Q3 2022 Bright Health Group Inc Earnings Call
Hello, and welcome to today's health group's third quarter 2022 earnings call. My name is baby and I'll be your moderator for today's call.
All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
You would like to ask a question. Please press star followed by one on your telephone keypad.
I would now like to pass the conference is that your host Stephen Hagan Investor Relations Director. Please go ahead when you're ready.
Good morning, and welcome to Brighthouse groups third quarter 2022 earnings Conference call. A question and answer session will follow bright health group's prepared remarks.
As a reminder, this call is being recorded leading the call today are Brian <unk>, President and CEO , Mike <unk>, and CFO and Chief administrative officer Kathy spent.
Before we begin we want to remind you that this call may contain forward looking statements under U S. Federal Securities Law. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found the reports <unk> files.
Securities and Exchange Commission, including the risk factors in our current and periodic reports, we file with the SEC, except as required by law, we undertake no obligation to revise or update any forward looking statements or information.
This call will also reference non-GAAP amounts and measures a reconciliation of the non-GAAP to GAAP measures is available on the Companys third quarter press release available on the company's Investor Relations page at investors Dot Bright health group Dot com.
Information presented on this call is contained in the earnings release, we issued this morning and in our form.
<unk> 8-K dated November nine 2022, which may be accessed from the Investor Relations page of the company's website.
With that I'll now turn the conference over to Brian <unk> Group, Chief Executive Officer, Mike Mike.
Thank you Steven.
Good morning, everyone and thank you for joining bright health groups third quarter 2022 earnings call I'll Open my remarks with comments on our business provide additional detail on the strategic update we announced last month, and then I will turn the call over to Kathy to go over our third quarter results.
As an organization Great Health group is going through a significant evolution. However, one that at its core keeps us focused on our mission.
At <unk> group, we are focused on making health care REIT together.
Our model continues to be built on the belief that by connecting and aligning the best local resources in health care delivery with the financing of care, we can deliver better outcomes at a lower cost for all consumers.
Our evolved value driven business model allows us to continue to do so in a more capital efficient way for our customers and shareholders.
On our call last month, we announced that we will be focused on delivering affordable health care for aging and underserved populations in the largest healthcare market in the country.
And continuing to leverage our fully aligned care model with external payer partners an affiliate care providers.
We will continue to build on the value driven care model that we've been advancing since the start of the company.
We are well underway and taken steps to move to this more focused model, while continuing to keep front and center the commitment to delivering on our financial targets for 2022.
Our overall performance. So far this year has been in line with our expectations and that continued in the third quarter across our businesses.
Our medical cost management efforts continue to achieve our cost savings target.
And utilization remained stable in the third quarter.
Our risk adjusted medical expense remained in line with our forecast as lower medical costs are balanced with revisions to our risk adjustment forecast.
Based on our performance year to date and our expectations for a strong finish to the remainder of the year. We are lowering the top end of the guidance range for our full year medical cost ratio.
We are also positively revise our adjusted EBITDA guidance range based on the narrower MCR forecast.
And then Kathy will discuss in greater detail the strong results in our Medicare advantage and new health businesses.
Gives us confidence in our target for 2023 profitability on an adjusted EBITDA basis.
For anyone that Couldnt join our strategic update call last month, we announced a more focused business model and a capital raise from existing shareholders strengthening our capital position.
We expect that our more focused business model and our strengthened capital position will support the business through profitability.
Our more focused business model means that bright healthcare will no longer offer individual and family health plans for 2023 or Medicare advantage health plans outside of California, and we will be focusing our new health business and continuing to grow our partnerships with external payers and the government.
Through the ACO reach program.
We haven't scaled Medicare advantage business in California, the largest market for aging and underserved populations and we have built a high performing fully aligned care model with our care partners across the state.
In Florida, and Texas are new health risk bearing care delivery and provider affiliate management business continues to deliver differentiated results and we expect to expand our footprint over time, serving the aging and underserved consumers in Medicare and the consumer marketplace together with our key.
Health plan partners.
We will also continue to grow our ACO reach business, which remains on track with our expectations for the year.
We have begun implementing the restructuring plans to adjust our cost structure in order to achieve our 2023 gross margin and operating expense targets, including impacts to many of our employees.
We will continue to take steps to adjust our expenses in line with milestones in the marketplace business through the end of the year and.
And over the course of the run out period.
While we are exiting the ACA marketplace insurance business at our core we are focused on serving aging and underserved populations through our fully aligned care model.
We have demonstrated and continue to believe that when you connect and align the local resources in health care delivery with the financing of care you get the best outcomes.
This is at the heart of our value driven business model and we see significant growth opportunities for our Medicare advantage and new health businesses, serving this population.
Both businesses are in attractive markets with strong tailwind, where we have demonstrated differentiated performance and are expanding our payer and aligned provider relationships.
We expect demand in both businesses as well as the enterprise to reach adjusted EBITDA profitability next year.
While building for long term capital efficient growth.
I'll now hand, it over to Kathy to go over our third quarter performance and our updated outlook.
Thank you, Mike and good morning, everyone.
I'll start with a review of our third quarter and year to date result provide a balance sheet update and then go over our 2022 and 2023 outlook we.
We ended the third quarter with over 1 million commercial consumers a modest increase from the second quarter on in your ISP enrollment and more than 120000, Medicare advantage from tumors as well as approximately 520000, new health value base lives.
Bright outgroup consolidated revenue increased 51% year over year to $1 $6 billion in Q3.
Brand health care commercial revenue grew 57% year over year to $983 million and bright healthcare Medicare advantage revenue grew 11% year over year to $409 million, which was entirely organic in Q3.
New health segment revenue of $502 million compared to $223 million in the prior year.
Consolidated and bright health care commercial revenues were negatively impacted by $88 million due to a year to date risk adjustment payable true across our marketplace States.
The increased risk adjustment payable forecast in the quarter reflects continued solid performance on medical costs.
Which more than offset the risk adjustment payable forecast revision on a year to date basis.
Our third quarter 2022, GAAP medical cost ratio at the enterprise level was 96% down from 103% in the third quarter of 2021.
The impact to our third quarter MCR from year to date risk adjustment payable true ups added 320 basis points to our enterprise MTR in Q3 of 2022, and approximately 800 basis points in Q3, 2021.
Underlying utilization and medical costs remain in line with our expectations and we saw the expected increase from the second quarter to the third quarter due to typical seasonality.
Our third quarter adjusted EBITDA was a loss of $82 $9 million, which excludes among other thing mark to market investment gains and losses on equity securities, we hold a $12 $2 million loss in the quarter.
Adjusted EBITDA also excludes the $74 $2 million goodwill impairment and $42 $6 million impairment of intangible assets recognized in Q3, 2022, which were primarily driven by macro and strategic factors.
Our adjusted EBITDA and operating expenses in the quarter saw a benefit from a $79 million release of the premium deficiency reserve, we previously booked.
And we now have a $61 million remaining balance on the PDR going into the fourth quarter.
Given the moving pieces within a year I would point to the year to date results for medical cost ratio as the best indication of the medical cost and risk adjustment trends.
Our year to date MCR of 87, 9% reflects strong performance in our medical cost management initiatives and improved operational performance as well as the success of our fully aligns care model.
So year to date MCR also includes the impact of the 2021 risk adjustment true up recognized in the second quarter. This year, partially offset by a favorable true up of 2021 medical costs, which increased the reported MCR by a net 40 basis points.
When comparing our MCR performance to 2021, we believe that the 240 basis points year over year improvement in our year to date MTR continues to understate the improvement we're driving in the business given their risk adjustment and medical cost impacts we recognized in Q4 last year and additional 2010.
One impactful recognized earlier this year.
I would also remind you that in looking at a comparison to 2021, our 2022 MCR is impacted by DCE revenue booked at a 98% MCR without DCE third quarter and year to date enterprise MCR would each be 100 basis points lower.
Third quarter Covid costs of $23 million were up $3 million from Q2, contributing approximately 140 basis points to the third quarter MTR up 10 basis points from the impact in the second quarter.
The $101 million year to date Covid costs remain approximately in line with our expectations and create a favorable impact given the pricing adjustments we made for Covid in 2022.
The Medicare advantage MTR was 88, 7% in the third quarter and 92% year to date, representing year over year improvements of 500, and 550 basis points respectively.
There is a meaningful improvement in performance, which gives us confidence in the future outlook for the business and our forecast that the business will be adjusted EBITDA profitable next year.
The commercial MCR in the third quarter was 91, 8%, which included a net positive contribution of 100 basis points from prior period premium and medical cost adjustments.
Year to date commercial MCR of 85, 8% is more reflective of the performance of the business.
And includes prudent assumptions on risk adjustment and solid performance in medical cost management.
The net impact of the 2021 risk adjustment true up from Q2, and the lower 2021 medical costs added 50 basis points to the year to date commercial MCR.
Both our Medicare advantage and commercial businesses are performing as expected year to date.
Turning to new health value based care patients increased by 20000 this quarter to approximately 520000, including approximately 405000 from bright health care 46000 from direct contracting and 69000 from other value based external payer relationships across marketplace.
And Medicare advantage.
Third quarter revenue for new health was $502 million, including the impact from the year to date true up for risk adjustment estimates that flows through to the capital New health lives as well as a smaller adjustment to the direct contracting benchmark recognized in Q3.
New house continues to perform well on care and utilization management driving a solid medical cost ratio in the quarter at 94, 5% approximately in line with our expectations.
Indirect contracting we now expect full year 2022, adjusted EBITDA to be profitable.
New health is performing across by health care lives external paralyzed and direct contracting positioning the business well for managing a growing number of external per life and the transition to ACO reach in 2023.
Turning to our balance sheet as of September 32022, we had over $220 million and nonregulated liquidity, including $190 million in cash and equivalents and $30 million in passive equity investments classified as short term.
We have over $2 5 billion of additional cash and short or long term investments held by our regulated insurance subsidiaries.
Our $350 million credit facility was fully drawn as of the end of Q3, when factoring in the $46 million letter of credit committed to support our direct contracting business.
As we announced on October 18, 2022, we closed on $175 million sale of series B convertible perpetual preferred stock.
The combined nearly $400 million from our nonregulated liquidity at the end of the quarter and the subsequent proceeds of the preferred stock issuance are expected to support our business through profitability.
Also as noted on our strategic update call, we expect to release $250 million and risk based capital currently and our regulated subsidiary from the exit of our marketplace insurance business pending claims run out and regulatory approval.
We expect to begin to release capital starting in the middle of next year, the nearly $400 million in nonregulated liquidity at the parent plus the $250 million in surplus capital has significantly strengthened our capital position and we believe that we are fully funded to profitability.
In our earnings release. This morning, we positively revised our full year 2022, MCR and adjusted EBITDA outlook. We continue to work through how we will report fourth quarter results.
We expect will include discontinued operations, but are providing updated guidance consistent with our prior reporting for now we expect to provide additional information when we report Q4 to bridge our performance to the guidance provided today.
We are revising our guidance for enterprise revenue to be approximately $6 $8 million. The low end of our prior range based on our current views on 2022 risk adjustment and the DCE benchmark.
For our enterprise medical cost ratio.
We have improved at the high end of our guidance and now expect MCR to be in the range of 90% to 92%.
We have also positively revised our full year 2022, adjusted EBITDA range and now expect a loss of between 550 and $700 million, which consistent with our prior guidance excludes any impact from mark to market investment gains and losses as well as the goodwill and intangibles impairments recognized in Q3.
We would again point to the midpoint of the MCR and adjusted EBITDA guidance ranges based on the trends to this point in utilization and risk adjustment.
We have increased visibility in our business this year and this greater predictability is allowing us to narrow our guidance range as we continue to deliver on the targets we set for the year.
For full year 2022, we expect an operating cost ratio of approximately 22%, excluding restructuring costs and impairment charges again, a meaningful improvement year over year.
On a segment basis, our end of year Bright health care member forecast is for greater than 1 million members, when combining commercial and Medicare advantage segment.
All are to our enterprise MCR guidance, we would expect the midpoint of the full year MCR for bright health care to be lower but with the move to reporting commercial and Medicare advantage segment, we are no longer providing a bright health care MCR guidance range.
Full year 2022, New health revenue is expected to be approximately $2 2 billion taking into account the changes to our risk adjustment forecast and the D. C EBIT Park.
Our expected intercompany revenue elimination estimate is approximately $1 $2 billion.
We expect the average new health value based care patients to be over 500000 during the year, including $45 to 50000 from DCE. We continue to expect approximately 40% of new health revenue generated from external sources.
This includes a revenue contribution from direct contracting of approximately $600 million.
On our strategic update call last month, we provided initial 2023 metrics and financial expectations. We are forecasting 2023 revenue to be greater than $3 billion and expect to see modest improvement in our enterprise medical cost ratio relative to our 2020 guidance as continued progress in our Medicare.
Vantage business is offset by a mix impact.
This morning, we are adjusting our membership expectations for 2023, we continue to expect new health commercial value based care patients to be between 85 and 90000, while we now expect end of year 2023, ACO reach members.
To be approximately 65000 up 5000 members from our prior forecast.
Medicare advantage and of your 2023 enrollment is now expected to be greater than 125000.
Collecting that are in the business will be focused exclusively on the California market for 2023 and early annual enrollment period results are ahead of expectations.
We expect an operating expense ratio in 2023 between 14, five and 15, 5% compared to our expectation for approximately 22% in 2022, reflecting our more focused business and other actions we are taking to reduce operating expenses.
Our MCR forecast plus the contribution from services revenue and our operating expense forecast is expected to support our view that we will achieve adjusted EBITDA profitability.
We expect our more focused model will result in greater predictability in revenue and gross margin in 2023, and the business is well positioned for capital efficient growth.
We expect to provide more detailed guidance in January .
Before I turn the call back to Mike I appreciate our amazing Brighthouse team across the country and I want to thank our shareholders for their continued support now here is Mike for some final comments.
Thank you Kathy.
We're encouraged by the performance of the business. So far this year with stable utilization supporting improved MCR and adjusted EBITDA results.
We're delivering against the guidance, we set back in March and are positive on the strategic actions, we're taking to accelerate profitability into 2023.
We are focusing on serving aging and underserved consumers that have unmet clinical needs through our fully aligns care model in Florida, Texas and California.
Some of the largest markets in healthcare were 26% of U S aging population call home.
And new health, we are confident that the business is the ability to manage cost and value based arrangements will attract a growing number of external payer partners in Texas and Florida.
Large markets with significant growth opportunities.
Our value driven care model and new health is driving differentiated results with lower medical costs and strong performance on key utilization metrics for both bright health care members and for external Payors.
We will continue to focus on serving consumers in the commercial marketplace, Medicaid Medicare advantage and ACO reach.
A differentiated model compared to competitors serving specific patient categories.
Our growing Epo reach business allows us to leverage our technology and value based care expertise to support physician groups and taking on risk for traditional Medicare lives.
We see a large long term opportunity in ACO reach as the U S government looks to shift more fee for service Medicare beneficiaries into value based care arrangements.
In our Medicare advantage business is well positioned working with our carrier partners in value based arrangements already serving seniors and underserved populations throughout California.
We have made substantial operational improvements in the business in 2022.
Which have shown results and our year to date performance.
And we expect will combined with further operational improvements going forward to deliver continued progress in 2023.
We believe our Medicare advantage business, we will have additional appeal wins from solid organic growth.
Early AEP growth ahead of expectations and pricing benefits into 2023.
Our current cost structure for our MA business already supports adjusted EBITDA profitability at our forecasted MCR next year.
Looking out to 2023, we're excited about our balanced portfolio of differentiated offerings and its ability to drive value and serve as a platform for sustainable and profitable growth in the future.
It's worth repeating that we have demonstrated and continue to believe that when you connect and align the best local resources in health care delivery with the financing of care you get the best outcomes.
This is at the heart of our value driven business model.
While we are excited for the future I want to acknowledge that this is a very challenging time for our team given the significant changes we are making.
We are very fortunate to have a dedicated team of amazing professionals that I have the privilege to work with every day.
To our amazing team I want to thank you for what you've done to help build the foundation of this company.
We continue to believe we will make healthcare REIT together.
Operator, let's take the first question.
Thank you.
If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to ask that question. Please press star followed by two.
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He asked you keep to one question and one follow up thank you.
Our first question today comes from the line of Nathan Rich from Goldman Sachs. Please go ahead. Your line is that way.
Hi, good morning, Thanks for the questions, maybe just starting with drug contracting and that moving into ACO reach you know you noted it was profitable this year and you expect it to remain profitable in.
2023 are there any considerations from a revenue or profitability standpoint, with respect to transition to ACO reach especially with the cap on <unk>.
Our risk score growth that we should keep in mind when thinking about the profitability of that program next year.
No I wouldn't say any change from what we're what we've discussed were.
2022, and anything Youre thinking yeah, no I and Nathan as as we've shared before we've got great affiliate partners and providers that are performing very very well ahead of benchmarks we're running.
EBITDA profitable this year and the teams.
Very prepared for next year into that move to ACO reach so I think we would say we're very excited about it.
Great and if I could just follow up on your MLR expectations for next year I think modest.
It's a modest improvement versus the 90% to 92 range for this year I guess, how are you thinking about kind of a potential normalization of utilization as we move into next year.
Are you sorry are you seeing any signs of pent up demand or anything like that in the market and then could you maybe also talk about your expectations around.
Flu and Covid as we get into the fourth quarter of the year.
Well.
Let's start with just the expectation that we'll get we'll get much more into detail when we get our our our enrollment for expectation for the year set of course, we're in the middle of AEP and OUP. So I don't want to get too specific because mix does impact us, but with respect to the guidance on MCR is you know.
We've got really three.
Kind of core components that build up the MCR senior managed care business in California.
Our DCE business, which as you know rate for 2022 is booked at 98%. So it is a liar higher medical care ratio and then we've got a risk based arrangements within new health and so depending on mix that's going to vary but when you look at the mix of business without the ECA insurance business, which is.
Lower than our <unk>.
Enterprise ratio when that goes away coupled with the growth of DCE with the improved Medicare advantage business. That's how you get to what we say is a modest improvement based on the enrollment targets that we put out there for for 'twenty 2023 year to date, we are optimistic on those.
Believe.
We're going to be able to deliver on them, but that will impact our <unk>.
Our MCR for next year in terms of pent up demand, we really haven't seen it.
As we've seen utilization to be very stable throughout 2022 that was a big core driver of our improved performance year over year, our medical cost initiatives have have met our expectations or outperformed throughout the year. So we really haven't seen that Medicare advantage is that we've talked about.
Utilization is mid to high single digits down year over year, Iot, even higher than that so our utilization has been down or stable. If you will drove the year and we expect so far to remain into the fourth quarter with respect to flu and Covid, we don't well we note that.
There are reports of increased flu out there, but we expect a normal season and thats whats baked into our numbers for the fourth quarter.
Thanks Nathan.
Thank you.
Thank you.
The next question today comes from the line of Joshua Raskin from Nephron Research. Please go ahead. Your line is now open.
Hi, Thanks. Good morning, I was wondering if you could just give us some overview expectations for new health next year I'd be curious if that's part of the EBITDA profitability.
Expectation than maybe in totality, we don't need the specifics on D C versus the others and then maybe sort of value based care membership expectations and how much of that change next year is bright health care exit related.
Well I appreciate the question Josh good morning.
So were we put guidance out there early to make sure that your models are updated.
We're targeting 85% to 90000 value based lives.
Next year.
Strong growth of our external book of business from this year, obviously with the ACA marketplace insurance business for bright healthcare going away.
That's the biggest degradation year over year.
We're optimistic that we're going to recapture a fair amount of those lives, but at this point we want it we think we've got a prudent outlook for for now we will get we will get more into that as we get out of OUP AEP, Josh and give updated guidance in in January .
And then I can't remember the profitability.
<unk> our expectations there is as we've shared before Josh our current DCE moving into ACO reach is performing well, we expect it to be profitable this year and into next.
Then as Mike just shared all of that and we shared earlier the third party Payor lives that new health serves are performing well and we continue to expect to continue to grow that.
Just this year I mean, our external new health book of business is a strong we're performing well for our external payers in partnership. So we're excited about the profitability outlook of that business not only for 2022, but for continued into 2023.
Okay, and then could you just remind me fourth quarter MLR expectation the guidance implies an increase in <unk> relative to what you've got year to date can you just remind me the the seasonal reasons for that because.
Because I'm thinking of the exchanges is as high deductible health plans.
I'm, assuming maybe that's it.
Yes, it's really the seasonality of the fourth quarter for the deductible wear off that we see every year. So that's really the.
Yes.
The reason for it and I would say somewhere in the mid Ninety's is what we're expecting for Q4, which again when you look at it on a year over year basis year to date Josh.
When you normalize our medical loss ratio for risk adjustment and medical costs to put them in the rate periods. We continue to track year over year on a year to date basis and expect this in the fourth quarter to be somewhere between 1200 basis points improved year over year and that's the three major factors that we.
<unk> talked about.
Last year coming into this year was driving medical cost initiatives. The fact that COVID-19, we price for Covid and Covid was a much meaning more bigger impact for us last year and then the.
The improvement year over year and risk adjustment that we've seen especially in Florida.
Percent, North Carolina, 20% improved year over year, when you take those three factors into consideration that's what's driving the normalized year over year improvement of that of around 1200 basis points, which is in line with the guidance that we provided.
Earlier today.
Alright, so really just to deductibles and nothing else to think about in terms of uptick there.
No.
Thank you.
Thanks, Josh.
Thank you.
The next question today comes from the line of Steven Valiquette from Barclays. Please go ahead. Your line is now open.
Hi, Thanks, Good morning, everybody. So I guess I'm curious is it too early to talk about the quarterly cadence of EBITDA for 'twenty three.
In light of your target for.
2023 profitability on adjusted EBITDA basis, we're talking about profitability just in the fourth quarter.
And then still losses in the first half just I'm, just trying to sort of parse out how many of the quarters of next year, we will be profitable EBITDA.
It might be too early but just any preliminary thoughts might help us. It just tried to pattern out the quarters for next year. Thanks.
Yes, I appreciate the questions, even though it's a little early for us to get that specific got so if you would indulge us and we'll be prepared to update you in January on that so its too preliminary for that today, but I do appreciate the question.
Okay.
Add on to that.
Right.
Sorry, Steve I was just going to add on to that question or to that responses. As you can imagine we've got a pretty significant change in our cost structure as we exit the TCA insurance business and B M. A business in the other states other than California.
We're well underway in.
In the plans for that.
Our business cost structure change year over year, which will help that cost come down pretty quickly.
Okay, and just maybe a quick follow up on Jonathan's question as well, but the new health segment continues to be somewhat tricky to model on a quarterly basis.
And there are a lot of swings from quarter to quarter, but just kind of thinking ahead.
For 'twenty three are there are there always going to be certain quarters that are not going to be profitable within new health, maybe just remind as to what's the long term margin target for new health as well.
Notwithstanding the quarterly volatility.
Well, let's talk about a quarter of quarterly volatility is impacted by the same things that are impacted by the bright healthcare book, principally and that is yes.
As we've entered into Florida last year, the volatility and there is given the fact that it's on a.
A risk basis or a complicated basis that the impact to bright healthcare flows through to new health and so the volatility that we saw in bright health care, we saw in new health in 'twenty, one and in 'twenty, two and that really comes from the adjustments that we're making through risk adjustment as we become more mature as we understand the book of.
Yes.
Over time, I expect that volatility to go down and of course, you don't see that same impact in our Medicare book of business, which is performing really well for us. So over time, we won't see that level of volatility and we will get more into targets and long term profit targets in all of that as we rollout.
In January .
Stephen So we will be more.
We'll update you more at that time.
Got it okay alright. Thanks.
Thank you.
The next question today comes from the line of Lisa Gill from J P. Morgan Chase. Please go ahead. Your line is now open.
Great. Thanks, very much and thanks for taking the question.
Really wanted to start with one on Medicare advantage.
Like I think you've talked about that early numbers look good as far as enrollment goes in California do you have any idea around one this enrollment and then secondly, as we think about stars for 2024.
What are some of the things that you plan to do Ted can mitigate some of that the star ratings for 24.
Okay. Alicia can we go back in for did you ask about dis enrollments for MA is that what you were yeah. Yeah that that's what's your anticipation that this enrollment for him and he said you know initial numbers are coming and going as far as developments go but just curious in California, what what's your initial expectations for enrollment.
Well number one.
Yeah.
That number is we believe it's net net favorable but while it is as you know over the last couple of years, we've grown our Medicare advantage book of business in California about 40% in total.
So it has significantly grown over the last several years I would characterize 2023 as we will continue to grow and take share, but it will be nowhere near the growth that we've seen in years past and that's part of the work that we're doing because we're really focused on integrating the business, which we started earlier this year and we're well along the way.
In 2022, but that will continue into 2023 as we.
<unk> the business for continued growth, we see significant opportunities throughout the state of California with our care partners.
So we're really excited about that so but as a respected guests enrollment with that role over the last couple of years.
I'm pretty high levels of just enrollment compared to our stable book of business in 2023, so far AEP, we've seen less enrollment.
I won't break it out separately I can tell you net we expect net growth and we're not seeing the level of guest enrollment we have seen over the last couple of years, just given the first year impact of that heavy growth, but hopefully that answers your question.
And then my other question was just around how to think about 2024 stars I mean.
Are there things that you can do to mitigate that going into 2024.
Yes. So there is of course, our whole company is focused on Starz. We know we understand the importance of it and we were impacted just like others were with some of the change of the focus on caps and what have you, but a lot of our star.
Yes.
Call. It performance has been significant.
The significant growth that we've seen and while we don't want to use that as an excuse it's a reality the first year or two with that level of growth.
We're impacted on some of our scores that rolled up to our stars rating, but as we mature as our as we understand the book of business and serve consumers longer and build deeper relationships and really focus we've done a lot of work on our front end communication and technology with our consumers. So we really believe we're going to see it.
Improved performance and and our target is to be a four star plus.
At least four star.
We believe that in our that's in that line.
Your line of sight to be achieved in the in the future.
Okay, great. Thank you.
Thanks Lisa.
Thank you.
Today's question today comes from the line of Michael Hall from Morgan Stanley . Please go ahead. Your line is now open.
Thank you guys and maybe a quick question for Cathy just on capital position.
The $221 million in nonregulated cash include the fully drawn $3 50, a credit facility.
Yeah, Yes, we are fully drawn on our facility, but remember we had the two 'twenty on the balance sheet at the end of the third quarter, Michael and then we closed shortly thereafter on the $175 million series B. So in aggregate 400 million, we are fully drawn on the facility, but remember we also.
Expect $250 million.
Plus coming back from risk based capital starting obviously after working with regulators the early into next year and beyond.
Got it. So then the $2 50 statutory capital at least I think last quarter. You are the last update call. You mentioned six to 18 months are beginning middle of next year to 18 months.
Wide range for claims right now how does that work I know claims lag generally three months in Italy, how much longer that typically take to.
Payout claims inventory right now.
Well, it's going to vary by states and of course, we're working with the state regulators.
As we wind down serve the continued membership that we have today and then by the end of the first quarter will be 90% ish completes unclaimed. So we'll be engaged with regulators on release of that capital will be staged over time. Some are we believe that some states will be more proactive early on.
Some will.
Pale on for a period of time, but that's why we give the broader range because every state has different policy with respect to.
The wind down or exit of insurance business, if you will.
Got it and then if I if I may one more just on technology platform just in light of the strategic update restructuring push for profitability next year.
Plans changed on the rebuild that started earlier this year or just any thoughts there.
Well the core of our technology, which is really what enables our fully align care model, which is is connecting.
Ah patients to their doctor and have a whole patient record.
And then having the tools to be able to manage population for our affiliate providers, whether we own and operate our employee. The docs are we affiliate like we do in DCE that technology has not changed in terms of our core clean platform and how we're thinking about that going forward, especially Medicare.
Vantage, we continue to evolve that but that's not what I would consider to be our differentiation our differentiation is really.
What is enabling our fully aligns care model and that has not changed and we will again get more in detail with that in January as we as we update all of you on our go forward business.
Thank you.
Thanks, Michael.
Thank you.
The next question today comes from the line of Kevin Fischbeck from Bank of America. Please go ahead. Your line is now open.
Okay, great. Thanks.
I just wanted to go to your operating cost guidance for next year.
Obviously, it's a nice improvement year over year, but my guess is that the operating costs.
Numbers are just different by segment.
Do you have like what that number would look like this year. If you were only operating in M&A and new health just to.
See how much progress needs to happen with them.
The ongoing businesses going forward.
Well.
In aggregate.
Don't want to get into that because the cohort mix will it will impact it but I would say if you look at the core of MAA and DCE, Yes, we know what they are and as I said is if we we believe with our MCR targets that we price too and that we believe we will manage to in both DCE and MMA, we will be profitable.
With the cost structure that we have today, new health is of course, the evolving because of the shift away from the ECA.
Insurance business from bright health care and so there are moving parts, depending on if youre managing the Medicare business versus the consumer marketplace or Medicaid. So I don't want to get too far along into that but today. The core part of our premium revenue is at the cost structure that we have today would be profitable at our MCR.
<unk> next year.
Okay, and then I guess, maybe just to that point about you know how much membership you've got to keep from the external.
The internal business, that's going to move to external next year is there some way to think about that.
As far as what percentage of health plans in those markets. You are in network and are you only in network with 10 or 20% of them are you in network with 60% of them is there.
Some way to think about.
How that looks.
Yes of course, we'll be much more.
With this in January again, it's a little early because we have been given our announcement last month.
Been signing and adding new external payer partners, which we're really excited about the interest level. So we've got a strong core set of partners that we're aligning with them.
We're ahead of ourselves in terms of how much we think we will recapture but we think it's a significant opportunity in and here's why.
You look at our performance within our integrated model, we perform better than the general fee for service marketplace today, Florida as we've talked about we believe long term, we can perform 15% to 20% better than the marketplace in terms of risk adjusted medical costs, we're doing.
That today in our Florida book of business, and we're seeing strong results in Texas as well. So we've got a great value proposition for our partnership with our payers and with a great consumer experience with the high NPS. So we're really excited about it but of course, it's early and just given the recency of Av.
Our announcement I don't want to get too far ahead of that but we will be up.
Talking about that in more detail, Kevin, but just be rest assured we have a core set up here partners that we're working with and we're excited about our prospects going forward.
Alright. Thanks.
Yeah.
Thank you.
The final question today comes from the line of Gary Taylor from Cowen. Please go ahead. Your line is now open.
Yeah.
Hi, good morning.
Two quick things one Kathy I, just wanted to catch that PDR release in the quarter again, I Didnt catch that when you ran through it and then my other question is can.
Can you update us on claims inventory claims processing I know.
<unk> been working on your systems, but there were quite some delays in the <unk> last year. So is there any way to give us a stat like.
In the third quarter medical expense this year X amount of those dollars are yet on processed at the end of the quarter versus the prior year, just some way to give us some update on kind of how you're moving through the claims inventories.
Yeah.
Maybe later on we can get into the detail of Cathy and then Steven can follow up on specifics, but I'll give you more of the the highlights of it. This is obviously a core focus of the business last year as you know Gary we started off the year behind operationally it took us till at least mid year to get going and we had a significant amount of cash.
Activity in the fourth quarter I think between kind of the beginning of the fourth quarter in January we processed about 50% of our claims last year, where we are.
We're not even close to that this year. We are back we were caught up at the beginning of the year and we process claims.
Consistently.
In a stable way environment throughout the year, so our claim.
Our claim receipts our claim process and our claim inventory had been stable all year, which obviously improves our predictability for the year and so we're really pleased with the outcomes of that that work really began late last year into the beginning of this year and that's been a big contributor to our improved performance and then Kathy only.
Yeah, PDR and then til therapy, Dr. As you would expect when you set up that lost contracts. We did at the end of last year, We had 79 million come through this quarter and we said that we have 61 remaining going into the fourth quarter.
Thank you.
So I believe those thanks, Gary I believe though the last question. So I want to thank everyone for your time today and your interest in Brighthouse group, we look forward to updating you again.
The January February timeframe. Thanks.
Thank you. This concludes today's conference call. Thank you all for your participation you may now disconnect your lines.
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