United States securities and exchange commission logo
December 4, 2020
Mario Schlosser
Chief Executive Officer
Mulberry Health Inc.
75 Varick Street, 5th Floor
New York, NY 10013
Re: Mulberry Health
Inc.
Draft Registration
Statement on Form S-1
Submitted November
6, 2020
CIK No. 0001568651
Dear Mr. Schlosser:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Summary
Hi, We're Oscar, page 1
1. We note your disclosure
that you are "the third largest for-profit national provider" in the
Individual market.
Please disclose your basis for this statement. Additionally clarify if
you mean you are the
third largest in a specific state, in all 15 states where you operate or
otherwise.
Summary Consolidated Financial and Other Data
Key Operating and Non-GAAP Financial Metrics, page 12
2. We note that Health
insurance subsidiary adjusted administrative expenses of $257.1
Mario Schlosser
Mulberry Health Inc.
December 4, 2020
Page 2
million is the basis for your InsuranceCo Administrative expense ratio
calculation in 2019
which is reconciled to selling, general and administrative expenses of
health insurance
subsidiaries of $224.9 million, a non-GAAP measure. Please revise your
disclosure to
reconcile to the most directly comparable GAAP measure. Refer to Item
10(e)(1)(i)(B).
3. Tell us why it is appropriate to remove your premium deficiency
reserves from your
InsuranceCo Administrative Expense Ratio as disclosed in sub-note (a)
to footnote (6). In
this regard, it appears to be a normal, recurring, cash operating
expense. See Question
100.01 of the Non-GAAP Financial Measures Compliance and Disclosure
Interpretations.
In your response also tell us your consideration for including this
reserve in your Medical
Loss Ratio as it represents future claims to be incurred.
4. You disclose depreciation and amortization separately from your
selling, general and
administrative expenses in your statement of operations and
comprehensive loss. Please
tell us why you do not appear to allocate any depreciation and/or
amortization to your
Medical Loss Ration, InsuranceCo Administrative Expense Ratio and
resulting
InsuranceCo Combined Ratio when presumably at least some of the
underlying assets are
used in the claims processing and administrative function.
5. We note you disclose Adjusted EBITDA of $129.5 million for your health
insurance
subsidiaries and $92.7 million for Holdco and its non-health insurance
subsidiaries in
footnote (c) of your Adjusted EBITDA reconciliation to the most
directly comparable
GAAP financial performance measure. These each appear to be non-GAAP
measures.
Please provide a reconciliation of each to reflect how these
allocations reconcile to
respective GAAP measures. Refer to Item 10(e)(1)(i)(B) of Regulation
S-K.
Risk Factors
We rely on relationship with the Oscar Medical Group, page 30
6. Please explain what your relationship is with Oscar Medical Group. If
it is a related party
or affiliate, please disclose, and explain in what manner it is so.
Additionally, in the
Business section disclose the material terms of your management
agreements with Oscar
Medical Group. File these agreements as exhibits to your registration
statement, or tell us
why this is not required.
Use of proceeds, page 51
7. Please state the approximate amount intended to be used for each
purpose listed in the first
sentence of the second paragraph, or tell us why you are unable to do
so.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Our Business
FirstName Model, page 60
LastNameMario Schlosser
Comapany
8. NameMulberry
Please Health Inc.
disclose membership for the periods presented by market, product
and plan and
discuss
December material
4, 2020 Pageperiod
2 over period changes.
FirstName LastName
Mario Schlosser
FirstName LastNameMario Schlosser
Mulberry Health Inc.
Comapany4,
December NameMulberry
2020 Health Inc.
December
Page 3 4, 2020 Page 3
FirstName LastName
Innovative Partnerships, page 62
9. Please disclose the number of partnerships with other payers and
providers in which co-
branded insurance is powered by your platform for the periods
presented and discuss
significant period over period changes.
Key Factors Affecting Performance, page 67
10. Please disclose new and retained membership for the periods presented
and discuss
significant period over period changes.
Critical Accounting Policies and Estimates
Benefits Payable, page 76
11. We note that incurred but not reported claims are generally more
heavily weighted to the
"most recent months" as characterized in the second and third
paragraphs on page 77.
Given that "completion factors are the most significant factors [you]
use in developing
[your] benefits payable estimates for periods prior to the most recent
months," and that it
appears that trend factors are more significant to the estimate for
the most recent months,
please:
Revise your disclosure to place a more definitive time frame on
the "most recent
months," for example, whether this is two, three or more months;
and
Tell us your consideration for providing separate benefits payable
sensitivity
information for reasonably likely changes in trend factors.
Business
We Help our Members Find the Right Doctor, page 91
12. You disclose that your technology saves Oscar and members money by
routing care to
high value providers. Please enhance your disclosure to describe how
you define a high
value provider.
13. Please disclose how you determined and calculated that the care
routing feature in Oscar
resulted in estimate median member savings of approximately 6% for the
nine months
ended September 30, 2020 for members who accepted the top
recommendation.
Our Network, page 96
14. Please disclose the nine largest health systems in the U.S. that are
part of your network.
Business
Reinsurance, page 100
15. We note your disclosure on page 78 that you have reinsurance
agreements with two
reinsurers. Please disclose the percentage of coverage ceded to each
reinsurer, the nature
and amount of collateral in trust under the contracts and any related
party information, if
Mario Schlosser
Mulberry Health Inc.
December 4, 2020
Page 4
applicable. In addition, please file these agreements as exhibits to
the registration
statement or advise why you are not required to do so.
Executive Compensation, page 117
16. We note that you have filed employment offer letters for Mr.
Schlosser, Mr. Klein and
Ms. Joyce as Exhibits 10.11, 10.12 and 10.13. Please describe the
material terms of these
employment agreements. Refer to Item 402(o)(1) of Regulation S-K.
Certain Relationships and Related Party Transactions, page 127
17. Please revise footnotes (1), (2) and (4) to the table on page 128 to
disclose the relationship
between you and the respective related party entity.
Exclusive Venue, page 137
18. We note that your forum selection provision identifies a state court
located within the
State of Delaware as the exclusive forum for certain litigation,
including any derivative
action and that the federal district courts are the sole and
exclusive forum for the
resolution of any complaint asserting a cause of action arising under
the Securities Act.
Please state that investors cannot waive compliance with the federal
securities laws and
the rules and regulations thereunder. In that regard, we note that
Section 22 of the
Securities Act creates concurrent jurisdiction for federal and state
courts over all suits
brought to enforce any duty or liability created by the Securities Act
or the rules and
regulations thereunder.
Notes to Consolidated Financial Statements
Note 2: Summary of Significant Accounting Policies
Premium Deficiency Reserve ("PDR"), page F-10
19. You disclose that you charge any PDR to selling, general and
administrative expenses.
Please tell us why you do not charge any PDR to claims incurred
expense when a
premium deficiency essentially represents future expected claims in
excess of future
premiums to be earned on existing policies. Reference for us any
authoritative literature
you rely upon to support your accounting/classification and tell us
what journal entries
you make in a hypothetical future period assuming the anticipated
premium deficiency
indeed comes to fruition.
Note 7: Regulation
Regulatory Capital and Dividend
FirstName LastNameMario Restrictions, page F-21
Schlosser
Comapany
20. NameMulberry
Please disclose your Health Inc.
statutory net income or loss for 2019. See Rule
7-03(a)23(c) of
Regulation S-X.
December 4, 2020 Page 4
FirstName LastName
Mario Schlosser
FirstName LastNameMario Schlosser
Mulberry Health Inc.
Comapany4,
December NameMulberry
2020 Health Inc.
December
Page 5 4, 2020 Page 5
FirstName LastName
Note 8: Benefits Payable, page F-22
21. It is apparent that your benefits reserve rollforward on page F-23
does not include claims
adjustment expenses (CAE) as required by ASC 944-40-50-3. Please
address the
following and reference for us, where appropriate, the authoritative
literature you rely
upon to support your accounting and/or disclosure:
Revise your disclosure to include CAE in this rollforward or tell
us why it is not
required and/or why your presentation is appropriate;
Revise your accounting and disclosure to include CAE with the
associated claims
expense as required by Rule 7-04.5 of Regulation S-X or tell us
why it is not
required; and
Confirm for us that none of your CAE is allocated to your claims
incurred and paid
presented in your claims development table presented on page
F-22 or revise those
tables as required by ASC 944-40-50-4B.
22. Please tell us why the reinsurance recoverable of $76.2 million in the
reconciliation of
total benefits payable at December 31, 2019 on page F-23 differs
significantly from the
$516.1 million presented on your balance sheet. To the extent that the
difference relates
to reinsurance recoverable on paid losses, given that the
reconciliation under ASC 944-40-
50-4C requires disclosure of reinsurance recoverable on unpaid claims,
tell us:
Why such a significant amount of ceded claims in 2019 have yet to
be collected from
reinsurers given the claims payments made and short tail
associated with health
insurance claims; and
How any delayed payment or collection terms qualify your
reinsurance contracts for
reinsurance accounting under ASC 944-20-15-40, with specific
emphasis on sub-
paragraph b.
Exhibits
23. Please file your material contracts as exhibits to the registration
statement and describe
their material terms or advise why you are not required to do so. In
this regard, we note
your references to the following partnerships or agreements in the
prospectus:
affiliations with Tenet Healthcare and AdventHealth on pages 31;
partnership with Cleveland Clinic on page 62, 85, and 97;
partnership with Cigna on pages 85 and 86;
partnerships with Montefiore, Holy Cross and Memorial Health on
pages 85-86;
prescription benefits management provided by CareMarkPCS Health on
page 33;
Tenth Amended and Restated Investors' Rights Agreement on page
128;
Tenth Amended and Restated First Refusal and Co-Sale Agreement on
page 129; and
various technology service agreements with affiliates of Alphabet
Holdings LLC on
page 129.
General
24. Please provide us with supplemental copies of all written
communications, as defined
Mario Schlosser
Mulberry Health Inc.
December 4, 2020
Page 6
in Rule 405 under the Securities Act, that you, or anyone authorized
to do so on your
behalf, have presented or expect to present to potential investors in
reliance on Section
5(d) of the Securities Act, whether or not you retained, or intend to
retain, copies of
those communications. Please contact Tonya K. Aldave at (202) 551-3601
to discuss how
to submit the materials, if any, to us for our review.
25. We note that throughout the prospectus you often describe the industry
and
your performance using compound annual growth rate ("CAGR"). Please
balance your
disclosure by also discussing that such growth trends may not
continue.
You may contact Michelle Miller at 202-551-3368 or Mark Brunhofer at
202-551-3638 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Tonya K. Aldave at 202-551-3601 or John Dana Brown at 202-551-3859 with
any other
questions.
FirstName LastNameMario Schlosser Sincerely,
Comapany NameMulberry Health Inc.
Division of
Corporation Finance
December 4, 2020 Page 6 Office of Finance
FirstName LastName