December 8, 2023

Vibrant Well being Group’s monetary image continues to darken, new disclosures from the struggling medical insurance firm reveal.

The insurtech reported a $12.9 million shortfall throughout its state-regulated insurance coverage divisions as of Dec. 31, in response to an annual report filed to the Securities and Trade Fee on Thursday.

Vibrant Well being additionally stated its high executives are getting more cash. This month, CEO Mike Mikan acquired a $1.69 million money bonus and Chief Monetary Officer Cathy Smith obtained $585,000. The corporate additionally handed Mikan and Smith extra fairness grants and restricted inventory models. Their base salaries are unchanged.

As in earlier experiences, Vibrant Well being included a disclosure that, absent its capacity to lift extra capital, it may go below. Executives stated final month the insurtech wants to lift about $300 million to remain afloat.

States require insurers to take care of minimal reserves to cowl excellent claims and Vibrant Well being is out of compliance with the rule in a number of states, the corporate stated within the submitting. The corporate reported deficits in Florida, Texas and Illinois, particularly. Florida regulators positioned Vibrant Well being below supervision final yr and extra not too long ago stated it reserves the authority to position it below receivership.

The insurtech continues to battle to pay claims from 2021 and concedes in its submitting that this represents a “materials weak point” in its capacity to supply correct monetary data to shareholders. Two years in the past, a third-party claims processor didn’t correctly pay suppliers in accordance with their contracts and price schedules, and didn’t re-price the claims, Vibrant Well being stated within the submitting. On the time, the insurer blamed a expertise error that pressured it to assessment all claims by hand and should have led to overpayments.

In response, Vibrant Well being carried out a brand new claims processing system. However after asserting its exit from the medical insurance change enterprise, the corporate “decreased its deal with performing sure management actions” associated to change income, membership, enrollment and eligibility, claims processing, reserves, danger adjustment, and dealer commissions, the submitting says. This may increasingly have brought about extra overpayments, in response to the corporate.

Vibrant Well being’s monetary difficulties may have adverse downstream results on different insurance coverage corporations. Beneath the Reasonably priced Care Act’s risk-adjustment program, market insurers with comparatively wholesome policyholders should switch funds to people who with sicker members.

In June, the Facilities for Medicare and Medicaid Companies will finalize risk-adjustment funds for final yr. Vibrant Well being expects to owe $1.9 billion, a sum that can doubtless comprise a notable portion of the overall risk-adjustment {dollars} CMS collects from insurers. That may jeopardize different carriers’ capacity to recoup funds by means of this system.

Vibrant Well being additionally disclosed it settled a shareholder class-action lawsuit in the course of the fourth quarter of 2022. Plaintiffs alleged that the corporate’s settlement with Cigna and New Enterprise Associates breached its fiduciary duties. Cigna and New Enterprise invested $750 million in Vibrant Well being in 2021. Vibrant Well being has reserved $800,000 to resolve the case.