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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, 2023
OR
☐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 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 fileroAccelerated filerx
Non-accelerated fileroSmaller reporting companyo
Emerging growth companyo 
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 2, 2023, the registrant had 636,146,133 shares of common stock, $0.0001 par value per share, outstanding.

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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 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,” “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 IFP and 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 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, 2022, that was filed with the United States Securities and Exchange Commission (the “SEC”) on March 16, 2023 (“2022 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.
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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,
2023		December 31,
2022
Assets
Current assets:
Cash and cash equivalents$382,506$466,325
Short-term investments12,11213,206
Accounts receivable, net of allowance of $6,513 and $6,098, respectively
125,24173,605
ACO REACH performance year receivable 882,88499,181
Current assets of discontinued operations (Note 16)2,225,7392,783,474
Prepaids and other current assets142,932134,843
Total current assets3,771,4143,570,634
Other assets:
Long-term investments3,8165,401
Property, equipment and capitalized software, net40,74742,596
Goodwill760,078760,078
Intangible assets, net242,286249,083
Other non-current assets29,66437,260
Total other assets1,076,5911,094,418
Total assets4,848,0054,665,052
Liabilities, Redeemable Noncontrolling Interest, Redeemable Preferred Stock and Shareholders’ Equity (Deficit)
Current liabilities:
Medical costs payable$458,465$411,753
Accounts payable33,63867,854
Unearned revenue139,416242
ACO REACH performance year obligation719,420—
Short-term borrowings303,947303,947
Current liabilities of discontinued operations (Note 16)2,225,7392,783,474
Other current liabilities131,256121,424
Total current liabilities4,011,8813,688,694
Other liabilities32,19136,673
Total liabilities4,044,0723,725,367
Commitments and contingencies (Note 11)
Redeemable noncontrolling interests223,503219,758
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
747,481747,481
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
172,936172,936
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
6363
Additional paid-in capital3,005,5922,972,271
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
2
Bright Health Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Loss)
(in thousands, except per share data)
(Unaudited)
Three Months Ended March 31,
20232022
Revenue:
Premium revenue$502,918$458,962
ACO REACH revenue239,807182,797
Service revenue13,57012,392
Investment income (loss)46(40,888)
Total revenue756,341613,263
Operating expenses:
Medical costs688,515594,248
Operating costs140,324159,117
Restructuring charges3,3576,864
Depreciation and amortization9,89112,897
Total operating expenses842,087773,126
Operating loss(85,746)(159,863)
Interest expense7,7871,193
Other income—(784)
Loss from continuing operations before income taxes(93,533)(160,272)
Income tax expense1,2593,242
Net loss from continuing operations(94,792)(163,514)
Loss from discontinued operations, net of tax (Note 16)(74,669)(17,115)
Net Loss(169,461)(180,629)
Net earnings from continuing operations attributable to noncontrolling interests(5,550)(14,605)
Series A preferred stock dividend accrued(9,714)(8,938)
Series B preferred stock dividend accrued(2,180)—
Net loss attributable to Bright Health Group, Inc. common shareholders$(186,905)$(204,172)
Basic and diluted loss per share attributable to Bright Health Group, Inc. common shareholders
Continuing operations$(0.18)$(0.30)
Discontinued operations(0.12)(0.02)
Basic and diluted loss per share(0.30)(0.32)
Basic and diluted weighted-average common shares outstanding631,534628,765
See accompanying Notes to Condensed Consolidated Financial Statements
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Bright Health Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(Unaudited)
Three Months Ended March 31,
20232022
Net loss$(169,461)$(180,629)
Other comprehensive (loss) income:
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 $0, respectively
(464)(1,749)
Other comprehensive (loss) income2,193(26,340)
Comprehensive loss(167,268)(206,969)
Comprehensive loss attributable to noncontrolling interests(5,550)(14,605)
Comprehensive loss attributable to Bright Health Group, Inc. common shareholders$(172,818)$(221,574)
See accompanying Notes to Condensed Consolidated Financial Statements
4
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 StockAdditional
Paid-In
Capital		Retained
Earnings
(Deficit)		Accumulated
Other
Comprehensive
Income (Loss)		Treasury StockTotal
2023SharesAmountSharesAmount
Balance at January 1, 2023925 $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, 2023925 $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
5
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 StockCommon StockAdditional
Paid-In
Capital		Retained
Earnings
(Deficit)		Accumulated
Other
Comprehensive
Income (Loss)		Treasury StockTotal
2022SharesAmountSharesAmount
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 stock750 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, 2022750 $747,481 628,993 $63 $2,894,421 $(1,896,085)$(29,675)$(12,000)$956,724 
See accompanying Notes to Condensed Consolidated Financial Statements
6
Bright Health Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Three Months Ended
March 31,
20232022
Cash flows from operating activities:
Net loss$(169,461)$(180,629)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization9,89113,041
Impairment of intangible assets—6,720
Share-based compensation33,32032,921
Deferred income taxes436717
Unrealized loss on equity securities—40,968
Other, net(2,807)2,378
Changes in assets and liabilities, net of acquired assets and liabilities:
Accounts receivable(43,409)(29,221)
ACO REACH performance year receivable(783,703)(638,641)
Other assets22,448(22,270)
Medical cost payable(423,459)337,180
Risk adjustment payable4,153354,276
Accounts payable and other liabilities(119,416)52,182
Unearned revenue137,563(18,402)
ACO REACH performance year obligation719,420533,537
Net cash (used in) provided by operating activities(615,024)484,757
Cash flows from investing activities:
Purchases of investments(2,880)(782,091)
Proceeds from sales, paydown, and maturities of investments690,161154,765
Purchases of property and equipment(1,863)(5,491)
Business divestitures, net of cash disposed of1,370—
Business acquisitions, net of cash acquired—(310)
Net cash provided by (used in) investing activities686,788(633,127)
Cash flows from financing activities:
Repayments of short-term borrowings—(155,000)
Proceeds from issuance of preferred stock—747,481
Proceeds from issuance of common stock1257
Distributions to noncontrolling interest holders(1,805)—
Net cash (used in) provided by financing activities(1,804)592,738
Net increase in cash and cash equivalents69,960444,368
Cash and cash equivalents – beginning of year1,932,2901,061,179
Cash and cash equivalents – end of period$2,002,250$1,505,547
Supplemental disclosures of cash flow information:
Changes in unrealized loss on available-for-sale securities in OCI$2,193$(26,340)
Cash paid for interest7,1571,168
See accompanying Notes to Condensed Consolidated Financial Statements
7
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: our Consumer Care business and Bright HealthCare. Consumer Care provides care delivery and value-based enablement services through our owned and affiliated clinics. Bright HealthCare offers Medicare health plan products in California.

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, 2022 included in our Form 10-K for the year ended December 31, 2022 (“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, ACO REACH performance year receivable and obligation, and valuation and impairment of goodwill and other intangible assets. Actual results could differ from these estimates.

Going Concern: 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 normal course of business.

The Company has a history of operating losses, and we generated a net loss of $169.5 million for the three months ended March 31, 2023. Additionally, the Company experienced negative operating cash flows primarily related to our discontinued Bright HealthCare – Commercial segment for the three months ended March 31, 2023, requiring additional cash to 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 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 $50.0 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.

Based on our projected cash flows and absent any other action, the Company may not meet certain covenants under the Credit Agreement or the Waiver which may result in the obligations under the Credit Agreement being accelerated. The Company will
8
Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
require additional liquidity to meet its obligations as they come due in the 12 months following the date the condensed consolidated financial statements contained in this Quarterly Report are issued. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

In response to these conditions, management has implemented a restructuring plan to reduce capital needs and our operating expenses in the 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 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 recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Operating Costs: Our operating costs, by functional classification for the three months ended March 31, 2023 and 2022, are as follows (in thousands):
Three Months Ended March 31,
20232022
Compensation and fringe benefits$85,208 $96,216 
Professional fees12,687 14,739 
Marketing and selling expenses20,344 18,382 
General and administrative expenses10,974 15,942 
Other operating expenses11,111 13,838 
Total operating costs$140,324 $159,117 

Recently Issued and Adopted Accounting Pronouncements: There are no 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.

Correction of prior period financial statements: Subsequent to the issuance of the 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 (deficit) and condensed consolidated statements of cash flows.

The Company determined that the correction of these errors was not material to the condensed consolidated financial statements.

9
Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 Company’s workforce and reduce expenses based on our updated business model.

Restructuring charges by reportable segment and corporate for the periods ended March 31 were as follows (in thousands):

Three Months Ended March 31, 2023
Bright HealthCareConsumer CareCorporate & EliminationsTotal
Employee termination benefits$6 $(41)$(725)$(760)
Long-lived asset impairments— — 880 880 
Contract termination and other costs55 — 3,182 3,237 
Total continuing operations$61 $(41)$3,337 $3,357 

The $0.9 million of long-lived asset impairments is the result of a lease abandonment for one of our corporate office locations during the three months ended March 31, 2023.

Three Months Ended March 31, 2022
Bright HealthCareConsumer CareCorporate & EliminationsTotal
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 

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

Employee Termination BenefitsContract Termination CostsTotal
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 

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


10
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, 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 as of March 31, 2023 and December 31, 2022 (in thousands):
March 31, 2023
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Carrying
Value
Cash equivalents$382,510 $5 $(9)$382,506 
Available for sale:
U.S. government and agency obligations7,256 1 (210)7,047 
Corporate obligations2,906 4 (69)2,841 
State and municipal obligations458 — (12)446 
Certificates of deposit3,304 — — 3,304 
Mortgage-backed securities37 — (1)36 
Asset-backed securities72 — — 72 
Total available-for-sale securities14,033 5 (292)13,746 
Held to maturity:
U.S. government and agency obligations233 — — 233 
Certificates of deposit1,949 — — 1,949 
Total held-to-maturity securities2,182 — — 2,182 
Total investments$398,725 $10 $(301)$398,434 
December 31, 2022
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Carrying
Value
Cash equivalents$340,795 $8 $— $340,803 
Available for sale:
U.S. government and agency obligations8,742 — (301)8,441 
Corporate obligations3,401 1 (95)3,307 
State and municipal obligations712 — (17)695 
Certificates of deposit3,318 — — 3,318 
Mortgage-backed securities156 — — 156 
Asset-backed securities60 — — 60 
Other1 — — 1 
Total available-for-sale securities16,390 1 (413)15,978 
Held to maturity:— 
U.S. government and agency obligations685 — — 685 
Certificates of deposit1,947 — — 1,947 
Total held-to-maturity securities2,632 — — 2,632 
Total investments$359,817 $9 $(413)$359,413 
11
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, 2023 and December 31, 2022 were as follows (in thousands):
March 31, 2023
Less Than 12 Months12 Months or GreaterTotal
Description of InvestmentsFair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Cash equivalents$70,213 $(9)$— $— $70,213 $(9)
U.S. government and agency obligations693 (9)6,694 (201)7,387 (210)
Corporate obligations178 (3)2,397 (66)2,575 (69)
State and municipal obligations3 — 369 (12)372 (12)
Asset-backed securities30 (1)— — 30 (1)
Total bonds$71,117 $(22)$9,460 $(279)$80,577 $(301)
December 31, 2022
Less Than 12 Months12 Months or GreaterTotal
Description of InvestmentsFair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
U.S. government and agency obligations$1,316 $(31)$6,808 $(270)$8,124 (301)
Corporate obligations740 (9)2,061 (86)2,801 (95)
State and municipal obligations340 (2)344 (15)684 (17)
Mortgage-backed securities2 — — — 2 — 
Other— — 1 — 1 — 
Total bonds$2,398 $(42)$9,214 $(371)$11,612 $(413)

As of March 31, 2023, we had 800 investment positions out of 1,340 that were in an unrealized loss position. As of December 31, 2022, we had 721 investment positions out of 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. Refer to Note 16 Discontinued Operations for discussion of the impairment of securities recognized within discontinued operations.

12
Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
As of March 31, 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
Due in one year or less10,343 10,187 
Due after one year through five years3,611 3,479 
Due after five years through 10 years79 80 
Due after 10 years— — 
Total debt securities14,033 13,746 

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, investment income in the Condensed Consolidated Statements of Income (Loss) was $0.1 million 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 were $2.4 million and $5.1 million, respectively. There were no realized (losses) gains from our fixed maturity securities for the three months ended March 31, 2023 and 2022.

Equity Securities

For the three months ended March 31, 2022, we recognized unrealized (losses) gains of $(41.0) million in investment income (loss) in the Condensed Consolidated Statements of Income (Loss). We held no equity securities during the three months ended March 31, 2023 and 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 2022 Form 10-K.
13
Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following tables set forth our fair value measurements as of March 31, 2023 and December 31, 2022, for assets measured at fair value on a recurring basis (in thousands):
March 31, 2023
Level 1Level 2Level 3Total
Assets
Cash equivalents$363,663 $15,749 $— $379,412 
Fixed maturity securities, available for sale:
U.S. government and agency obligations5,152 1,895 — 7,047 
Corporate obligations— 2,841 — 2,841 
State and municipal obligations— 446 — 446 
Certificates of deposit— 3,304 — 3,304 
Mortgage-backed securities— 36 — 36 
Asset-backed securities— 72 — 72 
Other— — — 
Total fixed maturity securities, available for sale:5,152 8,594 — 13,746 
Total assets at fair value$368,815 $24,343 $— $393,158 
December 31, 2022
Level 1Level 2Level 3Total
Assets
Cash equivalents$316,752 $15,601 $— $332,353 
Fixed maturity securities, available for sale:
U.S. government and agency obligations6,354 2,087 — 8,441 
Corporate obligations— 3,307 — 3,307 
State and municipal obligations— 695 — 695 
Certificates of deposit— 3,318 — 3,318 
Mortgage-backed securities— 156 — 156 
Asset-backed securities— 60 — 60 
Other— 1 — 1 
Total fixed maturity securities, available for sale:6,354 9,624 — 15,978 
Total assets at fair value$323,106 $25,225 $— $348,331 

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 1Level 2Level 3Total
Cash equivalents, held to maturity$3,094 $— $— $3,094 
Fixed maturity securities, held to maturity:
U.S. government and agency obligations233 — — 233 
Certificates of deposit1,619 330 — 1,949 
Total held to maturity$4,946 $330 $— $5,276 
14
Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
December 31, 2022
Level 1Level 2Level 3Total
Cash equivalents, held to maturity$8,450 $— $— $8,450 
Fixed maturity securities, held to maturity:
U.S. government and agency obligations685 — — 685 
Certificates of deposit— 1,947 — 1,947 
Total held to maturity$9,135 $1,947 $— $11,082 
There have been no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy.
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 thousands):
March 31, 2023December 31, 2022
Gross Carrying
Amount		Cumulative
Impairment		Gross Carrying
Amount		Cumulative
Impairment
Bright HealthCare$428,710 $70,017 $428,710 $70,017 
Consumer Care401,385 — 401,385 — 
Total$830,095 $70,017 $830,095 $70,017 

The gross carrying value and accumulated amortization for definite-lived intangible assets were as follows (in thousands):
March 31, 2023December 31, 2022
Gross Carrying
Amount		Accumulated AmortizationGross Carrying
Amount		Accumulated Amortization
Customer relationships$204,221 $46,642 $204,221 $41,604 
Trade names95,261 14,399 95,261 12,812 
Other5,400 1,555 5,400 1,383 
Total$304,882 $62,596 $304,882 $55,799 
There was no impairment expense for the three months ended March 31, 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.
15
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 was $6.8 million and $10.4 million, respectively. Estimated amortization expense relating to intangible assets for the remainder of 2023 and for each of the next five full years ending December 31 is as follows (in thousands):
2023 (April-December)$20,368 
2024$27,025 
2025$27,025 
2026$27,025 
2027$27,025 
2028$25,382 
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,
20232022
Medical costs payable - January 1$411,753 $263,187 
Incurred related to:
Current year656,599 672,697 
Prior year30,354 (76)
Total incurred686,953 672,621 
Paid related to:
Current year338,907 367,504 
Prior year301,334 161,143 
Total paid640,241 528,647 
Medical costs payable - March 31$458,465 $407,161 
Medical costs payable attributable to prior years increased by $30.4 million and decreased by $0.1 million for the three months ended March 31, 2023 and 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,
20232022
Claims unpaid$52,502 $63,329 
Provider incentive payable61,748 40,691 
Claims adjustment expense liability5,823 4,918 
Incurred but not reported (IBNR)338,392 298,223 
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).
16
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. As of March 31, 2023 and December 31, 2022 we had $303.9 million borrowed under the Credit Agreement at a weighted-average effective annual interest rate of 9.51%, which remains outstanding as of March 31, 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.

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 104.9 million shares of common stock authorized for issuance under the 2021 Incentive Plan. As of March 31, 2023, a total of 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 $33.3 million and $32.9 million for the three months ended March 31, 2023 and 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
17
Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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.

There were no options granted during the three months ended March 31, 2023.

The activity for stock options for the three months ended March 31, 2023 is as follows (in thousands, except exercise price and contractual life):
SharesWeighted-Average
Exercise Price		Weighted-Average
Remaining
Contractual Life
(In Years)		Aggregate
Intrinsic Value
Outstanding at January 1, 202364,291 $1.82 6.7$82 
Granted— — 
Exercised(3)0.63 
Forfeited958 0.58 
Expired(3,574)1.78 
Outstanding at March 31, 202361,672 $1.80 5.9$1 

We recognized share-based compensation expense related to stock options of $15.4 million for the three months ended March 31, 2023, which is included in operating costs in the Condensed Consolidated Statements of Income (Loss). At March 31, 2023, there was $28.8 million of unrecognized compensation expense related to stock options that is expected to be recognized over a weighted-average period of 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, 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, 2023 (in thousands, except weighted average grant date fair value):
Number of RSUsWeighted Average Grant Date Fair Value
Unvested RSUs at December 31, 202237,567$2.37 
Granted53,867 0.51 
Vested(5,868)1.83 
Forfeited(5,612)1.87 
Unvested RSUs at March 31, 202379,954 $1.19 

We recognized share-based compensation expense related to RSUs of $5.4 million for the three months ended March 31, 2023, which is included in operating costs in the Condensed Consolidated Statements of Income (Loss). As of March 31, 2023, there was $57.8 million of unrecognized compensation expense related to the RSU grants, which is expected to be recognized over a weighted-average period of 2.0 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 encompassed a total of 14.7 million PSUs, separated into four equal tranches, each of which are eligible to vest based
18
Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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, 2023 (in thousands, except weighted average grant date fair value):
Number of PSUsWeighted Average Grant Date Fair Value
Unvested PSUs at December 31, 202210,500$9.30 
Granted— — 
Forfeited— — 
Unvested PSUs at March 31, 202310,500 $9.30 
We recognized share-based compensation expense related to PSUs of $12.5 million for the three months ended March 31, 2023, which is included in operating costs in the Condensed Consolidated Statements of Income (Loss). At March 31, 2023, there was $34.2 million of unrecognized compensation expense related to the PSU grant, which is expected to be recognized over a weighted-average period of 1.2 years.

NOTE 9. REDEEMABLE CONVERTIBLE PREFERRED STOCK

Series A Convertible Preferred Stock

On January 3, 2022, we 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 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 $47.6 million and $37.9 million as of March 31, 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 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 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
19
Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 January 3, 2022.

At any time following 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 January 3, 2029 and (B) 100% if the redemption occurs at any time on or after 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 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 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

On October 17, 2022, we issued 175,000 shares of Series B Preferred Stock, par value $0.0001 per share, for an aggregate purchase price of $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 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 compounded dividends. Holders of the Series B 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
20
Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(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 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 change of control purchase date and (B) if the change of control effective date occurs on or after October 17, 2029, the sum of (x) the liquidation preference (reflecting increases for compounded dividends) of such 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 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 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,
20232022
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,
20232022
Redeemable convertible preferred stock (as converted to common stock)322,458 166,852 
Stock options to purchase common stock61,672 72,974 
Restricted stock units79,954 36,792 
Total464,084 276,618 

21
Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(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. An amended complaint was filed on June 24, 2022, which expands on the allegations in the original complaint and alleges a putative class period of June 24, 2021 through March 1, 2022. The amended complaint also adds as defendants the underwriters of our initial public offering. The Company has served a motion to dismiss the amended complaint, which has not yet been ruled on by the court.

We are vigorously 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 the Company in these matters, other than as set forth above, the amount or range of reasonably possible losses, if any, cannot be estimated. As a result, other than as set forth above, we have not accrued for any potential loss as of March 31, 2023 and December 31, 2022 for these actions.

Other commitments: As of March 31, 2023, we 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.

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 two reportable segments are Bright HealthCare and 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-
22
Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(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, 2023 and 2022 (in thousands):
Three Months Ended March 31, 2023Bright HealthCareConsumer CareCorporate & EliminationsConsolidated
Premium revenue$453,370 $49,548 $— $502,918 
ACO REACH revenue— 239,807 — 239,807 
Service revenue— 13,570 — 13,570 
Investment income46 — — 46 
Total segment revenue453,416 302,925 — 756,341 
Operating income (loss)(31,433)4,433 (58,746)(85,746)
Depreciation and amortization$4,408 $3,132 $2,351 $9,891 
Restructuring charges60 (41)3,338 3,357 
Three Months Ended March 31, 2022Bright HealthCareConsumer CareCorporate & EliminationsConsolidated
Premium revenue$430,313 $28,649 $— $458,962 
ACO REACH revenue— 182,797 — 182,797 
Service revenue— 12,392 — 12,392 
Investment income80 (40,968)— (40,888)
Affiliated revenue— 368,053 (368,053)— 
Total segment revenue430,393 550,923 (368,053)613,263 
Operating income (loss)(31,383)(70,054)(58,426)(159,863)
Depreciation and amortization$4,459 $7,002 $1,436 $12,897 
Restructuring charges$— $— $6,864 $6,864 
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 CODM.

NOTE 13. INCOME TAXES

Income tax was an expense of $1.3 million and $3.2 million for the three months ended March 31, 2023 and 2022, 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.
23
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, 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 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, 2023 and 2022 (in thousands):
20232022
Balance at January 1$219,758 $128,407 
(Losses) earnings attributable to noncontrolling interest1,421 (2,681)
Tax distributions to noncontrolling interest holders(1,805)— 
Measurement adjustment4,129 17,285 
Balance at March 31$223,503 $143,011 

NOTE 15. ACO REACH

We participate in the Centers for Medicare & Medicaid Services’ (“CMS”) ACO REACH Model with 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 ACO REACH Model, we are guaranteeing the performance of our care network of participating and preferred providers. The intention of the ACO 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 ACO REACH Model include:

•Performance Year Benchmark: The target amount for Medicare expenditures on covered services (Medicare Part A and B) furnished to a REACH ACO’s aligned beneficiaries during a performance year. The Performance Year Benchmark will be compared to the 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 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 expenditures for a given REACH ACO’s aligned population to the actual expenditures of that 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: Two of our REACH ACOs elected to participate in a “stop-loss arrangement” for the current and prior performance year offered by CMS, while one REACH ACO has elected third-party coverage. The “stop-loss arrangement” and 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 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

24
Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Through our participation in the ACO REACH Model, we determined that our arrangements with the providers of our REACH ACO beneficiaries require us to guarantee their performance to CMS. At the beginning of the performance year, we recognized the ACO REACH estimated performance year obligation and receivable for the duration of the performance year. This receivable and obligation 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 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 reduced as we receive 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 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 REACH ACOs by CMS (shared savings) or the consideration due to CMS by the REACH ACOs (shared loss) is reconciled in the year following the performance year. On a quarterly basis CMS adjusts the estimated Performance Year Benchmark based upon revised trend assumptions and changes in attributed membership. CMS will 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 various other assumptions including incurred but not reported reserves. The 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.

The tables below include the financial statement impacts of the performance guarantee at March 31, 2023 and for the three-month period then ended (in thousands):

March 31, 2023December 31, 2022
ACO REACH performance year receivable(1)(2)
$882,884 $99,181 
ACO REACH performance year obligation719,420 — 

(1)     We estimate there to be $154.8 million in-network and out-of-network claims incurred by beneficiaries aligned to our REACH ACOs but not reported as of March 31, 2023; this is included in medical costs payable on the Condensed Consolidated Balance Sheets.
(2)    The performance year receivable includes $14.9 million related to the prior performance year.

Three Months Ended March 31,
20232022
Amortization of ACO REACH performance year receivable(1)
$175,523 $75,127 
Amortization of ACO REACH performance year obligation239,807 182,797 
ACO REACH revenue239,807 182,797 

(1)     The amortization of the 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
25
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,
20232022
Revenue:
Premium revenue$713 $1,186,482 
Service revenue30 36 
Investment income20,892 788 
Total revenue from discontinued operations21,6351,187,306
Operating expenses:
Medical costs43,811 951,342 
Operating costs47,593 252,937 
Restructuring charges4,900 — 
Depreciation and amortization— 144 
Total operating expenses from discontinued operations96,3041,204,423
Loss from discontinued operations before income taxes(74,669)(17,117)
Income tax benefit— (2)
Net loss from discontinued operations$(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):

Cash used in operating activities - discontinued operations$(599,163)
Cash provided by investing activities - discontinued operations684,848 


26
Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Assets and liabilities of discontinued operations were as follows (in thousands):

March 31, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents$1,619,744$1,465,965
Short-term investments443,1621,121,435
Accounts receivable, net of allowance of $230 and $906, respectively
1,39811,082
Prepaids and other current assets161,435184,992
Current assets of discontinued operations2,225,7392,783,474
Total assets of discontinued operations$2,225,739$2,783,474
Liabilities
Current liabilities:
Medical costs payable$215,614$685,785
Accounts payable42,024122,425
Risk adjustment payable1,948,0431,943,890
Other current liabilities20,05831,374
Current liabilities of discontinued operations2,225,7392,783,474
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 benefits2,959 
Long-lived asset impairments100 
Contract termination and other costs1,841 
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):

27
Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Employee Termination BenefitsContract Termination CostsTotal
Balance at January 1, 2023$16,053 $28,538 $44,591 
Charges2,624 — 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 obligations277,194 142 (1,535)275,801 
Corporate obligations124,158 942 (643)124,457 
State and municipal obligations7,614 1 (57)7,558 
Certificates of deposit1,837 — — 1,837 
Mortgage-backed securities9,153 6 (213)8,946 
Asset backed securities18,325 89 (46)18,368 
Other388 — (9)379 
Total available-for-sale securities438,669 1,180 (2,503)437,346 
Held to maturity:
U.S. government and agency obligations4,823 — (110)4,713 
Total held-to-maturity securities4,823 — (110)4,713 
Total investments$1,371,782 $1,210 $(2,673)$1,370,319 

28
Bright Health Group, Inc.
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 obligations365,040 1 (2,956)362,085 
Corporate obligations520,097 523 (623)519,997 
State and municipal obligations9,653 — (80)9,573 
Certificates of deposit8,760 — (2)8,758 
Mortgage-backed securities154,864 46 (157)154,753 
Asset backed securities59,557 — — 59,557 
Other387 — (14)373 
Total available-for-sale securities1,118,358 570 (3,832)1,115,096 
Held to maturity:
U.S. government and agency obligations5,974 — (159)5,815 
Total held-to-maturity securities5,974 — (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, 2023December 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
29
Bright Health Group, Inc.
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 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 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, reduce systemic waste, lower costs, and optimize clinical outcomes. Bright Health Group consists of two reportable segments within our continuing operations: Consumer Care and Bright HealthCare. Additionally, we have one reportable segment in our discontinued operations: Bright HealthCare – Commercial.

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 and providers to enable a truly consumer-centric healthcare experience. As of March 2023, Consumer Care delivers high-quality 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 maintained 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.

Bright HealthCare. Our 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 that are focused on consumer retail healthcare and delivered through Bright Health’s alignment 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.

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.

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 believe our Medicare Advantage business is a strong business well positioned to serve aging and underserved consumers. While there are no assurances at this time of the eventual outcome of the evaluation of strategic alternatives, a potential sale of the business could substantially bolster the Company’s financial standing and position our Consumer Care business well for future growth in the value-based care delivery market.

We remain focused on advancing our value-based care model to drive our business forward. The Consumer Care segment continues its strong momentum in serving a growing number of consumers through value-based care partnerships with payors. We continue to see robust demand for value-based care arrangements, and our differentiated offering in the ACA Marketplace segment has attracted multiple payor partners. We’ve driven strong retention of former Bright HealthCare - Commercial members through these relationships, resulting in growth in the total number of patients in our clinics from 2022 to 2023. Our business is well diversified across payor partners and geographies.
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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 bringing to our 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 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 some incremental upside sharing based on value creation. We also expect to support our 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 intend to manage each business to maximize operating profitability in 2023, as well as working to manage corporate expenses to maximize consolidated Adjusted EBITDA profitability.

We believe the near-term steps that we are taking to improve our performance will optimize the business for long-term 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, 2023 and 2022.
As of March 31,
20232022
Bright HealthCare Consumers Served
Medicare Advantage123,000 120,000 
Consumer Care Patients
Value-based Care Consumers373,000 530,000 
.
Bright HealthCare Consumers Served

Consumers served include individual lives served via MA plans in California. We historically believed growth in the number of consumers at Bright HealthCare is a key indicator of the performance of our Bright HealthCare business. The 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 future consumer growth.

Value-Based Care Consumers

Value-based care consumers are 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 Consumer Care managed medical groups. We believe growth in the number of value-based care consumers is a key indicator of the performance of our 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. We saw a year over year decrease in value-based care consumers resulting from our exit of the commercial market; our focus is to continue to grow the number of value-based care consumers through third-party payor relationships.


Three Months Ended
March 31,
($ in thousands)20232022
Net loss from continuing operations$(94,792)(163,514)
Adjusted EBITDA(1)
$(35,053)(59,089)
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(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 equity securities, changes in the fair value of 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,
($ in thousands)20232022
Net loss$(169,461)$(180,629)
Loss from discontinued operations (a)
74,669 17,115 
EBITDA adjustments from continuing operations:
Interest expense7,787 1,193 
Income tax expense (benefit)1,259 3,242 
Depreciation and amortization9,891 12,897 
Transaction costs (b)
1,849 852 
Share-based compensation expense (c)
33,320 32,921 
Change in fair value of equity securities— 40,968 
Change in fair value of contingent consideration (d)
(1,827)— 
Termination and other exit costs (e)
4,157 5,488 
Restructuring costs (f)
3,303 6,864 
EBITDA adjustments from continuing operations$59,739 $104,425 
Adjusted EBITDA$(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 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.
(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.
(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 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 represent severance costs as part of a workforce reduction and impairment of certain long-lived assets relating to our decision to exit the Commercial business for the 2023 plan year.

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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, 2023 and 2022.
($ in thousands)Three Months Ended
March 31,
Condensed Consolidated Statements of Income (loss) and operating data:20232022
Revenue:
Premium revenue$502,918$458,962
ACO REACH revenue239,807182,797
Service revenue13,57012,392
Investment income (loss)46(40,888)
Total revenue756,341613,263
Operating costs
Medical costs688,515594,248
Operating costs140,324159,117
Restructuring charges3,3576,864
Depreciation and amortization9,89112,897
Total operating costs842,087773,126
Operating loss(85,746)(159,863)
Interest expense7,7871,193
Other income—(784)
Loss from continuing operations before income taxes(93,533)(160,272)
Income tax expense (benefit)1,2593,242
Net loss from continuing operations(94,792)(163,514)
Loss from discontinued operations, net of tax (Note 16)(74,669)(17,115)
Net loss(169,461)(180,629)
Net earnings from continuing operations attributable to noncontrolling interests(5,550)(14,605)
Series A preferred stock dividend accrued(9,714)(8,938)
Series B preferred stock dividend accrued(2,180)—
Net loss attributable to Bright Health
Group, Inc. common shareholders
$(186,905)$(204,172)
Adjusted EBITDA$(35,053)$(59,089)
Operating Cost Ratio (1)
18.6 %25.9 %
(1)Operating Cost Ratio is defined as operating costs divided by total revenue.

Total revenues increased by $143.1 million, or 23.3%, for the three months ended March 31, 2023 as compared to the same period in 2022, which was driven by an increase in our ACO REACH revenue of $57.0 million due to an increase of approximately 19,000 beneficiaries aligned to our REACH ACOs. In addition, for the three months ended March 31, 2022 we had an investment loss of $40.9 million driven by changes in 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 increased by $94.3 million, or 15.9%, 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 an increase in beneficiaries aligned to our REACH ACOs.

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Operating costs decreased by $18.8 million, or 11.8%, for the three months ended March 31, 2023 as compared to the same period in 2022. The decrease in operating costs was primarily due to a decrease in compensation and benefit costs resulting from a decrease in employees.

Our operating cost ratio of 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 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.

Interest expense was $7.8 million and $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 2022. 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, 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.

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, 2022 was $17.1 million, medical costs of $951.3 million and operating costs of $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:20232022
Revenue:
Premium revenue$453,370$430,313
Investment income (loss)4680
Total revenue453,416430,393
Operating expenses
Medical costs430,928416,200
Operating costs49,45341,117
Goodwill impairment——
Depreciation and amortization4,4084,459
Total operating expenses484,789461,776
Operating loss$(31,373)$(31,383)
Medical Cost Ratio (MCR)95.0 %96.7 %

Bright HealthCare premium revenue increased by $23.1 million, or 5.4%, for the three months ended March 31, 2023 as compared to the same period in 2022. The increase was driven by favorable premium rates and an increase in consumer lives of approximately 3,000 due to organic 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:20232022
Revenue:
Premium revenue$49,548$28,649
Affiliated revenue —368,053
ACO REACH revenue239,807182,797
Service revenue13,57012,392
Investment income (loss)—(40,968)
Total revenue302,925550,923
Operating expenses
Medical costs257,587566,694
Operating costs37,81447,281
Depreciation and amortization3,1327,002
Total operating expenses298,533620,977
Operating income (loss)$4,392$(70,054)

Premium revenue increased by $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 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 decreases in network expenses as 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 $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 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 cash include capital infusions into our regulated insurance entities, interest payments and other general and administrative costs. Our long-term cash 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, 2023 and 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, 2023, we were out of compliance with the minimum level for one of our regulated insurance legal entities of our continuing operations and certain of our regulated insurance legal entities within our discontinued operations.

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 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, 2023, we had $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.

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.

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.

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, 2023, we had $46.1 million of outstanding, undrawn letters of credit under the Credit Agreement, which reduce the amount available to borrow. Subsequently, in April 2023, $15.3 million of 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, 2023, we had $2.0 billion in cash and cash equivalents, $275.8 million in short-term investments and $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, 2023, we had non-regulated cash and cash equivalents of $140.5 million, short-term investments of $1.6 million and no long-term investments.

As of March 31, 2023, we had regulated insurance entity cash and cash equivalents of $1.8 billion, of which $21.8 million was restricted, short-term investments of $271.4 million, of which $2.8 million was restricted, and long-term investments of $180.4 million, of which $3.0 million was restricted.
Cash Flows
The following table presents a summary of our cash flows for the periods shown:
Three Months Ended
March 31,
($ in thousands)20232022
Net cash (used in) provided by operating activities$(615,024)$484,757 
Net cash provided by (used in) investing activities686,788 (633,127)
Net cash (used in) provided by financing activities(1,804)592,738 
Net increase in cash and cash equivalents69,960 444,368 
Cash and cash equivalents at beginning of period1,932,290 1,061,179 
Cash and cash equivalents at end of period$2,002,250 $1,505,547 

Operating Activities

During the three months ended March 31, 2023, net cash provided by operating activities decreased by $1.1 billion compared to the three-month period ended March 31, 2022, primarily driven by our Commercial business being in runout and not incurring additional medical costs and increase to our risk adjustment payable beyond prior period development.


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Investing Activities

During the three months ended March 31, 2023, net cash used in investing activities increased by $1.3 billion compared to the three-month period ended March 31, 2022. The increase was primarily attributable to an increase in the proceeds of investment sales of $535.4 million during the three months ended March 31, 2023 as compared to the three months ended March 31, 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, 2023, net cash provided by financing activities decreased by $594.5 million compared to the three months ended March 31, 2022. This decrease is primarily due to our Series A issuance during the three months ended March 31, 2022 net of a $155.0 million repayment of debt during that same period; the three months ended March 31, 2023 had no comparable activity.

Critical Accounting Policies and Estimates

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

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, 2023, the aggregate market value decrease to our regulated and unregulated portfolios would be approximately $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, 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 GAAP.

Previously Reported Material Weakness in Internal Control Over Financial Reporting

As disclosed in our 2022 Form 10-K, we previously identified a material weakness related to 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 deployment of control activities through internal control policies that establish what is expected and procedures that put policies into action. As of March 31, 2023, we continue to have a material weakness in the control activities component of internal control over financial reporting as defined by the COSO framework. Since disclosing this material weakness, we have taken steps to improve awareness, understanding and ownership of controls and control activities related to financial reporting. We remain focused on evaluating the design and operating effectiveness of controls activities within our continuing business operations. We are also focused on remediating control deficiencies noted in our continuing business operations that contributed to the 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

Other 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 2022 Form 10-K and our other filings with the SEC. There have been no material changes to the risk factors disclosed under the heading “Risk Factors” in our 2022 Form 10-K except for the following risk factor, which supplements the “Risk Factors” in our 2022 Form 10-K.

We may not be able to divest our California Medicare Advantage business on terms that are attractive to us or obtain the necessary approvals to 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 sale. Further, in the event we are unable to divest this business on terms acceptable to us, we may not be able to effect a strategic alternative to a sale. In addition, if we agree to proceed with this sale or other alternative, we may experience operational difficulties separating it from our retained assets and operations, which could impact the execution or timing for this disposition and could result in disruptions to our operations or claims for damages, among other things. Failure to consummate this sale or other strategic alternative could have a material adverse effect on our liquidity, business, financial condition, results of operations or cash flows.


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

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

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
3.2
3.3

3.4
3.5
10.1
10.2*†
10.3*†
31.1
31.2
32.1
32.2
101The following financial information from our Quarterly Report on Form 10-Q for the first quarter of fiscal 2023, filed with the SEC on May 10, 2023, formatted in Inline Extensible Business Reporting Language (“iXBRL”)
104Cover Page Interactive Data File (formatted as iXBRL and embedded within Exhibit 101)

* Filed 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 10, 2023By:/s/ G. Mike Mikan
Name:G. Mike Mikan
Title:Vice Chairman, President and Chief Executive Officer
(Principal Executive Officer)
By:/s/ 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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Exhibit 10.2
BRIGHT HEALTH GROUP, INC.

AMENDED AND RESTATED 2021 OMNIBUS INCENTIVE PLAN

1.          Purpose.  The purpose of the Bright Health Group, Inc. Amended and Restated 2021 Omnibus Incentive Plan is to provide a means through which the Company and the other members of the Company Group may attract and retain key personnel and to provide a means whereby directors, officers, employees, consultants and advisors of the Company and the other members of the Company Group can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the value of Common Stock, thereby strengthening their commitment to the welfare of the Company Group and aligning their interests with those of the Company’s stockholders.

The Bright Health Group, Inc. 2021 Omnibus Incentive Plan (the “Original Plan”) was originally adopted by the Board on May 21, 2021 and became effective when approved by the stockholders of the Company on June 5, 2021. The amendments to the Original Plan made under the Bright Health Group, Inc. Amended and Restated 2021 Omnibus Incentive Plan were approved by the Board on March 27, 2023 and shall be subject to approval by the shareholders of the Company at the annual meeting of shareholders of the Company to be held on May 4, 2023, and such amendments shall be effective as of the date of such shareholder approval.

2.          Definitions.  The following definitions shall be applicable throughout the Plan.

(a)          “Absolute Share Limit” has the meaning given to such term in Section 5(b) of the Plan.

(b)          “Adjustment Event” has the meaning given to such term in Section 12(a) of the Plan.

(c)          “Affiliate” means any Person that directly or indirectly controls, is controlled by or is under common control with the Company.  The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting or other securities, by contract or otherwise.

(d)          “Award” means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Equity-Based Award and Cash-Based Incentive Award granted under the Plan.

(e)          “Award Agreement” means the document or documents by which each Award (other than a Cash-Based Incentive Award) is evidenced.

(f)          “Board” means the Board of Directors of the Company.



        
(g)          “Cash-Based Incentive Award” means an Award denominated in cash that is granted under Section 11 of the Plan.

(h)          “Cause” means, as to any Participant, unless the applicable Award Agreement states otherwise, (i) “Cause,” as defined in any employment or consulting agreement between the Participant and the Service Recipient in effect at the time of the Participant’s Termination; or (ii) in the absence of any such employment or consulting agreement (or the absence of any definition of “Cause” contained therein), the Participant’s (A) willful neglect in the performance of the Participant’s duties for the Service Recipient or willful or repeated failure or refusal to perform such duties; (B) engagement in conduct in connection with the Participant’s employment or service with the Service Recipient, which results in, or could reasonably be expected to result in, material harm to the business or reputation of the Company or any other member of the Company Group; (C) conviction of, or plea of guilty or no contest to, (I) any felony; or (II) any other crime that results in, or could reasonably be expected to result in, material harm to the business or reputation of the Company or any other member of the Company Group; (D) material violation of the written policies of the Service Recipient, including, but not limited to, those relating to sexual harassment or the disclosure or misuse of confidential information, or those set forth in the manuals or statements of policy of the Service Recipient; (E) fraud or misappropriation, embezzlement or misuse of funds or property belonging to the Company or any other member of the Company Group; or (F) act of personal dishonesty that involves personal profit in connection with the Participant’s employment or service to the Service Recipient.

(i)          “Change in Control” means:

(i)          the acquisition (whether by purchase, merger, consolidation, combination or other similar transaction) by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of either (A) the then outstanding shares of common stock, taking into account as outstanding for this purpose such common stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such common stock; or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, that, for purposes of the Plan, the following acquisitions shall not constitute a Change in Control: (I) any acquisition by the Company or any Affiliate; (II) any acquisition by any employee benefit plan sponsored or maintained by the Company or any Affiliate; or (III) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of Persons including the Participant (or any entity controlled by the Participant or any group of Persons including the Participant);

(ii)          during any period of twelve (12) months, individuals who, at the beginning of such period, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided, that any person becoming a director subsequent to the Effective Date, whose election or nomination for election was approved by a vote of at least two-thirds (2/3rd) of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such
2

        
nomination) shall be an Incumbent Director; provided, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director; or

(iii)          the sale, transfer or other disposition of all or substantially all of the assets of the Company Group (taken as a whole) to any Person that is not an Affiliate of the Company.

(j)          “Code” means the Internal Revenue Code of 1986, as amended, and any successor thereto.  Reference in the Plan to any section of the Code shall be deemed to include any regulations or other interpretative guidance under such section, and any amendments or successor provisions to such section, regulations or guidance.

(k)          “Committee” means the Compensation and Human Capital Committee of the Board or any properly delegated subcommittee thereof or, if no such Compensation Committee or subcommittee thereof exists, the Board.

(l)          “Common Stock” means the common stock of the Company, par value $0.0001 per share (and any stock or other securities into which such Common Stock may be converted or into which it may be exchanged).

(m)          “Company” means Bright Health Group, Inc., a Delaware corporation, and any successor thereto.

(n)          “Company Group” means, collectively, the Company and its Subsidiaries.

(o)          “Date of Grant” means the date on which the granting of an Award is authorized, or such other date as may be specified in such authorization.

(p)          “Designated Foreign Subsidiaries” means all members of the Company Group that are organized under the laws of any jurisdiction or country other than the United States of America that may be designated by the Board or the Committee from time to time.

(q)          “Disability” means, as to any Participant, unless the applicable Award Agreement states otherwise, (i) “Disability,” as defined in any employment or consulting agreement between the Participant and the Service Recipient in effect at the time of the Participant’s Termination; or (ii) in the absence of any such employment or consulting agreement (or the absence of any definition of “Disability” contained therein), a condition entitling the Participant to receive benefits under a long-term disability plan of the Service Recipient or other member of the Company Group in which such Participant is eligible to participate, or, in the absence of such a plan, the complete and permanent inability of the Participant by reason of illness or accident to perform the duties of the position at which the Participant was employed or served when such disability commenced.  Any determination of whether Disability exists in the absence
3

        
of a long-term disability plan shall be made by the Company (or its designee) in its sole and absolute discretion.

(r)          “Effective Date” means May 4, 2023.

(s)          “Eligible Person” means any (i) individual employed by any member of the Company Group; provided, that no such employee covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto; (ii) director or officer of any member of the Company Group; or (iii) consultant or advisor to any member of the Company Group who may be offered securities registrable pursuant to a registration statement on Form S-8 under the Securities Act.

(t)          “Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor thereto.  Reference in the Plan to any section of (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.

(u)          “Exercise Price” has the meaning given to such term in Section 7(b) of the Plan.

(v)          “Fair Market Value” means, on a given date, (i) if the Common Stock is listed on a national securities exchange, the closing sales price of the Common Stock reported on the primary exchange on which the Common Stock is listed and traded on such date, or, if there are no such sales on that date, then on the last preceding date on which such sales were reported; (ii) if the Common Stock is not listed on any national securities exchange but is quoted in an inter-dealer quotation system on a last sale basis, the average between the closing bid price and ask price reported on such date, or, if there is no such sale on that date, then on the last preceding date on which a sale was reported; or (iii) if the Common Stock is not listed on a national securities exchange or quoted in an inter-dealer quotation system on a last sale basis, the amount determined by the Committee in good faith to be the fair market value of the Common Stock; provided, that, as to any Awards granted on or with a Date of Grant of the date of the pricing of the Company’s initial public offering, “Fair Market Value” shall be equal to the per share price at which the Common Stock is offered to the public in connection with such initial public offering.

(w)          “GAAP” has the meaning given to such term in Section 7(d) of the Plan.

(x)          “Immediate Family Members” has the meaning given to such term in Section 14(b) of the Plan.

(y)          “Incentive Stock Option” means an Option which is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in the Plan.

(z)          “Indemnifiable Person” has the meaning given to such term in Section 4(e) of the Plan.
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(aa)          “Nonqualified Stock Option” means an Option which is not designated by the Committee as an Incentive Stock Option.

(bb)          “Non-Employee Director” means a member of the Board who is not an employee of any member of the Company Group.

(cc)          “Option” means an Award granted under Section 7 of the Plan.

(dd)          “Option Period” has the meaning given to such term in Section 7(c) of the Plan.

(ee)          “Other Equity-Based Award” means an Award that is not an Option, Stock Appreciation Right, Restricted Stock or Restricted Stock Unit, that is granted under Section 10 of the Plan and is (i) payable by delivery of Common Stock, and/or (ii) measured by reference to the value of Common Stock.

(ff)          “Participant” means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award pursuant to the Plan.

(gg)         “Performance Criteria” means specific levels of performance of the Company (and/or one or more of the Company’s Affiliates, divisions or operational and/or business units, business segments, administrative departments, or any combination of the foregoing) or any Participant, which may be determined in accordance with GAAP or on a non-GAAP basis including, but not limited to, one or more of the following measures: (i) terms relative to a peer group or index; (ii) basic, diluted, or adjusted earnings per share; (iii) sales or revenue; (iv) earnings before interest, taxes, and other adjustments (in total or on a per share basis); (v) cash available for distribution; (vi) basic or adjusted net income; (vii) returns on equity, assets, capital, revenue or similar measure; (viii) level and growth of dividends; (ix) the price or increase in price of Common Stock; (x) total shareholder return; (xi) total assets; (xii) growth in assets, new originations of assets, or financing of assets; (xiii) equity market capitalization; (xiv) reduction or other quantifiable goal with respect to general and/or specific expenses; (xv) equity capital raised; (xvi) mergers, acquisitions, increase in enterprise value of Affiliates, Subsidiaries, divisions or business units or sales of assets of Affiliates, Subsidiaries, divisions or business units or sales of assets; and (xvii) any combination of the foregoing. Any one or more of the Performance Criteria may be stated as a percentage of another Performance Criteria, or used on an absolute or relative basis to measure the performance of the Company and/or one or more Affiliates as a whole or any divisions or operational and/or business units, business segments, administrative departments of the Company and/or one or more Affiliates or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Criteria may be compared to the performance of a selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate, or as compared to various stock market indices.

(hh)     “Permitted Transferee” has the meaning given to such term in Section 14(b) of the Plan.


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(ii)          “Person” means any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).

(jj)          “Plan” means this Bright Health Group, Inc. Amended and Restated 2021 Omnibus Incentive Plan, as it may be amended and/or restated from time to time.

(kk)          “Qualifying Director” means a person who is, with respect to actions intended to obtain an exemption from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 under the Exchange Act, a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act.

(ll)          “Restricted Period” means the period of time determined by the Committee during which an Award is subject to restrictions, including vesting conditions.

(mm)          “Restricted Stock” means Common Stock, subject to certain specified restrictions (which may include, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan.

(nn)          “Restricted Stock Unit” means an unfunded and unsecured promise to deliver shares of Common Stock, cash, other securities or other property, subject to certain restrictions (which may include, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan.

(oo)          “SAR Period” has the meaning given to such term in Section 8(c) of the Plan.

(pp)          “Securities Act” means the Securities Act of 1933, as amended, and any successor thereto.  Reference in the Plan to any section of (or rule promulgated under) the Securities Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.

(qq)          “Service Recipient” means, with respect to a Participant holding a given Award, the member of the Company Group by which the original recipient of such Award is, or following a Termination was most recently, principally employed or to which such original recipient provides, or following a Termination was most recently providing, services, as applicable.

(rr)          “Stock Appreciation Right” or “SAR” means an Award granted under Section 8 of the Plan.

(ss)          “Strike Price” has the meaning given to such term in Section 8(b) of the Plan.

(tt)          “Subsidiary” means, with respect to any specified Person:
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(i)          any corporation, association or other business entity of which more than fifty percent (50%) of the total voting power of shares of such entity’s voting securities (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(ii)          any partnership (or any comparable foreign entity) (A) the sole general partner (or functional equivalent thereof) or the managing general partner of which is such Person or Subsidiary of such Person or (B) the only general partners (or functional equivalents thereof) of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

(uu)          “Substitute Award” has the meaning given to such term in Section 5(e) of the Plan.

(vv)          “Sub-Plans” means any sub-plan to the Plan that has been adopted by the Board or the Committee for the purpose of permitting the offering of Awards to employees of certain Designated Foreign Subsidiaries or otherwise outside the United States of America, with each such sub-plan designed to comply with local laws applicable to offerings in such foreign jurisdictions.  Although any Sub-Plan may be designated a separate and independent plan from the Plan in order to comply with applicable local laws, the Absolute Share Limit and the other limits specified in Section 5(b) shall apply in the aggregate to the Plan and any Sub-Plan adopted hereunder.

(ww)          “Termination” means the termination of a Participant’s employment or service, as applicable, with the Service Recipient for any reason (including death).

3.          Effective Date; Duration.  The Plan shall be effective as of the Effective Date.  The expiration date of the Plan, on and after which date no Awards may be granted hereunder, shall be June 5, 2031, the tenth (10th) anniversary of the effective date of the Original Plan; provided, that such expiration shall not affect Awards then outstanding, and the terms and conditions of the Plan shall continue to apply to such Awards.

4.          Administration.

(a)          General.  The Committee shall administer the Plan.  To the extent required to comply with the provisions of Rule 16b-3 promulgated under the Exchange Act (if the Board is not acting as the Committee under the Plan), it is intended that each member of the Committee shall, at the time such member takes any action with respect to an Award under the Plan that is intended to qualify for the exemptions provided by Rule 16b-3 promulgated under the Exchange Act, be a Qualifying Director.  However, the fact that a Committee member shall fail to qualify as a Qualifying Director shall not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.


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(b)          Committee Authority.  Subject to the provisions of the Plan and applicable law, the Committee shall have the sole and plenary authority, in addition to other express powers and authorizations conferred on the Committee by the Plan, to (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of shares of Common Stock to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled in, or exercised for, cash, shares of Common Stock, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) to accelerate the vesting of any Award at any time and for any reason; (vii) determine whether, to what extent, and under what circumstances the delivery of cash, shares of Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant or of the Committee; (viii) interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; (ix) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of the Plan; (x) adopt Sub-Plans; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.

(c)          Delegation.  Except to the extent prohibited by applicable law or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it.  Any such allocation or delegation may be revoked by the Committee at any time.  Without limiting the generality of the foregoing, the Committee may delegate to one or more officers of any member of the Company Group, the authority to act on behalf of the Committee with respect to any matter, right, obligation, or election which is the responsibility of, or which is allocated to, the Committee herein, and which may be so delegated as a matter of law, except with respect to grants of Awards to persons (i) who are Non-Employee Directors, or (ii) who are subject to Section 16 of the Exchange Act.

(d)          Finality of Decisions.  Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan, any Award or any Award Agreement shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all Persons, including, without limitation, any member of the Company Group, any Participant, any holder or beneficiary of any Award, and any stockholder of the Company.

(e)          Indemnification.  No member of the Board, the Committee or any employee or agent of any member of the Company Group (each such Person, an “Indemnifiable Person”) shall be liable for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award hereunder (unless constituting fraud or a willful criminal act or omission).  Each Indemnifiable Person shall be indemnified and held harmless by the Company
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against and from any loss, cost, liability, or expense (including attorneys’ fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved by reason of any action taken or omitted to be taken or determination made with respect to the Plan or any Award hereunder and against and from any and all amounts paid by such Indemnifiable Person with the Company’s approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, and the Company shall advance to such Indemnifiable Person any such expenses promptly upon written request (which request shall include an undertaking by the Indemnifiable Person to repay the amount of such advance if it shall ultimately be determined, as provided below, that the Indemnifiable Person is not entitled to be indemnified); provided, that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice.  The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts, omissions or determinations of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person’s fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the organizational documents of any member of the Company Group.  The foregoing right of indemnification shall not be exclusive of or otherwise supersede any other rights of indemnification to which such Indemnifiable Persons may be entitled under the organizational documents of any member of the Company Group, as a matter of law, under an individual indemnification agreement or contract or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold such Indemnifiable Persons harmless.

(f)          Board Authority.  Notwithstanding anything to the contrary contained in the Plan, the Board may, in its sole discretion, at any time and from time to time, grant Awards and administer the Plan with respect to any Awards.  Any such actions by the Board shall be subject to the applicable rules of the securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted.  In any such case, the Board shall have all the authority granted to the Committee under the Plan.

5.          Grant of Awards; Shares Subject to the Plan; Limitations.

(a)          Grants.  The Committee may, from time to time, grant Awards to one or more Eligible Persons. All Awards granted under the Plan shall vest and become exercisable in such manner and on such date or dates or upon such event or events as determined by the Committee, including, without limitation, attainment of Performance Criteria. Notwithstanding any vesting dates or events, the Committee may, in its sole discretion, accelerate the vesting of any Award at any time and for any reason.

(b)          Share Reserve and Limits.  Awards granted under the Plan shall be subject to the following limitations:  (i) subject to Section 12 of the Plan, no more than 134,944,179 shares of Common Stock (the “Absolute Share Limit”) shall be available for Awards under the Plan;
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provided, that the Absolute Share Limit shall be automatically increased on the first day of each fiscal year commencing on January 1, 2022 in an amount equal to the lesser of (x) five percent (5%) of the total number of shares of Common Stock outstanding on the last day of the immediately preceding fiscal year and (y) such number of shares Common Stock as determined by the Board; (ii) subject to Section 12 of the Plan, no more than the number of shares of Common Stock equal to the Absolute Share Limit may be issued in the aggregate pursuant to the exercise of Incentive Stock Options granted under the Plan; and (iii) the maximum number of shares of Common Stock subject to Awards granted during a single fiscal year to any Non-Employee Director, taken together with any cash fees paid to such Non-Employee Director during the fiscal year, shall not exceed $650,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes).

(c)          Share Counting.  Other than with respect to Substitute Awards, to the extent that an Award expires or is canceled, forfeited, or terminated without issuance to the Participant of the full number of shares of Common Stock to which the Award related, the unissued shares will again be available for grant under the Plan.  Shares of Common Stock shall be deemed to have been issued in settlement of Awards if the Fair Market Value equivalent of such shares is paid in cash in connection with such settlement; provided, that no shares shall be deemed to have been issued in settlement of a SAR or Restricted Stock Unit that provides for settlement only in cash and settles only in cash or in respect of any Cash-Based Incentive Award.  In no event shall shares (i) tendered or withheld on exercise of Options or other Awards for the payment of the exercise or purchase price or withholding taxes, (ii) not issued upon the settlement of a SAR that by the terms of the Award Agreement would settle in shares of Common Stock (or could settle in shares of Common Stock), or (iii) purchased on the open market with cash proceeds from the exercise of Options, again become available for other Awards under the Plan.

(d)          Source of Shares.  Shares of Common Stock issued by the Company in settlement of Awards may be authorized and unissued shares, shares held in the treasury of the Company, shares purchased on the open market or by private purchase or a combination of the foregoing.

(e)          Substitute Awards.  Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity directly or indirectly acquired by the Company or with which the Company combines (“Substitute Awards”).  Substitute Awards shall not be counted against the Absolute Share Limit; provided, that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code shall be counted against the aggregate number of shares of Common Stock available for Awards of Incentive Stock Options under the Plan.  Subject to applicable stock exchange requirements, available shares under a stockholder-approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect the acquisition or combination transaction) may be used for Awards under the Plan and shall not reduce the number of shares of Common Stock available for issuance under the Plan.

6.          Eligibility.  Participation in the Plan shall be limited to Eligible Persons.


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7.          Options.

(a)          General.  Each Option granted under the Plan shall be evidenced by an Award Agreement, which agreement need not be the same for each Participant.  Each Option so granted shall be subject to the conditions set forth in this Section 7, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.  All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Award Agreement expressly states that the Option is intended to be an Incentive Stock Option.  Incentive Stock Options shall be granted only to Eligible Persons who are employees of a member of the Company Group, and no Incentive Stock Option shall be granted to any Eligible Person who is ineligible to receive an Incentive Stock Option under the Code.  No Option shall be treated as an Incentive Stock Option unless the Plan has been approved by the stockholders of the Company in a manner intended to comply with the stockholder approval requirements of Section 422(b)(1) of the Code; provided, that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock Option unless and until such approval is obtained.  In the case of an Incentive Stock Option, the terms and conditions of such grant shall be subject to, and comply with, such rules as may be prescribed by Section 422 of the Code.  If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan.

(b)          Exercise Price.  Except as otherwise provided by the Committee in the case of Substitute Awards, the exercise price (“Exercise Price”) per share of Common Stock for each Option shall not be less than one hundred percent (100%) of the Fair Market Value of such share (determined as of the Date of Grant); provided, that, in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of any member of the Company Group, the Exercise Price per share shall be no less than one hundred ten percent (110%) of the Fair Market Value per share on the Date of Grant.

(c)          Vesting and Expiration.

(i)          Options shall vest and become exercisable in such manner and on such date or dates or upon such event or events as determined by the Committee.

(ii)          Options shall expire upon a date determined by the Committee, not to exceed ten (10) years from the Date of Grant (the “Option Period”); provided, that, if the Option Period (other than in the case of an Incentive Stock Option) would expire at a time when trading in the shares of Common Stock is prohibited by the Company’s insider trading policy (or Company-imposed “blackout period”), then the Option Period shall be automatically extended until the thirtieth (30th) day following the expiration of such prohibition.  Notwithstanding the foregoing, in no event shall the Option Period exceed five (5) years from the Date of Grant in the case of an Incentive Stock Option granted to a
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Participant who on the Date of Grant owns stock representing more than ten percent (10%) of the voting power of all classes of stock of any member of the Company Group.

(d)          Method of Exercise and Form of Payment.  No shares of Common Stock shall be issued pursuant to any exercise of an Option until payment in full of the Exercise Price therefor is received by the Company and the Participant has paid to the Company an amount equal to any Federal, state, local and non-U.S. income, employment and any other applicable taxes required to be withheld.  Options which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company (or telephonic instructions to the extent provided by the Committee) in accordance with the terms of the Option accompanied by payment of the Exercise Price.  The Exercise Price shall be payable: (i) in cash, check, cash equivalent and/or shares of Common Stock valued at the Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of shares of Common Stock in lieu of actual issuance of such shares to the Company); provided, that such shares of Common Stock are not subject to any pledge or other security interest and have been held by the Participant for at least six (6) months (or such other period as established from time to time by the Committee in order to avoid adverse accounting treatment applying generally accepted accounting principles (“GAAP”)); or (ii) by such other method as the Committee may permit, in its sole discretion, including, without limitation (A) in other property having a fair market value on the date of exercise equal to the Exercise Price; (B) if there is a public market for the shares of Common Stock at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered (including telephonically to the extent permitted by the Committee) a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock otherwise issuable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price; or (C) a “net exercise” procedure effected by withholding the minimum number of shares of Common Stock otherwise issuable in respect of an Option that are needed to pay the Exercise Price.  Any fractional shares of Common Stock shall be settled in cash.

(e)          Notification upon Disqualifying Disposition of an Incentive Stock Option.  Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date the Participant makes a disqualifying disposition of any Common Stock acquired pursuant to the exercise of such Incentive Stock Option.  A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Stock before the later of (i) the date that is two (2) years after the Date of Grant of the Incentive Stock Option, or (ii) the date that is one (1) year after the date of exercise of the Incentive Stock Option.  The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession, as agent for the applicable Participant, of any Common Stock acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Common Stock.

(f)          Compliance With Laws, etc.  Notwithstanding the foregoing, in no event shall a Participant be permitted to exercise an Option in a manner which the Committee determines would violate the Sarbanes-Oxley Act of 2002, as it may be amended from time to time, or any other applicable law or the applicable rules and regulations of the Securities and Exchange
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Commission or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded.

8.          Stock Appreciation Rights.

(a)          General.  Each SAR granted under the Plan shall be evidenced by an Award Agreement.  Each SAR so granted shall be subject to the conditions set forth in this Section 8, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.  Any Option granted under the Plan may include tandem SARs.  The Committee also may award SARs to Eligible Persons independent of any Option.

(b)          Strike Price.  Except as otherwise provided by the Committee in the case of Substitute Awards, the strike price (“Strike Price”) per share of Common Stock for each SAR shall not be less than one hundred percent (100%) of the Fair Market Value of such share (determined as of the Date of Grant).  Notwithstanding the foregoing, a SAR granted in tandem with (or in substitution for) an Option previously granted shall have a Strike Price equal to the Exercise Price of the corresponding Option.

(c)          Vesting and Expiration.

(i)          A SAR granted in connection with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option.  A SAR granted independent of an Option shall vest and become exercisable in such manner and on such date or dates or upon such event or events as determined by the Committee.

(ii)          SARs shall expire upon a date determined by the Committee, not to exceed ten (10) years from the Date of Grant (the “SAR Period”); provided, that, if the SAR Period would expire at a time when trading in the shares of Common Stock is prohibited by the Company’s insider trading policy (or Company-imposed “blackout period”), then the SAR Period shall be automatically extended until the thirtieth (30th) day following the expiration of such prohibition.

(d)          Method of Exercise.  SARs which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Award, specifying the number of SARs to be exercised and the date on which such SARs were awarded.

(e)          Payment.  Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of shares subject to the SAR that is being exercised multiplied by the excess of the Fair Market Value of one (1) share of Common Stock on the exercise date over the Strike Price, less an amount equal to any Federal, state, local and non-U.S. income, employment and any other applicable taxes required to be withheld.  The Company shall pay such amount in cash, in shares of Common Stock valued at Fair Market Value, or any combination thereof, as determined by the Committee.  Any fractional shares of Common Stock shall be settled in cash.


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9.          Restricted Stock and Restricted Stock Units.

(a)          General.  Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement.  Each Restricted Stock and Restricted Stock Unit so granted shall be subject to the conditions set forth in this Section 9, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.

(b)          Stock Certificates and Book-Entry; Escrow or Similar Arrangement.  Upon the grant of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Participant to be issued or shall cause share(s) of Common Stock to be registered in the name of the Participant and held in book-entry form subject to the Company’s directions and, if the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than issued to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, if applicable; and (ii) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock covered by such agreement.  If a Participant shall fail to execute and deliver (in a manner permitted under Section 14(a) of the Plan or as otherwise determined by the Committee) an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be null and void.  Subject to the restrictions set forth in this Section 9, Section 14(c) of the Plan and the applicable Award Agreement, a Participant generally shall have the rights and privileges of a stockholder as to shares of Restricted Stock, including, without limitation, the right to vote such Restricted Stock.  To the extent shares of Restricted Stock are forfeited, any stock certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect thereto shall terminate without further obligation on the part of the Company.  A Participant shall have no rights or privileges as a stockholder as to Restricted Stock Units.

(c)          Vesting.  Restricted Stock and Restricted Stock Units shall vest, and any applicable Restricted Period shall lapse, in such manner and on such date or dates or upon such event or events as determined by the Committee.

(d)          Issuance of Restricted Stock and Settlement of Restricted Stock Units.

(i)          Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement.  If an escrow arrangement is used, upon such expiration, the Company shall issue to the Participant, or the Participant’s beneficiary, without charge, the stock certificate (or, if applicable, a notice evidencing a book-entry notation) evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (rounded down to the nearest full share).  Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, in the sole discretion
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of the Committee, in shares of Common Stock having a Fair Market Value (on the date of distribution) equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends.

(ii)          Unless otherwise provided by the Committee in an Award Agreement or otherwise, upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall issue to the Participant or the Participant’s beneficiary, without charge, one (1) share of Common Stock (or other securities or other property, as applicable) for each such outstanding Restricted Stock Unit; provided, that the Committee may, in its sole discretion, elect to (A) pay cash or part cash and part shares of Common Stock in lieu of issuing only shares of Common Stock in respect of such Restricted Stock Units; or (B) defer the issuance of shares of Common Stock (or cash or part cash and part shares of Common Stock, as the case may be) beyond the expiration of the Restricted Period if such extension would not cause adverse tax consequences under Section 409A of the Code.  If a cash payment is made in lieu of issuing shares of Common Stock in respect of such Restricted Stock Units, the amount of such payment shall be equal to the Fair Market Value per share of the Common Stock as of the date on which the Restricted Period lapsed with respect to such Restricted Stock Units.

(e)          Legends on Restricted Stock.  Each certificate, if any, or book entry representing Restricted Stock awarded under the Plan, if any, shall bear a legend or book entry notation substantially in the form of the following, in addition to any other information the Company deems appropriate, until the lapse of all restrictions with respect to such shares of Common Stock:

TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS OF THE BRIGHT HEALTH GROUP, INC. 2021 OMNIBUS INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT BETWEEN BRIGHT HEALTH GROUP, INC. AND PARTICIPANT.  A COPY OF SUCH PLAN AND AWARD AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF BRIGHT HEALTH GROUP, INC.

10.          Other Equity-Based Awards.  The Committee may grant Other Equity-Based Awards under the Plan to Eligible Persons, alone or in tandem with other Awards, in such amounts and dependent on such conditions as the Committee shall from time to time in its sole discretion determine.  Each Other Equity-Based Award granted under the Plan shall be evidenced by an Award Agreement and shall be subject to such conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.

11.          Cash-Based Incentive Awards.  The Committee may grant Cash-Based Incentive Awards under the Plan to any Eligible Person.  Each Cash-Based Incentive Award granted under the Plan shall be evidenced in such form as the Committee may determine from time to time.

12.          Changes in Capital Structure and Similar Events.  Notwithstanding any other provision in the Plan to the contrary, the following provisions shall apply to all Awards granted hereunder (other than Cash-Based Incentive Awards):


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(a)          General.  In the event of (i) any dividend (other than regular cash dividends) or other distribution (whether in the form of cash, shares of Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of Common Stock or other securities of the Company, issuance of warrants or other rights to acquire shares of Common Stock or other securities of the Company, or other similar corporate transaction or event that affects the shares of Common Stock (including a Change in Control); or (ii) unusual or nonrecurring events affecting the Company, including changes in applicable rules, rulings, regulations or other requirements, that the Committee determines, in its sole discretion, could result in substantial dilution or enlargement of the rights intended to be granted to, or available for, Participants (any event in (i) or (ii), an “Adjustment Event”), the Committee shall, in respect of any such Adjustment Event, make such proportionate substitution or adjustment, if any, as it deems equitable, to any or all of (A) the Absolute Share Limit, or any other limit applicable under the Plan with respect to the number and class of shares of common stock that may be delivered under the Plan; (B) the number, class and price of shares of common stock or other securities of the Company (or number and kind of other securities or other property) which may be issued in respect of Awards or with respect to which Awards may be granted under the Plan or any Sub-Plan; and (C) the terms of any outstanding Award, including, without limitation, (I) the number and class of shares of common stock or other securities of the Company (or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate; (II) the Exercise Price or Strike Price with respect to any Award; or (III) any applicable performance measures (including, without limitation, Performance Criteria); provided, that, in the case of any “equity restructuring” (within the meaning of the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor pronouncement thereto)), the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect such equity restructuring.

(b)          Change in Control.  Without limiting the foregoing, in connection with any Change in Control, the Committee may, in its sole discretion, provide for any one or more of the following:

(i)          substitution or assumption of Awards, or to the extent that the surviving entity (or Affiliate thereof) of such Change in Control does not substitute or assume the Awards, full acceleration of vesting of, exercisability of, or lapse of restrictions on, as applicable, any Awards; provided, that, unless the applicable Award Agreement provides for different treatment upon a Change in Control, with respect to any performance-vested Awards, any such acceleration of vesting, exercisability, or lapse of restrictions shall be based on (A) the target level of performance if the applicable performance period has not ended prior to the date of such Change in Control, and (B) the actual level of performance attained during the performance period if the applicable performance period has ended prior to the date of such Change in Control; and

(ii)          cancellation of any one or more outstanding Awards and payment to the holders of such Awards that are vested as of such cancellation (including, without limitation, any Awards that would vest as a result of the occurrence of such event but for
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such cancellation or for which vesting is accelerated by the Committee in connection with such event pursuant to clause (i) above), the value of such Awards, if any, as determined by the Committee (which value, if applicable, may be based upon the price per share of Common Stock received or to be received by other stockholders of the Company in such event), including, without limitation, in the case of an outstanding Option or SAR, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the shares of Common Stock subject to such Option or SAR over the aggregate Exercise Price or Strike Price of such Option or SAR (it being understood that, in such event, any Option or SAR having a per share Exercise Price or Strike Price equal to, or in excess of, the Fair Market Value of a share of Common Stock subject thereto may be canceled and terminated without any payment or consideration therefor).

For purposes of clause (i) above, an award will be considered granted in substitution of an Award if it has an equivalent value (as determined consistent with clause (ii) above) with the original Award, whether designated in securities of the acquiror in such Change in Control transaction (or an Affiliate thereof), or in cash or other property (including in the same consideration that other stockholders of the Company receive in connection with such Change in Control transaction), and retains the vesting schedule applicable to the original Award.

Payments to holders pursuant to clause (ii) above shall be made in cash or, in the sole discretion of the Committee, in the form of such other consideration necessary for a Participant to receive property, cash, or securities (or combination thereof) as such Participant would have been entitled to receive upon the occurrence of the transaction if the Participant had been, immediately prior to such transaction, the holder of the number of shares of Common Stock covered by the Award at such time (less any applicable Exercise Price or Strike Price).

(c)          Other Requirements.  Prior to any payment or adjustment contemplated under this Section 12, the Committee may require a Participant to (i) represent and warrant as to the unencumbered title to the Participant’s Awards; (ii) bear such Participant’s pro rata share of any post-closing indemnity obligations, and be subject to the same post-closing purchase price adjustments, escrow terms, offset rights, holdback terms, and similar conditions as the other holders of Common Stock, subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code; and (iii) deliver customary transfer documentation as reasonably determined by the Committee.

(d)          Fractional Shares.  Any adjustment provided under this Section 12 may provide for the elimination of any fractional share that might otherwise become subject to an Award.

(e)          Binding Effect.  Any adjustment, substitution, determination of value or other action taken by the Committee under this Section 12 shall be conclusive and binding for all purposes.

13.          Amendments and Termination.


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(a)          Amendment and Termination of the Plan.  The Board or Committee may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided, that no such amendment, alteration, suspension, discontinuance or termination shall be made without stockholder approval if (i) such approval is necessary to comply with any regulatory requirement applicable to the Plan (including, without limitation, as necessary to comply with any rules or regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company may be listed or quoted) or for changes in GAAP to new accounting standards; (ii) it would materially increase the number of securities which may be issued under the Plan (except for increases pursuant to Sections 5 or 12 of the Plan); or (iii) it would materially modify the requirements for participation in the Plan; provided, further, that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary.  Notwithstanding the foregoing, no amendment shall be made to Section 13(c) of the Plan without stockholder approval.

(b)          Amendment of Award Agreements.  The Committee may, to the extent consistent with the terms of the Plan and any applicable Award Agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award Agreement, prospectively or retroactively (including after a Participant’s Termination); provided, that, other than pursuant to Section 12, any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant.

(c)          No Repricing.  Notwithstanding anything in the Plan to the contrary, without stockholder approval, except as otherwise permitted under Section 12 of the Plan, (i) no amendment or modification may reduce the Exercise Price of any Option or the Strike Price of any SAR; (ii) the Committee may not cancel any outstanding Option or SAR and replace it with a new Option or SAR (with a lower Exercise Price or Strike Price, as the case may be) or other Award or cash payment that is greater than the intrinsic value (if any) of the cancelled Option or SAR; and (iii) the Committee may not take any other action which is considered a “repricing” for purposes of the stockholder approval rules of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted.

14.          General.

(a)          Award Agreements.  Each Award (other than a Cash-Based Incentive Award) under the Plan shall be evidenced by an Award Agreement, which shall be delivered to the Participant to whom such Award was granted and shall specify the terms and conditions of the Award and any rules applicable thereto, including, without limitation, the effect on such Award of the death, Disability or Termination of a Participant, or of such other events as may be determined by the Committee.  For purposes of the Plan, an Award Agreement may be in any such form (written or electronic) as determined by the Committee (including, without limitation, a Board or Committee resolution, an employment agreement, a notice, a certificate or a letter)
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evidencing the Award.  The Committee need not require an Award Agreement to be signed by the Participant or a duly authorized representative of the Company.

(b)          Nontransferability.

(i)          Each Award shall be exercisable only by such Participant to whom such Award was granted during the Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative.  No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant (unless such transfer is specifically required pursuant to a domestic relations order or by applicable law) other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against any member of the Company Group; provided, that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

(ii)          Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to be transferred by a Participant, without consideration, subject to such rules as the Committee may adopt consistent with any applicable Award Agreement to preserve the purposes of the Plan, to (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act or any successor form of registration statement promulgated by the Securities and Exchange Commission (collectively, the “Immediate Family Members”); (B) a trust solely for the benefit of the Participant and the Participant’s Immediate Family Members; (C) a partnership or limited liability company whose only partners or stockholders are the Participant and the Participant’s Immediate Family Members; or (D) a beneficiary to whom donations are eligible to be treated as “charitable contributions” for federal income tax purposes (each transferee described in clauses (A), (B), (C) and (D) above is hereinafter referred to as a “Permitted Transferee”); provided, that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan.

(iii)          The terms of any Award transferred in accordance with clause (ii) above shall apply to the Permitted Transferee and any reference in the Plan, or in any applicable Award Agreement, to a Participant shall be deemed to refer to the Permitted Transferee, except that (A) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the shares of Common Stock to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award Agreement, that such a registration statement is necessary or appropriate; (C) neither the Committee nor the Company shall be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise; and (D) the consequences of a Participant’s Termination under the terms of the Plan and the applicable Award Agreement
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shall continue to be applied with respect to the Participant, including, without limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award Agreement.

(c)          Dividends and Dividend Equivalents.  The Committee may, in its sole discretion, provide a Participant as part of an Award with dividends, dividend equivalents, or similar payments in respect of Awards, payable in cash, shares of Common Stock, other securities, other Awards or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee in its sole discretion, including, without limitation, payment directly to the Participant, withholding of such amounts by the Company subject to vesting of the Award or reinvestment in additional shares of Common Stock, Restricted Stock or other Awards.  Without limiting the foregoing, unless otherwise provided in the Award Agreement, any dividend otherwise payable in respect of any share of Restricted Stock that remains subject to vesting conditions at the time of payment of such dividend shall be retained by the Company and remain subject to the same vesting conditions as the share of Restricted Stock to which the dividend relates.

(d)          Tax Withholding.

(i)          A Participant shall be required to pay to the Company or one or more of its Subsidiaries, as applicable, an amount in cash (by check or wire transfer) equal to the aggregate amount of any income, employment and/or other applicable taxes that are statutorily required to be withheld in respect of an Award.  Alternatively, the Company or any of its Subsidiaries may elect, in its sole discretion, to satisfy this requirement by withholding such amount from any cash compensation or other cash amounts owing to a Participant.

(ii)          Without limiting the foregoing, the Committee may (but is not obligated to), in its sole discretion, permit or require a Participant to satisfy, all or any portion of the minimum income, employment and/or other applicable taxes that are statutorily required to be withheld with respect to an Award by (A) the delivery of shares of Common Stock (which are not subject to any pledge or other security interest) that have been both held by the Participant and vested for at least six (6) months (or such other period as established from time to time by the Committee in order to avoid adverse accounting treatment under applicable accounting standards) having an aggregate fair market value equal to such minimum statutorily required withholding liability (or portion thereof); or (B) having the Company withhold from the shares of Common Stock otherwise issuable or deliverable to, or that would otherwise be retained by, the Participant upon the grant, exercise, vesting or settlement of the Award, as applicable, a number of shares of Common Stock with an aggregate fair market value equal to an amount, subject to clause (iii) below, not in excess of such minimum statutorily required withholding liability (or portion thereof).

(iii)          The Committee has full discretion to allow Participants to satisfy, in whole or in part, any additional income, employment and/or other applicable taxes payable by them with respect to an Award by electing to have the Company withhold from the shares of Common Stock otherwise issuable or deliverable to, or that would otherwise be
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retained by, a Participant upon the grant, exercise, vesting or settlement of the Award, as applicable, shares of Common Stock having an aggregate fair market value that is greater than the applicable minimum required statutory withholding liability (but such withholding may in no event be in excess of the maximum statutory withholding amount(s) in a Participant’s relevant tax jurisdictions).

(e)          Data Protection.  By participating in the Plan or accepting any rights granted under it, each Participant consents to the collection and processing of personal data relating to the Participant so that the Company and its Affiliates can fulfill their obligations and exercise their rights under the Plan and generally administer and manage the Plan.  This data will include, but may not be limited to, data about participation in the Plan and shares offered or received, purchased, or sold under the Plan from time to time and other appropriate financial and other data (such as the date on which the Awards were granted) about the Participant and the Participant’s participation in the Plan.

(f)          No Claim to Awards; No Rights to Continued Employment; Waiver.  No employee of any member of the Company Group, or other Person, shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award.  There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards.  The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated.  Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Service Recipient or any other member of the Company Group, nor shall it be construed as giving any Participant any rights to continued service on the Board.  The Service Recipient or any other member of the Company Group may at any time dismiss a Participant from employment or discontinue any consulting relationship, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or any Award Agreement.  By accepting an Award under the Plan, a Participant shall thereby be deemed to have waived any claim to continued exercise or vesting of an Award or to damages or severance entitlement related to non-continuation of the Award beyond the period provided under the Plan or any Award Agreement, except to the extent of any provision to the contrary in any written employment contract or other agreement between the Service Recipient and/or any member of the Company Group and the Participant, whether any such agreement is executed before, on or after the Date of Grant.

(g)          International Participants.  With respect to Participants who reside or work outside of the United States of America, the Committee may, in its sole discretion, amend the terms of the Plan and create or amend Sub-Plans or amend outstanding Awards with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for a Participant or any member of the Company Group.

(h)          Designation and Change of Beneficiary.  Each Participant may file with the Committee a written designation of one or more Persons as the beneficiary or beneficiaries, as applicable, who shall be entitled to receive the amounts payable with respect to an Award, if any, due under the Plan upon the Participant’s death.  A Participant may, from time to time, revoke or
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change the Participant’s beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee.  The last such designation received by the Committee shall be controlling; provided, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant’s death, and in no event shall it be effective as of a date prior to such receipt.  If no beneficiary designation is filed by a Participant, the beneficiary shall be deemed to be the Participant’s spouse or, if the Participant is unmarried at the time of death, the Participant’s estate.

(i)          Termination.  Except as otherwise provided in an Award Agreement, unless determined otherwise by the Committee at any point following such event: (i) neither a temporary absence from employment or service due to illness, vacation or leave of absence (including, without limitation, a call to active duty for military service through a Reserve or National Guard unit) nor a transfer from employment or service with one Service Recipient to employment or service with another Service Recipient (or vice-versa) shall be considered a Termination; and (ii) if a Participant undergoes a Termination of employment, but such Participant continues to provide services to the Company Group in a non-employee capacity, such change in status shall not be considered a Termination for purposes of the Plan.  Further, unless otherwise determined by the Committee, in the event that any Service Recipient ceases to be a member of the Company Group (by reason of sale, divestiture, spin-off or other similar transaction), unless a Participant’s employment or service is transferred to another entity that would constitute a Service Recipient immediately following such transaction, such Participant shall be deemed to have suffered a Termination hereunder as of the date of the consummation of such transaction.

(j)          No Rights as a Stockholder.  Except as otherwise specifically provided in the Plan or any Award Agreement, no Person shall be entitled to the privileges of ownership in respect of shares of Common Stock which are subject to Awards hereunder until such shares have been issued or delivered to such Person.

(k)          Government and Other Regulations.

(i)          The obligation of the Company to settle Awards in shares of Common Stock or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required.  Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any shares of Common Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel (if the Company has requested such an opinion), satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with.  The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Common Stock to be offered or sold under the Plan.  The Committee shall have the authority to provide that all shares of Common Stock or other securities of any member of the Company Group issued under the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the Plan, the applicable Award
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Agreement, the Federal securities laws, or the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted and any other applicable Federal, state, local or non-U.S. laws, rules, regulations and other requirements, and, without limiting the generality of Section 9 of the Plan, the Committee may cause a legend or legends to be put on certificates representing shares of Common Stock or other securities of any member of the Company Group issued under the Plan to make appropriate reference to such restrictions or may cause such Common Stock or other securities of any member of the Company Group issued under the Plan in book-entry form to be held subject to the Company’s instructions or subject to appropriate stop-transfer orders.  Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to, at any time, add any additional terms or provisions to any Award granted under the Plan that the Committee, in its sole discretion, deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject.

(ii)          The Committee may cancel an Award or any portion thereof if it determines, in its sole discretion, that legal or contractual restrictions and/or blockage and/or other market considerations would make the Company’s acquisition of shares of Common Stock from the public markets, the Company’s issuance of Common Stock to the Participant, the Participant’s acquisition of Common Stock from the Company and/or the Participant’s sale of Common Stock to the public markets, illegal, impracticable or inadvisable.  If the Committee determines to cancel all or any portion of an Award in accordance with the foregoing, the Company shall, subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code, (A) pay to the Participant an amount equal to the excess of (I) the aggregate Fair Market Value of the shares of Common Stock subject to such Award or portion thereof canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or issued, as applicable); over (II) the aggregate Exercise Price or Strike Price (in the case of an Option or SAR, respectively) or any amount payable as a condition of issuance of shares of Common Stock (in the case of any other Award).  Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof, or (B) in the case of Restricted Stock, Restricted Stock Units or Other Equity-Based Awards, provide the Participant with a cash payment or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such Restricted Stock, Restricted Stock Units or Other Equity-Based Awards, or the underlying shares in respect thereof.

(l)          No Section 83(b) Elections Without Consent of Company.  No election under Section 83(b) of the Code or under a similar provision of law may be made unless expressly permitted by the terms of the applicable Award Agreement or by action of the Company in writing prior to the making of such election.  If a Participant, in connection with the acquisition of shares of Common Stock under the Plan or otherwise, is expressly permitted to make such election and the Participant makes the election, the Participant shall notify the Company of such election within ten (10) days of filing notice of the election with the Internal Revenue Service or other
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governmental authority, in addition to any filing and notification required pursuant to Section 83(b) of the Code or other applicable provision.

(m)          Payments to Persons Other Than Participants.  If the Committee shall find that any Person to whom any amount is payable under the Plan is unable to care for the Participant’s affairs because of illness or accident, or is a minor, or has died, then any payment due to such Person or the Participant’s estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to the Participant’s spouse, child, relative, an institution maintaining or having custody of such Person, or any other Person deemed by the Committee to be a proper recipient on behalf of such Person otherwise entitled to payment.  Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.

(n)          Nonexclusivity of the Plan.  Neither the adoption of the Plan by the Committee nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Committee or Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of equity-based awards otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

(o)          No Trust or Fund Created.  Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between any member of the Company Group, on the one hand, and a Participant or other Person, on the other hand.  No provision of the Plan or any Award shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company be obligated to maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes.  Participants shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other service providers under general law.

(p)          Reliance on Reports.  Each member of the Committee and each member of the Board shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent public accountant of any member of the Company Group and/or any other information furnished in connection with the Plan by any agent of the Company or the Committee or the Board, other than himself or herself.

(q)          Relationship to Other Benefits.  No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan or as required by applicable law.


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(r)          Governing Law.  The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and performed wholly within the State of Delaware, without giving effect to the conflict of laws provisions thereof.  EACH PARTICIPANT WHO ACCEPTS AN AWARD IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION, OR OTHER PROCEEDING INSTITUTED BY OR AGAINST SUCH PARTICIPANT IN RESPECT OF THE PARTICIPANT’S RIGHTS OR OBLIGATIONS HEREUNDER.

(s)          Severability.  If any provision of the Plan or any Award or Award Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

(t)          Obligations Binding on Successors.  The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.

(u)          Section 409A of the Code.

(i)          Notwithstanding any provision of the Plan to the contrary, it is intended that the provisions of the Plan comply with Section 409A of the Code, and all provisions of the Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code.  Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with the Plan (including any taxes and penalties under Section 409A of the Code), and neither the Service Recipient nor any other member of the Company Group shall have any obligation to indemnify or otherwise hold such Participant (or any beneficiary) harmless from any or all of such taxes or penalties.  With respect to any Award that is considered “deferred compensation” subject to Section 409A of the Code, references in the Plan to “termination of employment” (and substantially similar phrases) shall mean “separation from service” within the meaning of Section 409A of the Code.  For purposes of Section 409A of the Code, each of the payments that may be made in respect of any Award granted under the Plan is designated as a separate payment.

(ii)          Notwithstanding anything in the Plan to the contrary, if a Participant is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, no payments in respect of any Awards that are “deferred compensation” subject to Section 409A of the Code and which would otherwise be payable upon the Participant’s “separation from service” (as defined in Section 409A of the Code) shall be made to such Participant prior to the date that is six (6) months after the date of such Participant’s “separation from
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service” or, if earlier, the date of the Participant’s death.  Following any applicable six (6) month delay, all such delayed payments will be paid in a single lump sum on the earliest date permitted under Section 409A of the Code that is also a business day.

(iii)          Unless otherwise provided by the Committee in an Award Agreement or otherwise, in the event that the timing of payments in respect of any Award (that would otherwise be considered “deferred compensation” subject to Section 409A of the Code) would be accelerated upon the occurrence of (A) a Change in Control, no such acceleration shall be permitted unless the event giving rise to the Change in Control satisfies the definition of a change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation pursuant to Section 409A of the Code; or (B) a Disability, no such acceleration shall be permitted unless the Disability also satisfies the definition of “Disability” pursuant to Section 409A of the Code.

(v)          Clawback/Repayment.  All Awards shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with (i) any clawback, forfeiture or other similar policy adopted by the Board or the Committee and as in effect from time to time; and (ii) applicable law.  Further, to the extent that the Participant receives any amount in excess of the amount that the Participant should otherwise have received under the terms of the Award for any reason (including, without limitation, by reason of a financial restatement, mistake in calculations or other administrative error), the Participant may be required to repay any such excess amount to the Company.

(w)          Right of Offset.  The Company will have the right to offset against its obligation to deliver shares of Common Stock (or other property or cash) under the Plan or any Award Agreement any outstanding amounts (including, without limitation, travel and entertainment or advance account balances, loans, repayment obligations under any Awards, or amounts repayable to the Company pursuant to tax equalization, housing, automobile or other employee programs) that the Participant then owes to any member of the Company Group and any amounts the Committee otherwise deems appropriate pursuant to any tax equalization policy or agreement.  Notwithstanding the foregoing, if an Award is “deferred compensation” subject to Section 409A of the Code, the Committee will have no right to offset against its obligation to deliver shares of Common Stock (or other property or cash) under the Plan or any Award Agreement if such offset could subject the Participant to the additional tax imposed under Section 409A of the Code in respect of an outstanding Award.

(x)          Expenses; Titles and Headings.  The expenses of administering the Plan shall be borne by the Company Group.  The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.


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Exhibit 10.3
CONSULTING AGREEMENT

This Agreement is made by and between Bright Health Group, Inc., a Delaware corporation, on behalf of itself and its affiliates as applicable ("Bright") and Catherine R. Smith (“Consultant”) for the purpose of setting forth the terms and conditions under which Consultant shall provide certain services to Bright. This Agreement is effective as of the dates outlined in the Term and Termination section below (“Effective Date”).

1.Services to Bright. The parties acknowledge that Consultant has up until May 12, 2023 (the “Separation Date”) served as an employee and named officer of Bright. Consultant shall perform the services listed in Exhibit A. The services shall be performed between May 15, 2023 and the earlier to occur of (a) December 31, 2023 and (b) the closing of the sale of Bright’s CA Medicare Advantage business (the “Service Period”). Consultant shall perform the services called for by this Agreement in accordance with the highest standards of the industry and Bright’s instructions. Consultant's work may be performed remotely. Bright and Consultant acknowledge that Consultant may not assign any other person to perform work for Bright required under this Agreement without Bright’s prior written consent.

    2.    Payment to Consultant. For the services to be performed under this Agreement, Bright shall pay Consultant the amounts set forth in Exhibit A in the time frames set out in Exhibit A. In the event this Agreement is terminated pursuant to Section 7, Bright shall be liable for only those charges incurred prior to the effective termination date.

    3.    Confidentiality. Consultant acknowledges that, in the course of providing services to Bright, it may become aware of or come into possession of certain confidential or proprietary information and documents of Bright. Consultant shall not copy any such information without Bright’s permission, shall not disclose the information to any other person, shall not use the information for any purpose other than performing services under this Agreement and shall return all copies of any such information when all services to be performed under this Agreement have been performed. This Section shall survive any termination of this Agreement.

    4.    Ownership of Work Product. Consultant acknowledges that any work product of any type generated by Consultant under this Agreement belongs solely to Bright and Consultant hereby assigns and transfers to Bright any and all rights that Consultant might have asserted to such work product, including any copyright, patent, trademark, trade secret or other intellectual property rights, to Bright. Consultant will cooperate with Bright and will execute any documentation required by Bright to assert or protect its property rights in the work product.

    5.    Non-Disparagement. Bright and Consultant agree that they will not make disparaging or defamatory comments regarding one another, regardless of the forum. Consultant agrees that, unless it is in the context of an Equal Employment Opportunity Commission (“EEOC”) or other civil rights or other government enforcement agency investigation or proceeding, Consultant will make no critical, disparaging or defamatory comments regarding Bright or any affiliate in any respect. Furthermore, Consultant agrees not to assist or encourage in any way any individual or group of individuals to bring or pursue a lawsuit, charge, complaint, or grievance, or make any other demands against the Bright or any affiliate. This provision does not prohibit Consultant from participating in an EEOC or other civil rights or other government enforcement agency charge, investigation or proceeding. Further, nothing in this Agreement prohibits Consultant from testifying in an administrative, legislative, or judicial proceeding related to any alleged unlawful conduct or sexual harassment when Consultant has been required or requested to attend the proceeding pursuant to a court order, subpoena, or written request from an administrative agency or any legislature. Moreover, nothing in this Agreement prevents Employee from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct Consultant has reason to believe is unlawful.

6.    Compliance with Prior Agreements. Consultant remains bound by the terms of the agreements which Consultant previously entered into Bright and its affiliates including, without limitation, the Employee Confidentiality, Assignment of Inventions and Non-Competition Agreement, to the extent that they do not conflict with this Agreement. Consultant reaffirms and agrees to observe and abide by the terms of the Employee Confidentiality, Assignment of Inventions and Non-Competition Agreement, including the provisions therein regarding nondisclosure of Confidential Information and Third Party Confidential Information.

7.    Code §409A. Consultant and Bright intend that the payments and benefits provided under this Agreement will comply, in form and operation, with an exception to or exclusion from the requirements of
Bright Health Consultant Agreement
1

Internal Revenue Code §409A and this Agreement will be construed and administered in a manner that is consistent with and gives effect to such intention. The payments and benefits to be provided under this Agreement are intended to be exempt from the requirements of Code §409A because such payments and benefits are short-term deferrals under Treas. Reg. §1.409A-1(b)(4) or provided under a separation pay plan within the meaning of Treas. Reg. §1.409A-1(b)(9).

8.    Return of Property. Consultant affirms that she has returned to Bright, and not retained in any form or format, all Bright documents, data, and other property that was in Consultant’s possession or control. Bright “documents, data, and other property” includes, without limitation, any computers, fax machines, cell phones, access cards, keys, reports, manuals, records, product samples, correspondence and/or other documents or materials related to Bright’s business that Consultant has compiled, generated or received while working for Bright, including all copies, samples, computer data, disks, or records of such material. Moreover, Consultant agrees, upon request by Bright, to cooperate in any investigation, litigation, arbitration, or administrative proceeding involving Bright or any of its affiliates, without requiring service of a subpoena or other legal process. Consultant will be reasonably available to consult with any representative of Bright, to provide information, and, if required or requested, to appear to give testimony.

9.    Relationship of Parties. The sole relationship of the parties as of the Separation Date is that of independent contractors and nothing in this Agreement or otherwise shall be deemed or construed to create any other relationship, including one of employment, joint venture or agency. Consultant shall be solely responsible for any taxes of any type, including social security taxes, workers' compensation taxes or costs, unemployment compensation taxes or costs or any other similar taxes, costs or charges or any other taxes or charges related to Consultant's receipt of compensation and performance of services under this Agreement, and shall indemnify and hold Bright harmless against any such taxes or charges. This Section shall survive any termination of this Agreement.

    10.    Disputes. Any dispute relating to or arising under this Agreement shall be resolved by binding arbitration pursuant to the Commercial Rules of the American Arbitration Association. The arbitrators shall have no power to award any punitive or exemplary damages or to vary or ignore the terms of this Agreement and shall be bound by controlling law.

    11.    Term and Termination. This Agreement shall be effective during the Service Period unless extended by mutual written amendment.

    12.     Prior Employment and Release of Claims. Consultant agrees upon termination of her employment with Bright, and as consideration for this Consulting Agreement that on Consultant’s last day of employment she will execute the release of claims attached hereto as Exhibit B.

    13.    Miscellaneous. Unless otherwise noted herein, this Agreement, along with the exhibits, contains the entire understanding of the parties and may be amended only in writing signed by the parties. This Agreement shall supersede any prior agreements between the parties in regard to the same subject matter for services rendered after the effective date. This Agreement and any rights and obligations under it may not be assigned by Consultant unless Bright has given its prior written consent to such assignment. This Agreement shall by governed by and construed under the laws of the State of Minnesota.

THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION THAT MAY BE ENFORCED BY THE PARTIES.


Bright Health Consultant Agreement
2

BRIGHT HEALTH GROUP, INC.

By: /s/ Jeff Craig                
CONSULTANT

By: /s/ Catherine R. Smith            
Name:     Jeff CraigName:     Catherine R. Smith
Title: General Counsel and Corporate Secretary
Date: 5/9/2023
Date: 5/9/2023



Address: ________________________________________

_________________________________________

_________________________________________


Bright Health Consultant Agreement
3

EXHIBIT A

SERVICES TO BE PERFORMED & COMPENSATION FOR SERVICES


Services:

•Provide strategic advice to Bright on areas of responsibility.
•Assist the transition of responsibilities to successor(s) identified by Bright.
•Available to assist with investor relations and corporate communications as requested.
•Assist with Bright’s legal counsel on matters reasonably requested by Bright.
•Such other matters reasonably requested by Bright.


COMPENSATION

•Bright will pay Consultant a monthly retainer of $50,000 per month (the “Monthly Retainer”). The payment for May shall be made within 5 business days after the execution of this Agreement and shall be paid on the 15th day of each month thereafter.
•Upon the closing of the sale of Bright’s CA Medicare Advantage business at any time prior to June 30, 2024, Bright will pay Consultant an amount equal to her base salary minus the aggregate amounts paid by Bright for the Monthly Retainer. For purpose of this section, the sale of Bright’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 Bright’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.
•Expenses directly related to the services under this Agreement will be reimbursed in accordance with Bright Health’s Travel and Entertainment Expense Policy.



Bright Health Consultant Agreement
4
Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Certifications
I, G. Mike Mikan, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Bright Health Group, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.[Omitted];
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 10, 2023
/s/ G. Mike Mikan
G. Mike Mikan
Vice Chairman, President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Certifications
I, Catherine R. Smith, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Bright Health Group, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.[Omitted];
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 10, 2023
/s/ Catherine R. Smith
Catherine R. Smith
Chief Financial and Administrative Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Certification of Principal Executive Officer

In connection with the Quarterly Report on Form 10-Q of Bright Health Group, Inc. (the “Company”) for the period ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 10, 2023
/s/ G. Mike Mikan
G. Mike Mikan
Vice Chairman, President and Chief Executive Officer
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Certification of Principal Financial Officer

In connection with the Quarterly Report on Form 10-Q of Bright Health Group, Inc. (the “Company”) for the period ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 10, 2023
/s/ Catherine. R. Smith
Catherine R. Smith
Chief Financial and Administrative Officer