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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
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 1200, 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 filero
Non-accelerated filerxSmaller reporting companyo
Emerging growth companyo o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes      No  x
As of May 3, 2022, the registrant had 629,245,760 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” 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: a lack of acceptance or slow adoption of our business model; our ability to retain existing consumers and expand consumer enrollment; our ability to obtain and accurately assess, code, and report Individual and Family Plan (“IFP”) and Medicare Advantage (“MA”) risk adjustment factor scores for consumers; our ability to contract with care providers and arrange for the provision of quality care; our ability to accurately estimate our medical expenses, effectively manage our costs and claims liabilities or appropriately price our products and charge premiums; our ability to obtain claims information timely and accurately; the impact of the ongoing COVID-19 pandemic on our business and results of operations; the risks associated with our reliance on third-party providers to operate our business; the impact of modifications or changes to the U.S. health insurance markets; our ability to manage the growth of our business; our ability to operate, update or implement our technology platform and other information technology systems; our ability to retain key executives; our ability to successfully pursue acquisitions and integrate acquired businesses; the occurrence of severe weather events, catastrophic health events, natural or man-made disasters, and social and political conditions or civil unrest; our ability to prevent and contain data security incidents and the impact of data security incidents on our members, patients, employees and financial results; our ability to comply with requirements to maintain effective internal controls; our ability to adapt to new risks associated with our expansion into Direct Contracting; and the other factors set forth under the heading “Risk Factors” in this Quarterly Report and Bright Health Group’s Annual Report on Form 10-K for the year ended December 31, 2021, that was filed with the United States Securities and Exchange Commission (“SEC”) on March 18, 2022 (“2021 Form 10-K”) and our other filings with the SEC.

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

You should not rely upon forward-looking statements as predictions of future events. Our forward-looking statements speak only as of the date of this Quarterly Report and, although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance and events and circumstances reflected in such forward-looking statements will be achieved or occur at all. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this release to conform these statements to actual results or to changes in our expectations.
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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,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$1,505,547$1,061,179
Short-term investments692,472193,835
Accounts receivable, net of allowance of $5,172 and $4,074, respectively
142,695113,474
Direct contracting performance year receivable 638,641
Prepaids and other current assets315,422291,712
Total current assets3,294,7771,660,200
Other assets:
Long-term investments733,465675,192
Property, equipment and capitalized software, net41,27938,344
Goodwill835,450835,140
Intangible assets, net326,617343,860
Other non-current assets43,43845,603
Total other assets1,980,2491,938,139
Total assets$5,275,026$3,598,339
Liabilities, Redeemable Noncontrolling Interest, Redeemable Preferred Stock and Shareholders’ Equity (Deficit)
Current liabilities:
Medical costs payable$1,155,155$817,975
Accounts payable128,407118,140
Unearned revenue34,89353,295
Risk adjustment payable1,285,446931,170
Direct contracting performance year obligation533,537
Short-term borrowings155,000
Other current liabilities251,523207,238
Total current liabilities3,388,9612,282,818
Other liabilities38,84941,994
Total liabilities3,427,8102,324,812
Commitments and contingencies (Note 10)
Redeemable noncontrolling interests143,011128,407
Series A redeemable preferred stock, $0.0001 par value; 100,000,000 shares authorized in 2022 and 2021; 750,000 and — shares issued and outstanding in 2022 and 2021, respectively
747,481
Shareholders’ equity (deficit):
Common stock, $0.0001 par value; 3,000,000,000 shares authorized in 2022 and 2021; 628,992,422 and 628,622,872 shares issued and outstanding in 2022 and 2021, respectively
6363
Additional paid-in capital2,894,4212,861,243
Accumulated deficit(1,896,085)(1,700,851)
Accumulated other comprehensive loss(29,675)(3,335)
Treasury stock, at cost, 2,522,148 shares at March 31, 2022 and December 31, 2021, respectively
(12,000)(12,000)
Total shareholders’ equity (deficit)956,7241,145,120
Total liabilities, redeemable noncontrolling interests, redeemable preferred stock and shareholders’ equity (deficit)$5,275,026$3,598,339
See accompanying Notes to Condensed Consolidated Financial Statements
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Bright Health Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Loss)
(in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
20222021
Revenue:
Premium revenue$1,680,450$860,631
Direct contracting revenue 182,797
Service revenue12,4288,438
Investment income (loss)(40,100)5,489
Total revenue1,835,575874,558
Operating expenses:
Medical costs1,580,596684,570
Operating costs418,918208,240
Depreciation and amortization13,0414,581
Total operating expenses2,012,555897,391
Operating loss(176,980)(22,833)
Interest expense1,193546
Other income(784)
Loss before income taxes(177,389)(23,379)
Income tax expense3,2401,166
Net loss(180,629)(24,545)
Net earnings attributable to noncontrolling interests(14,605)(617)
Series A preferred stock dividend accrued(8,938)
Net loss attributable to Bright Health Group, Inc. common shareholders$(204,172)$(25,162)
Basic and diluted loss per share attributable to Bright Health Group, Inc. common shareholders$(0.32)$(0.18)
Basic and diluted weighted-average common shares outstanding628,765140,175
See accompanying Notes to Condensed Consolidated Financial Statements
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Bright Health Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(Unaudited)
Three Months Ended March 31,
20222021
Net loss$(180,629)$(24,545)
Other comprehensive (loss) income:
Unrealized investment holding losses arising during the year, net of tax of $0 and $0, respectively
(28,089)(980)
Less: reclassification adjustments for investment (losses) gains, net of tax of $0 and $0, respectively
(1,749)62
Other comprehensive (loss) income(26,340)(1,042)
Comprehensive loss(206,969)(25,587)
Comprehensive loss attributable to noncontrolling interests(14,605)(617)
Comprehensive loss attributable to Bright Health Group, Inc. common shareholders$(221,574)$(26,204)
See accompanying Notes to Condensed Consolidated Financial Statements
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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
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
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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
2021SharesAmountSharesAmount
Balance at January 1, 2021164,245 $1,681,015 137,663 $14 $9,877 $(515,989)$2,426 $— $(503,672)
Net loss— — — — — (25,162)— — (25,162)
Issuance of preferred stock1,420 55,137 — — — — — — — 
Issuance of common stock— — 4,661 — 4,893 — — — 4,893 
Share-based compensation— — — — 5,176 — — — 5,176 
Other comprehensive loss— — — — — — (1,042)— (1,042)
Balance at March 31, 2021165,665 $1,736,152 142,324 $14 $19,946 $(541,151)$1,384 $— $(519,807)
See accompanying Notes to Condensed Consolidated Financial Statements
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Bright Health Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Three Months Ended
March 31,
20222021
Cash flows from operating activities:
Net loss$(180,629)$(25,162)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization13,0414,581
Impairment of intangible assets6,720
Share-based compensation32,9215,176
Deferred income taxes7171,166
Unrealized loss on equity securities40,968
Other, net2,3782,694
Changes in assets and liabilities, net of acquired assets and liabilities:
Accounts receivable(29,221)(23,188)
Direct contracting performance year receivable(638,641)
Other assets(22,270)(15,707)
Medical cost payable337,180225,814
Risk adjustment payable354,276137,215
Accounts payable and other liabilities52,18230,096
Unearned revenue(18,402)918
Direct contracting performance year obligation533,537
Net cash provided by operating activities484,757343,603
Cash flows from investing activities:
Purchases of investments(782,091)(298,957)
Proceeds from sales, paydown, and maturities of investments154,765265,521
Purchases of property and equipment(5,491)(4,215)
Business acquisitions, net of cash acquired(310)(18,624)
Net cash used in investing activities(633,127)(56,275)
Cash flows from financing activities:
Proceeds from issuance of preferred stock747,481
Proceeds from issuance of common stock2574,893
Proceeds from short-term borrowings200,000
Repayments of short-term borrowings(155,000)
Payments for debt issuance costs(3,391)
Payments for IPO offering costs(1,268)
Net cash provided by financing activities592,738200,234
Net increase in cash and cash equivalents444,368487,562
Cash and cash equivalents – beginning of year1,061,179488,371
Cash and cash equivalents – end of period$1,505,547$975,933
Supplemental disclosures of cash flow information:
Changes in unrealized (loss) gain on available-for-sale securities in OCI$(26,340)$(1,042)
Cash paid for interest1,168244
Supplemental schedule of non-cash activities:
Redeemable convertible preferred stock issued for acquisitions$$32,982
See accompanying Notes to Condensed Consolidated Financial Statements
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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

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

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

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

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

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

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

Net loss per share: Prior to 2022, basic net loss per share attributable to common stockholders was computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net loss attributable to common stockholders is computed by adjusting net losses attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the
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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
weighted average number of shares of common stock outstanding for the period, including potential dilutive common shares. Beginning in 2022, we also include our Series A Convertible Perpetual Preferred Stock (“Series A Preferred Stock”) issued in January 2022 as a participating security in the computation of net loss per share pursuant to the two-class method. The two-class method of calculating net income (loss) per share is an allocation method that calculates earnings per share for common stock and participating securities. Under the two-class method, total dividends due to the holders of the Series A Preferred Stock and undistributed earnings allocated to participating securities are subtracted from net income (loss) in determining net income (loss) attributable to common stockholders.

Operating Costs: Our operating costs, by functional classification for the three months ended March 31, 2022 and 2021, are as follows (in thousands):
Three Months Ended
March 31,
20222021
Compensation and fringe benefits$132,067 $57,026 
Professional fees66,811 39,463 
Marketing and selling expenses91,807 50,205 
Premium taxes and fees69,781 37,731 
General and administrative expenses40,710 14,440 
Other operating expenses17,742 9,375 
Total operating costs$418,918 $208,240 

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

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

NOTE 2. BUSINESS COMBINATIONS

Centrum Acquisition: On July 1, 2021, we acquired 75% of the outstanding equity interests of Centrum Medical Holdings, LLC (“Centrum”) for cash consideration of $222.4 million and $75.0 million of common stock, for total purchase consideration of $296.2 million, net of $1.2 million of cash acquired. Centrum is a value-based primary care focused, multi-specialty medical group based in Florida. Centrum operates health centers in Florida, Texas and North Carolina serving Commercial, Medicare, and Medicaid consumers across multiple payors. Centrum is included in our NeueHealth reportable segment.

The total preliminary purchase consideration for the Centrum acquisition is allocated to tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the acquisition date. The excess of the purchase price over the net assets acquired is recorded as goodwill, which is predominantly attributable to the incremental financial benefits achievable through Bright Health Group’s integrated care delivery model, whereby Bright HealthCare members are cared for under value-based arrangements with Centrum. This model brings together the financing, distribution, and delivery of high-quality healthcare and provides the opportunity to enhance overall margin potential for the Company. The goodwill from the Centrum acquisition is expected to be deductible for tax purposes.
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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table discloses the preliminary estimated fair values of assets and liabilities acquired by the Company in the Centrum acquisition (in thousands):
Accounts receivable$1,874 
Prepaids and other current assets627 
Property and equipment2,557 
Intangible assets102,370 
Other assets8,917 
Total assets116,345 
Medical payables19 
Accounts payable359 
Other current liabilities861 
Other liabilities11,636 
Total liabilities12,875 
Net identified assets acquired103,470 
Goodwill275,066 
Redeemable noncontrolling interest(82,310)
Total purchase consideration, net of cash acquired$296,226 

The preliminary fair values of acquired assets and liabilities assumed represent management’s estimate of fair value and are subject to change if additional information, such as post-close working capital adjustments, becomes available.

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

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

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

The total purchase consideration for the CHP acquisition is allocated to tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the acquisition date. The excess of the purchase price over the net assets acquired is recorded as goodwill. The goodwill for CHP is attributable to synergies from leveraging CHP’s clinical model and California consumer expertise to continue to expand our MA business in the California market. The goodwill is not deductible for tax purposes.
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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table discloses the preliminary estimated fair values of assets and liabilities acquired by the Company in the CHP acquisition (in thousands):

Amount Recognized as of
Acquisition Date
(as previously reported)
Measurement
Period
Adjustments
Amounts Recognized as of
Acquisition Date
(as adjusted)
Accounts receivable$16,361 $879 $17,240 
Short-term investments19,041 — 19,041 
Prepaids and other current assets25,520 10 25,530 
Property and equipment370 — 370 
Intangible assets102,000 — 102,000 
Other assets— 1,249 1,249 
Total assets163,292 2,138 165,430 
Medical costs payable79,450 (3,807)75,643 
Accounts payable2,371 — 2,371 
Other current liabilities17,212 (9,228)7,984 
Other liabilities28,622 (2,347)26,275 
Total liabilities127,655 (15,382)112,273 
Net identified assets acquired35,637 17,520 53,157 
Goodwill236,037 (3,595)232,442 
Total purchase consideration, net of cash acquired$271,674 $13,925 $285,599 

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

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

If CHP had been included in the consolidated results of the Company for the three months ended March 31, 2021 our pro forma revenue would have been $1.0 billion and our pro forma net loss would have been $13.5 million.
True Health New Mexico and Zipnosis Acquisitions: On March 31, 2021 we acquired all of the outstanding equity interests of True Health New Mexico, Inc. (“THNM”) for initial cash consideration of $27.5 million and $8.1 million of favorable risk-based capital adjustments, net of cash acquired of $24.1 million, for total purchase consideration of $(4.7) million. THNM is a physician-led health insurance company offering policies available through the commercial market for individual on- and off-exchange and employer-sponsored health coverage. THNM is included in our Bright HealthCare reportable segment. In addition, on March 31, 2021, we acquired Zipnosis, Inc. (“Zipnosis”), which is a telehealth platform that offers virtual care to health systems around the U.S., for aggregate consideration of $73.0 million, including $55.1 million in Series E preferred stock and adjusted for $0.5 million of tangible net equity adjustments. We acquired $3.2 million of cash as part of the Zipnosis acquisition, for net total purchase consideration of $69.8 million. Zipnosis is included in our NeueHealth reportable segment.

The total purchase consideration for the THNM and Zipnosis acquisitions is allocated to tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the acquisition date. The excess of the purchase price over the
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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
net assets acquired is recorded as goodwill. The goodwill for THNM is attributable to synergies from leveraging THNM’s strong local clinical model of care and the ability to enter into a new state of strategic interest for future growth and expansion. The goodwill from the Zipnosis acquisition is attributable to benefits from the ability to enhance our proprietary technology platform, DocSquad, and Zipnosis’ attractive virtual care capabilities to enhance Bright Health’s consumer and provider connectivity. The goodwill from the THNM and Zipnosis acquisitions is not deductible for tax purposes.

The following table discloses the fair values of assets and liabilities acquired by the Company in the THNM and Zipnosis acquisitions (in thousands):
THNMZipnosis
Accounts receivable$714 $1,062 
Short-term investments4,705 — 
Prepaids and other current assets8,337 141 
Property and equipment— 232 
Intangible assets7,300 9,180 
Long-term investments13,644 — 
Other non-current assets1,324 766 
Total assets36,024 11,381 
Medical costs payable12,617 — 
Accounts payable14,663 136 
Unearned revenue3,645 120 
Other current liabilities11,406 665 
Other liabilities2,499 2,730 
Total liabilities44,830 3,651 
Net identified assets (liabilities) acquired(8,806)7,730 
Goodwill4,148 62,067 
Total purchase consideration, net of cash acquired$(4,658)$69,797 

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

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

If THNM and Zipnosis had been included in the consolidated results of the Company for the three months ended March 31, 2021 our pro forma revenue would have been $922.5 million and our pro forma net loss would have been $27.1 million.
During the three months ended March 31, 2022, we completed an immaterial business combination which increased goodwill.


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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 3. INVESTMENTS

Fixed Maturity Securities

Available-for-sale securities are reported at fair value as of March 31, 2022 and December 31, 2021. Held-to-maturity securities are reported at amortized cost as of March 31, 2022 and December 31, 2021. The following is a summary of our investment securities as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Carrying
Value
Cash equivalents$586,011 $— $(41)$585,970 
Available for sale:
U.S. government and agency obligations752,881 69 (7,366)745,584 
Corporate obligations392,440 56 (15,316)377,180 
State and municipal obligations18,654 (215)18,441 
Certificates of deposit14,340 — (2)14,338 
Mortgage-backed securities126,271 75 (4,564)121,782 
Asset-backed securities62,104 (1,766)60,347 
Other392 — (11)381 
Total available-for-sale securities1,367,082 211 (29,240)1,338,053 
Held to maturity:
U.S. government and agency obligations7,055 — — 7,055 
Certificates of deposit1,447 — — 1,447 
Total held-to-maturity securities8,502 — — 8,502 
Total investments$1,961,595 $211 $(29,281)$1,932,525 
December 31, 2021
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Carrying
Value
Cash equivalents$192,623 $— $— $192,623 
Available for sale:
U.S. government and agency obligations311,936 259 (2,200)309,995 
Corporate obligations313,965 326 (1,104)313,187 
State and municipal obligations16,122 33 (38)16,117 
Certificates of deposit18,752 — — 18,752 
Mortgage-backed securities38,558 63 (67)38,554 
Other42,889 13 (30)42,872 
Total available-for-sale securities742,222 694 (3,439)739,477 
Held to maturity:
U.S. government and agency obligations7,739 — — 7,739 
Certificates of deposit1,447 — — 1,447 
Total held-to-maturity securities9,186 — — 9,186 
Total investments$944,031 $694 $(3,439)$941,286 
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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The fair value of available-for-sale investments, including those that are cash equivalents, with gross unrealized losses by major security type and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2022 and December 31, 2021 were as follows (in thousands):
March 31, 2022
Less Than 12 Months12 Months or GreaterTotal
Description of InvestmentsFair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Cash equivalents204,916 (41)— — 204,916 (41)
U.S. government and agency obligations715,592 (6,884)13,148 (482)728,740 (7,366)
Corporate obligations358,350 (15,311)127 (5)358,477 (15,316)
State and municipal obligations15,113 (215)— — 15,113 (215)
Certificates of deposit936 (2)— — 936 (2)
Mortgage-backed securities112,180 (4,564)— — 112,180 (4,564)
Asset-backed securities56,979 (1,766)— — 56,979 (1,766)
Other382 (11)— — 382 (11)
Total bonds$1,464,448 $(28,794)$13,275 $(487)$1,477,723 $(29,281)
December 31, 2021
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 obligations286,823 (2,200)— — 286,823 (2,200)
Corporate obligations234,070 (1,104)— — 234,070 (1,104)
State and municipal obligations10,442 (38)— — 10,442 (38)
Mortgage-backed securities32,715 (67)— — 32,715 (67)
Other29,115 (30)— — 29,115 (30)
Total bonds$593,165 $(3,439)$— $— $593,165 $(3,439)

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

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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
As of March 31, 2022, 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 less$627,728 $626,875 
Due after one year through five years502,915 486,128 
Due after five years through 10 years228,247 217,160 
Due after 10 years8,192 7,890 
Total debt securities$1,367,082 $1,338,053 

Investment income in the Condensed Consolidated Statements of Income (Loss) for the three months ended March 31, 2022 and 2021, was $0.9 million, and $1.2 million, respectively, related to our fixed maturity securities. The gross proceeds from the sale of available-for-sale securities for the three months ended March 31, 2022 and 2021 were $127.6 million and $89.8 million, respectively. Realized (losses) gains from our fixed maturity securities of $(1.7) million and $0.1 million are included within total investment income, and reclassified out of accumulated other comprehensive income, for the three months ended March 31, 2022 and 2021, respectively.

Equity Securities

On April 1, 2021 we completed the purchase of 1.6 million shares of equity securities for aggregate cash consideration of $40.1 million. As of March 31, 2022 and December 31, 2021, the equity securities had a carrying value of $79.4 million and $120.4 million, respectively, which is included in short-term investments in the Condensed Consolidated Balance Sheet. We recognized unrealized (losses) gains of $(41.0) million and $4.2 million in investment income (loss) in the Condensed Consolidated Statements of Income (Loss) for the three months ended March 31, 2022 and 2021, respectively.

NOTE 4. FAIR VALUE MEASUREMENTS

Basis of fair value measurement:

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

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

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

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

For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument see Note 5 to the audited consolidated financial statements included in our 2021 Form 10-K.
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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following tables set forth our fair value measurements as of March 31, 2022 and December 31, 2021, for assets measured at fair value on a recurring basis (in thousands):
March 31, 2022
Level 1Level 2Level 3Total
Assets
Cash equivalents$563,876 $21,103 $— $584,979 
Fixed maturity securities, available for sale:
U.S. government and agency obligations724,519 21,065 — 745,584 
Corporate obligations2,255 374,925 — 377,180 
State and municipal obligations— 18,441 — 18,441 
Certificates of deposit— 14,338 — 14,338 
Mortgage-backed securities— 121,782 — 121,782 
Asset-backed securities— 60,347 60,347 
Other— 381 — 381 
Total fixed maturity securities, available for sale:726,774 611,279 — 1,338,053 
Equity securities79,396 — — 79,396 
Total assets at fair value$1,370,046 $632,382 $— $2,002,428 
Liabilities
Contingent consideration$— $— $1,495 $1,495 
December 31, 2021
Level 1Level 2Level 3Total
Assets
Cash equivalents$192,063 $250 $— $192,313 
Fixed maturity securities, available for sale:
U.S. government and agency obligations220,801 89,194 — 309,995 
Corporate obligations2,323 310,864 — 313,187 
State and municipal obligations— 16,117 — 16,117 
Certificates of deposit— 18,752 — 18,752 
Mortgage-backed securities2,404 36,150 — 38,554 
Other— 42,872 — 42,872 
Total fixed maturity securities, available for sale:225,528 513,949 — 739,477 
Equity securities120,364 — — 120,364 
Total assets at fair value$537,955 $514,199 $— $1,052,154 
Liabilities
Contingent consideration$— $— $1,495 $1,495 

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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following tables set forth the Company’s fair value measurements as of March 31, 2022 and December 31, 2021, for certain financial instruments not measured at fair value on a recurring basis (in thousands):
March 31, 2022
Level 1Level 2Level 3Total
Cash equivalents, held to maturity$991 $— $— $991 
Fixed maturity securities, held to maturity:
U.S. government and agency obligations7,055 — — 7,055 
Certificates of deposit— 1,447 — 1,447 
Total held to maturity$8,046 $1,447 $— $9,493 
December 31, 2021
Level 1Level 2Level 3Total
Cash equivalents, held to maturity$310 $— $— $310 
Fixed maturity securities, held to maturity:
U.S. government and agency obligations7,732 — — 7,732 
Certificates of deposit— 1,447 — 1,447 
Total held to maturity$8,042 $1,447 $— $9,489 
There have been no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy. The contingent consideration liability related to the acquisition of AssociatesMD Medical Group, Inc. is measured using Level 3 inputs based on a formulaic multiple of forecasted 2023 EBITDA per the terms of the purchase agreement discounted back to net present value. The following table presents the changes in fair value of the contingent consideration liability for the three months ended March 31, 2022 and year ended December 31, 2021 (in thousands):
20222021
Balance at beginning of period$1,495 $5,716 
Change in fair value of contingent consideration— (4,221)
Balance at end of period$1,495 $1,495 
The carrying amounts reported on the Condensed Consolidated Balance Sheets for other current financial assets and liabilities approximate fair value due to their short-term nature. These assets and liabilities are not included in the tables above.

NOTE 5. GOODWILL AND INTANGIBLE ASSETS
Changes in the carrying value of goodwill by reportable segment were as follows (in thousands):
Bright HealthCareNeueHealth
Gross Carrying
Amount
Cumulative
Impairment
Gross Carrying
Amount
Cumulative
Impairment
Balance at December 31, 2021$432,858 $— $402,282 $— 
Acquisitions  310  
Purchase adjustments    
Balance at March 31, 2022$432,858 $— $402,592 $— 
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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The gross carrying value and accumulated amortization for definite-lived intangible assets were as follows (in thousands):
March 31, 2022December 31, 2021
Gross Carrying
Amount
Accumulated AmortizationGross Carrying
Amount
Accumulated Amortization
Customer relationships$206,321 $26,632 $209,421 $21,728 
Trade names96,041 8,205 99,241 6,738 
Reacquired contract59,000 9,833 59,000 6,556 
Developed technology6,300 900 6,300 675 
Other5,400 875 6,400 805 
Total$373,062 $46,445 $380,362 $36,502 
We recognized $6.7 million of impairment expense on the intangible assets related to our THNM acquisition in operating costs in the Condensed Consolidated Statements of Income (Loss) for the three months ended March 31, 2022. See Note 2 Business Combinations, for additional information on this impairment. There was no impairment expense for the three months ended March 31, 2021.

Amortization expense relating to intangible assets for the three months ended March 31, 2022 and 2021 was $10.5 million and $3.7 million, respectively. Estimated amortization expense relating to intangible assets for the remainder of 2022 and for each of the next five full years ending December 31 is as follows (in thousands):
2022 (April-December)$31,120 
202341,471 
202441,332 
202541,332 
202628,104 
202728,065 
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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 6. MEDICAL COSTS PAYABLE
The following table shows the components of the change in medical costs payable for the three months ended March 31 (in thousands):
20222021
Medical costs payable - January 1$817,975 $249,777 
Incurred related to:
Current year1,576,725 689,572 
Prior year5,218 (3,076)
Total incurred1,581,943 686,496 
Paid related to:
Current year710,804 307,442 
Prior year533,959 153,240 
Total paid1,244,763 460,682 
Acquired claims liabilities— 13,268 
Medical costs payable - March 31$1,155,155 $488,859 
Medical costs payable attributable to prior years increased by $5.2 million and decreased by $3.1 million for the three months ended March 31, 2022 and 2021, 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,
20222021
Claims unpaid$102,293 $19,652 
Provider incentive payable45,805 36,592 
Claims adjustment expense liability15,479 5,038 
Incurred but not reported991,578 427,577 
Total medical costs payable$1,155,155 $488,859 
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).

NOTE 7. SHORT-TERM BORROWINGS

We have a $350.0 million revolving credit agreement with a syndicate of banks (the “Credit Agreement”), which matures on February 28, 2024. During the three months ended March 31, 2022, we repaid the $155.0 million outstanding under the Credit Agreement as of December 31, 2021. As of March 31, 2022, we had no short-term borrowings under the Credit Agreement.

The Credit Agreement contains a covenant that requires the Company to maintain a total debt to capitalization ratio of 0.25 to 1.00. The Credit Agreement also contains a covenant that require us to maintain a minimum liquidity of $150.0 million. We were in compliance with our debt covenants as of March 31, 2022.

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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 8. SHARE-BASED COMPENSATION

2016 Incentive Plan

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

2021 Incentive Plan

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

Share-Based Compensation Expense

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

Stock Options

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

The calculated value of each option award is estimated on the date of grant using a Black-Scholes option valuation model that used the following weighted-average assumptions for options granted during the three months ended March 31, 2022:
2022
Risk-free interest rate1.7 %
Expected volatility55.0 %
Expected dividend rate0.0 %
Forfeiture rate10.0 %
Expected life in years6.0

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

The activity for stock options for the three months ended March 31, 2022 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, 202269,244 $1.84 8.2$113,908 
Granted6,896 1.79 
Exercised(338)0.76 
Forfeited(2,416)2.24 
Expired(412)2.22 
Outstanding at March 31, 202272,974 $1.83 7.8$22,419 

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

The following table summarizes RSU award activity for the three months ended March 31, 2022 (in thousands, except weighted average grant date fair value):
Number of RSUsWeighted Average Grant Date Fair Value
Unvested RSUs at December 31, 202115,651$3.98 
Granted23,154 1.79 
Vested(36)8.95 
Forfeited(1,977)3.64 
Unvested RSUs at March 31, 202236,792 $2.61 

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

Performance-based Restricted Stock Units (“PSUs”)

In connection with our IPO, our Board of Directors approved the grant of PSUs to members of our executive leadership team. The grant encompasses a total of 14.7 million PSUs, separated into four equal tranches, each of which are eligible to vest based on the achievement of predetermined stock price goals and a minimum service period of 3 years. The fair value of the PSUs was determined using a Monte-Carlo simulation.
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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table summarizes PSU award activity for the three months ended March 31, 2022 (in thousands, except weighted average grant date fair value):
Number of PSUsWeighted Average Grant Date Fair Value
Unvested PSUs at December 31, 202114,700$9.30 
Granted— — 
Forfeited— — 
Unvested PSUs at March 31, 202214,700 $9.30 
We recognized share-based compensation expense related to PSUs of $10.3 million for the three months ended March 31, 2022, which is included in operating costs in the Condensed Consolidated Statements of Income (Loss). At March 31, 2022, there was $91.1 million of unrecognized compensation expense related to the PSU grant, which is expected to be recognized over a weighted-average period of 2.2 years.

NOTE 9. REDEEMABLE CONVERTIBLE PREFERRED STOCK

Series A Convertible Preferred Stock

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

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

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) as of the applicable conversion date plus (II) cash in lieu of fractional shares, subject to certain anti‑dilution adjustments. At any time after the third anniversary of the Closing Date, if the closing price per share of Common Stock on the New York Stock Exchange was greater than $7.96 for (x) each of at least twenty (20) trading days in any period of thirty (30) consecutive trading days and (y) the last trading day immediately before the Company provides the holders with notice of its election to convert all of the Series A Preferred Stock into the relevant number of shares of common stock, the Company may elect to convert all of the Series A Preferred Stock into the relevant number of shares of common stock.

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

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

We have applied the guidance in ASC 480‑10‑S99‑3A, SEC Staff Announcement: Classification and Measurement of Redeemable Securities, and have therefore classified the Series A Preferred Stock outside of shareholders’ equity on the Condensed Consolidated Balance Sheet because the shares contain liquidation features that are not solely within the Company's control. The Series A Preferred Stock was recorded at its fair value on the date of issuance net of $2.5 million of issuance costs. The Company has elected not to adjust the carrying value of the Series A Preferred Stock to the liquidation preference of such shares because of the uncertainty of whether or when such an event would occur. Subsequent adjustments to increase the carrying value to the liquidation preferences will be made only when it becomes probable that such a liquidation event will occur.

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,
20222021
Net loss attributable to Bright Health Group, Inc. common shareholders$(204,172)$(25,162)
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted628,765 140,175 
Net loss per share attributable to common stockholders, basic and diluted$(0.32)$(0.18)
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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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,
20222021
Redeemable convertible preferred stock (as converted to common stock)166,852 421,697 
Stock options to purchase common stock72,974 76,913 
Restricted stock units36,792 — 
Total276,618 498,610 

NOTE 11. COMMITMENTS AND CONTINGENCIES

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

On January 6, 2022, a putative securities class action lawsuit was filed against us and certain of our officers and directors in the Eastern District of New York. The case is captioned Marquez v. Bright Health Group, Inc. et al., 1:22-cv-00101 (E.D.N.Y.). The lawsuit alleges, among other things, that we made materially false and misleading statements regarding our business, operations, and compliance policies, which in turn adversely affected our stock price. No specific amounts of damages have been alleged in the putative securities class action lawsuit. We expect an amended complaint will be filed later this year in this action. Such amended complaint could assert additional or broader claims than the current complaint. We intend to vigorously defend this action; but there can be no assurance that we will be successful in any defense. Based on our assessment of the facts underlying the claims and the degree to which we intend to defend our company in these matters, the amount or range of reasonably possible losses, if any, cannot be estimated. At March 31, 2022 and December 31, 2021, there were no material known contingent liabilities.

Other commitments: As of March 31, 2022, we have $46.1 million outstanding, undrawn letters of credit under the Credit Agreement.
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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 12. SEGMENTS AND GEOGRAPHIC INFORMATION

Our two reportable segments are Bright HealthCare and NeueHealth.

The following tables present the reportable segment financial information for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended March 31, 2022Bright
HealthCare
NeueHealthEliminationsConsolidated
Premium revenue$1,593,501 $86,949 $— $1,680,450 
Direct contracting revenue— 182,797 — 182,797 
Service revenue36 12,392 — 12,428 
Investment income868 (40,968)— (40,100)
Total unaffiliated revenue1,594,405 241,170 — 1,835,575 
Affiliated revenue— 379,782 (379,782)— 
Total segment revenue1,594,405 620,952 (379,782)1,835,575 
Operating income (loss)(107,022)(69,958)— (176,980)
Depreciation and amortization$6,039 $7,002 $— $13,041 
Three Months Ended March 31, 2021Bright
HealthCare
NeueHealthEliminationsConsolidated
Premium revenue$841,925 $18,706 $— $860,631 
Direct contracting revenue— — — — 
Service revenue— 8,438 — 8,438 
Investment income1,246 4,243 — 5,489 
Total unaffiliated revenue843,171 31,387 — 874,558 
Affiliated revenue— 17,152 (17,152)— 
Total segment revenue843,171 48,539 (17,152)874,558 
Operating income (loss)(24,215)1,382 — (22,833)
Depreciation and amortization$2,357 $2,224 $— $4,581 
As a percentage of our total consolidated revenue, premium revenues and direct contracting revenues from CMS were 33% and 25% for the three months ended March 31, 2022 and 2021, respectively, which are included in premium revenue of our Bright HealthCare segment and direct contracting revenue of our NeueHealth segment. For all periods presented, all of our long-lived assets were located in the United States, and all revenues were earned in the United States. We do not include asset information by reportable segment in the reporting provided to the chief operating decision maker.

NOTE 13. INCOME TAXES

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

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

NOTE 14. REDEEMABLE NONCONTROLLING INTEREST

Redeemable noncontrolling interests in our subsidiaries whose redemption is outside of our control are classified as temporary equity. The following table provides details of our redeemable noncontrolling interest activity for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended
March 31,
20222021
Balance at beginning of period$128,407 $39,600 
Earnings attributable to noncontrolling interest(2,681)288 
Measurement adjustment17,285 329 
Balance at end of period$143,011 $40,217 

NOTE 15. DIRECT CONTRACTING

Beginning January 1, 2022, we began participating in CMS’ DC Model with two DCEs 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 DC Model, we are guaranteeing the performance of our care network of participating and preferred providers. The intention of the DC 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 DC Model include:

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

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

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

Risk-Mitigation Options: Both DCEs elected to participate in a “stop-loss arrangement” for the current performance year offered by CMS. The “stop-loss arrangement” is designed to reduce the financial uncertainty associated with high-cost expenditures of individual beneficiaries. Additionally, CMS has created a mandatory risk corridor program that allocates the DCE’s shared savings and losses in bands of percentage thresholds, after a deviation of greater than 25.0% of the Performance Year Benchmark.
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Bright Health Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Performance Guarantees

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

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

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

(1)     We estimate there to be $115.1 million in out-of-network claims incurred by beneficiaries aligned to our DCE but not reported as of March 31, 2022; this is included in medical costs payable on the Condensed Consolidated Balance Sheets.
(2)    This obligation represents the consideration due to providers, net of the shared savings or loss for the period and amortization of the liability.

Three Months Ended March 31, 2022
Amortization of Direct contracting performance year receivable$75,127 
Amortization of Direct contracting performance year obligation182,797 
Direct contracting revenue182,797 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes and the “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q and Bright Health Group, Inc.’s audited consolidated financial statements and the accompanying notes as well as the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2021 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 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. Bright Health Group consists of two reportable segments: NeueHealth and Bright HealthCare:

NeueHealth. Our healthcare enablement and technology business, NeueHealth, is developing the next generation, integrated healthcare system. NeueHealth significantly reduces the friction and current lack of coordination between payors and providers to enable a truly consumer-centric healthcare experience. As of March 2022, NeueHealth delivers high-quality virtual and in-person clinical care through our 75 owned primary care clinics within its integrated care delivery system. Through those risk-bearing clinics, NeueHealth maintains over 570,000 unique patient relationships as of March 31, 2022, over 530,000 of which are served through value-based arrangements, across multiple payors.

Bright HealthCare. Our healthcare financing and distribution business, Bright HealthCare, delivers simple, personal, and affordable solutions to integrate the consumer into Bright Health’s alignment model. Bright HealthCare currently aggregates and delivers healthcare benefits to over 1.1 million consumers through its various offerings, serving consumers across multiple product lines in 17 states. Bright HealthCare’s customers include commercial health plans across 16 states, which serve over 1.0 million individuals, as well as MA products in 6 states, which serve over 120,000 lives and generally focus on higher risk, special needs populations.

COVID-19 Update

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

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

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

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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.

We had a strong start to the year and continued to deliver substantial growth. We have reached significant scale and are maturing as a business; 2022 will be focused on optimizing the Company and executing on our strategic initiatives. We have made investments to position Bright HealthCare as a differentiated competitor in states with significant addressable markets in both the Commercial marketplace and in Medicare Advantage, as well as establishing our NeueHealth care delivery business.

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

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

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

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

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

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

4.Claims and Clinical Platform Stabilization: We launched all of our new market membership on our new claims administration platform in January 2022. The new claims platform is performing well and covers nearly one third of our Commercial membership. We also added resources to our legacy outsourced claims platform, and we are seeing improvements in the performance of that system. We continue to expect that we will transition the remainder of our Commercial members to the new claims management platform in January 2023. Our proprietary clinical system, Panorama, is also delivering significant benefits to our performance this year. All of our legacy Commercial markets are currently on Panorama, and we expect to have all of our Commercial membership on Panorama by 2023.

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5.We are Addressing Talent and Cost Structure: We remain disciplined on our expenses, as we continue to focus on productivity gains and operating expense leverage, while also adding selectively to our team to support growth and enhance our operational performance.

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

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

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

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

Key Metrics and Non-GAAP Financial Measures
In addition to our GAAP financial information, we review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate our business plan and make strategic decisions. The following table provides the approximate consumers and patients served as of March 31, 2022 and 2021.
As of March 31,
20222021
Bright HealthCare Consumers Served
Commercial(1)
1,040,000 480,000 
Medicare Advantage120,000 60,000 
NeueHealth Patients
Value-based Care Patient Lives530,000 30,000 
(1) Commercial plans include IFP and employer plans.
Bright HealthCare Consumers Served

Consumers served include Bright HealthCare individual lives served via health insurance policies across multiple lines of business, primarily attributable to IFP products and MA plans in markets across the country. We believe growth in the number of consumers is a key indicator of the performance of our Bright HealthCare 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 consumer growth.
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Value-Based Care Patients

Value-based care patients are patients attributed to providers contracted under varied value-based care delivery models in which the responsibility for control of an attributed patient’s medical care is transferred, in part or wholly, to our NeueHealth managed medical groups. We believe growth in the number of value-based care patients is a key indicator of the performance of our NeueHealth business. It also informs our management of the operational, clinical, technological and administrative functional area needs that will require further investment to support expected future patient growth. Over time, we expect our value-based care patients will increase as we convert fee-for-service arrangements into value-based care financial arrangements.

Three Months Ended
March 31,
($ in thousands)20222021
Net Loss$(180,629)(24,545)
Adjusted EBITDA(1)
$(74,830)(13,827)

(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 interest expense, income taxes, depreciation and amortization, adjusted for the impact of acquisition and financing-related transaction costs, share-based compensation, changes in the fair value of contingent consideration, changes in the fair value of equity securities, 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)20222021
Net loss$(180,629)$(24,545)
Interest expense1,193 546 
Income tax expense (benefit)3,240 1,166 
Depreciation and amortization13,041 4,581 
Impairment of intangible assets6,720 — 
Transaction costs (a)
111 2,020 
Share-based compensation expense (b)
32,921 5,176 
Change in fair value of equity securities (c)
40,968 (4,243)
Change in fair value of contingent consideration (d)
— 1,472 
Contract termination costs (e)
741 — 
Restructuring costs (f)
6,864 — 
Adjusted EBITDA$(74,830)$(13,827)

(a)Transaction costs include accounting, tax, valuation, consulting, legal and investment banking fees directly relating to business combinations and certain costs associated with our initial public offering. These costs can vary from period to period and impact comparability, and we do not believe such transaction costs reflect the ongoing performance of our business.
(b)Represents non-cash compensation expense related to stock option and restricted stock award grants, which can vary from period to period based on a number of factors, including the timing, quantity and grant date fair value of the awards.
(c)Beginning in 2022, Adjusted EBITDA excludes the impact of changes in unrealized gains and losses on equity securities. The comparable period in 2021 has been recast to exclude changes in unrealized gains and losses on equity securities.
(d)Represents the non-cash change in fair value of contingent consideration from business combinations, which is remeasured at fair value each reporting period.
(e)Represents amounts paid for early termination of existing vendor contracts.
(f)Restructuring costs represents severance costs as part of a workforce reduction in 2022.

Acquisitions

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

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

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

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

Results of Operations
The following table summarizes our unaudited Condensed Consolidated Statements of Income (Loss) data and other financial information for the three months ended March 31, 2022 and 2021.
($ in thousands)Three Months Ended
March 31,
Condensed Consolidated Statements of Income (loss) and operating data:20222021
Revenue:
Premium revenue$1,680,450$860,631
Direct contracting revenue182,797
Service revenue12,4288,438
Investment income (loss)(40,100)5,489
Total revenue1,835,575874,558
Operating expenses
Medical costs1,580,596684,570
Operating costs418,918208,240
Depreciation and amortization13,0414,581
Total operating expenses2,012,555897,391
Operating loss(176,980)(22,833)
Interest expense1,193546
Other income(784)
Loss before income taxes(177,389)(23,379)
Income tax expense3,2401,166
Net loss(180,629)(24,545)
Net earnings attributable to non-controlling interest(14,605)(617)
Series A preferred stock dividend accrued(8,938)
Net loss attributable to Bright Health Group, Inc. common shareholders$(204,172)$(25,162)
Adjusted EBITDA$(74,830)$(13,827)
Medical Cost Ratio (1)
84.8%79.5%
Operating Cost Ratio (2)
22.8%23.8%
(1)Medical Cost Ratio is defined as medical costs divided by premium and direct contracting revenue.
(2)Operating Cost Ratio is defined as operating costs divided by total revenue.

Total revenues increased by $961.0 million, or 109.9%, for the three months ended March 31, 2022 as compared to the same period in 2021, which was driven by premium revenue due to an increase of approximately 620,000 Bright HealthCare consumers and over 500,000 value-based care patient lives. In addition, two DCEs aligned with our NeueHealth segment began participating in the DC Model effective January 1, 2022, which contributed $182.8 million of the increase in total revenue. The increases in premium revenue and Direct Contracting revenue were partially offset by an investment loss for the three months ended March 31, 2022, as a result of $41.0 million of unrealized losses from investments in equity securities.

Medical costs increased by $896.0 million, or 130.9%, for the three months ended March 31, 2022 as compared to the same period in 2021. The increase in medical costs was driven by an increase in consumers through both organic growth in
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consumers and inorganic growth attributable to the acquisitions of CHP and Centrum. Medical costs incurred associated with beneficiaries aligned to our DCEs also contributed to the increase.

Our MCR of 84.8% for the three months ended March 31, 2022 increased 530 basis points compared to the same period in 2021. Our MCR included a 310 basis point and a 410 basis point unfavorable impact from COVID-19 costs for the three months ended March 31, 2022 and 2021, respectively. In addition, our MCR was impacted by Direct Contracting revenue recorded at a 96.6% MCR, which increased our MCR by 130 basis points.

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

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

Depreciation and amortization increased by $8.5 million for the three months ended March 31, 2022 as compared to the same period in 2021, primarily due to the $7.0 million of amortization expense resulting from intangible assets acquired in the Centrum, CHP and Zipnosis acquisitions, for which there were no comparable amounts in the three months ended March 31, 2021.

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

Income tax expense was $3.2 million for the three months ended March 31, 2022. For the three months ended March 31, 2022, the income tax expense largely relates to amortization of originating goodwill from asset acquisitions and estimated state income taxes attributable to income earned in separate filing states without state net operating loss carryforwards. For the three months ended March 31, 2021, income tax expense was $1.2 million, which was due to an adjustment to the tax impact of goodwill and intangible assets acquired as part of the Brand New Day and THNM acquisitions.
Bright HealthCare
($ in thousands)Three Months Ended
March 31,
Statement of income (loss) and operating data:20222021
Bright HealthCare:
Commercial revenue$1,163,224 $621,056 
Medicare Advantage revenue430,313 220,869 
Investment income868 1,246 
Total revenue1,594,405 843,171 
Operating expenses:
Medical costs1,323,724 675,056 
Operating costs371,664 189,973 
Depreciation and amortization6,039 2,357 
Total operating expenses1,701,427 867,386 
Operating loss$(107,022)$(24,215)
Medical Cost Ratio (MCR)83.1 %80.2 %
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Commercial revenue increased by $542.2 million, or 87.3%, for the three months ended March 31, 2022 as compared to the same period in 2021. The increase in revenues was driven by an increase in consumer lives of approximately 560,000 due to organic growth and entry into new markets in 2022 – particularly entry into Texas, which is partially offset by an increase in risk adjustment payable.

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

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

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

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

Depreciation and amortization increased by $3.7 million for the three months ended March 31, 2022 as compared to the same period in 2021. The increase was primarily due to amortization expense of $2.6 million resulting from intangible assets acquired in the CHP acquisition on April 1, 2021, for which there are no comparable amounts in the three months ended March 31, 2021.
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NeueHealth
($ in thousands)Three Months Ended
March 31,
Statement of income (loss) and operating data:20222021
NeueHealth:
Premium revenue$455,002 $28,674 
Direct contracting revenue 182,797 — 
Service revenue24,121 15,622 
Investment income (loss)(40,968)4,243 
Total revenue620,952 48,539 
Operating expenses
Medical costs624,994 19,482 
Operating costs58,914 25,451 
Depreciation and amortization7,002 2,224 
Total operating expenses690,910 47,157 
Operating income (loss)$(69,958)$1,382 
Medical Cost Ratio (MCR)98.0 %67.9 %

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

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

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

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

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

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

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Depreciation and amortization increased by $4.8 million for the three months ended March 31, 2022 as compared to the same period in 2021, which was primarily due to amortization expense of $4.4 million resulting from intangible assets acquired as part of the Centrum acquisition, which occurred on July 1, 2021.

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 A Preferred Stock in January 2022, which generated cash proceeds of $750.0 million, as well as through the issuance of common stock in June 2021 in connection with our initial public offering, which generated cash proceeds of $887.3 million.

Cash and investment balances held at regulated insurance entities are subject to regulatory restrictions and can only be accessed through dividends declared to the non-regulated parent company, pending regulatory approval, or through reimbursements related to administrative services agreements with the parent company. The Company declared no dividends from the regulated insurance entities to the parent company during the three months ended March 31, 2022 and 2021. The regulated legal entities are required to hold certain minimum levels of risk-based capital and surplus to satisfy regulatory requirements. As of March 31, 2022 and December 31, 2021, the amounts held in risk-based capital and surplus at regulated insurance legal entities was in excess of the minimum requirements, except for two states where we are working with the state departments of insurance to rectify potential instances of noncompliance.

Our expected primary short-term uses of cash for our regulated insurance entities include ongoing disbursements for claims payments, 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 include operating lease obligations, the Direct Contracting performance year obligation and redeemable noncontrolling interest.

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

Credit Agreement

We have a $350.0 million Credit Agreement, which matures on February 28, 2024. The Credit Agreement contains a covenant that requires the Company to maintain a total debt to capitalization ratio of (a) 0.25 to 1.00. The Credit Agreement also contains a covenant that require us to maintain a minimum liquidity of $150.0 million. As of March 31, 2022, we had no short-term borrowings under the Credit Agreement.

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

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

As of March 31, 2022, we had $46.1 million of outstanding, undrawn letters of credit under the Credit Agreement and $303.9 million of remaining availability thereunder.

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.

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

Cash and Investments

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

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

As of March 31, 2022, we had regulated insurance entity cash and cash equivalents of $1,220.8 million, of which $1.2 million was restricted, short-term investments of $612.0 million, of which $4.4 million was restricted, and long-term investments of $733.5 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)20222021
Net cash provided by operating activities$484,757 $343,603 
Net cash used in investing activities(633,127)(56,275)
Net cash provided by financing activities592,738 200,234 
Net increase in cash and cash equivalents444,368 487,562 
Cash and cash equivalents at beginning of period1,061,179 488,371 
Cash and cash equivalents at end of period$1,505,547 $975,933 

Operating Activities

During the three months ended March 31, 2022, net cash provided by operating activities increased by $141.2 million compared to the three-month period ended March 31, 2021, primarily driven by the increase in consumer growth driving the increased risk adjustment and medical cost payables, as well as accounts payables and other liabilities, partially offset by an increase in our net loss.

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Investing Activities

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

Financing Activities

During the three months ended March 31, 2022, net cash provided by financing activities increased by $392.5 million compared to the three months ended March 31, 2021, primarily driven by $750 million of proceeds from the issuance of Series A Preferred Stock in January 2022, offset by $2.5 million of cash paid for issuance costs. This increase was partially offset by the repayment of our $155.0 million of outstanding borrowings under the Credit Agreement on January 4, 2022, subsequent to the issuance of Series A Preferred Stock. The three months ended March 31, 2021 also included $200.0 million of cash from borrowings under our Credit Facility.

Critical Accounting Policies and Estimates

The critical accounting policies that reflect our significant judgements and estimates used in the preparation of our condensed consolidated financial statements include those described in the 2021 Form 10-K under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates.”

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

Direct Contracting Receivable and Performance Year Obligation

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

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

Recently Adopted Accounting Pronouncements

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

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Interest Risk

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

ITEM 4. CONTROLS AND PROCEDURES

Limitations on Effectiveness of Controls and Procedures

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

Evaluation of Disclosure Controls and Procedures

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

Previously Reported Material Weakness in Internal Control Over Financial Reporting

As disclosed in our 2021 Form 10-K, we previously identified a material weakness related to claims pertaining to our IFP business, which were processed by a third-party service provider. The claims were processed inaccurately according to terms of provider contracts and/or related fee schedules, or did not consistently go through claims re-pricing, where necessary, prior to payment. As of March 31, 2022, we continue to have a material weakness in IFP third-party claims processing. Since the identification of this material weakness, we have been expanding the comprehensiveness of our pre-pay and post-pay claims quality assurance procedures and datamining capabilities designed to enable targeted identification of potential claims payment discrepancies or other process gaps. Additionally, over the course of 2022, we will be improving provider data (e.g., provider roster data) and the processes of updating that data, both of which have contributed to the identified claims processing errors.

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

We are not presently a party to any litigation the outcomes of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows, or financial condition.

Item 1A. Risk Factors

This Quarterly Report on Form 10-Q should be read in conjunction with the risk factors included in our 2021 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 2021 Form 10-K, except for the following risk factor, which supplements the “Risk Factors” section in our 2021 Form 10-K.

Our expansion into Direct Contracting presents new risks to our business.

We expanded our business into CMS’ new Direct Contracting model (“DC Model”) in January 2022, enabling us to target a larger market opportunity, the Medicare FFS market, which is the largest segment of Medicare. As such, our Direct Contracting business is in the early stages of development, and we are subject to the risks inherent to the launch of any new business, including the risks that we may not generate sufficient returns to justify our investment, it may take longer or be more costly to achieve the expected benefits from this new program, and that it may require us to, at least initially, divert management attention and other resources from our existing businesses. In connection with our expansion into Direct Contracting, we are forming relationships with a greater number of physicians, which may pose challenges to scaling quickly, influencing physician behavior and directly engaging beneficiaries, and we may face additional new risks and difficulties, many of which we may not be able to predict or foresee. As a new advanced payment model, CMMI is constantly evaluating the program and has already revised the structure and design of the program for 2023, renaming the model “ACO REACH,” which stands for Realizing Equity, Access, and Community Health. The change to ACO REACH and potential future changes may have a significant impact on our ability to carry out our business. Similarly, while the Direct Contracting program is expected to transition to ACO REACH and continue through 2026, CMMI can determine to terminate the program at any time, and in some cases may be required to do so. If the program is terminated, we would need to reevaluate our Medicare FFS strategic options, which in turn could reduce the return on our investments and negatively impact our business, financial condition, results of operations and future prospects.

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

Unregistered Sales of Equity Securities

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

The foregoing transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. The sale of the above securities was deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving any public offering. The recipients of the securities in this transaction represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were placed upon the securities issued in this transaction.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.
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Item 6. Exhibits
EXHIBIT INDEX
Exhibit
Number
Description
3.1
3.2
3.3
10.1
10.2†*
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 2022, filed with the SEC on May 12, 2022, 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 12, 2022By:/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
SEPARATION AGREEMENT
This Separation Agreement (this “Agreement”) and the Release, which is attached and incorporated by reference as Exhibit A (“Release”), are made by and between [__] (“Employee”), and Bright Health Management, Inc. (“Employer” and, together with “Employee”, the “Parties”).
The Employer and Employee wish to end their employment relationship in an honorable, dignified and orderly fashion. Toward that end, the Parties have agreed to separate according to the terms set forth in this Agreement and the Release.
The Employer does not believe that it has any Claims against the Employee, nor does the Employee believe that the Employee has any Claims against the Employer or any of its parent, subsidiaries, affiliates, present or former officers, directors, shareholders, employees, agents or attorneys, successors, predecessors, assigns, or personal representatives (individually a “Released Party” and, collectively, the “Released Parties”). Nevertheless, the Parties have agreed upon the terms set forth in this Agreement, in full resolution of any actual or potential Claims arising out of the Employee’s employment with and separation from the Employer and both Parties enter into this Agreement and the Release intending to waive, settle and release all liability for and recovery from Claims either party ever had, now has, or might have against the other and the Released Parties as of the date of the Agreement and the Release.
IN CONSIDERATION OF THE FOREGOING RECITALS AND THE MUTUAL PROMISES CONTAINED IN THIS AGREEMENT, THE PARTIES AGREE AS FOLLOWS:
1.Termination Date. The Employee’s employment with the Employer will terminate on [__] (the “Termination Date”).
2.Time to Consider Offer. The Parties have agreed that the Employee has [__] days to consider the terms of this Agreement and the Release; provided, the Employee shall not sign this Agreement and the Release until after the Termination Date. If the Employee has not executed the Release on or before the date that is [__] days after the date this Agreement is provided to Employee, or the Employee rescinds or revokes the Release, the Employee forfeits all rights to the Consideration offered under this Agreement.
3.Consideration. Upon receipt by the Employer of a fully executed copy of this Agreement and the Release, and after the expiration of all statutory rescission and revocation periods without any revocation of the Release, and provided the Employee complies with all obligations hereunder and those contained in each agreement between Employee and Employer or one of its affiliates containing restrictive covenants that apply post-employment (collectively, the “Restrictive Covenant Agreements”), the Employer shall provide the Employee with the following consideration (the “Consideration”):
(a)Separation Pay. Subject to the terms of this Agreement and attached Release, the Employer will pay a total gross amount of (i) $[__], which consists of [__] weeks of Employee’s base salary (such number of weeks, the “Severance Period”), and (ii) $[__], consisting of Employee’s fiscal year [__] target annual bonus multiplied by [__]. These payments will be made on the Employer’s ordinary payroll dates starting within 2 pay periods after the Employer receives a fully executed copy of this Agreement and the Release, and will be subject to standard payroll deductions and withholdings.
(b)Benefit Coverage. Subject to the terms of this Agreement and Release, as of the Termination Date, if Employee participates in the Company’s group medical, dental, and/or vision plans (each, a “Health Plan” and collectively, the “Health Plans”), and Employee properly and timely elects to continue coverage under such Health Plan(s) in accordance with the continuation requirements of COBRA, Employer shall pay the insurer(s) providing benefits under such Health Plan(s), on Employee’s behalf, the excess, if any, of the monthly premium cost for COBRA coverage over the monthly premium cost for active employee coverage (the “COBRA Benefit”), measured, in each case based on Employee’s level of coverage under such Health Plan(s) immediately prior to the Termination Date. Payment of the COBRA Benefit shall be made on a monthly basis for the period beginning on the first day of the month following
    



the month that includes the Termination Date (such earlier month, the “Coverage Loss Month”) and ending on the earliest to occur of (i) the last day of the [_] month following the Coverage Loss Month; (ii) the date on which Employee becomes eligible for medical, dental or vision benefits with another employer; or (iii) the date Employee’s COBRA continuation coverage would end under the terms of the Health Plan(s) or applicable law (the “COBRA Subsidy Period”).  Payments of the COBRA Benefit shall commence as soon as reasonably practicable following the date on which the Release becomes effective. Following the COBRA Subsidy Period, and provided that the COBRA coverage period has not expired, Employee shall be entitled to continue his/her elected COBRA coverage for the remainder of the COBRA coverage period, at Employee’s own and sole expense.
(c)Cash Bonus. The Employer will also pay to Employee a prorated portion of the bonus, if any, payable in accordance with the terms of the applicable Employer bonus plan for fiscal year [__] (other than any requirement that participant remain employed through the end of the calendar year or at the time of payment), with such proration based on the number of months Employee is employed in fiscal year [__], subject to all applicable deductions and withholdings. The cash bonus will be paid at the time the Employer pays the bonus to other similarly situated employees but no later than [__].
(d)Equity Based Awards. All of Employee’s outstanding time based equity awards that are unvested as of the Termination Date shall continue to vest during the period of time after the Termination Date equal to the Severance Period (as defined above). Any such equity awards that are not vested by their terms by the end of such time period shall be forfeited. Employee shall have 90 days from the end the Severance Period to exercise any stock options that are vested as of the end of the Severance Period. Other than as set forth herein, the terms and conditions of the award agreements governing Employee’s equity based awards granted by the Company (the “Award Agreements”) shall remain unchanged.
The Parties agree that the foregoing satisfies all of the Employer’s obligations to the Employee. The Parties further agree that the Consideration set forth in Section 3 is over and above anything owed to Employee by law or under the policies of Employer, and it is provided to Employee in exchange for, and specifically contingent upon, the Employee entering into this Agreement and the attached Release.
4.Code §409A. The Employee and Employer intend that the benefits provided under this Agreement will comply, in form and operation, with an exception to or exclusion from the requirements of 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 payment and benefits to be provided under Section 3 are intended to be exempt from the requirements of Code §409A because such payment 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).
5.Other Benefits. Except as otherwise specifically provided in this Agreement the Employee’s participation in Employer sponsored benefits plans shall end on the Termination Date. To the extent the Employee is a participant in any Employer-sponsored or Released Party-sponsored employee benefit plan, payment of any benefits under such plan, including the amount and timing of payments, will be governed by the terms of such employee benefit plan.
6.Release of Claims. In exchange for the Consideration stated in this Agreement, the Employee will voluntarily sign the Release within the time period described in Section 2 of this Agreement and not before the Employee’s Termination Date. The Employee understands that the Employee is not entitled to the Consideration described in Section 3 of this Agreement, unless the Employee signs, and does not rescind or revoke, the attached Release within the time period described in that Release.
The Employee acknowledges and agrees that the Consideration provided under this Agreement is sufficient to support the Employee’s execution and compliance with all the terms of this Agreement and the Release and the Employee shall have no basis at any time to dispute the adequacy of the Consideration provided under this Agreement. The Consideration the Employee will receive under this Agreement, for
    
2



settling and releasing Claims (as such term is defined in the Release), is contingent upon the Employee’s agreement to be bound by the terms of the Release. Accordingly, if the Employee revokes the Release, the Employee is not entitled to the Consideration described in this Agreement.
7.Knowing Release of Claims. The Release may be subject to applicable statutes including, but not limited to, [the Older Workers Benefit Protection Act of 1990 (“OWBPA”); ]Title VII of the Civil Rights Act of 1961 (“Title VII”); Section 1981 of the Civil Rights Act of 1966 (“Section 1981”); the Americans with Disabilities Act (“ADA”); the Family and Medical Leave Act (“FMLA”) (regarding existing but not prospective claims); the Equal Pay Act; Section 1981 of U.S.C. Title 42; the Fair Credit Reporting Act (“FCRA”); [the Age Discrimination in Employment Act of 1967 (“ADEA”);] the Uniform Services Employment and Reemployment Rights Act (“USERRA”); the Genetic Information Nondiscrimination Act (“GINA”); the Immigration Reform and Control Act (”IRCA”); any state, local, municipal or other law, rule, regulation, code, ordinance; any other federal, state, local or other law, rule, regulation, constitution, code, guideline or ordinance; any public policy, contract (oral or written, express or implied), tort or common law; including the laws, regulations, and sources of legal rights listed in Schedule 1 to the Release, and any statute, common law, agreement or other basis for seeking or recovering any costs, fees or other expenses, including but not limited to attorneys’ fees and/or costs.
(a)[The OWBPA provides that a covered individual cannot waive a right or claim under the Age Discrimination in Employment Act of 1967 (“ADEA”), as amended, unless the waiver is knowing and voluntary. This requires, inter alia, that the Employee be advised to consult with an attorney prior to signing this Agreement and Release. In this Agreement, the Release and any accompanying attachments, to the extent applicable to the Employee, the Employee has been advised of the OWBPA requirements for a knowing release, and acknowledges and agrees the attached Release is signed voluntarily, and with full knowledge of the consequences of the Release. In accordance with the disclosure requirements of the OWBPA, Employee is advised that Employee is being terminated as part of a group separation program (the “Program”). Individuals who have been selected for separation of employment as part of this Program, have been selected for termination from their employment based on Employer’s business needs and one or more of the following factors: [__]. Attached as Schedule 2 to the Release is a list of the job titles and ages as of the Termination Date of all individuals selected for the Program. Attached as Schedule 3 to the Release is a list of the job titles and ages as of the Termination Date of all individuals currently employed in the same decisional unit as Employee who were not selected for termination in connection with the Program.]
8.Waiver of Rights to Recovery. By entering into this Agreement and the attached Release, the Employee waives any right the Employee may have to any form of recovery or compensation from any legal, administrative or other charge, claim, complaint, or action which has been, is or may be filed by the Employee or on the Employee’s behalf based on the Employee’s employment with, or separation of employment from, the Employer or any Claims (as such term is defined in the Release) against the Employer or any other Released Party.
9.Employee Acknowledgments. Employee acknowledges that the Employee has read this entire Agreement and Release, and understands all of its terms, been advised to consult with an attorney and has had a sufficient opportunity to review this Agreement and the Release with the Employee’s attorney, and the Employee is voluntarily and knowingly entering into this Agreement and the Release with full knowledge and understanding of the Employee’s legal rights and obligations.
Employee warrants that the Employee has full legal authority to release any and all claims as specified in this Agreement and the Release and to perform all other obligations as specified herein. The Employee understands that this Agreement will have a final and binding effect and that by executing this Agreement, the Employee may be giving up legal rights.
Employee affirms that Employee has not filed, caused to be filed, or presently is a party to any claim against any Released Party. Nothing in this Agreement or these Affirmations is intended to impair Employee’s rights under whistleblower laws or cause Employee to disclose Employee’s participation in
    
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any governmental whistleblower program or any whistleblowing statute(s) or regulation(s) allowing for anonymity.

Employee also affirms that Employee has been paid and/or has received all compensation, wages, bonuses, commissions, paid sick leave, predictability pay, and/or benefits which are due and payable as of the date Employee signs this Agreement and Employee has been reimbursed for all necessary expenses or losses incurred by Employee within the scope of Employee’s employment. Employee affirms that Employee has been granted any leave to which Employee was entitled under the Family and Medical Leave Act or related state or local leave or disability accommodation laws. Employee further affirms that Employee has no known workplace injuries or occupational diseases and that Employee has been granted or has not been denied any leave to which Employee was entitled under the Family and Medical Leave Act or disability accommodation laws.

    Employee also affirms that Employee has not divulged any proprietary or confidential information of Employer or any of its affiliates and will continue to maintain the confidentiality of such information consistent with Employer’s policies, the Employee Confidentiality, and Assignment of Inventions Agreement, and/or common law. Employee further affirms that Employee has not been retaliated against for reporting any allegations of wrongdoing by Employer or its officers, including any allegations of corporate fraud.

Employee and Employer acknowledge Employee’s rights to make truthful statements or disclosures required by law, regulation, or legal process and to request or receive confidential legal advice, and nothing in this Agreement shall be deemed to impair those rights. Employee affirms that all of Employer’s decisions regarding Employee's pay and benefits through the date of Employee's execution of this Agreement were not discriminatory based on age, disability, race, color, sex, religion, national origin or any other classification protected by law.

10.Return of Property and Commitment to Cooperate in Transition. Employee affirms that Employee has returned to Employer, and not retained in any form or format, all Employer documents, data, and other property that was in the Employee’s possession or control. Employer “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 the Employer’s business that the Employee has compiled, generated or received while working for the Employer, including all copies, samples, computer data, disks, or records of such material. Employee has also permanently deleted all documents, data, and other property from any electronic media in the Employee’s possession, custody, or control (including, but not limited to, computers, cell phones, hand-held devices, back-up devices, zip drives and PDAs) or to which the Employee has access (including, but not limited to, remote e-mail exchange servers, back-up servers and off-site storage), all documents or electronically stored images of the Employer, including writings, drawings, graphs, charts, sound recordings, images, and other data or data compilations stored in any medium from which such information can be obtained.
Furthermore, Employee affirms that Employee has provided Employer with a list of any documents Employee created or is otherwise aware of that are password-protected and the password(s) necessary to access such password-protected documents. The Employee shall cooperate with the Employer and shall use the Employee’s best efforts to ensure that both the Employer’s interests and those of the Employee are mutually protected, and to be available, on a reasonable basis, to answer questions that may arise to achieve a smooth transition. Moreover, Employee agrees, upon request by any Released Party, to cooperate in any investigation, litigation, arbitration, or administrative proceeding involving any Released Party, without requiring service of a subpoena or other legal process. Employee will be reasonably available to consult with any representative of any Released Party, to provide information, and, if required or requested, to appear to give testimony.
The Employer’s obligations under this Agreement are contingent upon the Employee returning all Employer documents, data, and other property and cooperating with the Employer as set forth above.
    
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11.Non-Disparagement. The Parties mutually agree that they will not make disparaging or defamatory comments regarding one another, regardless of the forum. The Employee 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, the Employee will make no critical, disparaging or defamatory comments regarding the Employer or any Released Party in any respect or make any comments concerning the conduct or events which precipitated the Employee’s separation. Furthermore, the Employee 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 Employer or any Released Party. This provision does not prohibit the Employee from participating in an EEOC or other civil rights or other government enforcement agency charge, investigation or proceeding. Further, nothing in this Agreement prohibits Employee from testifying in an administrative, legislative or judicial proceeding related to any alleged unlawful conduct or sexual harassment when Employee 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 Employee has reason to believe is unlawful.
12.Limited Restrictions on Certain Post-Employment Activities. In order to protect the Employer’s critical business interests, including but not limited to those with respect to Confidential Information (as defined Section 13 of this Agreement), trade secrets, customer, employee, and vendor relationships, and in order to protect the Employer’s investment in its products, services, technology, business planning, sales and marketing programs, and business strategies and plans, the Employer and Employee agree to the following limited restrictions:
(a)Limited Restriction on Competitive Activities. Employee agrees that, during the term of employment with the Employer and for a period equal to the Severance Period (as defined above) after employment with the Employer ends whether voluntarily or involuntarily, the Employee will not alone, or in any capacity with another firm:
(i)be employed by, work as a consultant for, or directly or indirectly render services to, invest in or lend to any person, firm or corporation conducting business in any of the states (including the District of Columbia and all U.S. territories) in which the Employer conducted business during Employee’s employment, by engaging in research, development, manufacture, marketing, sales, administrative support or promotion of any products, services, or technology (whether commercially available or under development) that are competitive with any products, services, or technology of the Employer of which the Employee had knowledge or responsibilities, including but not limited to the development, marketing, sales or administrative support of Employer products, services, or technology, including the direct or indirect supervision of Employer employees and consultants engaged in those activities;
(ii)engage in competitive conduct, disrupt, damage, impair, or interfere with the business of the Employer whether by way of interfering with or disrupting the relationship of the Employer with its clients, customers, representatives, vendors or suppliers;
(iii)directly or indirectly call upon or solicit any customer or supplier of the Employer or induce, encourage or influence any customer or supplier to terminate or otherwise adversely modify its business relationship with the Employer; or
(iv)directly or indirectly hire, solicit, or persuade any of the Employer’s employees, or former employees who worked for the Employer during the 12 months prior to the date of termination of Employee’s employment, for the purpose of hiring them, engaging them as consultants, or inducing them to leave their employment with the Employer, attempt to hire, solicit, or persuade or assist anyone else in the solicitation of such employees or former employees.
    
5



Employee agrees that if Employee is approached by a current or former Employer employee regarding potential employment, consultation, or contract, as described above during the time period covered by this Section 12, Employee must promptly (1) inform the employee or former employee of his or her non-solicitation obligation described above and (2) refrain from engaging in any communication with the employee or former employee regarding potential employment, consultation, or contract.
(b)Exceptions to the Foregoing Restrictions. The restrictions contained in Section 12 of this Agreement will not prevent the Employee from accepting employment with a large diversified organization with separate and distinct divisions that do not compete, directly or indirectly, with the Employer, as long as prior to accepting such employment the Employer receives a written assurance from the Employee, satisfactory to the Employer, to the effect that the Employee will not render any services to, or have any ability to provide strategic direction or oversight to, any division or business unit that competes, directly or indirectly, with the Employer. Nor do the restrictions in Section 12 of this Agreement prohibit Employee from being a passive owner of not more than 2% of the outstanding stock of any share class of a corporation which is publicly traded, so long as Employee has no active participation in the business of the corporation. During the restrictive period set forth in Section 12(a), the Employee will inform any new employer, prior to accepting employment, of the existence of this Agreement and provide such employer with a copy of this Agreement.
13.Compliance with Prior Agreements. The Employee remains bound by the terms of the agreements which the Employee previously entered into with the Employer and its affiliates including, without limitation, the Restrictive Covenant Agreements, to the extent that they do not conflict with this Agreement. In addition, the Employee agrees not to divulge or use any trade secrets, confidential information, or other proprietary information of the Employer or any other Released Party which the Employee obtained or to which the Employee had access during employment with the Employer. For purposes of this latter obligation, “Confidential Information” means information that is not generally known and that is proprietary to the Employer or any other Released Party or that the Employer or any other Released Party is obligated to treat as proprietary. It includes, but is not limited to, information or data of the Employer or any other Released Party concerning its business, financial statements, sales and marketing plans, customer contact information and data, products, proposed products, plans, ideas, drawings, designs, concepts, inventions, discoveries, improvements, patent applications, know-how, trade secrets, prototypes, processes, techniques and other proprietary information. It does not include information that: (a) is already lawfully in the possession of the Employee through independent means at the time of disclosure thereof; (b) is or later becomes part of the public domain through no fault of the Employee; (c) is lawfully received by the Employee from a third party having no obligations of confidentiality to the Employer or any other Released Party; or (d) is required to be disclosed by order of a governmental agency or by a court of competent jurisdiction. Any information that the Employee knows or should reasonably know is Confidential Information, or that the Employer or any other Released Party treats as Confidential Information, will be presumed to be Confidential Information.
It is the intent of the Parties that this Agreement be treated as Confidential Information as defined in the preceding paragraph. The Employee warrants that the Employee has not disclosed, and agrees that the Employee will not in the future disclose, the terms of this Agreement, or the terms of Consideration to be paid by the Employer to the Employee as part of this Agreement, to any person other than the Employee’s attorney, spouse, tax advisor, prospective future employer or future employer, or representatives of the EEOC, or comparable state agency, who shall be bound by the same prohibitions against disclosure as bind the Employee, and the Employee shall be responsible for advising these individuals of this confidentiality provision and obtaining their commitment to maintain such confidentiality. The Employee shall not provide or allow to be provided to any person this Agreement, or any copies thereof, nor shall the Employee now or in the future disclose in any way any information concerning any purported claims, charges, causes of action or this settlement to any person, with the sole exception of communications with the Employee’s spouse, attorney, tax advisor, prospective future employer or future employer, unless otherwise ordered to do so by a court or agency of competent jurisdiction.
    
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Pursuant to the Defend Trade Secrets Act of 2016, Employees may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed in a lawsuit or other proceeding, if such filing is made under seal. Further, Company will not retaliate against Employee in any way for disclosure made in accordance with the law. In the event a disclosure is made, and Employee files a lawsuit or other proceeding against Company alleging that Company retaliated against Employee because of Employee’s disclosure, Employee may disclose the relevant trade secret to Employee’s attorney and may use the trade secret in the proceeding if (i) Employee files any document containing the Trade Secret under seal, and (ii) Employee not otherwise disclose the Trade Secret except pursuant to court order.
14.Non-Admissions. The Parties expressly deny any and all liability or wrongdoing and agree that nothing in this Agreement shall be deemed to represent any concession or admission of such liability or wrongdoing or any waiver of any defense.
15.No Assignment. The Employee warrants and represents that the Employee has not assigned or transferred any claim or interest that is the subject of this Agreement to any person or entity.
16.Beneficiaries, Successors and Assigns. The Parties agree that any Employer (and any other Released Party) successor or assignee is a beneficiary of this Agreement and may rely on and enforce this Agreement to secure or defend its rights hereunder. The Employer agrees that its promises in this Agreement shall be binding on any successor or assignee of the Employer’s business or operations.
17.Entire Agreement. Other than the non-conflicting terms of the Restrictive Covenant Agreements, the Award Agreements governing any equity based awards granted to Employee by the Employer, continuing obligations under the agreements set forth herein, and any related Employer policy, this is the entire Agreement between the Employer and Employee relating to the Employee’s termination from employment.
18.Invalidity and Severability. In case any one or more of the provisions of this Agreement or the Release shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Agreement and the Release will not in any way be affected or impaired thereby.
19.Governing Law. The Employer’s principal place of business is Minneapolis, Minnesota, and accordingly, the Employee agrees that this Agreement shall be governed by, and be construed and enforced in accordance with Minnesota law, without reference to choice of law, except to the extent it is pre-empted by federal law. Employee agrees to submit to the personal jurisdiction of the State of Minnesota and that any dispute relating to this Agreement must be brought in federal court within the State of Minnesota, Hennepin County or within the state in which Employee last worked for Employer.
20.Employee Acknowledgments. The Employee acknowledges that the Employee has read this entire Agreement and Release, and understands all of its terms, been advised to consult with an attorney and has had a sufficient opportunity to review this Agreement and the Release with the Employee’s attorney, and the Employee is voluntarily and knowingly entering into this Agreement and the Release with full knowledge and understanding of the Employee’s legal rights and obligations.
[Remainder of page left intentionally blank; signature page follows.]
    
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The Employee warrants that the Employee has full legal authority to release any and all claims as specified in this Agreement and the Release and to perform all other obligations as specified herein. The Employee understands that this Agreement will have a final and binding effect and that by executing this Agreement, the Employee may be giving up legal rights.
In witness whereof, the Employee and Employer have duly executed this Agreement on the dates listed below.

EMPLOYEE:

Dated:                                                
Signature

EMPLOYER:

Bright Health Management, Inc.


Dated:                        By:                        
                        Name:                                                    Its:                        



    



EXHIBIT A

Form of Release

See attached.
    




RELEASE
1.Definitions. I intend all words used in this Release to have their plain meanings in ordinary English. Technical legal words are not needed to describe what I mean. Specific terms I use in this Release have the following meanings:
(a)I,” “me,” and “my” include me, [__], and anyone who has or obtains any legal rights or claims through me.
(b)Employer,” as used in this Release, shall at all times mean Bright Health Management, Inc.
(c)Released Party” or “Released Parties”, individually and collectively, means Universal Care, Inc. and its current and prior parent corporations, subsidiaries, affiliates, successors, predecessors and assigns, present or former officers, directors, shareholders, agents, assigns, employees and attorneys, whether in their individual or official capacities, benefit plans and plan administrators and insurers.
(d)Claim(s)” and “Release of Claims” means, except as otherwise provided below in this Release, actions or causes of action, suits, claims, charges, complaints, contracts (whether oral or written, express or implied from any source), and promises, whatsoever, in law or equity, that I ever had, may now have or hereafter can, shall or may have against the Employer or any other Released Party as of the date of the execution of this Release, including all unknown, undisclosed and unanticipated losses, wrongs, injuries, debts, claim or damages to me for, upon, or by reason of any matter, cause or thing whatsoever, that are in any way related to my hire by, employment with or separation (termination of employment) from the Employer.
(e)By signing this Release, I am agreeing to release any actual and potential Claims I have or may potentially have, either as an individual or standing in the shoes of the government, under any federal, state or local law, administrative regulation or legal principle (except as provided in Section 4 of this Release) against the Employer and all other Released Parties. The following listing of laws and types of claims is not meant to, and shall not be interpreted to, exclude any particular law or type of claim, law, regulation or legal principle not listed. I understand I am releasing all my Claims against the Employer and all Released Parties including, but not limited to, any Claims for wrongful termination in violation of public policy or expenses, Claims for invasion of privacy; breach of written or oral, express or implied, contract; fraud or misrepresentation; and any Claims under the following, as amended: [the Age Discrimination in Employment Act of 1967 (“ADEA”), 29 U.S.C. § 626; the Older Workers Benefit Protection Act of 1990 (“OWBPA”), 29 U.S.C. § 626(f);] Title VII of the Civil Rights Act of 1964 (“Title VII”), 42 U.S.C. § 2000e, et seq.; the Americans with Disabilities Act (“ADA”); the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001, et seq. (except for any claims for vested benefits under ERISA); the Equal Pay Act (“EPA”), 29 U.S.C. § 206(d); the Family and Medical Leave Act, 29 U.S.C. § 2601, et seq.; the Genetic Information Nondiscrimination Act of 2008 (“GINA); the False Claims Act, 31 U.S.C. § 3729, et seq.; all other federal, state, local or foreign statute, law, rule, regulation, ordinance or order, including, but not limited to laws, regulations, and sources of legal rights listed in Exhibit 1 to this Release and those Claims for violation of any civil rights laws based on protected class status; Claims for assault, battery, defamation, intentional or negligent infliction of emotional distress, breach of the covenant of good faith and fair dealing, promissory estoppel, negligence, negligent hiring, retention or supervision, retaliation, constructive discharge, violation of whistleblower protection laws, unjust enrichment, violation of public policy, and all other Claims for unlawful employment practices, and all other common law or statutory Claims.
2.Agreement to Release My Claims. Except as stated in Section 4 of the Release, in consideration of the payments to be made to me under the Separation Agreement by and between the
    



Employer and me to which this Release is attached (the “Separation Agreement”), I agree to release all my Claims, waive any rights to my Claims and forever discharge the Employer and all Released Parties of and from any and all liability to me for actions or causes of action, suits, or Claims. To the maximum extent permitted by law, I agree that I will not seek and I waive any right to accept any relief or award from any charge or action against the Employer or any other Released Party before any federal, state, or local administrative agency or federal state or local court whether filed by me or on my behalf with respect to any Claim or right covered by this Release. I also agree to withdraw any and all of my charges and lawsuits against the Employer or any other Released Party; except that I may, but am not required to, withdraw or dismiss, or attempt to withdraw or dismiss, any charges that I may have pending against the Employer or any other Released Party with the EEOC or other civil rights enforcement agency.
In exchange for my agreement to release my Claims, I am receiving satisfactory consideration (compensation) from the Employer to which I am not otherwise entitled by law, contract, or under any Employer policy. The consideration I am receiving is a full and fair payment for the release of all my Claims. Neither the Employer nor any other Released Party owes me anything in addition to what I will be receiving.
3.[Older Workers Benefit Protection Act. The OWBPA applies to individuals age forty (40) and older and sets forth certain criteria for such individuals to waive their rights under the ADEA in connection with an exit incentive program or other employment termination program. I understand and have been advised that this Release of my Claims is subject to the terms of the OWBPA. The OWBPA provides that a covered individual cannot waive a right or claim under the ADEA unless the waiver is knowing and voluntary. If I am a covered individual, I acknowledge that I have been advised of this law, and I agree that I am signing this Release voluntarily, and with full knowledge of its consequences. I understand that my termination is part of a group separation program, and therefore the Employer is giving me at least forty-five (45) days from the date I received a copy of this Release to decide whether I want to sign it. I acknowledge that I have been advised to use this time to consult with an attorney about the effect of this Release. If I sign this Release before the end of the forty-five (45) day period it will be my personal, voluntary decision to do so, and will be done with full knowledge of my legal rights. I agree that material and/or immaterial changes to the Separation Agreement, this Release, or any exhibits to the Separation Agreement or this Release, will not restart the running of this consideration period. The Separation Agreement and this Release have each been written in a way that I understand.]
4.Exclusions from the Release.
(a)The term “Claims” does not include my rights, if any, to claim the following: benefits and/or the right to seek benefits under applicable unemployment insurance and worker’s compensation statutes; Claims for my vested, accrued post-termination benefits under any 401(k) or similar tax-qualified retirement benefit plan; my rights to group health plan coverage pursuant to section 4980B of the Internal Revenue Code of 1986, as amended (“COBRA”); my rights to enforce the terms of this Release; claims which by law cannot be waived by signing this Release; or my rights to assert Claims that are based on events occurring after this Release becomes effective.
(b)Nothing in this Release interferes with my right to file or maintain a charge with the Equal Employment Opportunity Commission (“EEOC”) or other local civil rights enforcement agency, or participate in any manner in an EEOC or other such agency investigation or proceeding. Nor does anything in this Release preclude, prohibit, or otherwise limit, in any way, my rights and abilities to contact, communicate with, report matters to, or otherwise participate in any whistleblower program administered by any such agencies. Further, nothing in this Release prohibits me from testifying in an administrative, legislative or judicial proceeding related to any alleged unlawful conduct or sexual harassment when I have been required or requested to attend the proceeding pursuant to a court order, subpoena, or written request from an administrative agency or the Legislature. Moreover, nothing in this Release prevents me from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct I have reason to believe is unlawful. Further,
    



nothing in this Release prohibits me from testifying in an administrative, legislative or judicial proceeding related to any alleged unlawful conduct or sexual harassment when I have been required or requested to attend the proceeding pursuant to a court order, subpoena, or written request from an administrative agency or the Legislature. Moreover, nothing in this Release prevents me from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct I have reason to believe is unlawful. I understand, however, to the maximum extent permitted by law, I understand, however, that I am waiving my right to recover individual relief including, but not limited to, back pay, front pay, reinstatement, attorneys’ fees, and/or punitive damages, in any administrative or legal action whether brought by the EEOC or other civil rights enforcement agency, me, or any other party.
(c)[Nothing in this Release interferes with my right to challenge the knowing and voluntary nature of this Release under the ADEA and/or OWBPA.]
(d)I agree that the Employer and all other Released Parties reserve any and all defenses which each has or might have against any Claims brought by me. This includes, but is not limited to, the Employer’s (or Released Party’s) right to seek available costs and attorneys’ fees as allowed by law, and to have any monetary award granted to me, if any, reduced by the amount of money that I received in consideration for this Release.
(e)If any claim is not subject to release, to the extent permitted by law, I waive any right or ability to be a class or collective action representative or to otherwise participate in any putative or certified class, collective or multi-party action or proceeding based on such a claim in which Employer or any other Released Party identified in this Agreement is a party.
5.Effective Date/Right to Revoke. [I understand that insofar as this Release relates to my rights under the ADEA, it shall not become effective or enforceable until seven (7) days after I sign it. I have the right to revoke this Release insofar as it extends to potential Claims under the ADEA by written notice to Employer within seven (7) calendar days following my signing this Release. Any such revocation must be in writing, must specifically state that “I hereby revoke my waiver of ADEA Claims pursuant to our Separation Agreement and Release”, and must be either hand-delivered to the Employer or, if sent by mail, post-marked within the seven (7) day period of my signing this Release, and sent by certified mail, return receipt requested, and addressed as follows]:

Bright Health Group, Inc., Suite 1200
Attn: Legal Department - Employment
8000 Norman Center Drive
Minneapolis, MN 55437

I understand that the Consideration I am receiving for settling and releasing my Claims is contingent upon my agreement to be bound by the terms of this Release. Accordingly, if I decide to revoke this Release as provided herein, I understand that I am not entitled to the Consideration offered in the Separation Agreement. [I further understand that if I attempt to revoke my release of my ADEA Claims, I must immediately return to Employer any Consideration that I may have received under my Separation Agreement, provided however, that if I decide to challenge the knowing and voluntary nature of this Release under the ADEA and/or the OWBPA, I am not required to return to Employer any Consideration that I have received under my Separation Agreement.]

6.I Understand the Terms of this Release. The Employer advised me of my right to review this Release with my own attorney. I have had the opportunity to review this Release and related documents with my attorney and have read this Release carefully and understand all its terms. In agreeing to sign this Release, I have not relied on any oral statements or explanations made by the Employer or any other Released Party, including their employees or attorneys. I understand and agree that, except as specified within the Separation Agreement, this Release and the Separation Agreement contain all the agreements between the Employer (and any other Released Party) and me.
    



I understand this Release is a very important legal document and I agree to be bound by the terms of this Release.

Dated:             , 2022                                    
Signature
                            Name:                     

    



Schedule 1

State statues and other sources of legal rights
Alabama
The Alabama Age Discrimination Act; Alabama “Guns in the Parking Lot Act,” Ala. Act 2013-283; Alabama workers’ compensation and/or retaliatory discharge statutes, Ala. Code § 25-5-11.1 et seq.; Clarke-Figures Equal Pay Act, Ala. Act No. 2019-519; all Alabama laws, rules, regulations and/or ordinances.
Arizona
The Arizona Employment Protection Act; The Arizona Civil Rights Act; The Arizona Fair Wages and Healthy Families Act; The Arizona Wage Statutes; The Arizona Constructive Discharge Statute.
Colorado
The Colorado Anti-Discrimination Act, as amended; The Colorado Lawful Activities Statute, § 24-34-402.5; The Colorado Equal Pay Law; The Colorado Paid Sick Leave Law; The Colorado Public Health Emergency Whistleblower Law; The Colorado Minimum Pay Standards Order 38 (COMPS Order), as amended by any other subsequent executive order or legislative act; The Colorado Wage Claim Act; The Colorado Labor Peace Act; The Colorado Civil Rights Commissions’ Regulations; Retaliation provisions of the Colorado Workers’ Compensation Law; The Colorado Constitution.
Florida
Florida Civil Rights Act; Florida’s Private-Sector Whistleblower; Florida’s Statutory Provision Regarding Retaliation/Discrimination for Filing a Workers’ Compensation Claim; Florida Wage Discrimination Law; The Florida Constitution; Florida Minimum Wage Statute; The Florida Equal Pay Act; Florida AIDS Act; Florida OSHA; Florida Discrimination on the Basis of Sickle Cell Trait Law; Florida’s Domestic Violence Leave Laws; Florida’s Preservation and Protection of the Right to Keep and Bear Arms in Vehicles Act; Florida’s Wage Payment Laws; Florida’s General Labor Regulations; Those other provisions of the Florida Statutes that lawfully may be released.
Iowa
The Iowa Jury Duty Law; The Iowa Witness Duty Law; The Iowa Elected Officials Leave of Absence Law; The Iowa Emergency Response Leave Law; The Iowa Military Leave/Re-employment Law; The Iowa Smokefree Air Act; The Iowa WARN Act; The Iowa Civil Rights Act; The Iowa Whistleblower Protection Law (public employees only); The Iowa Job Reference Immunity Law; The Iowa Personnel Record Law; The Iowa AIDS Testing Law; The Iowa Genetic Testing Law; The Iowa Minimum Wage Law; The Iowa Wage Payment Collection Law; The Iowa Occupational Safety and Health Act; The Non-English-Speaking Employees Law; The Iowa Labor Union Membership Law; The Iowa Labor Boycotts and Strikes Law; The Iowa provisions regarding retaliation/discrimination for filing a workers’ compensation claim; The Iowa law prohibiting discrimination or retaliation as a result of compliance with communicable disease requirements.
Illinois
The Illinois Human Rights Act; 820 ILCS 305/4(h) of the Illinois Workers’ Compensation Act; Illinois common law regarding retaliation or discrimination for filing a workers’ compensation claim; Illinois Equal Pay Act; Illinois School Visitation Rights Act; Illinois AIDS Confidentiality Act; Illinois Right to Privacy in the Workplace Act; Illinois Genetic Information Privacy Act; Illinois One Day Rest in Seven Act; Illinois Eight Hour Work Day Act; Illinois Health and Safety Act; Illinois Whistleblower Act; Illinois Victims’ Economic Safety and Security Act; Illinois Worker Adjustment and Retraining Notification Act; Illinois Personnel Records Review Act; Illinois Criminal Identification Act; Illinois
    
    


Voter Leave Act; Illinois Family Military Leave Act; Illinois Joint Agency Rules of Sex Discrimination; Illinois Joint Agency Rules on National Origin Discrimination; Illinois Human Rights Commission Rules on Handicap Discrimination; Illinois Human Rights Commission Rules on Unfavorable Military Discharge Discrimination; Smoke Free Illinois Act; Illinois Blood Donation Leave Act; Illinois Civil Patrol Leave Law; Illinois Jury Duty Leave Law; Illinois Official Meetings Leave Law; Illinois Witness Duty Leave Law; Illinois Nursing Mothers in the Workplace Act; Illinois Common Law Claims for Unlawful Retaliatory Discharge in Violation of Public Policy; Illinois Employee Sick Leave Act; Illinois Child Bereavement Leave Act; Illinois Biometric Information Privacy Act; Illinois Workplace Transparency Act; Illinois Volunteer Emergency Worker Job Protection Act; Illinois Gender Violence Act; Cook County Human Rights Ordinance; Cook County Earned Sick Leave Ordinance; Chicago Human Rights Ordinance, as amended; Chicago Earned Sick Leave Ordinance; Chicago Anti-Retaliation Ordinance; Chicago Fair Workweek Ordinance.
Indiana
Indiana Age Discrimination Act; Indiana Civil Rights Law; Indiana Minimum Wage Law, including the Indiana Equal Pay Act; Indiana Employment Discrimination Against Disabled Persons Act; Indiana State Wage Payment and Work Hours Laws,; Indiana Family Military Leave Law; Indiana Occupational Safety and Health Act; Indiana Whistleblower Protection Laws; Indiana Possession of Firearms Laws; Indiana AIDS Testing Laws; Indiana Smoker’s Rights Law; Indiana Garnishment Retaliation Law.
Maryland
Maryland Human Relations Commission Act (MHRCA); Maryland Statutory Provision Regarding Retaliation/Discrimination for Filing a Workers' Compensation Claim; Maryland Equal Pay Law; Maryland Adoption Leave Law; Maryland Medical Information Bias Law; Maryland Military Leave Law; Maryland Volunteer/Civil Air Patrol Law; Maryland law protecting witnesses, jurors and victims who attend court proceedings; Maryland Day of Rest Law; Maryland Lie Detector Law; Maryland Wage and Hour Laws; Maryland Occupational Safety & Health; Maryland Flexible Leave Act; Maryland Pay Disparity Act; Maryland Workplace Fraud Act; Maryland Healthy Retail Employee Act; Maryland Job Applicant Fairness Act; Maryland Law Protecting Employees' and Applicants' Social Media Passwords; Maryland Leave Law for Family Members of Armed Services Members; Maryland's Reasonable Accommodations for Disabilities Due to Pregnancy Law; Maryland's Parental Leave Law.
Missouri
Missouri Human Rights Act; Missouri Equal Pay Law; Missouri Disability Discrimination Law; Missouri Genetic Testing Information Bias Law; Missouri State Wage, Payment, Work; Missouri AIDS Law; Missouri Jury Duty Law; Missouri Voting Leave Law; Missouri Emergency Response Leave Law; Missouri Witness/Crime Victim Law; Missouri Military Leave/Re-Employment Rights Law; Missouri War on Terror Veterans Leave Law; Missouri Service Letter Law; Missouri Statutory Provisions Regarding Employer Use of Employee Social Security Number; Missouri Statutory Provisions Regarding Disclosure of Workers’ Compensation Records; Missouri Statutory Provisions Regarding Off Duty Use of Tobacco & Alcohol; Missouri Statutory Provisions Regarding Employee Political Activities; Missouri Statutory Provisions Regarding Drug & Alcohol Testing; Missouri Statutory Provisions Regarding Retaliation/Discrimination for Filing Worker’s Compensation Claim; Missouri Statutory Provisions Regarding Wage Claim Retaliation; Missouri Statutory Provisions Regarding Whistleblower Protection; Missouri Statutory Provisions Regarding Civil Air Patrol Leave; Missouri Victims Economic Safety and Security Act (VESSA).
Nebraska
The Nebraska Fair Employment Practices Act; The Nebraska Equal Pay Act; The Nebraska Age Discrimination in Employment Act; The Nebraska Constitution; The Nebraska Wage Payment and Collection Act, as amended; any claim for workers’ compensation retaliation under Nebraska’s workers’ compensation law, as allowed by law.
New Jersey
    



New Jersey Law Against Discrimination; New Jersey Civil Rights Act; New Jersey Family Leave Act; New Jersey State Wage and Hour Law; Millville Dallas Airmotive Plant Job Loss Notification Act; New Jersey Conscientious Employee Protection Act; New Jersey Equal Pay Law; New Jersey Occupational Safety and Health Law; New Jersey Smokers’ Rights Law; New Jersey Opportunity to Compete Act; The New Jersey A1897 law concerning decriminalization of marijuana; Any Executive Order issued by the Governor of the State of New Jersey; New Jersey Genetic Privacy Act; New Jersey Fair Credit Reporting Act; New Jersey Paid Sick Leave Act; Jake Honig Compassionate Use Medical Cannabis Act; New Jersey Statutory Provision Regarding Retaliation/Discrimination for Filing A Workers’ Compensation Claim; New Jersey Public Employees’ Occupational Safety and Health Act; New Jersey laws regarding Political Activities of Employees, Lie Detector Tests, Jury Duty, Employment Protection, and Discrimination; Any rule, regulation, or ordinance issued by the New Jersey Department of Health.
New Mexico
New Mexico Human Rights Act; The New Mexico Occupational Health and Safety Act; The New Mexico Genetic Information Privacy Act; The New Mexico Employee Privacy Act; The New Mexico Promoting Financial Independence for Victims of Domestic Abuse Leave Act; New Mexico Nursing Mothers Law; New Mexico Jury Service Law; The New Mexico Military Service Law; The New Mexico Political Activities Law; New Mexico Volunteer Emergency Responder Job Protection Act; New Mexico Time to Vote Law; The New Mexico Social Media Passwords Law; The New Mexico Fair Pay for Women Act; The New Mexico Reemployment of Persons in the Armed Forces Law; The New Mexico Public Health Emergency Leave Law; New Mexico Wage Payment and Work Hour Laws.
New York
The New York State Executive Law, including the New York State Human Rights Law; The New York False Claims Act; The New York City Human Rights Law; The New York City Administrative Code; The New York Civil Rights Law; The New York Labor Law; The New York Paid Family Leave Act; The New York wage, wage-payment, wage-theft and all other wage-hour laws; The New York Whistleblower Law; The New York Education Law; The Retaliation/Discrimination provisions of the New York Workers’ Compensation Law and the New York State Disabilities Benefits Law; The New York State Workers Adjustment and Retraining Notification Act.
North Carolina
North Carolina Equal Employment Practices Act; North Carolina Parental Leave Law for School Involvement; North Carolina Lawful Use of Lawful Products Law; North Carolina Persons With Disabilities Protection Act; North Carolina Communicable Disease Law; North Carolina Discrimination on the Basis of Sickle Cell Trait Law; North Carolina Genetic Testing Law; North Carolina Retaliatory Employment Discrimination Law; North Carolina Wage and Hour Act, as amended; North Carolina Occupational Safety and Health Act, as amended; North Carolina Discrimination Against Military Personnel Act; North Carolina National Guard Employment Rights Act; North Carolina Jury Duty Leave Law; North Carolina Workplace Violence Prevention Act; North Carolina Domestic Violence Law; North Carolina Controlled Substances Examination Regulation Act; North Carolina Fair Classification Act; North Carolina Act to Provide Limited Immunity from Liability for Claims Based on Transmission of Coronavirus Disease.
Oklahoma
The Oklahoma Civil Rights Act; The Oklahoma Equal Pay Act; The Oklahoma Anti-Discrimination Act; The Oklahoma Retaliatory Discharge Act; The Standards For Workplace Drug and Alcohol Testing Act; The Retaliation Provisions of the Oklahoma Administrative Worker’s Compensation Act; The Oklahoma Employee Injury Benefit Act; The Oklahoma Worker’s Compensation Arbitration Act; The Oklahoma Occupational Safety and Health Act.
Pennsylvania
    



The Pennsylvania Equal Pay Act; The Pennsylvania Human Relations Act; The Pennsylvania Minimum Wage Act; The Pennsylvania Pregnancy Guidelines; The Pennsylvania Guidelines on Sexual Harassment; The Pennsylvania Disability Discrimination Rules; The Pennsylvania Occupational Safety and Health Laws; The Pennsylvania Wage Payment and Collection Law; The Pennsylvania Bona Fide Occupational Qualifications Rules; The Pennsylvania Religious Freedom Protection Act; The Pennsylvania Affirmative Action Guidelines; The Pennsylvania Military Leave and Re-Employment Rights Laws; Pennsylvania statutes regarding Whistleblower Protection; Personnel Files; Criminal Records; Wage Complaints: Retaliation; The Philadelphia Fair Practices Ordinance; and The Philadelphia WARN Act.
South Carolina
The South Carolina Human Affairs Law; The South Carolina Payment of Wages Law; The South Carolina Workers’ Compensation Retaliation Law; South Carolina Genetic Information Privacy Act; South Carolina Smokers’ Right Law; South Carolina Bone Marrow Donor Program Leave Provisions; South Carolina Occupational Safety and Health Act; South Carolina Jury and Witness Duty Leave Provisions; South Carolina Volunteer Firefighter and Emergency Medical Services Personnel Job Protection Act; South Carolina provision regarding termination of an authorized worker and replacing with unauthorized alien; South Carolina Military Leave/Reemployment Rights Provisions; South Carolina Illegal Immigration Reform Act; South Carolina provision regarding unlawful discrimination against union members; South Carolina Right to Work Act; South Carolina Pregnancy Accommodations Act; Any claim for wrongful termination in violation of public policy, breach of contract, or any other statutory, common law, or equitable claim under South Carolina law.
Tennessee
The Tennessee Human Rights Act; The Tennessee Public Protection Act; The Tennessee Equal Pay Act; The Tennessee Parental and Adoption and Nursing Leave Law; The Tennessee Disability Act; The Tennessee Smokers’ Rights Laws; The Tennessee Occupational Safety and Health Act; The Tennessee Wage Payment and Work Hour Laws; The Tennessee Voting Leave Law; The Tennessee Jury Duty Law; The Tennessee Prohibition Against Preventing Employees from Disclosing Information; The Tennessee Pregnant Workers Fairness Act.
Texas
The Texas Commission on Human Rights Act; Any provision of the Texas Payday Act; Any provision of the Texas Labor Code subject to release; The Texas Civil Practice and Remedies Code; The Texas Health and Safety Code.
Utah
The Utah Antidiscrimination Act; The Utah Employment Relations and Collective Bargaining Act; The Utah Right to Work Law; The Utah Drug and Alcohol Testing Act; The Utah Minimum Wage Act; The Utah Protection of Activities in Private Vehicles Act; The Utah Employment Selection Procedures Act; The Utah Occupational Safety and Health Act; Any claim for Wrongful Termination in Violation of Public Policy under Utah law.
Washington
The Washington Fair Credit Reporting Act; The Washington Consumer Protection Act; The Washington Law Against Discrimination, as amended; The Washington Minimum Wage Act, as amended; The Washington Wage Payment Act, as amended; The Washington wage deduction/rebate statutes, as amended; The Washington Family Leave Act, as amended; The Washington Family Care Act, as amended; Washington’s Domestic Violence Leave Law; Washington’s Military Family Leave Law; Washington’s Veteran’s and Veteran’s Affairs statute; The Washington Equal Pay and Opportunities Act; The Washington Industrial Safety and Health Act (“WISHA”); The Washington Healthy Starts Act; The Washington Paid Sick Leave Law; The Washington Paid Family and Medical Leave Law; Any provision of Title 49 of the Revised Code of Washington; Any provision of Title 296 of the Washington Administrative Code; The Industrial Welfare Act of Washington, as amended, to the extent permitted by
    



law; Any claim alleging the exception to the Industrial Insurance Act of Washington, established by RCW 51.24.020, for injury inflicted with “deliberate intention;” Any claim based on any proclamations, executive orders, or related orders or directives by the Governor of the State of Washington or any public health officer; Any claim based on federal, state, or local law, rule, regulation, or ordinance; Any claim for breach of contract or promise, express or implied; Any claim for breach of any term or condition of an employee handbook or policy manual, including any claim for breach of any promise of specific treatment in specific situations; Any common law claim of any kind; Any basis for recovering costs, fees or other expenses, including attorneys’ fees incurred in these matters; Any claim for violation of any provision of the Seattle Municipal Code, including, but not limited to all provisions of Title 14; Any claim for violation of any provision of a Tacoma city ordinance; Any claim for violation of any provision of SeaTac’s minimum wage laws or and paid leave laws; Any claim for violation of any provision of Spokane’s earned sick and safe leave law.
Wisconsin
The Wisconsin Fair Employment; The Wisconsin WARN Act; The Wisconsin statutory provisions regarding retaliation and/or discrimination for filing a worker’s compensation claim; The Wisconsin Family or Medical Leave Act; The Wisconsin Employees’ Right to Know Act; The Wisconsin Personnel Records Act; The Wisconsin Minimum Wage Act; The Wisconsin Wage Payments, Claims, and Collections.

    

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 12, 2022
/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 12, 2022
/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, 2022 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 12, 2022
/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, 2022 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 12, 2022
/s/ Catherine R. Smith
Catherine R. Smith
Chief Financial and Administrative Officer