately estimate and effectively manage the costs relating to changes in our business offerings and models; a delay or inability to withdraw regulated capital from our subsidiaries; our ability to comply with ongoing regulatory requirements, including consent decrees or government orders; a lack of acceptance or slow adoption of our business model; our ability to retain existing consumers and expand consumer enrollment; our and our Care Partners’ ability to obtain and accurately assess, code, and report ~~Individual~~IFP and ~~Family Plan (“IFP”) and Medicare Advantage (“MA”)~~MA risk adjustment factor scores for consumers; our ability to contract with care providers and arrange for the provision of quality care; our ability to accurately estimate our medical expenses, effectively manage our costs and claims liabilities or appropriately price our products and charge premiums; our ability to obtain claims information timely and accurately; the impact of the ongoing COVID-19 pandemic on our business and results of operations; the risks associated with our reliance on third-party providers to operate our business; the impact of modifications or changes to the U.S. health insurance markets; our ability to manage the growth of our business; our ability to operate, update or implement our technology platform and other information technology systems; our ability to retain key executives; our ability to successfully pursue acquisitions and integrate acquired businesses; the occurrence of severe weather events, catastrophic health events, natural or man-made disasters, and social and political conditions or civil unrest; our ability to prevent and contain data security incidents and the impact of data security incidents on our members, patients, employees and financial results; our ability to comply with requirements to maintain effective internal controls; our ability to adapt to new risks associated with our expansion into ~~Direct Contracting;~~the ACO REACH program; our ability to comply with the continued listing standards of the New York Stock Exchange; and the other factors set forth under the heading “Risk Factors” in this Quarterly Report and Bright Health Group’s Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, that was filed with the United States Securities and Exchange Commission ~~(“SEC”~~(the “SEC”) on March ~~18,~~ 16, 2023 (“2022 ~~(“2021~~ Form 10-K”) and our other filings with the SEC.

The preceding list is not intended to be an exhaustive list of all of the factors that might affect our forward-looking statements. The forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us. These statements are only predictions based upon our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Other sections of this Quarterly Report may include additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.

You should not rely upon forward-looking statements as predictions of future events. Our forward-looking statements speak only as of the date of this Quarterly Report and, although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance and events and circumstances reflected in such forward-looking statements will be achieved or occur at all. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this release to conform these statements to actual results or to changes in our expectations.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Bright Health Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

March 31,
2022 December 31,
2021
Assets
Current assets:
Cash and cash equivalents $ 1,505,547 $ 1,061,179
Short-term investments 692,472 193,835
Accounts receivable, net of allowance of $5,172 and $4,074, respectively 142,695 113,474
Direct contracting performance year receivable 638,641 —
Prepaids and other current assets 315,422 291,712
Total current assets 3,294,777 1,660,200
Other assets:
Long-term investments 733,465 675,192
Property, equipment and capitalized software, net 41,279 38,344
Goodwill 835,450 835,140
Intangible assets, net 326,617 343,860
Other non-current assets 43,438 45,603
Total other assets 1,980,249 1,938,139
Total assets $ 5,275,026 $ 3,598,339
Liabilities, Redeemable Noncontrolling Interest, Redeemable Preferred Stock and Shareholders’ Equity (Deficit)
Current liabilities:
Medical costs payable $ 1,155,155 $ 817,975
Accounts payable 128,407 118,140
Unearned revenue 34,893 53,295
Risk adjustment payable 1,285,446 931,170
Direct contracting performance year obligation 533,537 —
Short-term borrowings — 155,000
Other current liabilities 251,523 207,238
Total current liabilities 3,388,961 2,282,818
Other liabilities 38,849 41,994
Total liabilities 3,427,810 2,324,812
Commitments and contingencies (Note 10) 0 0
Redeemable noncontrolling interests 143,011 128,407
Series A redeemable preferred stock, $0.0001 par value; 100,000,000 shares authorized in 2022 and 2021; 750,000 and — shares issued and outstanding in 2022 and 2021, respectively 747,481 —
Shareholders’ equity (deficit):
Common stock, $0.0001 par value; 3,000,000,000 shares authorized in 2022 and 2021; 628,992,422 and 628,622,872 shares issued and outstanding in 2022 and 2021, respectively 63 63
Additional paid-in capital 2,894,421 2,861,243
Accumulated deficit (1,896,085) (1,700,851)
Accumulated other comprehensive loss (29,675) (3,335)
Treasury stock, at cost, 2,522,148 shares at March 31, 2022 and December 31, 2021, respectively (12,000) (12,000)
Total shareholders’ equity (deficit) 956,724 1,145,120
Total liabilities, redeemable noncontrolling interests, redeemable preferred stock and shareholders’ equity (deficit) $ 5,275,026 $ 3,598,339


	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	382,506	$	466,325
Short-term investments	12,112		13,206
Accounts receivable, net of allowance of $6,513 and $6,098, respectively	125,241		73,605
ACO REACH performance year receivable	882,884		99,181
Current assets of discontinued operations (Note 16)	2,225,739		2,783,474
Prepaids and other current assets	142,932		134,843
Total current assets	3,771,414		3,570,634
Other assets:
Long-term investments	3,816		5,401
Property, equipment and capitalized software, net	40,747		42,596
Goodwill	760,078		760,078
Intangible assets, net	242,286		249,083
Other non-current assets	29,664		37,260
Total other assets	1,076,591		1,094,418
Total assets	4,848,005		4,665,052
Liabilities, Redeemable Noncontrolling Interest, Redeemable Preferred Stock and Shareholders’ Equity (Deficit)
Current liabilities:
Medical costs payable	$	458,465	$	411,753
Accounts payable	33,638		67,854
Unearned revenue	139,416		242
ACO REACH performance year obligation	719,420		—
Short-term borrowings	303,947		303,947
Current liabilities of discontinued operations (Note 16)	2,225,739		2,783,474
Other current liabilities	131,256		121,424
Total current liabilities	4,011,881		3,688,694
Other liabilities	32,191		36,673
Total liabilities	4,044,072		3,725,367
Commitments and contingencies (Note 11)
Redeemable noncontrolling interests	223,503		219,758
Redeemable Series A preferred stock, $0.0001 par value; 750,000 shares authorized in 2023 and 2022; 750,000 shares issued and outstanding in 2023 and 2022	747,481		747,481
Redeemable Series B preferred stock, $0.0001 par value; 175,000 shares authorized in 2023 and 2022; 175,000 shares issued and outstanding in 2023 and 2022	172,936		172,936
Shareholders’ equity (deficit):
Common stock, $0.0001 par value; 3,000,000,000 shares authorized in 2023 and 2022; 636,142,597 and 630,271,508 shares issued and outstanding in 2023 and 2022, respectively	63		63
Additional paid-in capital	3,005,592		2,972,271
Accumulated deficit	(3,331,406)		(3,156,395)
Accumulated other comprehensive loss	(2,236)		(4,429)
Treasury Stock, at cost, 2,522,148 shares at March 31, 2023, and December 31, 2022, respectively	(12,000)		(12,000)
Total shareholders’ equity (deficit)	(339,987)		(200,490)
Total liabilities, redeemable noncontrolling interests, redeemable preferred stock and shareholders’ equity (deficit)	$	4,848,005	$	4,665,052

See accompanying Notes to Condensed Consolidated Financial Statements

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Bright Health Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Loss)

(in thousands, except per share data)

(Unaudited)


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Revenue:	Revenue:					Revenue:
Premium revenue	Premium revenue	$	1,680,450	$	860,631	Premium revenue	$	502,918	$	458,962
Direct contracting revenue		182,797		—
ACO REACH revenue						ACO REACH revenue	239,807		182,797
Service revenue	Service revenue	12,428		8,438		Service revenue	13,570		12,392
Investment income (loss)	Investment income (loss)	(40,100)		5,489		Investment income (loss)	46		(40,888)
Total revenue	Total revenue	1,835,575		874,558		Total revenue	756,341		613,263
Operating expenses:	Operating expenses:					Operating expenses:
Medical costs	Medical costs	1,580,596		684,570		Medical costs	688,515		594,248
Operating costs	Operating costs	418,918		208,240		Operating costs	140,324		159,117
Restructuring charges						Restructuring charges	3,357		6,864
Depreciation and amortization	Depreciation and amortization	13,041		4,581		Depreciation and amortization	9,891		12,897
Total operating expenses	Total operating expenses	2,012,555		897,391		Total operating expenses	842,087		773,126
Operating loss	Operating loss	(176,980)		(22,833)		Operating loss	(85,746)		(159,863)
Interest expense	Interest expense	1,193		546		Interest expense	7,787		1,193
Other income	Other income	(784)		—		Other income	—		(784)
Loss before income taxes		(177,389)		(23,379)
Loss from continuing operations before income taxes						Loss from continuing operations before income taxes	(93,533)		(160,272)
Income tax expense	Income tax expense	3,240		1,166		Income tax expense	1,259		3,242
Net loss		(180,629)		(24,545)
Net earnings attributable to noncontrolling interests		(14,605)		(617)
Net loss from continuing operations						Net loss from continuing operations	(94,792)		(163,514)
Loss from discontinued operations, net of tax (Note 16)						Loss from discontinued operations, net of tax (Note 16)	(74,669)		(17,115)
Net Loss						Net Loss	(169,461)		(180,629)
Net earnings from continuing operations attributable to noncontrolling interests						Net earnings from continuing operations attributable to noncontrolling interests	(5,550)		(14,605)
Series A preferred stock dividend accrued	Series A preferred stock dividend accrued	(8,938)		—		Series A preferred stock dividend accrued	(9,714)		(8,938)
Series B preferred stock dividend accrued						Series B preferred stock dividend accrued	(2,180)		—
Net loss attributable to Bright Health Group, Inc. common shareholders	Net loss attributable to Bright Health Group, Inc. common shareholders	$	(204,172)	$	(25,162)	Net loss attributable to Bright Health Group, Inc. common shareholders	$	(186,905)	$	(204,172)

Basic and diluted loss per share attributable to Bright Health Group, Inc. common shareholders	Basic and diluted loss per share attributable to Bright Health Group, Inc. common shareholders	$	(0.32)	$	(0.18)	Basic and diluted loss per share attributable to Bright Health Group, Inc. common shareholders
Continuing operations						Continuing operations	$	(0.18)	$	(0.30)
Discontinued operations						Discontinued operations	(0.12)		(0.02)
Basic and diluted loss per share						Basic and diluted loss per share	(0.30)		(0.32)

Basic and diluted weighted-average common shares outstanding	Basic and diluted weighted-average common shares outstanding	628,765		140,175		Basic and diluted weighted-average common shares outstanding	631,534		628,765

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

Bright Health Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(Unaudited)


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Net loss	Net loss	$	(180,629)	$	(24,545)	Net loss	$	(169,461)	$	(180,629)
Other comprehensive (loss) income:	Other comprehensive (loss) income:					Other comprehensive (loss) income:
Unrealized investment holding losses arising during the year, net of tax of $0 and $0, respectively		(28,089)		(980)
Unrealized investment holding gains (losses) arising during the year, net of tax of $0 and $0, respectively						Unrealized investment holding gains (losses) arising during the year, net of tax of $0 and $0, respectively	1,729		(28,089)
Less: reclassification adjustments for investment (losses) gains, net of tax of $0 and $0, respectively	Less: reclassification adjustments for investment (losses) gains, net of tax of $0 and $0, respectively	(1,749)		62		Less: reclassification adjustments for investment (losses) gains, net of tax of $0 and $0, respectively	(464)		(1,749)
Other comprehensive (loss) income	Other comprehensive (loss) income	(26,340)		(1,042)		Other comprehensive (loss) income	2,193		(26,340)
Comprehensive loss	Comprehensive loss	(206,969)		(25,587)		Comprehensive loss	(167,268)		(206,969)
Comprehensive loss attributable to noncontrolling interests	Comprehensive loss attributable to noncontrolling interests	(14,605)		(617)		Comprehensive loss attributable to noncontrolling interests	(5,550)		(14,605)
Comprehensive loss attributable to Bright Health Group, Inc. common shareholders	Comprehensive loss attributable to Bright Health Group, Inc. common shareholders	$	(221,574)	$	(26,204)	Comprehensive loss attributable to Bright Health Group, Inc. common shareholders	$	(172,818)	$	(221,574)

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

Bright Health Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Redeemable Preferred Stock and Shareholders’ Equity (Deficit)

(in thousands)

(Unaudited)


	Redeemable Preferred Stock			Common Stock			Additional Paid-In Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
2023	Shares	Amount		Shares	Amount
Balance at January 1, 2023	925	$	920,417	630,272	$	63	$	2,972,271	$	(3,156,395)	$	(4,429)	$	(12,000)	$	(200,490)
Net loss	—	—		—	—		—		(175,011)		—		—		(175,011)
Issuance of common stock	—	—		5,871	—		1		—		—		—		1
Share-based compensation	—	—		—	—		33,320		—		—		—		33,320
Other comprehensive loss	—	—		—	—		—		—		2,193		—		2,193
Balance at March 31, 2023	925	$	920,417	636,143	$	63	$	3,005,592	$	(3,331,406)	$	(2,236)	$	(12,000)	$	(339,987)

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

Bright Health Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Redeemable Preferred Stock and Shareholders’ Equity (Deficit)

(in thousands)

(Unaudited)

Redeemable
Preferred Stock Common Stock Additional
Paid-In
Capital Retained
Earnings
(Deficit) Accumulated
Other
Comprehensive
Income (Loss) Treasury Stock Total
2022 Shares Amount Shares Amount
Balance at January 1, 2022 — $ — 628,623 $ 63 $ 2,861,243 $ (1,700,851) $ (3,335) $ (12,000) $ 1,145,120
Net loss — — — — — (195,234) — — (195,234)
Issuance of preferred stock 750 747,481 — — — — — — —
Issuance of common stock — — 370 — 257 — — — 257
Share-based compensation — — — — 32,921 — — — 32,921
Other comprehensive loss — — — — — — (26,340) — (26,340)
Balance at March 31, 2022 750 $ 747,481 628,993 $ 63 $ 2,894,421 $ (1,896,085) $ (29,675) $ (12,000) $ 956,724

~~See accompanying Notes to Condensed Consolidated Financial Statements~~

~~Table of Contents~~

~~Bright Health Group, Inc. and Subsidiaries~~

~~Condensed Consolidated Statements of Changes in Redeemable Preferred Stock and Shareholders’ Equity (Deficit)~~

~~(in thousands)~~

~~(Unaudited)~~


		Redeemable Preferred Stock			Common Stock			Additional Paid-In Capital				Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock				Total			Redeemable Preferred Stock						Common Stock			Additional Paid-In Capital			Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
2021		Shares	Amount		Shares	Amount
Balance at January 1, 2021		164,245	$	1,681,015	137,663	$	14			$	9,877			$	(515,989)			$	2,426					$	—		$	(503,672)
2022																						2022	Shares			Amount			Shares	Amount		Additional Paid-In Capital			Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance at January 1, 2022																						Balance at January 1, 2022	—			$	—		628,623	$	63
Net loss	Net loss	—	—		—	—		—				(25,162)		—		—				(25,162)		Net loss	—			—			—	—				—			(195,234)		—		—		(195,234)
Issuance of preferred stock	Issuance of preferred stock	1,420	55,137		—	—		—				—		—		—				—		Issuance of preferred stock	750			747,481			—	—		—			—		—		—		—
Issuance of common stock	Issuance of common stock	—	—		4,661	—		4,893				—		—		—				4,893		Issuance of common stock	—			—			370	—		257			—		—		—		257
Share-based compensation	Share-based compensation	—	—		—	—		5,176				—		—		—				5,176		Share-based compensation	—			—			—	—		32,921			—		—		—		32,921
Other comprehensive loss	Other comprehensive loss	—	—		—	—		—				—		(1,042)		—				(1,042)		Other comprehensive loss	—			—			—	—		—			—		(26,340)		—		(26,340)
Balance at March 31, 2021		165,665	$	1,736,152	142,324	$	14	$	19,946			$	(541,151)	$	1,384	$	—			$	(519,807)
Balance at March 31, 2022																						Balance at March 31, 2022	750			$	747,481		628,993	$	63	$	2,894,421		$	(1,896,085)	$	(29,675)	$	(12,000)	$	956,724

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

Bright Health Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(180,629)	$	(25,162)	Net loss	$	(169,461)	$	(180,629)
Adjustments to reconcile net loss to net cash provided by operating activities:	Adjustments to reconcile net loss to net cash provided by operating activities:					Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	13,041		4,581		Depreciation and amortization	9,891		13,041
Impairment of intangible assets	Impairment of intangible assets	6,720		—		Impairment of intangible assets	—		6,720

Share-based compensation	Share-based compensation	32,921		5,176		Share-based compensation	33,320		32,921
Deferred income taxes	Deferred income taxes	717		1,166		Deferred income taxes	436		717
Unrealized loss on equity securities	Unrealized loss on equity securities	40,968		—		Unrealized loss on equity securities	—		40,968
Other, net	Other, net	2,378		2,694		Other, net	(2,807)		2,378
Changes in assets and liabilities, net of acquired assets and liabilities:	Changes in assets and liabilities, net of acquired assets and liabilities:					Changes in assets and liabilities, net of acquired assets and liabilities:
Accounts receivable	Accounts receivable	(29,221)		(23,188)		Accounts receivable	(43,409)		(29,221)
Direct contracting performance year receivable		(638,641)		—
ACO REACH performance year receivable						ACO REACH performance year receivable	(783,703)		(638,641)
Other assets	Other assets	(22,270)		(15,707)		Other assets	22,448		(22,270)
Medical cost payable	Medical cost payable	337,180		225,814		Medical cost payable	(423,459)		337,180
Risk adjustment payable	Risk adjustment payable	354,276		137,215		Risk adjustment payable	4,153		354,276
Accounts payable and other liabilities	Accounts payable and other liabilities	52,182		30,096		Accounts payable and other liabilities	(119,416)		52,182
Unearned revenue	Unearned revenue	(18,402)		918		Unearned revenue	137,563		(18,402)
Direct contracting performance year obligation		533,537		—
Net cash provided by operating activities		484,757		343,603
ACO REACH performance year obligation						ACO REACH performance year obligation	719,420		533,537
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(615,024)		484,757
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of investments	Purchases of investments	(782,091)		(298,957)		Purchases of investments	(2,880)		(782,091)
Proceeds from sales, paydown, and maturities of investments	Proceeds from sales, paydown, and maturities of investments	154,765		265,521		Proceeds from sales, paydown, and maturities of investments	690,161		154,765
Purchases of property and equipment	Purchases of property and equipment	(5,491)		(4,215)		Purchases of property and equipment	(1,863)		(5,491)
Business divestitures, net of cash disposed of						Business divestitures, net of cash disposed of	1,370		—
Business acquisitions, net of cash acquired	Business acquisitions, net of cash acquired	(310)		(18,624)		Business acquisitions, net of cash acquired	—		(310)
Net cash used in investing activities		(633,127)		(56,275)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	686,788		(633,127)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Repayments of short-term borrowings						Repayments of short-term borrowings	—		(155,000)
Proceeds from issuance of preferred stock	Proceeds from issuance of preferred stock	747,481		—		Proceeds from issuance of preferred stock	—		747,481
Proceeds from issuance of common stock	Proceeds from issuance of common stock	257		4,893		Proceeds from issuance of common stock	1		257
Proceeds from short-term borrowings		—		200,000
Repayments of short-term borrowings		(155,000)		—
Payments for debt issuance costs		—		(3,391)
Payments for IPO offering costs		—		(1,268)
Net cash provided by financing activities		592,738		200,234
Distributions to noncontrolling interest holders						Distributions to noncontrolling interest holders	(1,805)		—

Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(1,804)		592,738
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	444,368		487,562		Net increase in cash and cash equivalents	69,960		444,368
Cash and cash equivalents – beginning of year	Cash and cash equivalents – beginning of year	1,061,179		488,371		Cash and cash equivalents – beginning of year	1,932,290		1,061,179
Cash and cash equivalents – end of period	Cash and cash equivalents – end of period	$	1,505,547	$	975,933	Cash and cash equivalents – end of period	$	2,002,250	$	1,505,547
Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Changes in unrealized (loss) gain on available-for-sale securities in OCI		$	(26,340)	$	(1,042)
Changes in unrealized loss on available-for-sale securities in OCI						Changes in unrealized loss on available-for-sale securities in OCI	$	2,193	$	(26,340)
Cash paid for interest	Cash paid for interest	1,168		244		Cash paid for interest	7,157		1,168
Supplemental schedule of non-cash activities:
Redeemable convertible preferred stock issued for acquisitions		$	—	$	32,982

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

Bright Health Group, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

Organization: Bright Health Group, Inc. and subsidiaries (collectively, “Bright Health,” “we,” “our,” “us,” or the “Company”) was founded in 2015 to transform healthcare. Our mission of Making Healthcare Right.Together. is built upon the belief that by aligning the best local resources in healthcare delivery with the financing of care we can drive a superior consumer experience, optimize clinical outcomes, reduce systemic waste, and lower costs. We are a healthcare company building a national Integrated System of Care in close partnership with our Care Partners. Our differentiated approach is built on alignment, focused on the consumer, and powered by technology. We have two market facing businesses: ~~NeueHealth~~our Consumer Care business and Bright HealthCare. ~~NeueHealth~~Consumer Care provides care delivery and value-based enablement services through our owned and affiliated clinics. Bright HealthCare offers ~~Commercial and~~ Medicare health plan products ~~across the nation.~~

~~Beginning January 1, 2022, 2 Direct Contracting Entities (“DCEs”) aligned with our NeueHealth segment began participating~~ in the Centers for Medicare and Medicaid Services' (“CMS”) Global and Professional Direct Contracting model (“DC Model”). Both DCEs assume full risk for the total cost of care of aligned beneficiaries.

California.

In April 2022, we announced that Bright HealthCare will be exiting the Commercial marketplace in 6 states for the 2023 plan year: Illinois, New Mexico, Oklahoma, South Carolina, Utah, and Virginia, as well as discontinuing our employer group business.

Basis of Presentation: The condensed consolidated financial statements include the accounts of Bright Health Group, Inc. and all subsidiaries and controlled companies. All intercompany balances and transactions are eliminated upon consolidation. The condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. We have omitted certain footnote disclosures that would substantially duplicate the disclosures in our audited consolidated financial statements, unless the information contained in those disclosures materially changed or is required by GAAP. As such, the condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, ~~2021~~2022 included in our Form 10-K for the year ended December 31, ~~2021~~2022 (“~~2021~~2022 Form 10-K”). The accompanying condensed consolidated financial statements include all normal recurring adjustments necessary for fair presentation of the interim financial statements.

Use of Estimates: The preparation of our condensed consolidated financial statements in conformance with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Our most significant estimates include medical costs payable, risk adjustment revenue and associated payables and receivables, premium deficiency reserve, ~~Direct Contracting~~ACO REACH performance year receivable and obligation, and valuation and impairment of goodwill and other intangible assets. Actual results could differ from these estimates.

~~Performance Guarantees:~~ Going Concern:~~Through our participation~~ The condensed consolidated financial statements have been prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the ~~DC Model, we determined that our arrangements with the providers~~normal course of our DCE beneficiaries require us to guarantee their performance to CMS. We recognized our obligation to guarantee their performance for the duration of the performance year on the Condensed Consolidated Balance Sheets. As we fulfill our obligation we ratably amortize the guarantee for the amount that represents the completed portion of the performance obligation as direct contracting revenue on the Condensed Consolidated Statements of Income (Loss). Direct contracting revenue is derived from the estimated annual sum of the capitation payments made to the DCEs for services within the scope of the capitation arrangement with CMS and fee-for-service (“FFS”) payments from CMS made directly to third-party providers for our aligned beneficiaries. For each performance year, the final consideration due to the DCEs by CMS (shared savings) or the consideration due to CMS by the DCEs (shared loss) is reconciled in the year following the performance year. Periodically during the performance year, CMS will measure the shared savings or loss and adjust the performance benchmark and thus the remaining performance obligation if we are in a probable shared loss position.business.

~~Net loss per share:~~ ~~Prior to 2022, basic~~The Company has a history of operating losses, and we generated a net loss ~~per share attributable~~of $169.5 million for the three months ended March 31, 2023. Additionally, the Company experienced negative operating cash flows primarily related to ~~common stockholders was computed by dividing~~our discontinued Bright HealthCare – Commercial segment for the ~~net loss attributable~~three months ended March 31, 2023, requiring additional cash to ~~common stockholders~~be infused to satisfy statutory capital requirements. The Company’s discontinued operations will continue to experience negative cash outflows through the third quarter of 2023, as it pays out the 2022 IFP risk adjustment obligations.

In addition, the Company’s $350.0 million revolving credit agreement with a syndicate of banks (the “Credit Agreement”), matures on February 28, 2024. On March 1, 2023, the Company disclosed that during the First Quarter of 2023, the Company breached the minimum liquidity covenant of the Credit Agreement. On April 28, 2023, the Company entered into an amended and restated limited waiver and consent (the “Waiver”) under the Credit Agreement, which amended and restated the limited waiver and consent entered into by the ~~weighted average number~~Company under the Credit Agreement on February 28, 2023 (the "Original Waiver"). The Waiver amends the Original Waiver by, among other things, extending the temporary waiver of ~~shares~~compliance with the minimum liquidity covenant set forth in Section 11.12.2 of ~~common stock outstanding for~~ the ~~period. Diluted net loss attributable~~Credit Agreement, which originally spanned from January 25, 2023 to ~~common stockholders is computed~~April 30, 2023, to January 25, 2023 to June 30, 2023 (the “Extended Waiver Period”). From April 29, 2023 until the end of the Extended Waiver Period, the Company will be subject to a minimum liquidity covenant of not less than $50.0 million. The Waiver also (i) amends the Original Waiver and the Credit Agreement by ~~adjusting net losses attributable~~changing the definition of "Minimum Liquidity" to ~~common stockholders~~mean unrestricted cash of the Company and the other loan parties and (ii) waives permanently any default or event of default arising from the failure to ~~reallocate undistributed earnings based~~deliver the 2022 audit report without a qualification as to "going concern." In addition, during the Extended Waiver Period, the Company will not have access to certain negative covenant baskets and will be subject to additional cash-flow, cash balance, and other reporting requirements.

Based on our projected cash flows and absent any other action, the ~~potential impact of dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing~~Company may not meet certain covenants under the ~~diluted net loss attributable to common stockholders by~~Credit Agreement or the Waiver which may result in the obligations under the Credit Agreement being accelerated. The Company will

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Bright Health Group, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~weighted average number of shares of common stock outstanding for~~require additional liquidity to meet its obligations as they come due in the ~~period, including potential dilutive common shares. Beginning~~12 months following the date the condensed consolidated financial statements contained in ~~2022, we also include our Series A Convertible Perpetual Preferred Stock (“Series A Preferred Stock”) issued in January 2022~~this Quarterly Report are issued. These conditions raise substantial doubt about the Company’s ability to continue as a ~~participating security~~going concern.

In response to these conditions, management has implemented a restructuring plan to reduce capital needs and our operating expenses in the ~~computation~~future to drive positive operating cash flow and increase liquidity. The Company’s Bright HealthCare business has exited the Commercial marketplace at the end of ~~net loss per share pursuant~~the 2022 plan year. In addition to our market exits, management is in the process of executing upon additional restructuring activities, which include reducing our workforce, exiting excess office space, and terminating or restructuring contracts. The Company also closed on a $175.0 million capital raise in October 2022 to capitalize our continuing operations as further described in Note 9, Preferred Stock. On April 28, 2023, the Company disclosed that it is exploring strategic alternatives for its California Medicare Advantage business, which consists of Brand New Day and Central Health Plan, with a focus on a potential sale.

In the event the Company is unable to execute on its strategic plans with a focus on potential sale of the California Medicare Advantage business, obtain additional financing or take other management actions, among other potential consequences, we forecast we will be unable to satisfy our obligations. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.

The condensed consolidated financial statements do not include any adjustments relating to the ~~two-class method. The two-class method~~recoverability and classification of ~~calculating net income (loss) per share is an allocation method~~recorded asset amounts or the amounts and classification of liabilities that ~~calculates earnings per share for common stock and participating securities. Under~~might result from the ~~two-class method, total dividends due to the holders~~outcome of the Series A Preferred Stock and undistributed earnings allocated to participating securities are subtracted from net income (loss) in determining net income (loss) attributable to common stockholders.this uncertainty.

Operating Costs: Our operating costs, by functional classification for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, are as follows (in thousands):


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Compensation and fringe benefits	Compensation and fringe benefits	$	132,067	$	57,026	Compensation and fringe benefits	$	85,208	$	96,216
Professional fees	Professional fees	66,811		39,463		Professional fees	12,687		14,739
Marketing and selling expenses	Marketing and selling expenses	91,807		50,205		Marketing and selling expenses	20,344		18,382
Premium taxes and fees		69,781		37,731
General and administrative expenses	General and administrative expenses	40,710		14,440		General and administrative expenses	10,974		15,942
Other operating expenses	Other operating expenses	17,742		9,375		Other operating expenses	11,111		13,838
Total operating costs	Total operating costs	$	418,918	$	208,240	Total operating costs	$	140,324	$	159,117

Recently Issued and Adopted Accounting Pronouncements: ~~In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06,~~ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. We adopted ASU 2020-06 on January 1, 2022. The adoption did not have a material impact on our financial condition, results of operations or cash flows.

There ~~were~~are no ~~other~~ accounting pronouncements that were recently issued and not yet adopted or adopted since our audited consolidated financial statements were issued that had, or are expected to have, a material impact on our consolidated financial position, results of operations, or cash flows.

~~NOTE 2. BUSINESS COMBINATIONS~~

~~Centrum Acquisition:~~Correction of prior period financial statements: ~~On July 1, 2021, we acquired 75%~~Subsequent to the issuance of the ~~outstanding~~condensed consolidated financial statements for the quarter ended March 31, 2022, we identified an error in the accounting for gross versus net revenue recognition conclusion from certain value-based care arrangements. As a result, Premium revenue and Medical costs have been reduced by $58.3 million for the quarter ended March 31, 2022. There is no impact on Operating loss or Net loss. There was no impact to the condensed consolidated balance sheets, condensed consolidated statements of comprehensive income (loss), condensed consolidated statements of changes in redeemable preferred stock and shareholders’ equity ~~interests of Centrum Medical Holdings, LLC (“Centrum”) for cash consideration of $222.4 million~~(deficit) and ~~$75.0 million of common stock, for total purchase consideration of $296.2 million, net of $1.2 million~~condensed consolidated statements of cash acquired. Centrum is a value-based primary care focused, multi-specialty medical group based in Florida. Centrum operates health centers in Florida, Texas and North Carolina serving Commercial, Medicare, and Medicaid consumers across multiple payors. Centrum is included in our NeueHealth reportable segment.flows.

The ~~total preliminary purchase consideration for~~Company determined that the ~~Centrum acquisition is allocated to tangible and intangible assets acquired and liabilities assumed based on their respective fair values as~~correction of ~~the acquisition date. The excess of the purchase price over the net assets acquired is recorded as goodwill, which is predominantly attributable~~these errors was not material to the ~~incremental~~condensed consolidated financial benefits achievable through Bright Health Group’s integrated care delivery model, whereby Bright HealthCare members are cared for under value-based arrangements with Centrum. This model brings together the financing, distribution, and delivery of high-quality healthcare and provides the opportunity to enhance overall margin potential for the Company. The goodwill from the Centrum acquisition is expected to be deductible for tax purposes.statements.

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Bright Health Group, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~The following table discloses~~NOTE 2. RESTRUCTURING CHARGES

In October 2022, we announced our decision to further focus our business on our Fully Aligned Care Model, and that we will no longer offer commercial plans through Bright HealthCare, or Medicare Advantage products outside of California in 2023. As result of these strategic changes, we announced and have taken actions to restructure the ~~preliminary estimated fair values of assets~~Company’s workforce and ~~liabilities acquired~~reduce expenses based on our updated business model.

Restructuring charges by reportable segment and corporate for the ~~Company in the Centrum acquisition~~periods ended March 31 were as follows (in ~~thousand~~s)thousands):


~~Accounts receivable~~	$	~~1,874~~
~~Prepaids and other current assets~~	~~627~~
~~Property and equipment~~	~~2,557~~
~~Intangible assets~~	~~102,370~~
~~Other assets~~	~~8,917~~
~~Total assets~~	~~116,345~~
~~Medical payables~~	19
~~Accounts payable~~	~~359~~
~~Other current liabilities~~	~~861~~
~~Other liabilities~~	~~11,636~~
~~Total liabilities~~	~~12,875~~
~~Net identified assets acquired~~	~~103,470~~
~~Goodwill~~	~~275,066~~
~~Redeemable noncontrolling interest~~	~~(82,310)~~
~~Total purchase consideration, net of cash acquired~~	$	~~296,226~~


	Three Months Ended March 31, 2023
	Bright HealthCare		Consumer Care		Corporate & Eliminations		Total
Employee termination benefits	$	6	$	(41)	$	(725)	$	(760)
Long-lived asset impairments	—		—		880		880
Contract termination and other costs	55		—		3,182		3,237
Total continuing operations	$	61	$	(41)	$	3,337	$	3,357

The ~~preliminary fair values~~$0.9 million of ~~acquired assets and liabilities assumed represent management’s estimate~~long-lived asset impairments is the result of ~~fair value and are subject to change if additional information, such as post-close working capital adjustments, becomes available.~~

~~Our preliminary estimate~~a lease abandonment for one of intangible assets related to the Centrum acquisition consists of trade names with a 15-year useful life, customer relationships with 2- to 15-year useful lives, and a reacquired contract between Bright HealthCare and Centrum with a useful life of 4.5 years. The value of the trade name was determined using the relief of royalty method and the excess earnings method was used to value the customer relationships; both methods are considered Level 3 fair value measurements. The fair value of noncontrolling interest was determined using a market approach and included a discount to account for the lack of marketability of the noncontrolling interest.

~~The acquisition of Centrum would not have had a material impact on~~ our ~~revenue or net loss had it been included in the consolidated results of the Company for~~corporate office locations during the three months ended March 31, ~~2021.~~2023.


	Three Months Ended March 31, 2022
	Bright HealthCare		Consumer Care		Corporate & Eliminations		Total
Employee termination benefits	$	—	$	—	$	6,097	$	6,097
Long-lived asset impairments	—		—		—		—
Contract termination and other costs	—		—		767		767
Total continuing operations	$	—	$	—	$	6,864	$	6,864

~~Central Health Plan Acquisition:~~ On April 1, 2021, we acquired all of the outstanding shares of Central Health Plan of California, Inc. (“CHP”) for cash consideration of $276.0 million and $79.8 million in Series E preferred stock and $13.9 million of working capital adjustments, for total purchase consideration of $285.6 million, net of $84.1 million of cash acquired. All outstanding shares of Series E preferred stock were converted into shares of common stock automatically immediately prior to the closing of our initial public offering on June 28, 2021. CHP is an insurance provider of Medicare Advantage (“MA”) Health Maintenance Organization (“HMO”) services. CHP is included in our Bright HealthCare reportable segment.

~~The total purchase consideration~~Restructuring accrual activity recorded by major type for the ~~CHP acquisition is allocated to tangible and intangible assets acquired and liabilities assumed based on their respective fair values~~three months ended March 31, 2023 were as of the acquisition date. The excess of the purchase price over the net assets acquired is recorded as goodwill. The goodwill for CHP is attributable to synergies from leveraging CHP’s clinical model and California consumer expertise to continue to expand our MA business in the California market. The goodwill is not deductible for tax purposes.

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~~Bright Health Group, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~The following table discloses the preliminary estimated fair values of assets and liabilities acquired by the Company in the CHP acquisition~~follows (in ~~thousand~~s)thousands):

Amount Recognized as of
Acquisition Date
(as previously reported) Measurement
Period
Adjustments Amounts Recognized as of
Acquisition Date
(as adjusted)
Accounts receivable $ 16,361 $ 879 $ 17,240
Short-term investments 19,041 — 19,041
Prepaids and other current assets 25,520 10 25,530
Property and equipment 370 — 370
Intangible assets 102,000 — 102,000
Other assets — 1,249 1,249
Total assets 163,292 2,138 165,430
Medical costs payable 79,450 (3,807) 75,643
Accounts payable 2,371 — 2,371
Other current liabilities 17,212 (9,228) 7,984
Other liabilities 28,622 (2,347) 26,275
Total liabilities 127,655 (15,382) 112,273
Net identified assets acquired 35,637 17,520 53,157
Goodwill 236,037 (3,595) 232,442
Total purchase consideration, net of cash acquired $ 271,674 $ 13,925 $ 285,599


	Employee Termination Benefits		Contract Termination Costs		Total
Balance at January 1, 2023	$	24,077	$	515	$	24,592
Charges	(1,716)		—		(1,716)
Cash payments	(9,739)		(100)		(9,839)
Balance at March 31, 2023	$	12,622	$	415	$	13,037

The measurement period adjustments above primarily resulted from obtaining additional information for the valuation of deferred taxes included in other liabilities, to estimate the fair value of the right-of-use lease asset and liability includedEmployee termination benefits are recorded within other assets and other liabilities, and to recognize post-close working capital true-ups based on additional information. The preliminary fair values of acquired assets and liabilities assumed represent management’s estimate of fair value and are subject to change if additional information, such as post-close working capital adjustments, becomes available.

Our preliminary estimate of intangible assets related to the CHP acquisition consists of customer relationships with a 10-year useful life, trade names with a 15-year useful life and the provider network with a 7-year useful life. The value of the trade name was determined using the relief from royalty method and the excess earnings method was used to value the customer relationships; both methods are considered Level 3 fair value measurements.

If CHP had been included in the consolidated results of the Company for the three months ended March 31, 2021 our pro forma revenue would have been $1.0 billion and our pro forma net loss would have been $13.5 million.

~~True Health New Mexico and Zipnosis Acquisitions:~~ On March 31, 2021 we acquired all of the outstanding equity interests of True Health New Mexico, Inc. (“THNM”) for initial cash consideration of $27.5 million and $8.1 million of favorable risk-based capital adjustments, net of cash acquired of $24.1 million, for total purchase consideration of $(4.7) million. THNM is a physician-led health insurance company offering policies available through the commercial market for individual on- and off-exchange and employer-sponsored health coverage. THNM is included in our Bright HealthCare reportable segment. In addition, on March 31, 2021, we acquired Zipnosis, Inc. (“Zipnosis”), which is a telehealth platform that offers virtual care to health systems around the U.S., for aggregate consideration of $73.0 million, including $55.1 million in Series E preferred stock and adjusted for $0.5 million of tangible net equity adjustments. We acquired $3.2 million of cash as part of the Zipnosis acquisition, for net total purchase consideration of $69.8 million. Zipnosis is included in our NeueHealth reportable segment.

The total purchase consideration for the THNM and Zipnosis acquisitions is allocated to tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the acquisition date. The excess of the purchase price over the

~~Table of Contents~~

~~Bright Health Group, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

net assets acquired is recorded as goodwill. The goodwill for THNM is attributable to synergies from leveraging THNM’s strong local clinical model of care and the ability to enter into a new state of strategic interest for future growth and expansion. The goodwill from the Zipnosis acquisition is attributable to benefits from the ability to enhance our proprietary technology platform, DocSquad, and Zipnosis’ attractive virtual care capabilities to enhance Bright Health’s consumer and provider connectivity. The goodwill from the THNM and Zipnosis acquisitions is not deductible for tax purposes.

~~The following table discloses the fair values of assets and liabilities acquired by the Company in the THNM and Zipnosis acquisitions~~ ~~(in~~ ~~thousand~~s):

THNM Zipnosis
Accounts receivable $ 714 $ 1,062
Short-term investments 4,705 —
Prepaids and other current assets 8,337 141
Property and equipment — 232
Intangible assets 7,300 9,180
Long-term investments 13,644 —
Other non-current assets 1,324 766
Total assets 36,024 11,381
Medical costs payable 12,617 —
Accounts payable 14,663 136
Unearned revenue 3,645 120
Other current liabilities 11,406 665
Other liabilities 2,499 2,730
Total liabilities 44,830 3,651
Net identified assets (liabilities) acquired (8,806) 7,730
Goodwill 4,148 62,067
Total purchase consideration, net of cash acquired $ (4,658) $ 69,797

We recognized measurement period adjustments for THNM for post-close working capital true-ups of a $0.7 million reduction in medical costs payable (from the $13.3 million previously reported) and a $8.7 million increase in otherOther current liabilities ~~(from the $2.7 million previously reported) based on additional information.~~

Intangible assets initially recognized related to the THNM acquisition consisted of customer relationships with 10- to 14-year useful lives, trade names with a 15-year useful life and the provider network with a 7-year useful life. In the first quarter of 2022, we fully impaired the intangible assets related to THNM as a result of our decision to no longer offer Individual and Family Plan (“IFP”) products in New Mexico for the 2023 plan year and exit the employer business as contracts expire. For the Zipnosis acquisition, our preliminary estimate of intangible assets consists of customer relationships with a 15-year useful life, trade names with a 5-year useful life and developed technology with a 7-year useful life. For these acquisitions the value of the trade names and developed technology was determined using the relief from royalty method and the excess earnings method was used to value the customer relationships; both methodswhile contract termination costs are ~~considered Level 3 fair value measurements.~~

If THNM and Zipnosis had been included in the consolidated results of the Company for the three months ended March 31, 2021 our pro forma revenue would have been $922.5 million and our pro forma net loss would have been $27.1 million.

~~During the three months ended March 31, 2022, we completed an immaterial business combination which increased goodwill.~~recorded within Accounts payable.

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Bright Health Group, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 3. INVESTMENTS

Fixed Maturity Securities

Available-for-sale securities are reported at fair value as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. Held-to-maturity securities are reported at amortized cost as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. The following is a summary of our investment securities as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		March 31, 2022									March 31, 2023
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Value
Cash equivalents	Cash equivalents	$	586,011	$	—	$	(41)	$	585,970	Cash equivalents	$	382,510	$	5	$	(9)	$	382,506
Available for sale:	Available for sale:									Available for sale:
U.S. government and agency obligations	U.S. government and agency obligations	752,881		69		(7,366)		745,584		U.S. government and agency obligations	7,256		1		(210)		7,047
Corporate obligations	Corporate obligations	392,440		56		(15,316)		377,180		Corporate obligations	2,906		4		(69)		2,841
State and municipal obligations	State and municipal obligations	18,654		2		(215)		18,441		State and municipal obligations	458		—		(12)		446
Certificates of deposit	Certificates of deposit	14,340		—		(2)		14,338		Certificates of deposit	3,304		—		—		3,304
Mortgage-backed securities	Mortgage-backed securities	126,271		75		(4,564)		121,782		Mortgage-backed securities	37		—		(1)		36
Asset-backed securities	Asset-backed securities	62,104		9		(1,766)		60,347		Asset-backed securities	72		—		—		72
Other		392		—		(11)		381

Total available-for-sale securities	Total available-for-sale securities	1,367,082		211		(29,240)		1,338,053		Total available-for-sale securities	14,033		5		(292)		13,746
Held to maturity:	Held to maturity:									Held to maturity:
U.S. government and agency obligations	U.S. government and agency obligations	7,055		—		—		7,055		U.S. government and agency obligations	233		—		—		233
Certificates of deposit	Certificates of deposit	1,447		—		—		1,447		Certificates of deposit	1,949		—		—		1,949
Total held-to-maturity securities	Total held-to-maturity securities	8,502		—		—		8,502		Total held-to-maturity securities	2,182		—		—		2,182
Total investments	Total investments	$	1,961,595	$	211	$	(29,281)	$	1,932,525	Total investments	$	398,725	$	10	$	(301)	$	398,434


		December 31, 2021									December 31, 2022
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Value
Cash equivalents	Cash equivalents	$	192,623	$	—	$	—	$	192,623	Cash equivalents	$	340,795	$	8	$	—	$	340,803
Available for sale:	Available for sale:									Available for sale:
U.S. government and agency obligations	U.S. government and agency obligations	311,936		259		(2,200)		309,995		U.S. government and agency obligations	8,742		—		(301)		8,441
Corporate obligations	Corporate obligations	313,965		326		(1,104)		313,187		Corporate obligations	3,401		1		(95)		3,307
State and municipal obligations	State and municipal obligations	16,122		33		(38)		16,117		State and municipal obligations	712		—		(17)		695
Certificates of deposit	Certificates of deposit	18,752		—		—		18,752		Certificates of deposit	3,318		—		—		3,318
Mortgage-backed securities	Mortgage-backed securities	38,558		63		(67)		38,554		Mortgage-backed securities	156		—		—		156
Asset-backed securities										Asset-backed securities	60		—		—		60
Other	Other	42,889		13		(30)		42,872		Other	1		—		—		1
Total available-for-sale securities	Total available-for-sale securities	742,222		694		(3,439)		739,477		Total available-for-sale securities	16,390		1		(413)		15,978
Held to maturity:	Held to maturity:									Held to maturity:							—
U.S. government and agency obligations	U.S. government and agency obligations	7,739		—		—		7,739		U.S. government and agency obligations	685		—		—		685
Certificates of deposit	Certificates of deposit	1,447		—		—		1,447		Certificates of deposit	1,947		—		—		1,947
Total held-to-maturity securities	Total held-to-maturity securities	9,186		—		—		9,186		Total held-to-maturity securities	2,632		—		—		2,632
Total investments	Total investments	$	944,031	$	694	$	(3,439)	$	941,286	Total investments	$	359,817	$	9	$	(413)	$	359,413

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Bright Health Group, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The fair value of available-for-sale investments, including those that are cash equivalents, with gross unrealized losses by major security type and length of time that individual securities have been in a continuous unrealized loss position at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows (in thousands):


		March 31, 2022													March 31, 2023
		Less Than 12 Months				12 Months or Greater				Total					Less Than 12 Months				12 Months or Greater				Total
Description of Investments	Description of Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Description of Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Cash equivalents	Cash equivalents	204,916		(41)		—		—		204,916		(41)		Cash equivalents	$	70,213	$	(9)	$	—	$	—	$	70,213	$	(9)
U.S. government and agency obligations	U.S. government and agency obligations	715,592		(6,884)		13,148		(482)		728,740		(7,366)		U.S. government and agency obligations	693		(9)		6,694		(201)		7,387		(210)
Corporate obligations	Corporate obligations	358,350		(15,311)		127		(5)		358,477		(15,316)		Corporate obligations	178		(3)		2,397		(66)		2,575		(69)
State and municipal obligations	State and municipal obligations	15,113		(215)		—		—		15,113		(215)		State and municipal obligations	3		—		369		(12)		372		(12)
Certificates of deposit		936		(2)		—		—		936		(2)
Mortgage-backed securities		112,180		(4,564)		—		—		112,180		(4,564)
Asset-backed securities	Asset-backed securities	56,979		(1,766)		—		—		56,979		(1,766)		Asset-backed securities	30		(1)		—		—		30		(1)
Other		382		(11)		—		—		382		(11)
Total bonds	Total bonds	$	1,464,448	$	(28,794)	$	13,275	$	(487)	$	1,477,723	$	(29,281)	Total bonds	$	71,117	$	(22)	$	9,460	$	(279)	$	80,577	$	(301)


		December 31, 2021													December 31, 2022
		Less Than 12 Months				12 Months or Greater				Total					Less Than 12 Months				12 Months or Greater				Total
Description of Investments	Description of Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Description of Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government and agency obligations	U.S. government and agency obligations	286,823		(2,200)		—		—		286,823		(2,200)		U.S. government and agency obligations	$	1,316	$	(31)	$	6,808	$	(270)	$	8,124	(301)
Corporate obligations	Corporate obligations	234,070		(1,104)		—		—		234,070		(1,104)		Corporate obligations	740		(9)		2,061		(86)		2,801		(95)
State and municipal obligations	State and municipal obligations	10,442		(38)		—		—		10,442		(38)		State and municipal obligations	340		(2)		344		(15)		684		(17)
Mortgage-backed securities	Mortgage-backed securities	32,715		(67)		—		—		32,715		(67)		Mortgage-backed securities	2		—		—		—		2		—
Other	Other	29,115		(30)		—		—		29,115		(30)		Other	—		—		1		—		1		—
Total bonds	Total bonds	$	593,165	$	(3,439)	$	—	$	—	$	593,165	$	(3,439)	Total bonds	$	2,398	$	(42)	$	9,214	$	(371)	$	11,612	$	(413)

As of March 31, ~~2022,~~2023, we had ~~1,704~~800 investment positions out of ~~1,976~~1,340 that were in an unrealized loss position. As of December 31, ~~2021,~~2022, we had ~~1,343~~721 investment positions out of ~~1,836~~2,432 that were in an unrealized loss position. We believe that we will collect the principal and interest due on our debt securities that have an amortized cost in excess of fair value. The unrealized losses were primarily caused by interest rate increases and not by unfavorable changes in the credit quality associated with these securities. At each reporting period, we evaluate securities for impairment when the fair value of the investment is less than its amortized cost. We evaluated the underlying credit quality and credit ratings of the issuers, noting no significant deterioration since purchase. ~~As of March 31, 2022, we did not have the intent~~Refer to ~~sell any~~Note 16 Discontinued Operations for discussion of the impairment of securities ~~in an unrealized loss position. Therefore, we believe these losses to be temporary.~~recognized within discontinued operations.

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Bright Health Group, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

As of March 31, ~~2022,~~2023, the maturity of available-for-sale securities, by contractual maturity, reflected at amortized cost and fair value were as follows (in thousands):


		Amortized Cost		Fair Value			Amortized Cost	Fair Value
Due in one year or less	Due in one year or less	$	627,728	$	626,875	Due in one year or less	10,343	10,187
Due after one year through five years	Due after one year through five years	502,915		486,128		Due after one year through five years	3,611	3,479
Due after five years through 10 years	Due after five years through 10 years	228,247		217,160		Due after five years through 10 years	79	80
Due after 10 years	Due after 10 years	8,192		7,890		Due after 10 years	—	—
Total debt securities	Total debt securities	$	1,367,082	$	1,338,053	Total debt securities	14,033	13,746

~~Investment~~There was $46.3 thousand of investment income in the Condensed Consolidated Statements of Income (Loss) related to our fixed maturity securities for the three months ended March 31, 2023. For the three months ended March 31, 2022, ~~and 2021,~~investment income in the Condensed Consolidated Statements of Income (Loss) was ~~$0.9~~$0.1 million ~~and $1.2 million, respectively,~~ related to our fixed maturity securities. The gross proceeds from the sale of available-for-sale securities for the three months ended March 31, 2023 and 2022 ~~and 2021~~ were ~~$127.6~~$2.4 million and ~~$89.8~~$5.1 million, respectively. ~~Realized~~There were no realized (losses) gains from our fixed maturity securities of ~~$(1.7) million~~ ~~and $0.1 million are included within total investment income, and reclassified out of accumulated other comprehensive income,~~ for the three months ended March 31, ~~2022~~2023 and ~~2021, respectively.~~2022.

Equity Securities

~~On April 1, 2021 we completed~~For the ~~purchase of 1.6 million shares of equity securities for aggregate cash consideration of $40.1 million. As of~~three months ended March 31, 2022, and December 31, 2021, the equity securities had a carrying value of $79.4 million and $120.4 million, respectively, which is included in short-term investments in the Condensed Consolidated Balance Sheet. Wewe recognized unrealized (losses) gains of $(41.0) ~~million and $4.2~~ million in investment income (loss) in the Condensed Consolidated Statements of Income (Loss) ~~for~~. We held no equity securities during the three months ended March 31, ~~2022~~2023 and ~~2021, respectively.~~as such did not recognize any investment income (loss).

NOTE 4. FAIR VALUE MEASUREMENTS

Basis of fair value measurement:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices for similar assets or liabilities in active markets or quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Certain assets and liabilities are measured at fair value in the condensed consolidated financial statements or have fair values disclosed in the notes to the condensed consolidated financial statements. These assets and liabilities are classified into one of three levels of a hierarchy defined by GAAP.

For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument see Note 5 to the audited consolidated financial statements included in our ~~2021~~2022 Form 10-K.

1513

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Bright Health Group, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following tables set forth our fair value measurements as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, for assets measured at fair value on a recurring basis (in thousands):


		March 31, 2022									March 31, 2023
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets	Assets									Assets
Cash equivalents	Cash equivalents	$	563,876	$	21,103	$	—	$	584,979	Cash equivalents	$	363,663	$	15,749	$	—	$	379,412
Fixed maturity securities, available for sale:	Fixed maturity securities, available for sale:									Fixed maturity securities, available for sale:
U.S. government and agency obligations	U.S. government and agency obligations	724,519		21,065		—		745,584		U.S. government and agency obligations	5,152		1,895		—		7,047
Corporate obligations	Corporate obligations	2,255		374,925		—		377,180		Corporate obligations	—		2,841		—		2,841
State and municipal obligations	State and municipal obligations	—		18,441		—		18,441		State and municipal obligations	—		446		—		446
Certificates of deposit	Certificates of deposit	—		14,338		—		14,338		Certificates of deposit	—		3,304		—		3,304
Mortgage-backed securities	Mortgage-backed securities	—		121,782		—		121,782		Mortgage-backed securities	—		36		—		36
Asset-backed securities	Asset-backed securities	—		60,347		0		60,347		Asset-backed securities	—		72		—		72
Other	Other	—		381		—		381		Other	—				—		—
Total fixed maturity securities, available for sale:	Total fixed maturity securities, available for sale:	726,774		611,279		—		1,338,053		Total fixed maturity securities, available for sale:	5,152		8,594		—		13,746
Equity securities		79,396		—		—		79,396
Total assets at fair value	Total assets at fair value	$	1,370,046	$	632,382	$	—	$	2,002,428	Total assets at fair value	$	368,815	$	24,343	$	—	$	393,158
Liabilities
Contingent consideration		$	—	$	—	$	1,495	$	1,495


		December 31, 2021									December 31, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets	Assets									Assets
Cash equivalents	Cash equivalents	$	192,063	$	250	$	—	$	192,313	Cash equivalents	$	316,752	$	15,601	$	—	$	332,353
Fixed maturity securities, available for sale:	Fixed maturity securities, available for sale:									Fixed maturity securities, available for sale:
U.S. government and agency obligations	U.S. government and agency obligations	220,801		89,194		—		309,995		U.S. government and agency obligations	6,354		2,087		—		8,441
Corporate obligations	Corporate obligations	2,323		310,864		—		313,187		Corporate obligations	—		3,307		—		3,307
State and municipal obligations	State and municipal obligations	—		16,117		—		16,117		State and municipal obligations	—		695		—		695
Certificates of deposit	Certificates of deposit	—		18,752		—		18,752		Certificates of deposit	—		3,318		—		3,318
Mortgage-backed securities	Mortgage-backed securities	2,404		36,150		—		38,554		Mortgage-backed securities	—		156		—		156
Asset-backed securities										Asset-backed securities	—		60		—		60
Other	Other	—		42,872		—		42,872		Other	—		1		—		1
Total fixed maturity securities, available for sale:	Total fixed maturity securities, available for sale:	225,528		513,949		—		739,477		Total fixed maturity securities, available for sale:	6,354		9,624		—		15,978
Equity securities		120,364		—		—		120,364
Total assets at fair value	Total assets at fair value	$	537,955	$	514,199	$	—	$	1,052,154	Total assets at fair value	$	323,106	$	25,225	$	—	$	348,331
Liabilities
Contingent consideration		$	—	$	—	$	1,495	$	1,495

The following tables set forth the Company’s fair value measurements as of March 31, 2023 and December 31, 2022, for certain financial instruments not measured at fair value on a recurring basis (in thousands):


	March 31, 2023
	Level 1		Level 2		Level 3		Total
Cash equivalents, held to maturity	$	3,094	$	—	$	—	$	3,094
Fixed maturity securities, held to maturity:
U.S. government and agency obligations	233		—		—		233
Certificates of deposit	1,619		330		—		1,949
Total held to maturity	$	4,946	$	330	$	—	$	5,276

Table of Contents

Bright Health Group, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~The following tables set forth the Company’s fair value measurements as of March 31, 2022 and December 31, 2021, for certain financial instruments not measured at fair value on a recurring basis~~ ~~(in~~ ~~thousand~~s):


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Cash equivalents, held to maturity	$	8,450	$	—	$	—	$	8,450
Fixed maturity securities, held to maturity:
U.S. government and agency obligations	685		—		—		685
Certificates of deposit	—		1,947		—		1,947
Total held to maturity	$	9,135	$	1,947	$	—	$	11,082

March 31, 2022
Level 1 Level 2 Level 3 Total
Cash equivalents, held to maturity $ 991 $ — $ — $ 991
Fixed maturity securities, held to maturity:
U.S. government and agency obligations 7,055 — — 7,055
Certificates of deposit — 1,447 — 1,447
Total held to maturity $ 8,046 $ 1,447 $ — $ 9,493

December 31, 2021
Level 1 Level 2 Level 3 Total
Cash equivalents, held to maturity $ 310 $ — $ — $ 310
Fixed maturity securities, held to maturity:
U.S. government and agency obligations 7,732 — — 7,732
Certificates of deposit — 1,447 — 1,447
Total held to maturity $ 8,042 $ 1,447 $ — $ 9,489

There have been no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy. The contingent consideration liability related to the acquisition of AssociatesMD Medical Group, Inc. is measured using Level 3 inputs based on a formulaic multiple of forecasted 2023 EBITDA per the terms of the purchase agreement discounted back to net present value. The following table presents the changes in fair value of the contingent consideration liability for the three months ended March 31, 2022 and year ended December 31, 2021 ~~(in~~ ~~thousand~~s):

2022 2021
Balance at beginning of period $ 1,495 $ 5,716
Change in fair value of contingent consideration — (4,221)
Balance at end of period $ 1,495 $ 1,495

The carrying amounts reported on the Condensed Consolidated Balance Sheets for other current financial assets and liabilities approximate fair value due to their short-term nature. These assets and liabilities are not included in the tables above.

NOTE 5. GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying value of goodwill by reportable segment were as follows (in ~~thousand~~s)thousands):

Bright HealthCare NeueHealth
Gross Carrying
Amount Cumulative
Impairment Gross Carrying
Amount Cumulative
Impairment
Balance at December 31, 2021 $ 432,858 $ — $ 402,282 $ —
Acquisitions — — 310 —
Purchase adjustments — — — —
Balance at March 31, 2022 $ 432,858 $ — $ 402,592 $ —


	March 31, 2023				December 31, 2022
	Gross Carrying Amount		Cumulative Impairment		Gross Carrying Amount		Cumulative Impairment
Bright HealthCare	$	428,710	$	70,017	$	428,710	$	70,017
Consumer Care	401,385		—		401,385		—
Total	$	830,095	$	70,017	$	830,095	$	70,017

~~Table of Contents~~

~~Bright Health Group, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The gross carrying value and accumulated amortization for definite-lived intangible assets were as follows (in thousands):


		March 31, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Customer relationships	Customer relationships	$	206,321	$	26,632	$	209,421	$	21,728	Customer relationships	$	204,221	$	46,642	$	204,221	$	41,604
Trade names	Trade names	96,041		8,205		99,241		6,738		Trade names	95,261		14,399		95,261		12,812
Reacquired contract		59,000		9,833		59,000		6,556
Developed technology		6,300		900		6,300		675
Other	Other	5,400		875		6,400		805		Other	5,400		1,555		5,400		1,383
Total	Total	$	373,062	$	46,445	$	380,362	$	36,502	Total	$	304,882	$	62,596	$	304,882	$	55,799

We recognized $6.7 million of impairment expense on the intangible assets related to our THNM acquisition in operating costs in the Condensed Consolidated Statements of Income (Loss) for the three months ended March 31, 2022. See Note 2 ~~Business Combinations,~~ ~~for additional information on this impairment.~~ There was no impairment expense for the three months ended March 31, ~~2021.~~2023 and 2022.

We are continuously evaluating factors that affect the fair values of our reporting units including our market capitalization, macroeconomic trends and other events and uncertainties. Negative trends in these factors could result in a non-cash charge for impairment to goodwill or intangible assets in a future period.

Table of Contents

Bright Health Group, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Amortization expense relating to intangible assets for the three months ended March 31, 2023 and 2022 ~~and 2021~~ was ~~$10.5~~$6.8 million and ~~$3.7~~$10.4 million, respectively. Estimated amortization expense relating to intangible assets for the remainder of ~~2022~~2023 and for each of the next five full years ending December 31 is as follows (in thousands):

2022 (April-December) $ 31,120
2023 41,471
2024 41,332
2025 41,332
2026 28,104
2027 28,065


2023 (April-December)	$	20,368
2024	$	27,025
2025	$	27,025
2026	$	27,025
2027	$	27,025
2028	$	25,382

~~Table of Contents~~

~~Bright Health Group, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

NOTE 6. MEDICAL COSTS PAYABLE

The following table shows the components of the change in medical costs payable for the three months ended March 31 (in thousands):


							March 31,
		2022		2021			2023		2022
Medical costs payable - January 1	Medical costs payable - January 1	$	817,975	$	249,777	Medical costs payable - January 1	$	411,753	$	263,187
Incurred related to:	Incurred related to:					Incurred related to:
Current year	Current year	1,576,725		689,572		Current year	656,599		672,697
Prior year	Prior year	5,218		(3,076)		Prior year	30,354		(76)
Total incurred	Total incurred	1,581,943		686,496		Total incurred	686,953		672,621
Paid related to:	Paid related to:					Paid related to:
Current year	Current year	710,804		307,442		Current year	338,907		367,504
Prior year	Prior year	533,959		153,240		Prior year	301,334		161,143
Total paid	Total paid	1,244,763		460,682		Total paid	640,241		528,647

Acquired claims liabilities		—		13,268
Medical costs payable - March 31	Medical costs payable - March 31	$	1,155,155	$	488,859	Medical costs payable - March 31	$	458,465	$	407,161

Medical costs payable attributable to prior years increased by ~~$5.2~~$30.4 million and decreased by ~~decreased~~ by ~~$3.1~~$0.1 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. Medical costs payable estimates are adjusted as additional information becomes known regarding claims; there were no significant changes to estimation methodologies during the periods.

The table below details the components making up the medical costs payable as of March 31 (in thousands):


		March 31,					March 31,
		2022		2021			2023		2022
Claims unpaid	Claims unpaid	$	102,293	$	19,652	Claims unpaid	$	52,502	$	63,329
Provider incentive payable	Provider incentive payable	45,805		36,592		Provider incentive payable	61,748		40,691
Claims adjustment expense liability	Claims adjustment expense liability	15,479		5,038		Claims adjustment expense liability	5,823		4,918
Incurred but not reported		991,578		427,577
Incurred but not reported (IBNR)						Incurred but not reported (IBNR)	338,392		298,223
Total medical costs payable	Total medical costs payable	$	1,155,155	$	488,859	Total medical costs payable	$	458,465	$	407,161

Medical costs payable are primarily related to the current year. The Company has recorded claims adjustment expense as a component of operating costs in the Condensed Consolidated Statements of Income (Loss).

Table of Contents

Bright Health Group, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 7. SHORT-TERM BORROWINGS

We have a $350.0 million revolving credit agreement with a syndicate of banks (the “Credit Agreement”), which matures on February 28, 2024. ~~During the three months ended~~As of March 31, 2023 and December 31, 2022 we ~~repaid the $155.0~~had $303.9 million ~~outstanding~~borrowed under the Credit Agreement asat a weighted-average effective annual interest rate of ~~December 31, 2021. As of March 31, 2022, we had no short-term borrowings under the Credit Agreement.~~

~~The Credit Agreement contains a covenant that requires the Company to maintain a total debt to capitalization ratio of 0.25 to 1.00.~~ ~~The Credit Agreement also contains a covenant that require us to maintain a minimum liquidity of $150.0 million. We were in compliance with our debt covenants~~9.51%, which remains outstanding as of March 31, ~~2022.~~2023. Refer to Note 11, Commitments and Contingencies for more information on the undrawn letters of credit of $46.1 million under the Credit Agreement, which reduce the amount available to borrow. Subsequently, in April 2023, $15.3 million of the outstanding, undrawn letters of credit under the Credit Agreement were released.

On March 1, 2023, the Company disclosed that during the First Quarter of 2023, the Company breached the minimum liquidity covenant of the Credit Agreement. On April 28, 2023, the Company entered into an amended and restated limited waiver and consent (the “Waiver”) under the Credit Agreement, which amended and restated the limited waiver and consent entered into by the Company under the Credit Agreement on February 28, 2023 (the "Original Waiver"). The Waiver amends the Original Waiver by, among other things, extending the temporary waiver of compliance with the minimum liquidity covenant set forth in Section 11.12.2 of the Credit Agreement, which originally spanned from January 25, 2023 to April 30, 2023, to January 25, 2023 to June 30, 2023 (the “Extended Waiver Period”). From April 29, 2023 until the end of the Extended Waiver Period, the Company will be subject to a minimum liquidity covenant of not less than $50 million. The Waiver also (i) amends the Original Waiver and the Credit Agreement by changing the definition of "Minimum Liquidity" to mean unrestricted cash of the Company and the other loan parties and (ii) waives permanently any default or event of default arising from the failure to deliver the 2022 audit report without a qualification as to "going concern." In addition, during the Extended Waiver Period, the Company will not have access to certain negative covenant baskets and will be subject to additional cash-flow, cash balance, and other reporting requirements.

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~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

NOTE 8. SHARE-BASED COMPENSATION

2016 Incentive Plan

The Company adopted its 2016 Stock Incentive Plan (the “2016 Incentive Plan”) in March 2016. The 2016 Incentive Plan allowed for the Company to grant stock options, restricted stock awards (“RSAs”), and restricted stock units (“RSUs”) to certain employees, consultants and non-employee directors. The 2016 Incentive Plan was initially adopted on March 25, 2016, and most recently amended in December 2020. Following the effectiveness of our 2021 Omnibus Plan (the “2021 Incentive Plan”), no further awards will be granted under the 2016 Incentive Plan. However, all outstanding awards granted under the 2016 Incentive Plan will continue to be governed by the existing terms of the 2016 Incentive Plan and the applicable award agreements.

2021 Incentive Plan

The 2021 Incentive Plan (the “2021 Incentive Plan”) was adopted by our Board of Directors on May 21, 2021 and approved by our stockholders on May 25, 2021 and June 5, 2021. The 2021 Incentive Plan allows the Company to grant stock options, RSAs, RSUs, stock appreciation rights, other equity based awards, and cash based incentive awards to certain employees, consultants and non-employee directors. There are ~~73.4~~104.9 million shares of common stock authorized for issuance under the 2021 Incentive Plan. As of March 31, ~~2022,~~2023, a total of ~~14.7~~0.5 million shares of common stock were available for future issuance under the 2021 Incentive Plan.

Share-Based Compensation Expense

We recognized share-based compensation expense of ~~$32.9~~$33.3 million and $~~5.2~~32.9 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, which is included in operating costs in the Condensed Consolidated Statements of Income (Loss).

Stock Options

The Board of Directors, or the Compensation and Human Capital Committee of the Board of Directors, as applicable, determines the exercise price, vesting periods and expiration date at the time of the grant. Stock options granted prior to the third quarter of 2021 generally vest 25% at one year from the grant date, then ratably over the next 36 months with continuous

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employee service. Stock options granted after the beginning of the third quarter of 2021 generally vest ratably over three years. Option grants generally expire 10 years from the date of grant.

~~The calculated value of each option award is estimated on the date of grant using a Black-Scholes option valuation model that used the following weighted-average assumptions for~~There were no options granted during the three months ended March 31, ~~2022:~~


	~~2022~~
~~Risk-free interest rate~~	~~1.7~~	%
~~Expected volatility~~	~~55.0~~	%
~~Expected dividend rate~~	~~0.0~~	%
~~Forfeiture rate~~	~~10.0~~	%
~~Expected life in years~~	~~6.0~~

Risk-free interest rates are based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are based on the historical volatility of our publicly traded industry peers and the implied volatility from exchange-traded options on the Company’s common stock. We use historical data to estimate option forfeitures within the valuation model. The expected lives of options granted represent the period of time that the awards granted are expected to be outstanding based on historical exercise patterns.

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~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

2023.

The activity for stock options for the three months ended March 31, ~~2022~~2023 is as follows (in thousands, except exercise price and contractual life):


		Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (In Years)	Aggregate Intrinsic Value			Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (In Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2022		69,244	$	1.84	8.2	$	113,908
Outstanding at January 1, 2023								Outstanding at January 1, 2023	64,291	$	1.82	6.7	$	82
Granted	Granted	6,896	1.79					Granted	—	—
Exercised	Exercised	(338)	0.76					Exercised	(3)	0.63
Forfeited	Forfeited	(2,416)	2.24					Forfeited	958	0.58
Expired	Expired	(412)	2.22					Expired	(3,574)	1.78
Outstanding at March 31, 2022		72,974	$	1.83	7.8	$	22,419
Outstanding at March 31, 2023								Outstanding at March 31, 2023	61,672	$	1.80	5.9	$	1

We recognized share-based compensation expense related to stock options of ~~$18.3~~$15.4 million for the three months ended March 31, ~~2022,~~2023, which is included in operating costs in the Condensed Consolidated Statements of Income (Loss). ~~The weighted-average grant date fair value of stock options granted during the three months ended March 31, 2022 was $0.94 per share.~~ At March 31, ~~2022,~~2023, there was ~~$124.4~~$28.8 million of unrecognized compensation expense related to stock options that is expected to be recognized over a weighted-average period of ~~2.9~~1.9 years.

Restricted Stock Units

RSUs represent the right to receive shares of our common stock at a specified date in the future and generally vest over a three-year ~~period.~~period, except for Board of Director grants which generally vest one year from the date of grant. The fair value of RSUs is determined based on the closing market price of our common stock on the date of grant.

The following table summarizes RSU award activity for the three months ended March 31, ~~2022~~2023 (in thousands, except weighted average grant date fair value):


		Number of RSUs	Weighted Average Grant Date Fair Value			Number of RSUs	Weighted Average Grant Date Fair Value
Unvested RSUs at December 31, 2021		15,651	$	3.98
Unvested RSUs at December 31, 2022					Unvested RSUs at December 31, 2022	37,567	$	2.37
Granted	Granted	23,154	1.79		Granted	53,867	0.51
Vested	Vested	(36)	8.95		Vested	(5,868)	1.83
Forfeited	Forfeited	(1,977)	3.64		Forfeited	(5,612)	1.87
Unvested RSUs at March 31, 2022		36,792	$	2.61
Unvested RSUs at March 31, 2023					Unvested RSUs at March 31, 2023	79,954	$	1.19

We recognized share-based compensation expense related to RSUs of ~~$4.4~~$5.4 million for the three months ended March 31, ~~2022,~~2023, which is included in operating costs in the Condensed Consolidated Statements of Income (Loss). As of March 31, ~~2022,~~2023, there was ~~$72.8~~$57.8 million of unrecognized compensation expense related to the RSU grants, which is expected to be recognized over a weighted-average period of ~~2.8~~2.0 years.

Performance-based Restricted Stock Units (“PSUs”)

In connection with our IPO, our Board of Directors approved the grant of PSUs to members of our executive leadership team. The grant ~~encompasses~~encompassed a total of 14.7 million PSUs, separated into 4four equal tranches, each of which are eligible to vest based ~~on the achievement of predetermined stock price goals and a minimum service period of 3 years. The fair value of the PSUs was determined using a Monte-Carlo simulation.~~

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on the achievement of predetermined stock price goals and a minimum service period of 3.0 years. The fair value of the PSUs was determined using a Monte-Carlo simulation.

The following table summarizes PSU award activity for the three months ended March 31, ~~2022~~2023 (in thousands, except weighted average grant date fair value):


		Number of PSUs	Weighted Average Grant Date Fair Value			Number of PSUs	Weighted Average Grant Date Fair Value
Unvested PSUs at December 31, 2021		14,700	$	9.30
Unvested PSUs at December 31, 2022					Unvested PSUs at December 31, 2022	10,500	$	9.30
Granted	Granted	—	—		Granted	—	—
Forfeited	Forfeited	—	—		Forfeited	—	—
Unvested PSUs at March 31, 2022		14,700	$	9.30
Unvested PSUs at March 31, 2023					Unvested PSUs at March 31, 2023	10,500	$	9.30

We recognized share-based compensation expense related to PSUs of ~~$10.3~~$12.5 million for the three months ended March 31, ~~2022,~~2023, which is included in operating costs in the Condensed Consolidated Statements of Income (Loss). At March 31, ~~2022,~~2023, there was ~~$91.1~~$34.2 million of unrecognized compensation expense related to the PSU grant, which is expected to be recognized over a weighted-average period of ~~2.2~~1.2 years.

NOTE 9. REDEEMABLE CONVERTIBLE PREFERRED STOCK

Series A Convertible Preferred Stock

On ~~December 6, 2021,~~January 3, 2022, we ~~entered into an investment agreement with certain subsidiaries of Cigna Corporation and certain affiliates of New Enterprise Associates (collectively, the “Purchasers”) relating to the issuance of~~issued 750,000 shares of Series A Preferred Stock, par value $0.0001 per share, for an aggregate purchase price of $750.0 million, or $1,000 per ~~share (the “Issuance”). The close of the Issuance occurred on January 3, 2022 (the “Closing Date”).~~share.

The Series A Preferred Stock ranks senior to the shares of the Company’s common stock with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. The Preferred Stock has an initial liquidation preference of $1,000 per share, which shall increase by accumulated quarterly dividends that are not paid in cash (“compounded dividends”). Holders of the Series A Preferred Stock are entitled to a dividend at the rate of 5.0% per annum, accruing daily and payable quarterly in arrears and subject to certain adjustments, as set forth in the Certificate of Designations. Dividends will be payable in cash, by increasing the amount of liquidation preference (compounded dividends) with respect to a share of Series A Preferred Stock, or any combination thereof, at the sole discretion of the Company. The Series A Preferred Stock had accrued compounded dividends of ~~$8.9~~$47.6 million and $37.9 million as of March 31, ~~2022.~~2023 and December 31, 2022, respectively.

The Series A Preferred Stock will be convertible at the option of the holders into (I) the number of shares of common stock equal to the quotient of (a) the sum of (x) the liquidation preference (reflecting increases for compounded dividends) plus (y) the accrued dividends with respect to each share of Series A Preferred Stock as of the applicable conversion date divided by (b) the conversion price (initially approximately $4.55 per ~~share)~~share and approximately $4.07 per share subsequent to the issuance of the Series B Preferred Stock) as of the applicable conversion date plus (II) cash in lieu of fractional shares, subject to certain anti‑dilution adjustments. At any time after ~~the third anniversary of the Closing Date,~~January 3, 2025, if the closing price per share of Common Stock on the New York Stock Exchange was greater than $7.96 for (x) each of at least twenty (20) trading days in any period of thirty (30) consecutive trading days and (y) the last trading day immediately before the Company provides the holders with notice of its election to convert all of the Series A Preferred Stock into the relevant number of shares of common stock, the Company may elect to convert all of the Series A Preferred Stock into the relevant number of shares of common stock.

Under the Certificate of Designations, holders of the Series A Preferred Stock are entitled to vote with the holders of the common stock on an as‑converted basis, solely with respect to (i) a change of control transaction (to the extent such change of control transaction is submitted to a vote of the holders of the common stock) or (ii) the issuance of capital stock by the Company in connection with an acquisition by the Company (to the extent such issuance is submitted to a vote of the holders of the common stock), subject to certain restrictions. Holders of the Series A Preferred Stock are entitled to a separate class vote with respect to, among other things, amendments to the Company’s organizational documents that have an adverse effect on the ~~Series A Preferred Stock, authorizations or issuances by the Company of securities that are senior to the Series A Preferred~~

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Series A Preferred Stock, authorizations or issuances by the Company of securities that are senior to the Series A Preferred Stock, increases or decreases in the number of authorized shares of Preferred Stock, and issuances of shares of the Series A Preferred Stock after ~~the Closing Date.~~January 3, 2022.

At any time following ~~the fifth anniversary of the original issuance date,~~January 3, 2027, the Company may redeem all of the Series A Preferred Stock for a per share amount in cash equal to: (i) the sum of (A) the liquidation preference (reflecting increases for compounded dividends) thereof plus (B) all accrued dividends as of the applicable redemption date, multiplied by (ii) (A) 105% if the redemption occurs at any time prior to ~~the seventh anniversary of the Closing Date~~January 3, 2029 and (B) 100% if the redemption occurs at any time on or after ~~the seventh anniversary of the Closing Date.~~January 3, 2029. Upon certain change of control events involving the Company, the holders of the Series A Preferred Stock may, at such holder’s election, convert their shares of Series A Preferred Stock into common stock at the then‑current conversion price or require the Company to purchase all or a portion of such holder’s shares of Preferred Stock that have not been so converted at a purchase price per share of Preferred Stock, payable in cash, equal to the greater of (I) (A) if the change of control effective date occurs at any time prior to ~~the seventh anniversary of the Closing Date,~~January 3, 2029, the product of 105% multiplied by the sum of (x) the liquidation preference of such share of Series A Preferred Stock (reflecting increases for compounded dividends) plus (y) the accrued dividends in respect of such share of Series A Preferred Stock as of the change of control purchase date and (B) if the change of control effective date occurs on or after ~~the seventh anniversary of the Closing Date,~~January 3, 2029, the sum of (x) the liquidation preference (reflecting increases for compounded dividends) of such share of Series A Preferred Stock plus (y) the accrued dividends in respect of such share of Series A Preferred Stock as of the change of control purchase date and (II) the consideration that would have been payable in connection with such change of control if such share of Series A Preferred Stock had been converted into Common Stock immediately prior to the change of control.

Series B Convertible Preferred Stock

~~We have applied the guidance in ASC 480‑10‑S99‑3A,~~ ~~SEC Staff Announcement: Classification and Measurement~~On October 17, 2022, we issued 175,000 shares of ~~Redeemable Securities, and have therefore classified the~~ Series AB Preferred Stock, ~~outside~~par value $0.0001 per share, for an aggregate purchase price of ~~shareholders’ equity~~$175.0 million, or $1,000 per share.

The Series B Preferred Stock ranks senior to the shares of the Company’s common stock with respect to dividend rights and rights on the ~~Condensed Consolidated Balance Sheet because~~distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the ~~shares contain liquidation features that are not solely within~~affairs of the ~~Company's control.~~Company. The ~~Series A~~ Preferred Stock ~~was recorded at its fair value on the date~~has an initial liquidation preference of ~~issuance net of $2.5 million of issuance costs. The Company has elected not to adjust the carrying value~~$1,000 per share, which shall increase by compounded dividends. Holders of the Series AB Preferred Stock are entitled to a dividend at the rate of 5.0% per annum, accruing daily and payable quarterly in arrears and subject to certain adjustments, as set forth in the Certificate of Designations. Dividends will be payable in cash, by increasing the amount of liquidation preference (compounded dividends) with respect to a share of Series B Preferred Stock, or any combination thereof, at the sole discretion of the Company. The Series B Preferred Stock had accrued compounded dividends of $4.0 million and $1.8 million as of March 31, 2023 and December 31, 2022, respectively.

The Series B Preferred Stock will be convertible at the option of the holders into (I) the number of shares of common stock equal to the quotient of (a) the sum of (x) the liquidation preference (reflecting increases for compounded dividends) plus (y) the accrued dividends with respect to each share of Series B Preferred Stock as of the applicable conversion date divided by (b) the conversion price (initially approximately $1.42 per share) as of the applicable conversion date plus (II) cash in lieu of fractional shares, subject to certain anti‑dilution adjustments. At any time after October 17, 2025, if the closing price per share of common stock on the NYSE was greater than 287% of the then effective Conversion Price for (x) each of at least twenty (20) trading days in any period of thirty (30) consecutive trading days and (y) the last trading day immediately before the Company provides the holders with notice of its election to convert all of the Series B Preferred Stock into the relevant number of shares of common stock, the Company may elect to convert all of the Series B Preferred Stock into the relevant number of shares of common stock.

Under the Certificate of Designations, holders of the Series B Preferred Stock are entitled to vote with the holders of the common stock on an as‑converted basis, solely with respect to (i) a change of control transaction (to the extent such change of control transaction is submitted to a vote of the holders of the common stock) or (ii) the issuance of capital stock by the Company in connection with an acquisition by the Company (to the extent such issuance is submitted to a vote of the holders of the common stock), subject to certain restrictions. Holders of the Series B Preferred Stock are entitled to a separate class vote with respect to, among other things, amendments to the Company’s organizational documents that have an adverse effect on the Series B Preferred Stock, authorizations or issuances by the Company of securities that are senior to the Series B Preferred

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(Unaudited)

Stock, increases or decreases in the number of authorized shares of Preferred Stock, and issuances of shares of the Series B Preferred Stock after October 17, 2022.

At any time following October 17, 2027, the Company may redeem all of the Series B Preferred Stock for a per share amount in cash equal to: (i) the sum of (A) the liquidation preference (reflecting increases for compounded dividends) thereof plus (B) all accrued dividends as of the applicable redemption date, multiplied by (ii) (A) 105% if the redemption occurs at any time prior to October 17, 2029 and (B) 100% if the redemption occurs at any time on or after October 17, 2029. Upon certain change of control events involving the Company, the holders of the Series B Preferred Stock may, at such holder’s election, convert their shares of Series B Preferred Stock into common stock at the then‑current conversion price or require the Company to purchase all or a portion of such holder’s shares of Preferred Stock that have not been so converted at a purchase price per share of Preferred Stock, payable in cash, equal to the greater of (I) (A) if the change of control effective date occurs at any time prior to October 17, 2029, the product of 105% multiplied by the sum of (x) the liquidation preference of such ~~shares because~~share of Series B Preferred Stock (reflecting increases for compounded dividends) plus (y) the accrued dividends in respect of such share of Series B Preferred Stock as of the ~~uncertainty~~change of ~~whether~~control purchase date and (B) if the change of control effective date occurs on or ~~when~~after October 17, 2029, the sum of (x) the liquidation preference (reflecting increases for compounded dividends) of such ~~an event~~share of Series B Preferred Stock plus (y) the accrued dividends in respect of such share of Series B Preferred Stock as of the change of control purchase date and (II) the consideration that would ~~occur. Subsequent adjustments to increase the carrying value~~have been payable in connection with such change of control if such share of Series B Preferred Stock had been converted into common stock immediately prior to the ~~liquidation preferences will be made only when it becomes probable that such a liquidation event will occur.~~change of control.

NOTE 10. NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders for the three months ended March 31 (in thousands, except for per share amounts):

Three Months Ended
March 31,
2022 2021
Net loss attributable to Bright Health Group, Inc. common shareholders $ (204,172) $ (25,162)
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted 628,765 140,175
Net loss per share attributable to common stockholders, basic and diluted $ (0.32) $ (0.18)

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~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~


	Three Months Ended March 31,
	2023		2022
Loss from continuing operations, net noncontrolling interests and accrued preferred stock dividends	$	(112,236)	$	(187,057)
Loss from discontinued operations	(74,669)		(17,115)
Net loss attributable to Bright Health Group, Inc. common shareholders	$	(186,905)	$	(204,172)
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted	631,534		628,765
Basic and diluted loss per share attributable to Bright Health Group, Inc. common shareholders
Continuing operations	$	(0.18)	$	(0.30)
Discontinued operations	$	(0.12)	$	(0.02)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.30)	$	(0.32)

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share because including them would have had an anti-dilutive effect for the three months ended March 31 (in thousands):


		Three Months Ended March 31,			Three Months Ended March 31,
		2022	2021		2023	2022
Redeemable convertible preferred stock (as converted to common stock)	Redeemable convertible preferred stock (as converted to common stock)	166,852	421,697	Redeemable convertible preferred stock (as converted to common stock)	322,458	166,852
Stock options to purchase common stock	Stock options to purchase common stock	72,974	76,913	Stock options to purchase common stock	61,672	72,974
Restricted stock units	Restricted stock units	36,792	—	Restricted stock units	79,954	36,792
Total	Total	276,618	498,610	Total	464,084	276,618

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(Unaudited)

NOTE 11. COMMITMENTS AND CONTINGENCIES

Legal proceedings: In the normal course of business, we could be involved in various legal proceedings such as, but not limited to, the following: lawsuits alleging negligence in care or general liability, violation of regulatory bodies’ rules and regulations, or violation of federal and/or state laws.

On January 6, 2022, a putative securities class action lawsuit was filed against us and certain of our officers and directors in the Eastern District of New York. The case is captioned Marquez v. Bright Health Group, Inc. et al., 1:22-cv-00101 (E.D.N.Y.). The lawsuit alleges, among other things, that we made materially false and misleading statements regarding our business, operations, and compliance policies, which in turn adversely affected our stock price. ~~No specific amounts of damages have been alleged~~An amended complaint was filed on June 24, 2022, which expands on the allegations in the original complaint and alleges a putative ~~securities~~ class ~~action lawsuit. We expect an~~period of June 24, 2021 through March 1, 2022. The amended complaint ~~will be filed later this year in this action. Such~~also adds as defendants the underwriters of our initial public offering. The Company has served a motion to dismiss the amended complaint, ~~could assert additional or broader claims than~~which has not yet been ruled on by the ~~current complaint.~~ court.

We ~~intend to~~are vigorously ~~defend this action;~~defending the Company in the above actions, but there can be no assurance that we will be successful in any defense.

Based on our assessment of the facts underlying the claims and the degree to which we intend to defend ~~our company~~the Company in these matters, other than as set forth above, the amount or range of reasonably possible losses, if any, cannot be estimated. AtAs a result, other than as set forth above, we have not accrued for any potential loss as of March 31, ~~2022~~2023 and December 31, ~~2021, there were no material known contingent liabilities.~~2022 for these actions.

Other commitments: As of March 31, ~~2022,~~2023, we ~~have~~had $46.1 million outstanding, undrawn letters of credit under the Credit Agreement. Subsequently, in April 2023, $15.3 million of the outstanding, undrawn letters of credit under the Credit Agreement were released.

Restricted capital and surplus: Our regulated insurance legal entities are required by statute to meet and maintain a minimum level of capital as stated in applicable state regulations, such as risk-based capital requirements. These balances are monitored regularly to ensure compliance with these regulations. As of March 31, 2023, we were out of compliance with the minimum level for one of our regulated insurance legal entities of our continuing operations.

The amount of ordinary dividends that may be paid out of the regulated legal entities’ unassigned surplus during any given period is subject to certain restrictions as specified by state statutes, which generally require prior-year net income or sufficient statutory capital and surplus. The regulated legal entities did not pay any dividends during the three months ended March 31, 2023 and 2022.

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~~(Unaudited)~~

NOTE 12. SEGMENTS AND GEOGRAPHIC INFORMATION

Factors used to determine our reportable segments include the nature of operating activities, economic characteristics, existence of separate senior management teams and the type of information used by the Company’s chief operating decision maker (“CODM”) to evaluate its results of operations. We have identified three operating segments based on our primary product and service offerings: Bright HealthCare and Consumer Care, within our continuing operations and Bright HealthCare – Commercial within our discontinued operations.

Our 2two reportable segments are Bright HealthCare and ~~NeueHealth.~~Consumer Care. The following is a description of the types of products and services from which the two reportable segments of our continuing operations derive their revenues:

Bright HealthCare:Our delegated senior managed care business that partners with a tight group of aligned providers in California. Our healthcare financing and distribution business focused on serving aging and underserved populations with unmet clinical needs through a Fully-Aligned Care Model. As of March 31, 2023, Bright HealthCare provides MA products in California which serve over 123,000 lives and generally focus on higher risk, special needs, or other traditionally underserved populations.

Consumer Care:Our value-driven care delivery business that manages risk in partnership with external payors, Consumer Care, aims to significantly reduce the friction and current lack of coordination between payors by delivering on our Fully-

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(Unaudited)

Aligned Care Model with multiple payors. Our Consumer Care business delivers virtual and in-person clinical care through its 72 owned primary care clinics within an integrated care delivery system. Through these risk-bearing clinics and our affiliated network of care providers, Consumer Care maintains over 410,000 unique patient relationships as of March 31, 2023, approximately 373,000 of which are served through value-based arrangements, across multiple payors. Consumer Care customers include external payors, third party administrators, affiliated providers and direct-to-government programs.

The Company’s accounting policies for reportable segment operations are consistent with those described in Note 2, Summary of Significant Accounting Policies, in our 2022 Form 10-K. We utilize operating income (loss) before income taxes as the profitability metric for our reportable segments.

The following tables present the reportable segment financial information for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):


Three Months Ended March 31, 2022		Bright HealthCare		NeueHealth		Eliminations		Consolidated
Three Months Ended March 31, 2023										Three Months Ended March 31, 2023	Bright HealthCare		Consumer Care		Corporate & Eliminations		Consolidated
Premium revenue	Premium revenue	$	1,593,501	$	86,949	$	—	$	1,680,450	Premium revenue	$	453,370	$	49,548	$	—	$	502,918
Direct contracting revenue		—		182,797		—		182,797
ACO REACH revenue										ACO REACH revenue	—		239,807		—		239,807
Service revenue	Service revenue	36		12,392		—		12,428		Service revenue	—		13,570		—		13,570
Investment income	Investment income	868		(40,968)		—		(40,100)		Investment income	46		—		—		46
Total unaffiliated revenue		1,594,405		241,170		—		1,835,575
Affiliated revenue		—		379,782		(379,782)		—
Total segment revenue	Total segment revenue	1,594,405		620,952		(379,782)		1,835,575		Total segment revenue	453,416		302,925		—		756,341
Operating income (loss)	Operating income (loss)	(107,022)		(69,958)		—		(176,980)		Operating income (loss)	(31,433)		4,433		(58,746)		(85,746)

Depreciation and amortization	Depreciation and amortization	$	6,039	$	7,002	$	—	$	13,041	Depreciation and amortization	$	4,408	$	3,132	$	2,351	$	9,891
Restructuring charges										Restructuring charges	60		(41)		3,338		3,357


Three Months Ended March 31, 2021		Bright HealthCare		NeueHealth		Eliminations		Consolidated
Three Months Ended March 31, 2022										Three Months Ended March 31, 2022	Bright HealthCare		Consumer Care		Corporate & Eliminations		Consolidated
Premium revenue	Premium revenue	$	841,925	$	18,706	$	—	$	860,631	Premium revenue	$	430,313	$	28,649	$	—	$	458,962
Direct contracting revenue		—		—		—		—
ACO REACH revenue										ACO REACH revenue	—		182,797		—		182,797
Service revenue	Service revenue	—		8,438		—		8,438		Service revenue	—		12,392		—		12,392
Investment income	Investment income	1,246		4,243		—		5,489		Investment income	80		(40,968)		—		(40,888)
Total unaffiliated revenue		843,171		31,387		—		874,558
Affiliated revenue	Affiliated revenue	—		17,152		(17,152)		—		Affiliated revenue	—		368,053		(368,053)		—
Total segment revenue	Total segment revenue	843,171		48,539		(17,152)		874,558		Total segment revenue	430,393		550,923		(368,053)		613,263
Operating income (loss)	Operating income (loss)	(24,215)		1,382		—		(22,833)		Operating income (loss)	(31,383)		(70,054)		(58,426)		(159,863)

Depreciation and amortization	Depreciation and amortization	$	2,357	$	2,224	$	—	$	4,581	Depreciation and amortization	$	4,459	$	7,002	$	1,436	$	12,897
Restructuring charges										Restructuring charges	$	—	$	—	$	6,864	$	6,864

As a percentage of our total consolidated revenue, premium revenues and direct contracting revenues from CMS were 33% and 25% for the three months ended March 31, 2022 and 2021, respectively, which are included in premium revenue of our Bright HealthCare segment and direct contracting revenue of our NeueHealth segment. For all periods presented, all of our long-lived assets were located in the United States, and all revenues were earned in the United States. We do not include asset information by reportable segment in the reporting provided to the ~~chief operating decision maker.~~CODM.

NOTE 13. INCOME TAXES

Income tax was an expense ~~was $3.2~~of $1.3 million and ~~$1.2~~$3.2 million for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively. The impact from income taxes varies from the federal statutory rate of 21.0% due to state income taxes, changes in the valuation allowance for deferred tax assets and adjustments for permanent differences. For the three months ended March 31, 2023, and March 31, 2022, the expense largely relates to amortization of originating goodwill from asset acquisitions and estimated state income taxes attributable to income earned in separate filing states without state net operating loss carryforwards. For the three months ended March 31, 2021, the expense largely relates to adjustments to the valuation allowance for federal and state deferred tax assets, as well as the effect of deferred taxes recorded as part of business combination accounting for the Universal Care, Inc. (d.b.a. Brand New Day) and THNM acquisitions.

2523

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Bright Health Group, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

We assess whether sufficient future taxable income will be generated to permit the use of deferred tax assets. This assessment includes consideration of the cumulative losses incurred over the three-year period ended March 31, ~~2022.~~2023. Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections for future earnings. On the basis of this evaluation, we have recorded a valuation allowance for deferred tax assets to the extent that they cannot be supported by reversals of existing cumulative temporary differences. Any federal tax benefit generated from losses in ~~2022~~2023 is expected to require an offsetting adjustment to the valuation allowance for deferred tax assets, and thus have no net effect on the income tax provision.

NOTE 14. REDEEMABLE NONCONTROLLING INTEREST

Redeemable noncontrolling interests in our subsidiaries whose redemption is outside of our control are classified as temporary equity. The following table provides details of our redeemable noncontrolling interest activity for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):

Three Months Ended
March 31,
2022 2021
Balance at beginning of period $ 128,407 $ 39,600
Earnings attributable to noncontrolling interest (2,681) 288
Measurement adjustment 17,285 329
Balance at end of period $ 143,011 $ 40,217


	2023		2022
Balance at January 1	$	219,758	$	128,407
(Losses) earnings attributable to noncontrolling interest	1,421		(2,681)
Tax distributions to noncontrolling interest holders	(1,805)		—
Measurement adjustment	4,129		17,285
Balance at March 31	$	223,503	$	143,011

NOTE 15. ~~DIRECT CONTRACTING~~ACO REACH

~~Beginning January 1, 2022, we began participating~~We participate in ~~CMS’ DC~~the Centers for Medicare & Medicaid Services’ (“CMS”) ACO REACH Model with ~~2 DCEs~~three REACH ACOs participating through the global risk arrangement and assuming full risk for the total cost of care of aligned beneficiaries. As part of our participation in the DCACO REACH Model, we are guaranteeing the performance of our care network of participating and preferred providers. The intention of the DCACO REACH Model is to enhance the quality of care for Medicare FFS beneficiaries while reducing the administrative burden, supporting a focus on complex, chronically ill patients, and encouraging physician organizations that have not typically participated in Medicare FFS programs to serve Medicare FFS beneficiaries.

Key components of the financial agreement for the DCACO REACH Model include:

•Performance Year Benchmark: The target amount for Medicare expenditures on covered services (Medicare Part A and B) furnished to a ~~DCE’s~~REACH ACO’s aligned beneficiaries during a performance year. The Performance Year Benchmark will be compared to the ~~DCE’s~~REACH ACO’s performance year expenditures. This comparison will be used to calculate shared savings and shared losses. The Performance Year Benchmark is established at the beginning of the performance year utilizing prospective trend estimates and is subject to retrospective trend adjustments, if warranted, before the Financial Reconciliation.

•Risk-Sharing Arrangements: Used in determining the percent of savings and losses that ~~DCEs~~REACH ACOs are eligible to receive as shared savings or may be required to repay as shared losses.

•Financial Reconciliation: The process by which CMS determines shared savings or shared losses by comparing the calculated total benchmark ~~expenditure~~expenditures for a given ~~DCE’s~~REACH ACO’s aligned population to the actual expenditures of that ~~DCE’s~~REACH ACO’s aligned beneficiaries over the course of a performance year that includes various risk-mitigation options such as stop-loss reinsurance and risk corridors.

•Risk-Mitigation Options: ~~Both DCEs~~Two of our REACH ACOs elected to participate in a “stop-loss arrangement” for the current and prior performance year offered by ~~CMS.~~CMS, while one REACH ACO has elected third-party coverage. The “stop-loss arrangement” isand third-party coverage are designed to reduce the financial uncertainty associated with high-cost expenditures of individual beneficiaries. Additionally, CMS has created a mandatory risk corridor program that allocates the ~~DCE’s~~REACH ACO’s shared savings and losses in bands of percentage thresholds, after a deviation of greater than 25.0% of the Performance Year Benchmark.

Performance Guarantees

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~Performance Guarantees~~

Through our participation in the DCACO REACH Model, we determined that our arrangements with the providers of our ~~DCE~~REACH ACO beneficiaries require us to guarantee their performance to CMS. At the beginning of the performance year, we recognized the ~~Direct Contracting~~ACO REACH estimated performance year obligation and receivable for the duration of the performance year. This receivable and obligation ~~were~~are measured at an amount equivalent to the estimated Performance Year Benchmark per CMS that is representative of the expected Medicare expenditures for beneficiaries aligned to our ~~DCEs.~~REACH ACOs. As we fulfill our obligation, we amortize the guarantee on a straight-line basis for the amount that represents the completed portion of the performance obligation. The receivable is ~~amortized~~reduced as we receive ~~payment~~payments from CMS for in-network claims or receive CMS reporting detailing out-of-network claims paid by CMS on behalf of our aligned beneficiaries. At the end of each reporting period, we estimate both in-network claims and out-of-network claims incurred by beneficiaries aligned to our ~~DCEs~~REACH ACOs but not yet reported and record a reserve for the estimated amount which is included in medical costs payable on the Condensed Consolidated Balance Sheets. For each performance year, the final consideration due to the ~~DCEs~~REACH ACOs by CMS (shared savings) or the consideration due to CMS by the ~~DCEs~~REACH ACOs (shared loss) is reconciled in the year following the performance year. ~~Periodically during~~On a quarterly basis CMS adjusts the ~~performance year,~~estimated Performance Year Benchmark based upon revised trend assumptions and changes in attributed membership. CMS will ~~measure~~also estimate the shared savings or loss for the REACH ACO on a quarterly basis based upon this revised estimated Performance Year Benchmark, changes to membership, payments made to the REACH ACO for in-network claims, out-of-network claims paid on behalf of the REACH ACO and ~~adjust the performance benchmark and thus the remaining performance obligation if we are in a probable shared loss position.~~various other assumptions including incurred but not reported reserves. The ~~performance year benchmark~~estimated Performance Year Benchmark is our best estimate of our obligation as we are unable to estimate the potential shared savings or loss due to the “stop-loss arrangement”, risk corridor components of the agreement, and a number of variables including but not limited to risk ratings and benchmark trends that could have an inestimable impact on estimated future payments.

~~There were no financial statement impacts of the performance guarantee at March 31, 2021 or for the three-month period then ended.~~ The tables below include the financial statement impacts of the performance guarantee at March 31, ~~2022~~2023 and for the three-month period then ended (in thousands):


	~~March 31, 2022~~
~~Direct contracting performance year receivable~~ ~~(1)~~	$	~~638,641~~
~~Direct contracting performance year obligation(2)~~	~~533,537~~


	March 31, 2023		December 31, 2022
ACO REACH performance year receivable(1)(2)	$	882,884	$	99,181
ACO REACH performance year obligation	719,420		—

(1) We estimate there to be ~~$115.1~~$154.8 million inin-network and out-of-network claims incurred by beneficiaries aligned to our ~~DCE~~REACH ACOs but not reported as of March 31, ~~2022;~~2023; this is included in medical costs payable on the Condensed Consolidated Balance Sheets.

(2) ~~This obligation represents~~The performance year receivable includes $14.9 million related to the ~~consideration due to providers, net of the shared savings or loss for the period and~~prior performance year.


	Three Months Ended March 31,
	2023		2022
Amortization of ACO REACH performance year receivable(1)	$	175,523	$	75,127
Amortization of ACO REACH performance year obligation	239,807		182,797
ACO REACH revenue	239,807		182,797

(1) The amortization of the ~~liability.~~ACO REACH performance year receivable includes $84.3 million related to the amortization of the prior year receivable.

NOTE 16. DISCONTINUED OPERATIONS

In October 2022, we announced that we will no longer offer commercial plans through our Bright HealthCare - Commercial segment in 2023. As a result, we exited the Commercial marketplace effective December 31, 2022. We determined this exit represented a strategic shift that will have a material impact on our business and financial results that requires presentation as

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Bright Health Group, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

discontinued operations. The discontinued operations presentation has been retrospectively applied to all prior periods presented.

While we are no longer offering plans in the Commercial marketplace as of December 31, 2022, we will continue to have involvement in the states where we formerly operated in as we support run out activities of medical claims incurred in the 2022 plan year and perform other activities necessary to wind down our operations in each state, including making final payments of 2022 risk adjustment payable liabilities during the third quarter of 2023. We expect these activities to be substantially complete by the end of 2023.

The financial results of discontinued operations by major line item for the periods ended March 31 were as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Revenue:
Premium revenue	$	713	$	1,186,482
Service revenue	30		36
Investment income	20,892		788
Total revenue from discontinued operations	21,635		1,187,306
Operating expenses:
Medical costs	43,811		951,342
Operating costs	47,593		252,937
Restructuring charges	4,900		—
Depreciation and amortization	—		144
Total operating expenses from discontinued operations	96,304		1,204,423
Loss from discontinued operations before income taxes	(74,669)		(17,117)
Income tax benefit	—		(2)
Net loss from discontinued operations	$	(74,669)	$	(17,115)

The following table presents cash flows from operating and investing activities for discontinued operations for the three months ended March 31, 2023 (in thousands):


	~~Three Months Ended March 31, 2022~~
~~Amortization of Direct contracting performance year receivable~~Cash used in operating activities - discontinued operations	$	~~75,127~~ (599,163)
~~Amortization of Direct contracting performance year obligation~~Cash provided by investing activities - discontinued operations	~~182,797~~684,848

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

Assets and liabilities of discontinued operations were as follows (in thousands):


	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	1,619,744	$	1,465,965
Short-term investments	443,162		1,121,435
Accounts receivable, net of allowance of $230 and $906, respectively	1,398		11,082
Prepaids and other current assets	161,435		184,992
Current assets of discontinued operations	2,225,739		2,783,474
Total assets of discontinued operations	$	2,225,739	$	2,783,474
Liabilities
Current liabilities:
Medical costs payable	$	215,614	$	685,785
Accounts payable	42,024		122,425
Risk adjustment payable	1,948,043		1,943,890
Other current liabilities	20,058		31,374
Current liabilities of discontinued operations	2,225,739		2,783,474
Total liabilities of discontinued operations	$	2,225,739	$	2,783,474

Revenue Recognition: We record adjustments for changes to the risk adjustment balances for individual policies in premium revenue. The risk adjustment program adjusts premiums based on the demographic factors and health status of each consumer as derived from current-year medical diagnoses as reported throughout the year. Under the risk adjustment program, a risk score is assigned to each covered consumer to determine an average risk score at the individual and small-group level by legal entity in a particular market in a state. Additionally, an average risk score is determined for the entire subject population for each market in each state. Settlements are determined on a net basis by legal entity and state and are made in the middle of the year following the end of the contract year. Each health insurance issuer’s average risk score is compared to the state’s average risk score. Risk adjustment is subject to audit by the U.S. Department of Health and Human Services (“HHS”), which could result in future payments applicable to benefit years.

Restructuring Charges: As a result of the strategic changes, we announced and have taken actions to restructure the Company’s workforce and reduce expenses based on our updated business model.

There were no restructuring charges for the three months ended March 31, 2022. Restructuring charges within our discontinued operations for the three months ended March 31, 2023 were as follows (in thousands):


Employee termination benefits	2,959
~~Direct contracting revenue~~Long-lived asset impairments	~~182,797~~100
Contract termination and other costs	1,841
Total discontinued operations restructuring charges	$	4,900

Restructuring accrual activity recorded by major type for the three months ended March 31, 2023 was as follows (in thousands):

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Notes to Condensed Consolidated Financial Statements

(Unaudited)


	Employee Termination Benefits		Contract Termination Costs		Total
Balance at January 1, 2023	$	16,053	$	28,538	$	44,591
Charges	2,624		—		2,624
Cash payments	(8,231)		(51)		(8,282)
Balance at March 31, 2023	$	10,446	$	28,487	$	38,933

Employee termination benefits are recorded within Other current liabilities of discontinued operations while contract termination costs are recorded within Accounts payable of discontinued operations.

Fixed Maturity Securities: Available-for-sale securities within our discontinued operations are reported at fair value as of March 31, 2023 and December 31, 2022. Held-to-maturity securities are reported at amortized cost as of March 31, 2023 and December 31, 2022. The following is a summary of our investment securities (in thousands):


	March 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Value
Cash equivalents	$	928,290	$	30	$	(60)	$	928,260
Available for sale:
U.S. government and agency obligations	277,194		142		(1,535)		275,801
Corporate obligations	124,158		942		(643)		124,457
State and municipal obligations	7,614		1		(57)		7,558
Certificates of deposit	1,837		—		—		1,837
Mortgage-backed securities	9,153		6		(213)		8,946
Asset backed securities	18,325		89		(46)		18,368
Other	388		—		(9)		379
Total available-for-sale securities	438,669		1,180		(2,503)		437,346
Held to maturity:
U.S. government and agency obligations	4,823		—		(110)		4,713
Total held-to-maturity securities	4,823		—		(110)		4,713
Total investments	$	1,371,782	$	1,210	$	(2,673)	$	1,370,319

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Notes to Condensed Consolidated Financial Statements

(Unaudited)


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Value
Cash equivalents	$	622,267	$	24	$	—	$	622,291
Available for sale:
U.S. government and agency obligations	365,040		1		(2,956)		362,085
Corporate obligations	520,097		523		(623)		519,997
State and municipal obligations	9,653		—		(80)		9,573
Certificates of deposit	8,760		—		(2)		8,758
Mortgage-backed securities	154,864		46		(157)		154,753
Asset backed securities	59,557		—		—		59,557
Other	387		—		(14)		373
Total available-for-sale securities	1,118,358		570		(3,832)		1,115,096
Held to maturity:
U.S. government and agency obligations	5,974		—		(159)		5,815
Total held-to-maturity securities	5,974		—		(159)		5,815
Total investments	$	1,746,599	$	594	$	(3,991)	$	1,743,202

We believe that we will collect the principal and interest due on our debt securities that have an amortized cost in excess of fair value. The unrealized losses were primarily caused by interest rate increases and not by unfavorable changes in the credit quality associated with these securities. At each reporting period, we evaluate securities for impairment when the fair value of the investment is less than its amortized cost. We evaluated the underlying credit quality and credit ratings of the issuers, noting no significant deterioration since purchase.

Fair Value Measurements: As of March 31, 2023, investments and cash equivalents within our discontinued operations were comprised of $1.2 billion and $206.2 million with fair value measurements of Level 1 and Level 2, respectively. As of December 31, 2022, the investments and cash equivalents within our discontinued operations were comprised of $940.5 million and $802.7 million with fair value measurements of Level 1 and Level 2, respectively. See Note 4, Fair Value Measurements for additional discussion of methods and assumptions used to determine the fair value hierarchy classification of each class of financial instrument.

Medical Costs Payable: The table below details the components making up the medical costs payable within current liabilities of discontinued operations (in thousands):


	March 31, 2023		December 31, 2022
Claims unpaid	$	61,398	$	60,477
Provider incentive payable	1,717		3,446
Claims adjustment expense liability	14,293		45,932
Incurred but not reported (IBNR)	138,206		575,930
Total medical costs payable of discontinued operations	$	215,614	$	685,785

Risk Adjustment: We record adjustments for changes to the risk adjustment balances for individual policies in premium revenue. The risk adjustment program adjusts premiums based on the demographic factors and health status of each consumer as derived from current-year medical diagnoses as reported throughout the year. Under the risk adjustment program, a risk score is assigned to each covered consumer to determine an average risk score at the individual and small-group level by legal entity in a particular market in a state. Additionally, an average risk score is determined for the entire subject population for each market in each state. Settlements are determined on a net basis by legal entity and state and are made in the middle of the year following the end of the contract year. Each health insurance issuer’s average risk score is compared to the state’s average risk

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

score. Risk adjustment is subject to audit by HHS, which could result in future payments applicable to benefit years. Risk adjustment payable for our discontinued operations was estimated to be $1.9 billion at March 31, 2023 and December 31, 2022.

Accounts Payable: As of March 31, 2023, the Accounts payable balance for discontinued operations included $1.2 million of premium taxes payable, $0.2 million of broker commissions payable as well as the $28.5 million of contract termination costs related to restructuring. As of December 31, 2022, the Accounts payable balance for discontinued operations included $47.1 million of premium taxes payable, $21.1 million of broker commissions payable as well as the $28.5 million of contract termination costs related to restructuring.

Restricted Capital and Surplus: Our regulated insurance legal entities are required by statute to meet and maintain a minimum level of capital as stated in applicable state regulations, such as risk-based capital requirements. These balances are monitored regularly to ensure compliance with these regulations. We are out of compliance with the minimum levels for certain of our regulated insurance legal entities of our discontinued operations.

NOTE 17. SUBSEQUENT EVENTS

On April 28, 2023, the Company disclosed that it is exploring strategic alternatives for its California Medicare Advantage business, which consists of Brand New Day and Central Health Plan, with a focus on a potential sale.

Additionally, on April 28, 2023, we entered into an amended and restated limited waiver and consent (the “Waiver”) under the Credit Agreement. The Waiver amends and restates the limited waiver and consent entered into by the Company under the Credit Agreement on February 28, 2023 and disclosed by the Company in a current report on Form 8-K filed with the Securities and Exchange Commission on March 1, 2023 (the "Original Waiver").

The Waiver amends the Original Waiver by, among other things, extending the temporary waiver of compliance with the minimum liquidity covenant set forth in Section 11.12.2 of the Credit Agreement, which originally spanned from January 25, 2023 to April 30, 2023, to January 25, 2023 to June 30, 2023 (the “Extended Waiver Period”). From April 29, 2023 until the end of the Extended Waiver Period, the Company will be subject to a minimum liquidity covenant of not less than $50.0 million. The Waiver also (i) amends the Original Waiver and the Credit Agreement by changing the definition of "Minimum Liquidity" to mean unrestricted cash of the Company and the other loan parties and (ii) waives permanently any default or event of default arising from the failure to deliver the 2022 audit report without a qualification as to "going concern."

In addition, during the Extended Waiver Period, the Company will not have access to certain negative covenant baskets and will be subject to additional cash-flow, cash balance, and other reporting requirements. The foregoing description of the Waiver does not purport to be complete and is subject to and qualified in its entirety by reference to the full text of the Waiver, a copy of which is filed as Exhibit 10.1 hereto and incorporated by reference herein.

Any future non-compliance with the covenants under the Credit Agreement or uncertainty of being able to obtain any additional waivers or amendments of the terms of the Credit Agreement may result in the obligations under the Credit Agreement being accelerated.

On May 4, 2023, we granted 19.1 million RSU grants that will vest ratably over a three-year period. Such grant was approved on February 24, 2023 by our Compensation and Human Capital Committee as part of the Company’s annual equity grants, subject to shareholder approval of an amendment to the Company's 2021 Omnibus Incentive Plan, which was obtained on May 4, 2023.

During our annual meeting on May 4, 2023, our stockholders voted to approve an amendment to our Ninth Amended and Restated Certificate of Incorporation to effect a reverse stock split at a ratio of not less than 1-for-15 and not greater than 1-for-80 (the “Reverse Stock Split”), with the exact ratio and effective time of the Reverse Stock Split to be determined by our Board of Directors at any time within one year of the date of the Annual Meeting. On May 5, 2023, our Board approved a ratio of 1-for-80 and an effective date of May 19, 2023, with a delegation to the Vice Chairman of the Board to change the date in the event he determines it is in the best interests of the Company.

We have evaluated the events and transactions that have occurred through the date at which the condensed consolidated financial statements were issued. Other than those described above, no additional events or transactions have occurred that may require adjustment to the condensed consolidated financial statements or disclosure.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes and the “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q and ~~Bright Health Group, Inc.’s~~our audited consolidated financial statements and the accompanying notes as well as the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our ~~2021~~2022 Form 10-K. Unless the context otherwise indicates or requires, the terms “we”, “our”, and the “Company” as used herein refer to Bright Health Group, Inc. and its consolidated subsidiaries.

Business Overview

Bright Health Group was founded in 2015 to transform healthcare. Our mission of Making Healthcare Right. Together. is built upon the belief that by connecting and aligning the best local resources in healthcare delivery with the financing of care, leveraging what we call the “Value Layer” of healthcare, we can drive a superior consumer experience, ~~optimize clinical outcomes,~~ reduce systemic waste, lower costs, and lower costs. We are a healthcare company building a national Integrated System of Care in close partnership with our Care Partners. Our differentiated approach is built on alignment, focused on the consumer, and powered by technology. optimize clinical outcomes. Bright Health Group consists of two reportable ~~segments: NeueHealth~~segments within our continuing operations: Consumer Care and Bright ~~HealthCare:~~HealthCare. Additionally, we have one reportable segment in our discontinued operations: Bright HealthCare – Commercial.

~~NeueHealth.~~Consumer Care. Our ~~healthcare enablement and technology~~value-driven care delivery business ~~NeueHealth, is developing the next generation, integrated healthcare system. NeueHealth~~that manages risk in partnership with external payors. Consumer Care aims to significantly ~~reduces~~reduce the friction and current lack of coordination between payors and providers to enable a truly consumer-centric healthcare experience. As of March ~~2022, NeueHealth~~2023, Consumer Care delivers high-quality virtual and in-person clinical care through ~~our 75~~its 72 owned primary care clinics within ~~its~~an integrated care delivery system. Through ~~those~~these risk-bearing clinics ~~NeueHealth maintains~~and our affiliated network of care providers, Consumer Care maintained over ~~570,000~~410,000 unique patient relationships as of March 31, ~~2022, over 530,000~~2023, approximately 373,000 of which are served through value-based arrangements, across multiple payors.

Bright HealthCare. Our ~~healthcare financing and distribution~~delegated senior managed care business that partners with a tight group of aligned providers in California. Bright HealthCare delivers simple, personal, and affordable financing solutions ~~to integrate the~~that are focused on consumer ~~into~~retail healthcare and delivered through Bright Health’s alignment model. As of March 31, 2023, Bright HealthCare ~~currently aggregates and delivers healthcare benefits to over 1.1 million consumers through its various offerings, serving consumers across multiple product lines~~provides MA products in ~~17 states. Bright HealthCare’s customers include commercial health plans across 16 states,~~California, which serve over ~~1.0 million individuals, as well as MA products in 6 states, which serve over 120,000~~123,000 lives and generally focus on higher risk, special needs, or other traditionally underserved populations.

~~COVID-19 Update~~Bright HealthCare – Commercial. Included in our discontinued operations, our Commercial healthcare financing and distribution business focused on commercial plans. In October 2022, we announced that we will no longer offer commercial health plans in 2023.

The ongoing COVID-19 pandemic, including its effect on the macroeconomic environment, and the response of local, state, and federal governments to contain and manage the virus, continues to impact our business. The emergence of COVID-19 variants in the United States and abroad continues to prolong the risk of additional surges of the virus. In addition, some individuals have delayed or are not seeking routine medical care to avoid COVID-19 exposure. These and other responses to the COVID-19 pandemic have meant that our Medical Cost Ratio (“MCR”) may be subject to additional uncertainty as certain segments of the economy and workforce come back on line, members resume care that may have been foregone, and the broader population becomes vaccinated.

For the three months ended March 31, 2022 and 2021, the impact of COVID-19 increased our MCR by 310 basis points and 410 basis points, respectively, reflecting an increase in medical costs of $58.4 million and $34.8 million, respectively.

Overall measures to contain the ongoing COVID-19 outbreak may remain in place for a significant period of time, as certain geographic regions have experienced a resurgence of COVID-19 infections and new strains of COVID-19 that appear to be more transmissible have emerged. Although the number of people who have been vaccinated has been increasing, the duration and severity of this pandemic is unknown and the extent of the business disruption and financial impact depends on factors beyond our knowledge and control.

~~Table of Contents~~

Business Update

Our mission – Making Healthcare Right. Together. – is built on the belief that by connecting and aligning the best local resources in healthcare delivery with the financing of care, we can deliver better outcomes, at a lower cost, for all consumers.

In April 2023 we announced that we are exploring strategic alternatives for our Medicare Advantage business, with a focus on a potential sale of the business. Our Board of Directors is conducting this evaluation following inbound interest in the business. We ~~had~~believe our Medicare Advantage business is a strong ~~start~~business well positioned to serve aging and underserved consumers. While there are no assurances at this time of the ~~year~~eventual outcome of the evaluation of strategic alternatives, a potential sale of the business could substantially bolster the Company’s financial standing and ~~continued to deliver substantial growth. We have reached significant scale and are maturing as a business; 2022 will be focused on optimizing~~position our Consumer Care business well for future growth in the Company and executing on our strategic initiatives. We have made investments to position Bright HealthCare as a differentiated competitor in states with significant addressable markets in both the Commercial marketplace and in Medicare Advantage, as well as establishing our NeueHealthvalue-based care delivery ~~business.~~market.

We ~~expect the next phase of~~remain focused on advancing our ~~growth to be more capital efficient, as we focus on performance within our markets and expanding our NeueHealth business. Our underlying capabilities are maturing and improving, and we continue~~value-based care model to drive ~~down operating costs and leverage~~ our ~~technology investments to enhance our performance.~~

~~We believe we are well positioned~~business forward. The Consumer Care segment continues its strong momentum in ~~2022,~~serving a growing number of consumers through value-based care partnerships with key tailwinds and strategic actions supporting better performance. Bright HealthCare now serves over 1.1 million consumers and NeueHealth has reached approximately 530,000 lives served under value-based contracts. We have scale in major markets, including Florida, Texas, North Carolina, and California. The percentage of our Commercial membership that was new to us in 2022 was consistent with our expectations at 56.1%, meaningfully lower than 2021 due to strong renewal rates and lower overall impact from new market entries. Bright HealthCare’s Medicare Advantage business produced year over year growth, both organic and through acquisition, now serving over 120,000 consumers. We are making improvements in our operations including significantly reducing our claims backlog, successfully implementing our new technology platforms, and demonstrating NeueHealth’s differentiation to our Bright HealthCare business while it is also becoming a meaningful contributor to our overall results.

~~We have made meaningful progress on the following specific actions to drive improved year-over-year results:~~

1.~~Net Pricing Action in Core Markets:~~ We took pricing actions for the majority of our membership in legacy Commercial markets, in excess of underlying medical cost trends, to support our objective to improve profitability. We expect net pricing in both Commercial and Medicare Advantage to remain an important lever in 2023 as we continue on our path to profitability.

2.~~Unit Cost Reductions and Medical Cost Management Initiatives:~~ We are improving our unit cost and executing on medical management opportunities that we identified in 2021 as areas for improvement. We are focused on specific initiatives in contracting, out of network rates, specialty provider networks, and more closely managing high-cost cases. We believe we will deliver on the expected medical cost improvement to our year-over-year improvement in Adjusted EBITDA.

3.~~Risk Adjustment Actions:~~ Our high-performing local Care Partner networks were better prepared in 2022 for our strong growth, which allowed us to attribute members to owned and affiliated physicians much faster, including in Florida and new markets such as Texas. This has enabled our owned and affiliated physicians to engage with their members earlier in the year. That early engagement, combined with higher renewed membership, and the significant investments we made in data and operational capabilities, helps ensure we are accurately capturing the risk of the population we serve.

4.~~Claims and Clinical Platform Stabilization:~~ We launched all of our new market membership on our new claims administration platform in January 2022. The new claims platform is performing well and covers nearly one third of our Commercial membership. We also added resources to our legacy outsourced claims platform, and we are seeing improvements in the performance of that system.payors. We continue to ~~expect that we will transition~~see robust demand for value-based care arrangements, and our differentiated offering in the ~~remainder~~ACA Marketplace segment has attracted multiple payor partners. We’ve driven strong retention of ~~our~~former Bright HealthCare - Commercial members tothrough these relationships, resulting in growth in the ~~new claims management platform~~total number of patients in ~~January~~our clinics from 2022 to 2023. Our ~~proprietary clinical system, Panorama,~~business is ~~also delivering significant benefits to our performance this year. All of our legacy Commercial markets are currently on Panorama,~~well diversified across payor partners and ~~we expect to have all of our Commercial membership on Panorama by 2023.~~

geographies.

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5.
We

As we’ve continued to build our value-based care capabilities in our Consumer Care segment, we have been working on ways to expand the services we are ~~Addressing Talent and Cost Structure:~~ ~~We remain disciplined on our expenses, as we continue to focus on productivity gains and operating expense leverage, while also adding selectively~~bringing to our ~~team~~physician group partners. Beginning in 2023, a major Independent Physicians Association (“IPA”) in California joined our REACH ACO. In the first quarter we expanded our relationship to support ~~growth~~this IPA in partnering with a major national payor to enter a value-based care arrangement, largely focused on the Medicaid population. For our Consumer Care business, we benefit through fee-based payments and ~~enhance~~some incremental upside sharing based on value creation. We also expect to support our ~~operational performance.~~IPA partner as they move other payor relationships to value-based care arrangements, resulting in additional lives supported through this physician enablement arrangement during the year.

We ~~will continue~~intend to focus on markets where our Fully Aligned Care Model can deliver differentiated results, where we can get to sufficient scale, and where we believe we can deliver on our financial targets. We are focusing our Commercialmanage each business to ~~offer Individual and Family Plans~~maximize operating profitability in 10 states where we believe we can drive differentiated value through our Fully Aligned Care Model. We believe these decisions place us in the best position to achieve long-term success for our members and Care Partners. These states have a substantial addressable market at approximately 50% of the Commercial Marketplace consumers. We have meaningful scale in Florida, Texas, and North Carolina, and growth opportunities with strong Care Partner relationships in the other seven states. Optimizing our footprint supports our strategy for profitable, capital efficient growth on our path to improved performance in 2023, ~~and our target for Enterprise Adjusted EBITDA breakeven in 2024.~~

~~Bright HealthCare will be exiting the Commercial marketplace in six states for the 2023 plan year: Illinois, New Mexico, Oklahoma, South Carolina, Utah, and Virginia,~~ as well as ~~discontinuing our employer group business. The markets we are exiting represent approximately 8% of total Bright HealthCare membership, and they are forecast~~working to ~~contribute approximately 5% of our 2022~~manage corporate expenses to maximize consolidated ~~revenue and would have an immaterial impact on revenue in 2023 and beyond.~~

We expect modest 2022 cost savings associated with reduced spending in the markets we are exiting, and we also expect a benefit to our capital position as we will not need to add growth capital to the markets we are exiting. Over time we also expect to have the opportunity to recover or redirect the excess statutory capital currently invested in these states after we resolve all medical claims.Adjusted EBITDA profitability.

We believe the near-term steps that we are taking to improve our performance will ~~continue to grow as we deepen our presence in Bright HealthCare’s 2023 Commercial marketplace states, and as we build on our 120,000 member Medicare Advantage business. We will also continue to grow~~optimize the ~~NeueHealth care delivery and provider enablement~~ business including deeper penetration in the Bright HealthCare business and expanding NeueHealth’s external payor relationships. We have built a differentiated Fully Aligned Care Model and our market decisions for ~~2023 are focused on optimizing this model to deliver the best healthcare experience for consumers and for the~~ long-term ~~success of our business.~~success.

Key Metrics and Non-GAAP Financial Measures

In addition to our GAAP financial information, we review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate our business plan and make strategic decisions. The following table provides the approximate consumers and patients served as of March 31, ~~2022~~2023 and ~~2021.~~2022.

As of March 31,
2022 2021
Bright HealthCare Consumers Served
Commercial(1)
1,040,000 480,000
Medicare Advantage 120,000 60,000
NeueHealth Patients
Value-based Care Patient Lives 530,000 30,000


	As of March 31,
	2023	2022
Bright HealthCare Consumers Served
Medicare Advantage	123,000	120,000

Consumer Care Patients
Value-based Care Consumers	373,000	530,000

~~(1)Commercial plans include IFP and employer plans.~~.

Bright HealthCare Consumers Served

Consumers served include ~~Bright HealthCare~~ individual lives served via ~~health insurance policies across multiple lines of business, primarily attributable to IFP products and~~ MA plans in ~~markets across the country.~~California. We ~~believe~~historically believed growth in the number of consumers at Bright HealthCare is a key indicator of the performance of our Bright HealthCare business. ItThe number of consumers served also informs our management of the operational, clinical, technological and administrative functional area needs that will require further investment to support ~~expected~~ future consumer growth.

~~Table of Contents~~

Value-Based Care ~~Patients~~Consumers

Value-based care ~~patients~~consumers are ~~patients~~consumers attributed to providers contracted under varied value-based care delivery models in which the responsibility for control of an attributed patient’s medical care is transferred, in part or wholly, to our ~~NeueHealth~~Consumer Care managed medical groups. We believe growth in the number of value-based care ~~patients~~consumers is a key indicator of the performance of our ~~NeueHealth~~Consumer Care business. It also informs our management of the operational, clinical, technological and administrative functional area needs that will require further investment to support expected future patient growth. ~~Over time, we expect our~~We saw a year over year decrease in value-based care ~~patients will increase as we convert fee-for-service arrangements into~~consumers resulting from our exit of the commercial market; our focus is to continue to grow the number of value-based care ~~financial arrangements.~~consumers through third-party payor relationships.

Three Months Ended
March 31,
($ in thousands) 2022 2021
Net Loss $ (180,629) (24,545)
Adjusted EBITDA(1)
$ (74,830) (13,827)


	Three Months Ended March 31,
($ in thousands)	2023		2022
Net loss from continuing operations	$	(94,792)	(163,514)
Adjusted EBITDA(1)	$	(35,053)	(59,089)

Table of Contents

(1)See “Non-GAAP Financial Measures” below for reconciliations to the most directly comparable financial measures calculated in accordance with GAAP and related disclosures.

Non-GAAP Financial Measures

Adjusted EBITDA

We define Adjusted EBITDA as net loss excluding loss from discontinued operations, interest expense, income taxes, depreciation and amortization, any impairment of goodwill or intangible assets, adjusted for the impact of acquisition and financing-related transaction costs, share-based compensation, changes in the fair value of ~~contingent consideration,~~equity securities, changes in the fair value of ~~equity securities,~~contingent consideration, contract termination costs and restructuring costs. Adjusted EBITDA has been presented in this Quarterly Report as a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP, because we believe it assists management and investors in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes Adjusted EBITDA is useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. Management uses Adjusted EBITDA to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare our performance against that of other peer companies using similar measures. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.

Adjusted EBITDA is not a recognized term under GAAP and should not be considered as an alternative to net income (loss) as a measure of financial performance or cash provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. Additionally, this measure is not intended to be a measure of free cash flow available for management’s discretionary use as we do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. The presentation of this measure has limitations as an analytical tool and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentation of this measure may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.

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The following table provides a reconciliation of net loss to Adjusted EBITDA for the periods presented:


		Three Months Ended March 31,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2022		2021		($ in thousands)	2023		2022
Net loss	Net loss	$	(180,629)	$	(24,545)	Net loss	$	(169,461)	$	(180,629)
Loss from discontinued operations (a)						Loss from discontinued operations (a)	74,669		17,115
EBITDA adjustments from continuing operations:						EBITDA adjustments from continuing operations:
Interest expense	Interest expense	1,193		546		Interest expense	7,787		1,193
Income tax expense (benefit)	Income tax expense (benefit)	3,240		1,166		Income tax expense (benefit)	1,259		3,242
Depreciation and amortization	Depreciation and amortization	13,041		4,581		Depreciation and amortization	9,891		12,897
Impairment of intangible assets		6,720		—
Transaction costs (a)		111		2,020
Share-based compensation expense (b)		32,921		5,176
Change in fair value of equity securities (c)		40,968		(4,243)
Transaction costs (b)						Transaction costs (b)	1,849		852
Share-based compensation expense (c)						Share-based compensation expense (c)	33,320		32,921
Change in fair value of equity securities						Change in fair value of equity securities	—		40,968
Change in fair value of contingent consideration (d)	Change in fair value of contingent consideration (d)	—		1,472		Change in fair value of contingent consideration (d)	(1,827)		—
Contract termination costs (e)		741		—
Termination and other exit costs (e)						Termination and other exit costs (e)	4,157		5,488
Restructuring costs (f)	Restructuring costs (f)	6,864		—		Restructuring costs (f)	3,303		6,864
EBITDA adjustments from continuing operations						EBITDA adjustments from continuing operations	$	59,739	$	104,425
Adjusted EBITDA	Adjusted EBITDA	$	(74,830)	$	(13,827)	Adjusted EBITDA	$	(35,053)	$	(59,089)

(a)Beginning in the fourth quarter of 2022, Adjusted EBITDA excludes the impact of discontinued operations. The comparable period in 2022 has been recast to exclude these impacts. Represents losses associated with the Commercial business segment that we exited at the end of 2022.

(b)Transaction costs include accounting, tax, valuation, consulting, legal and investment banking fees directly relating to ~~business combinations and certain costs associated with our initial public offering.~~financing initiatives. These costs can vary from period to period and impact comparability, and we do not believe such transaction costs reflect the ongoing performance of our business.

~~(b)~~(c)Represents non-cash compensation expense related to stock option and restricted stock unit award grants, which can vary from period to period based on a number of factors, including the timing, quantity and grant date fair value of the awards.

~~(c)~~Beginning in 2022, Adjusted EBITDA excludes the impact of changes in unrealized gains and losses on equity securities. The comparable period in 2021 has been recast to exclude changes in unrealized gains and losses on equity securities.

(d)Represents the non-cash change in fair value of contingent consideration from business combinations, which is remeasured at fair value each reporting period.

(e)Represents amounts paid for early termination of existing vendor ~~contracts.~~contracts and, beginning in 2023, includes the impact of our MA legacy operations that we exited at the end of 2022. The adjustment in the comparable period in 2022 has been recast to include these impacts.

(f)Restructuring costs ~~represents~~represent severance costs as part of a workforce reduction ~~in 2022.~~and impairment of

certain long-lived assets relating to our decision

~~Acquisitions~~

~~Effective March 31, 2021, we acquired THNM, which offers policies available through~~to exit the commercial market for individual on- and off-exchange and employer-sponsored health coverage. In addition, we acquired Zipnosis on March 31, 2021, which is a telehealth platform that offers virtual care to health systems around the U.S. This NeueHealth acquisition was completed to enhance our proprietary technology platform, DocSquad, and our consumer and provider connectivity with Zipnosis’ virtual care capabilities.

Effective April 1, 2021, we acquired CHP, an insurance provider of MA HMO services. This Bright HealthCare acquisition was completed to gain synergies from leveraging CHP’s clinical model and California consumer expertise to continue to expand our MACommercial business ~~in the California market.~~

Effective July 1, 2021, we acquired Centrum, a value-based primary care focused, multi-specialty medical group, serving Commercial, Medicare, and Medicaid consumers across multiple payors. This NeueHealth acquisition was completed for the incremental financial benefits achievable through our integrated care delivery model, whereby Bright HealthCare members are cared for under value-based arrangements with Centrum. This model brings together the financing, distribution, and delivery of high-quality healthcare and provides the opportunity to enhance our overall margin potential.2023 plan year.

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~~See Note 2,~~ ~~Business Combinations, in our condensed consolidated financial statements of this Quarterly Report.~~ ~~for more information regarding our business combinations.~~

Results of Operations

The following table summarizes our unaudited Condensed Consolidated Statements of Income (Loss) data and other financial information for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022.


($ in thousands)	($ in thousands)	Three Months Ended March 31,				($ in thousands)	Three Months Ended March 31,
Condensed Consolidated Statements of Income (loss) and operating data:	Condensed Consolidated Statements of Income (loss) and operating data:	2022		2021		Condensed Consolidated Statements of Income (loss) and operating data:	2023			2022

Revenue:	Revenue:					Revenue:
Premium revenue	Premium revenue	$	1,680,450	$	860,631	Premium revenue	$	502,918		$	458,962
Direct contracting revenue		182,797		—
ACO REACH revenue						ACO REACH revenue	239,807			182,797
Service revenue	Service revenue	12,428		8,438		Service revenue	13,570			12,392
Investment income (loss)	Investment income (loss)	(40,100)		5,489		Investment income (loss)	46			(40,888)
Total revenue	Total revenue	1,835,575		874,558		Total revenue	756,341			613,263
Operating expenses
Operating costs						Operating costs
Medical costs	Medical costs	1,580,596		684,570		Medical costs	688,515			594,248
Operating costs	Operating costs	418,918		208,240		Operating costs	140,324			159,117
Restructuring charges						Restructuring charges	3,357			6,864
Depreciation and amortization	Depreciation and amortization	13,041		4,581		Depreciation and amortization	9,891			12,897
Total operating expenses		2,012,555		897,391
Total operating costs						Total operating costs	842,087			773,126
Operating loss	Operating loss	(176,980)		(22,833)		Operating loss	(85,746)			(159,863)
Interest expense	Interest expense	1,193		546		Interest expense	7,787			1,193
Other income	Other income	(784)		—		Other income	—			(784)
Loss before income taxes		(177,389)		(23,379)
Income tax expense		3,240		1,166
Loss from continuing operations before income taxes						Loss from continuing operations before income taxes	(93,533)			(160,272)
Income tax expense (benefit)						Income tax expense (benefit)	1,259			3,242
Net loss from continuing operations						Net loss from continuing operations	(94,792)			(163,514)
Loss from discontinued operations, net of tax (Note 16)						Loss from discontinued operations, net of tax (Note 16)	(74,669)			(17,115)
Net loss	Net loss	(180,629)		(24,545)		Net loss	(169,461)			(180,629)
Net earnings attributable to non-controlling interest		(14,605)		(617)
Net earnings from continuing operations attributable to noncontrolling interests						Net earnings from continuing operations attributable to noncontrolling interests	(5,550)			(14,605)
Series A preferred stock dividend accrued	Series A preferred stock dividend accrued	(8,938)		—		Series A preferred stock dividend accrued	(9,714)			(8,938)
Series B preferred stock dividend accrued						Series B preferred stock dividend accrued	(2,180)			—
Net loss attributable to Bright Health Group, Inc. common shareholders	Net loss attributable to Bright Health Group, Inc. common shareholders	$	(204,172)	$	(25,162)	Net loss attributable to Bright Health Group, Inc. common shareholders	$	(186,905)		$	(204,172)
Adjusted EBITDA	Adjusted EBITDA	$	(74,830)	$	(13,827)	Adjusted EBITDA	$	(35,053)		$	(59,089)
Medical Cost Ratio (1)		84.8%		79.5%
Operating Cost Ratio (2)		22.8%		23.8%
Operating Cost Ratio (1)						Operating Cost Ratio (1)	18.6		%	25.9		%

(1)~~Medical Cost Ratio is defined as medical costs divided by premium and direct contracting revenue.~~

~~(2)~~Operating Cost Ratio is defined as operating costs divided by total revenue.

Total revenues increased by ~~$961.0~~$143.1 million, or ~~109.9%~~23.3%, for the three months ended March 31, ~~2022~~2023 as compared to the same period in ~~2021,~~2022, which was driven by ~~premium~~an increase in our ACO REACH revenue of $57.0 million due to an increase of approximately ~~620,000 Bright HealthCare consumers and over 500,000 value-based care patient lives.~~19,000 beneficiaries aligned to our REACH ACOs. In addition, two DCEs aligned with our NeueHealth segment began participating in the DC Model effective January 1, 2022, which contributed $182.8 million of the increase in total revenue. The increases in premium revenue and Direct Contracting revenue were partially offset by an investment loss for the three months ended March 31, 2022 ~~as a result~~we had an investment loss of ~~$41.0~~$40.9 million driven by changes in the fair value of ~~unrealized losses from~~our investments in equity ~~securities.~~securities; we held no equity securities during the three months ended March 31, 2023 and as such there was not equivalent activity in the current period.

Medical costs increased by ~~$896.0~~$94.3 million, or ~~130.9%~~15.9%, for the three months ended March 31, ~~2022~~2023 as compared to the same period in ~~2021.~~2022. The increase in medical costs was primarily driven by an increase in ~~consumers through both organic growth in~~beneficiaries aligned to our REACH ACOs.

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~~consumers and inorganic growth attributable~~Operating costs decreased by $18.8 million, or 11.8%, for the three months ended March 31, 2023 as compared to the ~~acquisitions of CHP~~same period in 2022. The decrease in operating costs was primarily due to a decrease in compensation and ~~Centrum. Medical~~benefit costs ~~incurred associated with beneficiaries aligned to our DCEs also contributed to the increase.~~resulting from a decrease in employees.

Our ~~MCR~~operating cost ratio of ~~84.8%~~18.6% for the three months ended March 31, 2023, decreased 730 basis points compared to the same period in 2022. The decrease is primarily resulting from our restructuring efforts.

Depreciation and amortization decreased by $3.0 million for the three months ended March 31, 2023 as compared to the same period in 2022. The decrease is primarily due to the full impairment of the reacquired contract intangible asset during the third quarter of 2022; for the three months ended March 31, 2022 ~~increased 530 basis points~~amortization of the reacquired contract intangible asset was $3.3 million as compared to ~~the same period in 2021. Our MCR included a 310 basis point and a 410 basis point unfavorable impact from COVID-19 costs~~no related expense for the three months ended March 31, ~~2022 and 2021, respectively. In addition, our MCR was impacted by Direct Contracting revenue recorded at a 96.6% MCR, which increased our MCR by 130 basis points.~~2023.

~~Operating costs increased by $210.7~~Interest expense was $7.8 million ~~or 101.2%, for the three months ended March 31, 2022 as compared to the same period in 2021. The increase in operating costs was primarily due to a $75.0 million increase in compensation~~ and benefit costs driven by increases in employees, a $27.7 million increase in share-based compensation costs and $6.9 million of restructuring severance costs as part of a workforce reduction in 2022. In addition, operating costs from new market entry and marketing and selling expenses contributed to the year-over-year increase in operating costs. Operating costs for the three months ended March 31, 2022, also include a $6.7 million impairment of intangible assets.

Our operating cost ratio of 22.8% for the three months ended March 31, 2022, decreased 100 basis points compared to the same period in 2021. The decrease was primarily due to operating costs increasing at a slower rate than the increased premium revenues earned due to consumer growth and participation in the DC Model, as we continue to gain leverage on our operating costs as we grow, partially offset by an increase in compensation and benefit costs and an impairment of intangible assets.

~~Depreciation and amortization increased by $8.5~~$1.2 million for the three months ended March 31, 2023 and 2022, respectively, which was due to increased borrowings on the Credit Agreement throughout the period.

Income tax expense decreased by $2.0 million for the three months ended March 31, 2023 as compared to the same period in ~~2021, primarily~~2022. The impact from income taxes varies from the federal statutory rate of 21.0% due to ~~the $7.0 million of amortization expense resulting from intangible assets acquired~~state income taxes, changes in the ~~Centrum, CHP~~valuation allowance for deferred tax assets and ~~Zipnosis acquisitions,~~adjustments for ~~which there were no comparable amounts in the three months ended March 31, 2021.~~

~~Interest expense was $1.2 million and $0.5 million for the three months ended March 31, 2022 and, 2021, respectively, which was due to interest on the Credit Agreement we entered into in March 2021.~~

~~Income tax expense was $3.2 million for the three months ended March 31, 2022.~~ permanent differences. For the three months ended March 31, ~~2022,~~2023, the ~~income tax~~ expense largely relates to amortization of originating goodwill from asset acquisitions and estimated state income taxes attributable to income earned in separate filing states without state net operating loss carryforwards. ~~For~~

Loss from discontinued operations for the three months ended March 31, 2023 is reflective of our first quarter of run out after our exit of the Commercial marketplace. Loss from discontinued operations for the three months ended March 31, 2023 was $74.7 million for the three months ended March 31, 2023, primarily resulting from run out medical costs from prior period development of $43.8 million and operating costs to support our run out activities of $47.6 million partially offset by investment income of $20.9 million. Loss from discontinued operations for the three months ended March 31, ~~2021, income tax expense~~2022 was ~~$1.2~~$17.1 million ~~which was due to an adjustment to the tax impact~~, medical costs of ~~goodwill~~$951.3 million and ~~intangible assets acquired as part~~operating costs of ~~the Brand New Day and THNM acquisitions.~~$252.9 million were partially offset by premium revenue of $1.2 billion.

Bright HealthCare
($ in thousands) Three Months Ended
March 31,
Statement of income (loss) and operating data: 2022 2021
Bright HealthCare:
Commercial revenue $ 1,163,224 $ 621,056
Medicare Advantage revenue 430,313 220,869
Investment income 868 1,246
Total revenue 1,594,405 843,171
Operating expenses:
Medical costs 1,323,724 675,056
Operating costs 371,664 189,973
Depreciation and amortization 6,039 2,357
Total operating expenses 1,701,427 867,386
Operating loss $ (107,022) $ (24,215)
Medical Cost Ratio (MCR) 83.1 % 80.2 %

~~Table of Contents~~


Bright HealthCare
($ in thousands)	Three Months Ended March 31,
Statement of income (loss) and operating data:	2023			2022

Revenue:
Premium revenue	$	453,370		$	430,313
Investment income (loss)	46			80
Total revenue	453,416			430,393
Operating expenses
Medical costs	430,928			416,200
Operating costs	49,453			41,117
Goodwill impairment	—			—
Depreciation and amortization	4,408			4,459
Total operating expenses	484,789			461,776
Operating loss	$	(31,373)		$	(31,383)
Medical Cost Ratio (MCR)	95.0		%	96.7		%

~~Commercial~~Bright HealthCare premium revenue increased by ~~$542.2~~$23.1 million, or ~~87.3%~~5.4%, for the three months ended March 31, ~~2022~~2023 as compared to the same period in ~~2021.~~2022. The increase ~~in revenues~~ was driven by favorable premium rates and an increase in consumer lives of approximately ~~560,000~~3,000 due to organic ~~growth and entry into new markets in 2022 – particularly entry into Texas, which is partially offset by an increase in risk adjustment payable.~~

Medicare Advantage revenue increased by $209.4 million, or 94.8%, for the three months ended March 31, 2022 as compared to the same period in 2021. The three months ended March 31, 2022 included $129.2 million of revenue from our acquisition of CHP, which occurred on April 1, 2021. The remaining increase was primarily driven by organic growth and favorable premium rates.

~~Medical costs increased by $648.7 million, or 96.1%, for the three months ended March 31, 2022 as compared to the same period in 2021.~~ ~~For the three months ended March 31, 2022 and 2021, the impact of COVID-19 increased our medical costs $58.4 million and $34.8 million, respectively.~~ ~~The remaining increase in 2022 is due to an increase in consumers and medical costs from our acquisition of CHP, partially offset by favorable medical cost rates in our Commercial business.~~

Our MCR of 83.1% for the three months ended March 31, 2022 increased 290 basis points compared to the same period in 2021. Our MCR for the three months ended March 31, 2022 included a 370 basis point unfavorable impact from COVID-19 costs. Our MCR for the three months ended March 31, 2021 included a 410 basis point unfavorable impact from COVID-19 costs. The increase in MCR is primarily due to an increase in risk adjustment payable.

Operating costs increased by $181.7 million, or 95.6%, for the three months ended March 31, 2022 as compared to the same period in 2021. The increase was primarily due to increased compensation and benefit costs driven by an increase in employees and an increase in share-based compensation costs. In addition, we experienced increases in operating costs from new market entry and increased marketing and selling expenses. Operating costs for the three months ended March 31, 2022, also include a $6.7 million impairment of intangible assets.

Depreciation and amortization increased by $3.7 million for the three months ended March 31, 2022 as compared to the same period in 2021. The increase was primarily due to amortization expense of $2.6 million resulting from intangible assets acquired in the CHP acquisition on April 1, 2021, for which there are no comparable amounts in the three months ended March 31, 2021.

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NeueHealth
($ in thousands) Three Months Ended
March 31,
Statement of income (loss) and operating data: 2022 2021
NeueHealth:
Premium revenue $ 455,002 $ 28,674
Direct contracting revenue 182,797 —
Service revenue 24,121 15,622
Investment income (loss) (40,968) 4,243
Total revenue 620,952 48,539
Operating expenses
Medical costs 624,994 19,482
Operating costs 58,914 25,451
Depreciation and amortization 7,002 2,224
Total operating expenses 690,910 47,157
Operating income (loss) $ (69,958) $ 1,382
Medical Cost Ratio (MCR) 98.0 % 67.9 %

Premium revenue increased by $426.3 million for the three months ended March 31, 2022 as compared to the same period in 2021. The increase in premium revenue is primarily due to growth in capitated revenue driven by the acquisition of Centrum on July 1, 2021.

We began participating in the DC Model beginning in January 2022 through two DCEs aligned with our NeueHealth business. Direct contracting revenue was $182.8 million for the three months ended March 31, 2022. This revenue was attributable to the alignment of beneficiaries to our DCE entities, which numbered approximately 49,000 at March 31, 2022.

Service revenue increased by $8.5 million, or 54.4%, for the three months ended March 31, 2022 as compared to the same period in 2021. The increase in service revenue is primarily driven by increased intercompany network contract service revenue with our Bright HealthCare segment, which is charged on a per consumer per month basis and has increased due to market expansion and an increase in consumer lives. The acquisition of Zipnosis on March 31, 2021 also contributed to the year-over-year increase in service revenue.

We experienced a $41.0 million investment loss for the three months ended March 31, 2022, compared to investment income of $4.2 million in the three months ended March 31, 2021. The investment income and loss in both periods was due to unrealized gains and losses on equity securities.

Medical costs were $625.0 million for the three months ended March 31, 2022, an increase of $605.5 million as compared to the same period in 2021, which was primarily driven by an increase in patient lives as a result of the Centrum acquisition, new market expansion and our participation in Direct Contracting beginning in January 2022. MCR was 98.0% for the three months ended March 31, 2022, compared to 67.9% for the three months ended March 31, 2021. The increase was primarily due to higher MCRs in new markets where we do not have prior history, as well as a higher MCR for our DCEs of 96.6%.

Operating costs increased by $33.5 million, or 131.5%, for the three months ended March 31, 2022 as compared to the same period in 2021. The increase was primarily due to increased compensation and benefit costs from more employees, and outsourced vendor fees in support of consumer growth, as well as costs from the Centrum acquisition.growth.

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Bright HealthCare medical costs increased by $14.7 million, or 3.5%, for the three months ended March 31, 2023 as compared to the same period in 2022. The increase in medical costs was primarily driven by increased utilization of supplemental benefits paid in the current year. Bright HealthCare medical costs for the three months ended March 31, 2023 included $27.5 million in prior period development as compared $2.1 million in prior period development for the three months ended March 31, 2022.

Our MCR of 95.0% for the three months ended March 31, 2023 decreased 170 basis points compared to the same period in 2022. The MCR for the three months ended March 31, 2023 included 608 basis points of unfavorable impact from prior period development as compared to 49 basis points of unfavorable impact from prior period development for the MCR for the three months ended March 31, 2022.

Operating costs increased by $8.3 million, or 20.3%, for the three months ended March 31, 2023 as compared to the same period in 2022. The increase was primarily due to increases in compensation expense and other administrative expenses.

Depreciation and amortization remained relatively flat for the three months ended March 31, 2023 as compared to the same period in 2022.


Consumer Care
($ in thousands)	Three Months Ended March 31,
Statement of income (loss) and operating data:	2023		2022

Revenue:
Premium revenue	$	49,548	$	28,649
Affiliated revenue	—		368,053
ACO REACH revenue	239,807		182,797
Service revenue	13,570		12,392
Investment income (loss)	—		(40,968)
Total revenue	302,925		550,923
Operating expenses
Medical costs	257,587		566,694
Operating costs	37,814		47,281


Depreciation and amortization	3,132		7,002
Total operating expenses	298,533		620,977
Operating income (loss)	$	4,392	$	(70,054)

Premium revenue increased by ~~$4.8~~$20.9 million, or 72.9%, for the three months ended March 31, 2023 as compared to the same period in 2022. The increase in premium revenue for the three months ended March 31, 2023 is a result of increased membership through our third party payor contracts as compared to the three months ended March 31, 2022.

Affiliated revenue decreased to zero for the three months ended March 31, 2023 as compared to $368.1 million for the three months ended March 31, 2022 as our result of our exit of our Commercial business.

ACO REACH revenue increased $57.0 million for the three months ended March 31, 2023 compared to the same period in ~~2021, which~~2022. This increase is attributable to an increase of approximately 19,000 beneficiaries aligned to our REACH ACOs as of March 31, 2023 compared to the same period in 2022. See Note 15, ACO REACH, for additional information regarding our remaining performance obligation based on the most recent benchmark data.

Service revenue remained relatively flat for the three months ended March 31, 2023 as compared to the same period in 2022.

We had no investment loss for the three months ended March 31, 2023, compared to investment loss of $41.0 million in the three months ended March 31, 2022. The investment loss for the three months ended March 31, 2022 was driven by changes in

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the fair value of our investments in equity securities; we held no equity securities during the three months ended March 31, 2023 and as such there was not equivalent activity in the current period.

Medical costs were $257.6 million for the three months ended March 31, 2023, a decrease of $309.1 million as compared to the same period in 2022. The decrease is primarily a result of the limited risk contracts that we have entered into with third party payors that are accounted for on a net basis as compared to the full risk contract with Bright Healthcare - Commercial that was accounted for on a gross basis in the prior period.

Operating costs decreased by $9.5 million, or 20.0%, for the three months ended March 31, 2023 as compared to the same period in 2022. The decrease was primarily due to ~~amortization expense of $4.4 million resulting from intangible assets acquired~~decreases in network expenses as ~~part of the Centrum acquisition, which occurred on July 1, 2021.~~well as compensation expense.

Depreciation and amortization decreased by $3.9 million for the three months ended March 31, 2023 as compared to the same period in 2022. The decrease is primarily due to the full impairment of the reacquired contract intangible asset during the third quarter of 2022; for the three months ended March 31, 2022 amortization of the reacquired contract intangible asset was $3.3 million as compared to no related expense for the three months ended March 31, 2023.

Liquidity and Capital Resources

We assess our liquidity and capital resources in terms of our ability to generate adequate amounts of cash to meet our current and future needs. We have historically funded our operations and acquisitions primarily through the sale of stock, including the issuance of Series B Preferred Stock in October 2022, which generated cash proceeds of $172.9 million and the issuance of Series A Preferred Stock in January 2022, which generated cash proceeds of ~~$750.0 million,~~$747.5 million.

We have incurred operating losses since our founding, and we expect to incur operating losses in the future. However, we are implementing a restructuring plan to reduce our capital needs and our operating expenses in the future to drive positive operating cash flow and increase liquidity. Our restructuring plan includes Bright HealthCare’s exiting of the Commercial marketplace for the 2023 plan year as well as reducing our workforce, exiting excess office space, and terminating or restructuring contracts. On April 28, 2023, the Company disclosed that it is exploring strategic alternatives for its California Medicare Advantage business, which consists of Brand New Day and Central Health Plan, with a focus on a potential sale. In the event the Company is unable to execute on its strategic plans around the California Medicare Advantage business, obtain additional financing or take other management actions, among other potential consequences, we forecast we will be unable to satisfy our obligations.

In addition to our current capital needs, we regularly evaluate our future capital needs to support our future growth plans and other strategic opportunities that may arise. We may seek funds through borrowings or through additional rounds of financing, including private or public equity offerings. Our longer-term future capital requirements and ability to raise additional capital will depend on many forward-looking factors, including:

•investor confidence in our ability to continue as a going concern,

•our ability to continue executing on cost saving measures previously described, and

•our ability to successfully improve our profitability.

Our expected primary short-term uses of cash for our regulated insurance entities include ongoing disbursements for claims payments, the ~~issuance~~ACO REACH performance year obligation, as well as payments into the risk adjustment program which generally occur in the third quarter. For our non-regulated entities, our expected short-term uses of ~~common stock in June 2021 in connection with~~cash include capital infusions into our ~~initial public offering, which generated~~regulated insurance entities, interest payments and other general and administrative costs. Our long-term cash ~~proceeds of $887.3 million.~~requirements primarily include operating lease obligations and redeemable noncontrolling interests.

Cash and investment balances held at regulated insurance entities are subject to regulatory restrictions and can only be accessed through dividends declared to the non-regulated parent company, pending regulatory approval, or through reimbursements related to administrative services agreements with the parent company. The Company declared no dividends from the regulated insurance entities to the parent company during the three months ended March 31, ~~2022~~2023 and ~~2021.~~ 2022.

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The regulated legal entities are required to hold certain minimum levels of risk-based capital and surplus to satisfy regulatory requirements. As of March 31, ~~2022 and December 31, 2021,~~2023, we were out of compliance with the ~~amounts held in risk-based capital and surplus at~~minimum level for one of our regulated insurance legal entities ~~was in excess~~ of ~~the minimum requirements, except for two states where we are working with the state departments~~our continuing operations and certain of ~~insurance to rectify potential instances of noncompliance.~~

~~Our expected primary short-term uses of cash for~~ our regulated insurance legal entities ~~include ongoing disbursements for claims payments, as well as payments into the risk adjustment program which generally occur in the third quarter. For~~within our non-regulated entities, our expected short-term uses of cash include capital infusions into our regulated insurance entities, interest payments and other general and administrative costs. Our long-term cash requirements include operating lease obligations, the Direct Contracting performance year obligation and redeemable noncontrolling interest.

discontinued operations.

We expect to continue to incur operating losses for the foreseeable future; however, we believe our business is at a different phase of capital need than in prior years when we were investing heavily in Bright HealthCare new state entries and acquisitions. In addition, we have taken actions to improve our capital position, including reducing headcount, renegotiating vendor contracts and exiting certain markets. We are seeking the most capital efficient ways to achieve our growth and financial targets in order to reduce the need for external capital. This includes balancing our growth plans with our capital needs, continuing our efforts to drive better medical cost and more accurately capture the acuity of the population we serve, focusing our growth on NeueHealth, carefully managing expenses, and potentially increasing our use of quota share reinsurance. We continue to evaluate our future capital needs; however, we believe that existing cash on hand, investments and amounts available under our Credit Agreement described below will be sufficient to satisfy our anticipated cash requirements for the next twelve months. However, we may seek additional capital to support our future growth plans and other strategic opportunities that may arise.

Credit Agreement

We have a $350.0 million Credit Agreement, which matures on February 28, 2024. The Credit Agreement contains a covenant that requires the Company to maintain a total debt to capitalization ratio of (a) 0.25 to 1.00. The Credit Agreement also contains a covenant that ~~require~~requires us to maintain a minimum liquidity of $150.0 million. We were not in compliance with the total debt to capitalization ratio covenant as of September 30, 2022. On November 8, 2022, we executed an amendment to the Credit Agreement pursuant to which certain collateral related defaults were waived and, in addition, it was agreed that we would (i) not be required to test our debt to capitalization ratio covenant during and including the four quarter test period ending September 30, 2022 through and including the four quarter test period ending September 30, 2023, (ii) be required to maintain a minimum liquidity of $200.0 million from November 8, 2022 through and including September 30, 2023 and (iii) be required to maintain a minimum liquidity of $150.0 million after September 30, 2023.As of March 31, ~~2022,~~2023, we had no$303.9 million of short-term borrowings under the Credit Agreement.

On March 1, 2023, the Company disclosed that during the First Quarter of 2023, the Company breached the minimum liquidity covenant of the Credit Agreement. On February 28, 2023, the Company entered into a limited waiver and consent (the “Original Waiver”) under the Credit Agreement, which, among other matters, provided for a temporary waiver for the period from January 25, 2023 through April 30, 2023 of compliance with the minimum liquidity covenant set forth in Section 11.12.2 of the Credit Agreement.

On April 28, 2023, the Company entered into an amended and restated limited waiver and consent (the “Waiver”) under the Credit Agreement, which amended and restated the Original Waiver. The Waiver amends the Original Waiver by, among other things, extending the temporary waiver of compliance with the minimum liquidity covenant set forth in Section 11.12.2 of the Credit Agreement, which originally spanned from January 25, 2023 to April 30, 2023, to January 25, 2023 to June 30, 2023 (the “Extended Waiver Period”). From April 29, 2023 until the end of the Extended Waiver Period, the Company will be subject to a minimum liquidity covenant of not less than $50.0 million. The Waiver also (i) amends the Original Waiver and the Credit Agreement by changing the definition of "Minimum Liquidity" to mean unrestricted cash of the Company and the other loan parties and (ii) waives permanently any default or event of default arising from the failure to deliver the 2022 audit report without a qualification as to "going concern." In addition, during the Extended Waiver Period, the Company will not have access to certain negative covenant baskets and will be subject to additional cash-flow, cash balance, and other reporting requirements.

The obligations under the Credit Agreement are secured by substantially all of the assets of the Company and its wholly owned subsidiaries that are designated as guarantors, including a pledge of the equity of each of its subsidiaries. Borrowings under the Credit Agreement accrue interest at the Company’s election either at a rate of: the (i) the sum of (a) the greatest of (1) the Prime Rate (as defined in the Credit Agreement), (2) the rate of the Federal Reserve Bank of New York in effect plus 1∕2 of 1.0% per annum, and (3) London interbank offered rate (“LIBOR”), plus 1% per annum, and (b) a margin of 4.0%; or (ii) the sum of (a) the LIBOR multiplied by a statutory reserve rate and (b) a margin of 5.0%. In addition, the commitment fee is 0.75% of the unused amount of the Credit Agreement.

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Furthermore, the Credit Agreement contains covenants that, among other things, restrict the ability of the Company and its subsidiaries to make dividends or other distributions, incur additional debt, engage in certain asset sales, mergers, acquisitions or similar transactions, create liens on assets, engage in certain transactions with affiliates, change its business or make investments. In addition, the Credit Agreement contains other customary covenants, representations and events of default.

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As of March 31, ~~2022,~~2023, we had $46.1 million of outstanding, undrawn letters of credit under the Credit Agreement, ~~and $303.9~~which reduce the amount available to borrow. Subsequently, in April 2023, $15.3 million of ~~remaining availability thereunder.~~the undrawn letters of credit were released.

Preferred Stock Financing

On January 3, 2022, we issued 750,000 shares of the Series A Preferred Stock, par value $0.0001 per share, for an aggregate purchase price of $750.0 million. We used a portion of the proceeds to repay in full our $155.0 million of outstanding borrowings under the Credit Agreement on January 4, 2022.

On October 17, 2022, we issued 175,000 shares of the Series B Preferred Stock, par value $0.0001 per share, for an aggregate purchase price of $175.0 million.

For additional information on the Series A and Series B Preferred Stock, see Note 9, Redeemable Convertible Preferred Stock, in our condensed consolidated financial statements of this Quarterly Report.

Cash and Investments

As of March 31, ~~2022,~~2023, we had ~~$1,505.5 million~~$2.0 billion in cash and cash equivalents, ~~$692.5~~$275.8 million in short-term investments and ~~$733.5~~$183.3 million in long-term investments on the consolidated balance sheet. Our cash and investments are held at non-regulated entities and regulated insurance entities.

As of March 31, ~~2022,~~2023, we had non-regulated cash and cash equivalents of ~~$284.7~~$140.5 million, short-term investments of ~~$80.5~~$1.6 million and no long-term investments.

As of March 31, ~~2022,~~2023, we had regulated insurance entity cash and cash equivalents of ~~$1,220.8 million,~~$1.8 billion, of which ~~$1.2~~$21.8 million was restricted, short-term investments of ~~$612.0~~$271.4 million, of which ~~$4.4~~$2.8 million was restricted, and long-term investments of ~~$733.5~~$180.4 million, of which $3.0 million was restricted.

Cash Flows

The following table presents a summary of our cash flows for the periods shown:


		Three Months Ended March 31,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2022		2021		($ in thousands)	2023		2022
Net cash provided by operating activities		$	484,757	$	343,603
Net cash used in investing activities		(633,127)		(56,275)
Net cash provided by financing activities		592,738		200,234
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	$	(615,024)	$	484,757
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	686,788		(633,127)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(1,804)		592,738
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	444,368		487,562		Net increase in cash and cash equivalents	69,960		444,368
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	1,061,179		488,371		Cash and cash equivalents at beginning of period	1,932,290		1,061,179
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,505,547	$	975,933	Cash and cash equivalents at end of period	$	2,002,250	$	1,505,547

Operating Activities

During the three months ended March 31, ~~2022,~~2023, net cash provided by operating activities ~~increased~~decreased by ~~$141.2 million~~$1.1 billion compared to the three-month period ended March 31, ~~2021,~~2022, primarily driven by ~~the~~our Commercial business being in runout and not incurring additional medical costs and increase ~~in consumer growth driving the increased~~to our risk adjustment ~~and medical cost payables, as well as accounts payables and other liabilities, partially offset by an increase in our net loss.~~payable beyond prior period development.

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Investing Activities

During the three months ended March 31, ~~2022,~~2023, net cash used in investing activities increased by ~~$576.9 million~~$1.3 billion compared to the three-month period ended March 31, ~~2021.~~2022. The increase was primarily attributable to ~~a $593.9 million~~an increase in ~~purchases~~the proceeds of ~~investments, net~~investment sales of proceeds from sales, paydowns and maturities of investments, which was driven by additional investments at our regulated entities to support continued consumer growth. The increase of cash used for investments was partially offset by a $18.3$535.4 million ~~decrease in cash used for acquisitions~~during the three months ended March 31, 2023 as compared to the three months ended March 31, ~~2021.~~2022. Investment purchases also decreased by $779.2 million during the three months ended March 31, 2023 as compared to the three months ended March 31.2022.

Financing Activities

During the three months ended March 31, ~~2022,~~2023, net cash provided by financing activities ~~increased~~decreased by ~~$392.5~~$594.5 million compared to the three months ended March 31, ~~2021,~~2022. This decrease is primarily ~~driven by $750 million of proceeds from the issuance of~~due to our Series A ~~Preferred Stock in January 2022, offset by $2.5 million of cash paid for~~ issuance ~~costs. This increase was partially offset by~~during the ~~repayment of our $155.0 million of outstanding borrowings under the Credit Agreement on January 4, 2022, subsequent to the issuance of Series A Preferred Stock. The~~ three months ended March 31, ~~2021 also included $200.0~~2022 net of a $155.0 million repayment of ~~cash from borrowings under our Credit Facility.~~debt during that same period; the three months ended March 31, 2023 had no comparable activity.

Critical Accounting Policies and Estimates

~~The~~As of March 31, 2023, there had been no material changes to the critical accounting policies ~~that reflect our significant judgements~~ and estimates used in the preparation of our condensed consolidated financial statements ~~include those~~as described in the ~~2021~~2022 Form 10-K under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates.”

Other than described below, which is due to our participation in the DC Model beginning on January 1, 2022, there have been no material changes to our critical accounting policies and estimates for the period ended March 31, 2022:

~~Direct Contracting Receivable and Performance Year Obligation~~

Performance year receivable and obligation represents the average Medicare beneficiary’s total cost of care for beneficiaries aligned to our DCEs and refers to the target expenditure amount that will be compared to Medicare expenditures for items and services furnished to aligned beneficiaries during a performance year. This comparison will be used to calculate shared savings and shared losses.

The key inputs in determining the performance year receivable and obligation are trends, risk score, and the number of beneficiaries aligned to our DCEs. We begin our benchmark estimation process with benchmark reports delivered from CMS’ Center for Medicare & Medicaid Innovation (“CMMI”) on a quarterly basis, which drive the determination of whether certain inputs to that calculation need to be adjusted or accrued as a result of more accurate data. Prospective and retrospective trends are set at a national level, and while it is unlikely we would deviate from CMMI’s estimates, we could adjust from the benchmark report due to new information received directly from CMMI, national studies we complete ourselves, or other anticipated policy updates that we believe are probable and estimable. The preliminary benchmark is set based on risk scores with data captured as of a certain point in time. Once new data is received, an updated analysis of claims provides an opportunity for the benchmark to be adjusted. Lastly, beneficiary counts are updated throughout the year and represent a timing difference between CMMI reporting, for which we accrue.

Recently Adopted Accounting Pronouncements

For a description of recently issued accounting pronouncements, see Note 1, Organization and Basis of Presentation, in our condensed consolidated financial statements of this Quarterly Report.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our earnings and financial position are exposed to financial market risk, including those resulting from changes in interest rates.

Interest Risk

The level of our pretax earnings is subject to market risk due to changes in interest rates and the resulting impact on investment income and interest expense. We invest in a professionally managed portfolio of securities, which includes debt securities of publicly traded companies, obligations of the U.S. government, domestic government agencies, and state and political subdivisions. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies and other factors outside of our control. Assuming a hypothetical and immediate 1% increase in interest rates across the entire U.S. Treasury curve at March 31, ~~2022,~~2023, the aggregate market value decrease to our regulated and unregulated portfolios would be approximately ~~$18.6~~$5.2 million.

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ITEM 4. CONTROLS AND PROCEDURES

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, ~~2022,~~2023, our disclosure controls and procedures were not effective due to the material weakness in our internal control over financial reporting described below. In light of this fact, our management has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding the material weaknesses in our internal control over financial reporting, the condensed consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with ~~U.S.~~ GAAP.

Previously Reported Material Weakness in Internal Control Over Financial Reporting

As disclosed in our ~~2021~~2022 Form 10-K, we previously identified a material weakness related to ~~claims pertaining~~the control activities component of internal control over financial reporting, based upon the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“the COSO framework”). Specifically, multiple deficiencies constituted a material weakness, in the aggregate, relating to ~~our IFP business, which were processed by a third-party service provider. The claims were processed inaccurately according to terms~~deployment of ~~provider contracts and/or related fee schedules, or did not consistently go~~control activities through ~~claims re-pricing, where necessary, prior to payment.~~internal control policies that establish what is expected and procedures that put policies into action. As of March 31, ~~2022,~~2023, we continue to have a material weakness in ~~IFP third-party claims processing.~~the control activities component of internal control over financial reporting as defined by the COSO framework. Since ~~the identification of~~disclosing this material weakness, we have ~~been expanding~~taken steps to improve awareness, understanding and ownership of controls and control activities related to financial reporting. We remain focused on evaluating the ~~comprehensiveness~~design and operating effectiveness of controls activities within our pre-pay and post-pay claims quality assurance procedures and datamining capabilities designed to enable targeted identification of potential claims payment discrepancies or other process gaps. Additionally, over the course of 2022, we will be improving provider data (e.g., provider roster data) and the processes of updatingcontinuing business operations. We are also focused on remediating control deficiencies noted in our continuing business operations that ~~data, both of which have~~ contributed to the ~~identified claims processing errors.~~material weakness.

Changes in Internal Control over Financial Reporting

Other than the material weakness remediation actions discussed above, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management continues to advance its remediation program to ensure that control deficiencies contributing to the material weakness are remediated.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

WeOther than the matters described in Note 11, Commitments and Contingencies, we are not presently a party to any litigation the outcomes of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows, or financial condition.

Item 1A. Risk Factors

This Quarterly Report on Form 10-Q should be read in conjunction with the risk factors included in our ~~2021~~2022 Form 10-K and our other filings with the ~~SEC~~.SEC. There have been no material changes to the risk factors disclosed under the heading “Risk Factors” in our ~~2021~~2022 Form 10-K, except for the following risk factor, which supplements the “Risk Factors” ~~section~~ in our ~~2021~~2022 Form ~~10-K~~.

~~Our expansion into Direct Contracting presents new risks to our business.~~10-K.

We ~~expanded~~may not be able to divest our California Medicare Advantage business ~~into CMS’ new Direct Contracting model (“DC Model”) in January 2022, enabling~~on terms that are attractive to us or obtain the necessary approvals to ~~target~~divest it, or otherwise effect other strategic alternatives acceptable to us.

We may not be able to divest our California Medicare Advantage business on terms that are attractive to us, or at all, or obtain the necessary regulatory or other approvals required to consummate such a ~~larger market opportunity, the Medicare FFS market, which is the largest segment of Medicare. As such, our Direct Contracting business is~~sale. Further, in the ~~early stages of development, and~~event we are ~~subject~~unable to ~~the risks inherent~~divest this business on terms acceptable to the launch of any new business, including the risks that we may not generate sufficient returns to justify our investment, it may take longer or be more costly to achieve the expected benefits from this new program, and that it may require us, to, at least initially, divert management attention and other resources from our existing businesses. In connection with our expansion into Direct Contracting, we are forming relationships with a greater number of physicians, which may pose challenges to scaling quickly, influencing physician behavior and directly engaging beneficiaries, and we may face additional new risks and difficulties, many of which we may not be able to ~~predict~~effect a strategic alternative to a sale. In addition, if we agree to proceed with this sale or ~~foresee. As a new advanced payment model, CMMI is constantly evaluating~~other alternative, we may experience operational difficulties separating it from our retained assets and operations, which could impact the ~~program~~execution or timing for this disposition and ~~has already revised the structure and design of the program~~could result in disruptions to our operations or claims for ~~2023, renaming the model “ACO REACH,” which stands for Realizing Equity, Access, and Community Health. The change~~damages, among other things. Failure to ~~ACO REACH and potential future changes may~~ consummate this sale or other strategic alternative could have a ~~significant impact~~material adverse effect on our ability to carry out our business. Similarly, while the Direct Contracting program is expected to transition to ACO REACH and continue through 2026, CMMI can determine to terminate the program at any time, and in some cases may be required to do so. If the program is terminated, we would need to reevaluate our Medicare FFS strategic options, which in turn could reduce the return on our investments and negatively impact ourliquidity, business, financial condition, results of operations ~~and future prospects.~~or cash flows.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

~~Unregistered Sales of Equity Securities~~

On January 3, 2022, we issued 750,000 shares of our Series A Preferred Stock for an aggregate purchase price of $750.0 million, or $1,000 per share to certain subsidiaries of Cigna Corporation and certain affiliates of New Enterprise Associates.

The foregoing transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. The sale of the above securities was deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving any public offering. The recipients of the securities in this transaction represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were placed upon the securities issued in this transaction.None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~At the Annual Meeting of Stockholders (the “Annual Meeting”) of Bright Health Group, Inc. (the “Company”) held on Thursday, May 4, 2023, the Company’s stockholders approved the Bright Health Group, Inc. Amended and Restated 2021 Omnibus Incentive Plan (the “Amended Plan”). The Amended Plan had previously been approved by the Compensation Committee of the Company’s Board of Directors, subject to stockholder approval. Such stockholder approval authorized an additional 30,000,000 shares of the Company’s common stock to be issued under the Amended Plan, which provides for grants of stock options (both non-qualified and incentive stock options), stock appreciation rights, restricted shares or restricted stock units and other equity-based or cash-based awards to the Company’s directors, officers, employees, consultants and advisors.

The principal features of the Amended Plan and information about certain 2023 annual equity-based compensation awards we granted to our named executive officers upon approval of the Amended Plan are described in detail under “PROPOSAL 4 – APPROVAL OF THE BRIGHT HEALTH GROUP, INC. AMENDED AND RESTATED 2021 OMNIBUS INCENTIVE PLAN” of the Company’s Definitive Proxy Statement on Schedule 14A for the Annual Meeting filed by the Company with the Securities and Exchange Commission (the “SEC”) on April 7, 2023 (the “Proxy Statement”). Such description of the principal features of the Amended Plan and these awards are included in the Proxy Statement is incorporated herein by reference. The foregoing description of the principal features of the Amended Plan is qualified in its entirety by reference to the full text of the Amended Plan, which is filed as Exhibit 10.2 and incorporated herein by reference.

As previously announced, on May 1, 2023, Cathy Smith, Chief Financial and Administrative Officer of the Company, informed the Company that she plans to resign to pursue other opportunities, effective May 12, 2023.

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On May 9, 2023, the Company and Ms. Smith entered into a Consulting Agreement (the “Consulting Agreement”) detailing the terms of Ms. Smith’s separation from the Company. As part of the Consulting Agreement, Ms. Smith will remain employed by the Company until May 12, 2023. Between May 15, 2023 and the earlier to occur of (a) December 31, 2023 and (b) the closing of a sale of the Company’s CA Medicare Advantage business (the “Service Period”), Ms. Smith will provide certain consulting services to the Company pertaining to strategic advice, transition of responsibilities and other matters.

Pursuant to the Consulting Agreement, and in consideration of Ms. Smith’s commitment to assist with an orderly transition, her execution of a release of claims in favor of the Company and her agreement to certain restrictive covenants, Ms. Smith will receive a monthly retainer of $50,000 per month (the “Monthly Retainer”) and, upon the closing of a sale of the Company’s CA Medicare Advantage business at any time prior to June 30, 2024, the Company will pay Ms. Smith an amount equal to her base salary ($750,000) minus the aggregate amounts paid by the Company for the Monthly Retainer under the Consulting Agreement. The sale of the Company’s CA Medicare Advantage business shall include the sale of any of the following entities or a majority of their assets provided that proceeds of such sale are sufficient to satisfy the Company’s obligations under its credit agreement and to ensure each of its regulated insurance entities are solvent: (i) Bright Health Company of California, (ii) Universal Care, Inc. and (iii) Central Health Plan of California, Inc.

The foregoing description is qualified in its entirety by the Consulting Agreement, a copy of which is attached hereto as Exhibit 10.3 and incorporated herein by reference.

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Item 6. Exhibits

EXHIBIT INDEX


Exhibit Number						Description
3.1						Ninth Amended and Restated Certificate of Incorporation of Bright Health Group, Inc. (incorporated by reference to Exhibit 4.1 filed with the Registrant’s Registration Statement on Form S-8 filed on June 28, 2021)
3.2						Certificate of Designations of Series A Convertible Perpetual Preferred Stock of Bright Health Group, Inc. (incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K filed on January 3, 2022)
3.3						Certificate of Amendment to the Certificate of Designations of Series A Convertible Perpetual Preferred Stock of Bright Health Group, Inc. (incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K filed on October 18, 2022)
3.4						Certificate of Designations of Series B Convertible Perpetual Preferred Stock of Bright Health Group, Inc. (incorporated by reference to Exhibit 3.2 filed with the Registrant’s Current Report on Form 8-K filed on October 18, 2022)
3.5						Amended and Restated Bylaws of Bright Health Group, Inc. (incorporated by reference to Exhibit 4.2 filed with the Registrant’s Registration Statement on Form S-8 filed on June 28, 2021)
10.1						~~Second Amendment to the Second Amended~~Limited Waiver and ~~Restated Registration Rights Agreement,~~Consent, dated as of ~~January 3, 2022, by and~~February 28, 2023, among Bright Health Group, Inc. ~~and~~, the other loan parties ~~named therein.~~party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent. (incorporated by reference to Exhibit 10.1 filed with the ~~Registrant’s~~Registrant's Current Report on Form 8-K filed on ~~January 3, 2022)~~March 1, 2023)
10.2†10.2†						~~Form~~Bright Health Group, Inc. Amended and Restated 2021 Omnibus Incentive Plan, effective as of ~~Executive Separation Agreement~~May 4, 2023
10.3*†						Consulting agreement, dated May 9, 2023, between Catherine R. Smith and Bright Health Group, Inc.
31.1						Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1						Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
32.2						Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
101						The following financial information from our Quarterly Report on Form 10-Q for the first quarter of fiscal ~~2022,~~2023, filed with the SEC on May ~~12, 2022,~~10, 2023, formatted in Inline Extensible Business Reporting Language (“iXBRL”)
104						Cover Page Interactive Data File (formatted as iXBRL and embedded within Exhibit 101)

* Filed ~~herewith.~~

herewith

† Management contract or compensatory plan or arrangement.

(1) The certifications in Exhibits 32.1 and 32.2 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	BRIGHT HEALTH GROUP, INC.

Dated: May ~~12, 2022~~10, 2023	By:	/s/ G. Mike Mikan
	Name:	G. Mike Mikan
	Title:	Vice Chairman, President and Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ ~~Catherine~~Catherine. R. Smith
	Name:	Catherine R. Smith
	Title:	Chief Financial and Administrative Officer
		(Principal Financial Officer)

	By:	/s/ Jeffrey J. Scherman
	Name:	Jeffrey J. Scherman
	Title:	Chief Accounting Officer
		(Principal Accounting Officer)

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	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	1,505,547	$	1,061,179
Short-term investments	692,472		193,835
Accounts receivable, net of allowance of $5,172 and $4,074, respectively	142,695		113,474
Direct contracting performance year receivable	638,641		—
Prepaids and other current assets	315,422		291,712
Total current assets	3,294,777		1,660,200
Other assets:
Long-term investments	733,465		675,192
Property, equipment and capitalized software, net	41,279		38,344
Goodwill	835,450		835,140
Intangible assets, net	326,617		343,860
Other non-current assets	43,438		45,603
Total other assets	1,980,249		1,938,139
Total assets	$	5,275,026	$	3,598,339
Liabilities, Redeemable Noncontrolling Interest, Redeemable Preferred Stock and Shareholders’ Equity (Deficit)
Current liabilities:
Medical costs payable	$	1,155,155	$	817,975
Accounts payable	128,407		118,140
Unearned revenue	34,893		53,295
Risk adjustment payable	1,285,446		931,170
Direct contracting performance year obligation	533,537		—
Short-term borrowings	—		155,000
Other current liabilities	251,523		207,238
Total current liabilities	3,388,961		2,282,818
Other liabilities	38,849		41,994
Total liabilities	3,427,810		2,324,812
Commitments and contingencies (Note 10)	0		0
Redeemable noncontrolling interests	143,011		128,407
Series A redeemable preferred stock, $0.0001 par value; 100,000,000 shares authorized in 2022 and 2021; 750,000 and — shares issued and outstanding in 2022 and 2021, respectively	747,481		—
Shareholders’ equity (deficit):
Common stock, $0.0001 par value; 3,000,000,000 shares authorized in 2022 and 2021; 628,992,422 and 628,622,872 shares issued and outstanding in 2022 and 2021, respectively	63		63
Additional paid-in capital	2,894,421		2,861,243
Accumulated deficit	(1,896,085)		(1,700,851)
Accumulated other comprehensive loss	(29,675)		(3,335)
Treasury stock, at cost, 2,522,148 shares at March 31, 2022 and December 31, 2021, respectively	(12,000)		(12,000)
Total shareholders’ equity (deficit)	956,724		1,145,120
Total liabilities, redeemable noncontrolling interests, redeemable preferred stock and shareholders’ equity (deficit)	$	5,275,026	$	3,598,339


	Amount Recognized as of Acquisition Date (as previously reported)		Measurement Period Adjustments		Amounts Recognized as of Acquisition Date (as adjusted)
Accounts receivable	$	16,361	$	879	$	17,240
Short-term investments	19,041		—		19,041
Prepaids and other current assets	25,520		10		25,530
Property and equipment	370		—		370
Intangible assets	102,000		—		102,000
Other assets	—		1,249		1,249
Total assets	163,292		2,138		165,430
Medical costs payable	79,450		(3,807)		75,643
Accounts payable	2,371		—		2,371
Other current liabilities	17,212		(9,228)		7,984
Other liabilities	28,622		(2,347)		26,275
Total liabilities	127,655		(15,382)		112,273
Net identified assets acquired	35,637		17,520		53,157
Goodwill	236,037		(3,595)		232,442
Total purchase consideration, net of cash acquired	$	271,674	$	13,925	$	285,599


	THNM		Zipnosis
Accounts receivable	$	714	$	1,062
Short-term investments	4,705		—
Prepaids and other current assets	8,337		141
Property and equipment	—		232
Intangible assets	7,300		9,180
Long-term investments	13,644		—
Other non-current assets	1,324		766
Total assets	36,024		11,381
Medical costs payable	12,617		—
Accounts payable	14,663		136
Unearned revenue	3,645		120
Other current liabilities	11,406		665
Other liabilities	2,499		2,730
Total liabilities	44,830		3,651
Net identified assets (liabilities) acquired	(8,806)		7,730
Goodwill	4,148		62,067
Total purchase consideration, net of cash acquired	$	(4,658)	$	69,797


	2022		2021
Balance at beginning of period	$	1,495	$	5,716
Change in fair value of contingent consideration	—		(4,221)
Balance at end of period	$	1,495	$	1,495


2022 (April-December)	$	31,120
2023	41,471
2024	41,332
2025	41,332
2026	28,104
2027	28,065