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 ~~June 30, 2021~~March 31, 2022


☐			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 ox No xo

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 filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	o
Emerging growth company	o		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 ~~August 2, 2021~~May 3, 2022, the registrant had ~~630,222,819~~629,245,760 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents


PART I.	FINANCIAL INFORMATION	2

Item 1.	Financial Statements	2

	Condensed Consolidated Balance Sheets (Unaudited)	2

	Condensed Consolidated Statements of Income (Loss) (Unaudited)	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	4

	C ~~ondensed~~Condensed Consolidated Statements of ~~Stockholders~~’Changes in Redeemable Preferred Stock and Shareholders’ Equity (Deficit) (Unaudited)	5

	Condensed Consolidated Statements of Cash Flows (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2628

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4140

Item 4.	Controls and Procedures	4140

PART II.	OTHER INFORMATION	4241

Item 1.	Legal Proceedings	4241

Item 1A.	Risk Factors	4241

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	4241

Item 3.	Defaults upon Senior Securities	4341

Item 4 .4.	Mine Safety Disclosures	4341

Item 5.	Other Information	4341

Item 6.	Exhibits	4342

Table of Contents

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 ~~or the Securities Act,~~(the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended or (“the Exchange ~~Act.~~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, ~~including descriptions of~~ our business plan and ~~strategies.~~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. ~~These forward-looking statements include any statements regarding our plans and expectations with respect to Bright Health Group, Inc.~~ 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 ~~prospectus dated June 23,~~Annual Report on Form 10-K for the year ended December 31, 2021, ~~(File No.333-256286), as~~that was filed with the United States Securities and Exchange Commission ~~pursuant to Rule 424(b)(4) under~~(“SEC”) on March 18, 2022 (“2021 Form 10-K”) and our other filings with the ~~Securities Act of 1933, as amended.~~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. ~~Although~~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 ~~the~~such forward-looking statements will be achieved or ~~occur.~~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.

Table of Contents

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)


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,506,319	$	488,371	Cash and cash equivalents	$	1,505,547	$	1,061,179
Short-term investments	Short-term investments	283,337		499,928		Short-term investments	692,472		193,835
Accounts receivable, net of allowance of $4,535 and $2,602, respectively		93,086		60,522
Accounts receivable, net of allowance of $5,172 and $4,074, respectively						Accounts receivable, net of allowance of $5,172 and $4,074, respectively	142,695		113,474
Direct contracting performance year receivable						Direct contracting performance year receivable	638,641		—
Prepaids and other current assets	Prepaids and other current assets	208,693		130,986		Prepaids and other current assets	315,422		291,712
Total current assets	Total current assets	2,091,435		1,179,807		Total current assets	3,294,777		1,660,200
Other assets:	Other assets:					Other assets:
Long-term investments	Long-term investments	633,029		175,176		Long-term investments	733,465		675,192
Property, equipment and capitalized software, net	Property, equipment and capitalized software, net	19,101		12,264		Property, equipment and capitalized software, net	41,279		38,344
Goodwill	Goodwill	565,020		263,035		Goodwill	835,450		835,140
Intangible assets, net	Intangible assets, net	262,420		152,211		Intangible assets, net	326,617		343,860
Other non-current assets	Other non-current assets	28,773		28,309		Other non-current assets	43,438		45,603
Total other assets	Total other assets	1,508,343		630,995		Total other assets	1,980,249		1,938,139
Total assets	Total assets	$	3,599,778	$	1,810,802	Total assets	$	5,275,026	$	3,598,339
Liabilities, Redeemable Noncontrolling Interest, Redeemable Preferred Stock and Shareholders’ Equity (Deficit)	Liabilities, Redeemable Noncontrolling Interest, Redeemable Preferred Stock and Shareholders’ Equity (Deficit)					Liabilities, Redeemable Noncontrolling Interest, Redeemable Preferred Stock and Shareholders’ Equity (Deficit)
Current liabilities:	Current liabilities:					Current liabilities:
Medical costs payable	Medical costs payable	$	565,620	$	249,777	Medical costs payable	$	1,155,155	$	817,975
Accounts payable	Accounts payable	86,527		57,252		Accounts payable	128,407		118,140
Unearned revenue	Unearned revenue	38,060		34,628		Unearned revenue	34,893		53,295
Risk adjustment payable	Risk adjustment payable	507,853		187,777		Risk adjustment payable	1,285,446		931,170
Direct contracting performance year obligation						Direct contracting performance year obligation	533,537		—
Short-term borrowings						Short-term borrowings	—		155,000
Other current liabilities	Other current liabilities	166,227		35,847		Other current liabilities	251,523		207,238
Total current liabilities	Total current liabilities	1,364,287		565,281		Total current liabilities	3,388,961		2,282,818
Other liabilities	Other liabilities	44,453		28,578		Other liabilities	38,849		41,994
Total liabilities	Total liabilities	1,408,740		593,859		Total liabilities	3,427,810		2,324,812
Commitments and contingencies (Note 10)	Commitments and contingencies (Note 10)	0		0		Commitments and contingencies (Note 10)	0		0
Redeemable noncontrolling interests	Redeemable noncontrolling interests	41,012		39,600		Redeemable noncontrolling interests	143,011		128,407
Redeemable preferred stock, $0.0001 par value; 100,000,000 and 166,307,087 shares authorized in 2021 and 2020, respectively; 0 and 164,244,893 shares issued and outstanding in 2021 and 2020, respectively		0		1,681,015
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						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):	Shareholders’ equity (deficit):					Shareholders’ equity (deficit):
Common stock, $0.0001 par value; 3,000,000,000 and 658,993,725 shares authorized in 2021 and 2020, respectively; 625,691,448 and 137,662,698 shares issued and outstanding in 2021 and 2020, respectively		63		14
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						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	63		63
Additional paid-in capital	Additional paid-in capital	2,735,099		9,877		Additional paid-in capital	2,894,421		2,861,243
Accumulated deficit	Accumulated deficit	(585,669)		(515,989)		Accumulated deficit	(1,896,085)		(1,700,851)
Accumulated other comprehensive income		533		2,426
Accumulated other comprehensive loss						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						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)	Total shareholders’ equity (deficit)	2,150,026		(503,672)		Total shareholders’ equity (deficit)	956,724		1,145,120
Total liabilities, redeemable noncontrolling interests, redeemable preferred stock and shareholders’ equity (deficit)	Total liabilities, redeemable noncontrolling interests, redeemable preferred stock and shareholders’ equity (deficit)	$	3,599,778	$	1,810,802	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 ~~share and~~ per share data)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Revenue:	Revenue:									Revenue:
Premium revenue	Premium revenue	$	1,042,086	$	290,972	$	1,902,717	$	481,709	Premium revenue	$	1,680,450	$	860,631
Direct contracting revenue										Direct contracting revenue	182,797		—
Service revenue	Service revenue	12,085		3,604		20,523		8,424		Service revenue	12,428		8,438
Investment income		59,669		2,280		65,158		5,289
Investment income (loss)										Investment income (loss)	(40,100)		5,489
Total revenue	Total revenue	1,113,840		296,856		1,988,398		495,422		Total revenue	1,835,575		874,558
Operating expenses:	Operating expenses:									Operating expenses:
Medical costs	Medical costs	904,630		233,180		1,589,200		363,795		Medical costs	1,580,596		684,570
Operating costs	Operating costs	261,060		88,827		469,300		163,271		Operating costs	418,918		208,240
Depreciation and amortization	Depreciation and amortization	7,195		2,085		11,776		2,872		Depreciation and amortization	13,041		4,581
Total operating expenses	Total operating expenses	1,172,885		324,092		2,070,276		529,938		Total operating expenses	2,012,555		897,391
Operating loss	Operating loss	(59,045)		(27,236)		(81,878)		(34,516)		Operating loss	(176,980)		(22,833)
Interest expense	Interest expense	4,142		0		4,688		0		Interest expense	1,193		546
Other income										Other income	(784)		—
Loss before income taxes	Loss before income taxes	(63,187)		(27,236)		(86,566)		(34,516)		Loss before income taxes	(177,389)		(23,379)
Income tax (benefit) expense		(19,464)		(9,162)		(18,298)		(9,162)
Income tax expense										Income tax expense	3,240		1,166
Net loss	Net loss	(43,723)		(18,074)		(68,268)		(25,354)		Net loss	(180,629)		(24,545)
Net earnings attributable to noncontrolling interests	Net earnings attributable to noncontrolling interests	(795)		0		(1,412)		0		Net earnings attributable to noncontrolling interests	(14,605)		(617)
Series A preferred stock dividend accrued										Series A preferred stock dividend accrued	(8,938)		—
Net loss attributable to Bright Health Group, Inc. common shareholders	Net loss attributable to Bright Health Group, Inc. common shareholders	$	(44,518)	$	(18,074)	$	(69,680)	$	(25,354)	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	Basic and diluted loss per share attributable to Bright Health Group, Inc. common shareholders	$	(0.28)	$	(0.13)	$	(0.46)	$	(0.19)	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 outstanding	Basic and diluted weighted-average common shares outstanding	160,942		135,801		150,616		135,719		Basic and diluted weighted-average common shares outstanding	628,765		140,175

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 June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Net loss	Net loss	$	(43,723)	$	(18,074)	$	(68,268)	$	(25,354)	Net loss	$	(180,629)	$	(24,545)
Other comprehensive (loss) income:	Other comprehensive (loss) income:									Other comprehensive (loss) income:
Unrealized investment holding gains (losses) arising during the year, net of tax of $0 and $0, respectively		(684)		2,394		(1,665)		3,285
Less: reclassification adjustments for investment gains (losses), net of tax of $0 and $0, respectively		167		10		228		(50)
Unrealized investment holding losses arising during the year, net of tax of $0 and $0, respectively										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										Less: reclassification adjustments for investment (losses) gains, net of tax of $0 and $0, respectively	(1,749)		62
Other comprehensive (loss) income	Other comprehensive (loss) income	(851)		2,384		(1,893)		3,335		Other comprehensive (loss) income	(26,340)		(1,042)
Comprehensive loss	Comprehensive loss	(44,574)		(15,690)		(70,161)		(22,019)		Comprehensive loss	(206,969)		(25,587)
Comprehensive loss attributable to noncontrolling interests	Comprehensive loss attributable to noncontrolling interests	(795)		0		(1,412)		0		Comprehensive loss attributable to noncontrolling interests	(14,605)		(617)
Comprehensive loss attributable to Bright Health Group, Inc. common shareholders	Comprehensive loss attributable to Bright Health Group, Inc. common shareholders	$	(45,369)	$	(15,690)	$	(71,573)	$	(22,019)	Comprehensive loss attributable to Bright Health Group, Inc. common shareholders	$	(221,574)	$	(26,204)

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

Bright Health Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Redeemable Preferred Stock and Shareholders’ Equity (Deficit)

(in thousands)

(Unaudited)


		Redeemable Preferred Stock			Common Stock			Additional Paid-In Capital				Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)				Total			Redeemable Preferred Stock						Common Stock			Additional Paid-In Capital			Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
2021		Shares	Amount		Shares	Amount
Balance at January 1, 2021		164,245	1,681,015		137,663	$	14			$	9,877					$	(515,989)					$	2,426		$	(503,672)
2022																				2022	Shares			Amount			Shares	Amount		Additional Paid-In Capital			Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance at January 1, 2022																				Balance at January 1, 2022	—			$	—		628,623	$	63
Net loss	Net loss	—	—		—	—		—				(25,162)		—				(25,162)		Net loss	—			—			—	—				—			(195,234)		—		—		(195,234)
Issuance of preferred stock	Issuance of preferred stock	1,420	55,137		—	—		—				—		—				—		Issuance of preferred stock	750			747,481			—	—		—			—		—		—		—
Issuance of common stock	Issuance of common stock	—	—		4,661	—		4,893				—		—				4,893		Issuance of common stock	—			—			370	—		257			—		—		—		257
Share-based compensation	Share-based compensation	—	—		—	—		5,176				—		—				5,176		Share-based compensation	—			—			—	—		32,921			—		—		—		32,921
Other comprehensive loss	Other comprehensive loss	—	—		—	—		—				—		(1,042)				(1,042)		Other comprehensive loss	—			—			—	—		—			—		(26,340)		—		(26,340)
Balance at March 31, 2021		165,665	$	1,736,152	142,324	$	14	$	19,946			$	(541,151)	$	1,384			$	(519,807)

Net loss		—	—		—	—		—				(44,518)		—				(44,518)
Issuance of preferred stock		2,067	79,807		—	—		—				—		—				—
Conversion of preferred stock to common stock		(167,732)	(1,815,959)		427,897	43		1,815,916				—		—				1,815,959
Issuance of common stock		—	—		4,120	1		4,722				—		—				4,723
Sale of common stock from IPO, net of offering costs		—	—		51,350	5		880,637				—		—				880,642
Share-based compensation		—	—		—	—		13,878				—		—				13,878
Other comprehensive loss		—	—		—	—		—				—		(851)				(851)
Balance at June 30, 2021		0	0		625,691	$	63	$	2,735,099			$	(585,669)	$	533			$	2,150,026
Balance at March 31, 2022																				Balance at March 31, 2022	750			$	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 Stock		Common Stock			Additional Paid-In Capital				Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)				Total			Redeemable Preferred Stock						Common Stock			Additional Paid-In Capital			Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
2020		Shares	Amount	Shares	Amount
Balance at January 1, 2020		119,222	871,990	135,509	$	14			$	3,184					$	(267,547)					$	982		$	(263,367)
2021																			2021	Shares			Amount			Shares	Amount		Additional Paid-In Capital			Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance at January 1, 2021																			Balance at January 1, 2021	164,245			$	1,681,015		137,663	$	14
Net loss	Net loss	—	—	—	—		—				(7,280)		—				(7,280)		Net loss	—			—			—	—				—			(25,162)		—		—		(25,162)
Issuance of preferred stock	Issuance of preferred stock	—	—	—	—		—				—		—				—		Issuance of preferred stock	1,420			55,137			—	—		—			—		—		—		—
Issuance of common stock	Issuance of common stock	—	—	183	—		13				—		—				13		Issuance of common stock	—			—			4,661	—		4,893			—		—		—		4,893
Share-based compensation	Share-based compensation	—	—	—	—		943				—		—				943		Share-based compensation	—			—			—	—		5,176			—		—		—		5,176
Other comprehensive income		—	—	—	—		—				—		951				951
Balance at March 31, 2020		119,222	871,990	135,692	$	14	$	4,140			$	(274,827)	$	1,933			$	(268,740)

Net loss		—	—	—	—		—				(18,074)		—				(18,074)
Issuance of preferred stock		19,661	291,200	—	—		—				—		—				—
Issuance of common stock		—	—	246	—		118				—		—				118
Share-based compensation		—	—	—	—		1,250				—		—				1,250
Other comprehensive income		—	—	—	—		—				—		2,384				2,384
Balance at June 30, 2020		138,883	1,163,190	135,938	$	14	$	5,508			$	(292,901)	$	4,317			$	(283,062)
Other comprehensive loss																			Other comprehensive loss	—			—			—	—		—			—		(1,042)		—		(1,042)
Balance at March 31, 2021																			Balance at March 31, 2021	165,665			$	1,736,152		142,324	$	14	$	19,946		$	(541,151)	$	1,384	$	—	$	(519,807)

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

Bright Health Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in ~~thousands)~~thousands)

(Unaudited)


		Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(69,680)	$	(25,354)	Net loss	$	(180,629)	$	(25,162)
Adjustments to reconcile net loss to net cash provided by operating activities:	Adjustments to reconcile net loss to net cash provided by operating activities:					Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	11,776		2,872		Depreciation and amortization	13,041		4,581
Impairment of intangible assets						Impairment of intangible assets	6,720		—
Share-based compensation	Share-based compensation	19,054		2,193		Share-based compensation	32,921		5,176
Deferred income taxes	Deferred income taxes	(18,018)		0		Deferred income taxes	717		1,166
Unrealized gain on equity securities		(62,754)		0
Unrealized loss on equity securities						Unrealized loss on equity securities	40,968		—
Other, net	Other, net	8,681		486		Other, net	2,378		2,694
Changes in assets and liabilities, net of acquired assets and liabilities:	Changes in assets and liabilities, net of acquired assets and liabilities:					Changes in assets and liabilities, net of acquired assets and liabilities:
Accounts receivable	Accounts receivable	(14,427)		23,681		Accounts receivable	(29,221)		(23,188)
Direct contracting performance year receivable						Direct contracting performance year receivable	(638,641)		—
Other assets	Other assets	(39,883)		(3,844)		Other assets	(22,270)		(15,707)
Medical cost payable	Medical cost payable	223,125		21,739		Medical cost payable	337,180		225,814
Risk adjustment payable	Risk adjustment payable	318,758		108,787		Risk adjustment payable	354,276		137,215
Accounts payable and other liabilities	Accounts payable and other liabilities	120,847		(46,376)		Accounts payable and other liabilities	52,182		30,096
Unearned revenue	Unearned revenue	(333)		2,860		Unearned revenue	(18,402)		918
Direct contracting performance year obligation						Direct contracting performance year obligation	533,537		—
Net cash provided by operating activities	Net cash provided by operating activities	497,146		87,044		Net cash provided by operating activities	484,757		343,603
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of investments	Purchases of investments	(596,811)		(486,873)		Purchases of investments	(782,091)		(298,957)
Proceeds from sales, paydown, and maturities of investments	Proceeds from sales, paydown, and maturities of investments	449,636		209,155		Proceeds from sales, paydown, and maturities of investments	154,765		265,521
Purchases of property and equipment	Purchases of property and equipment	(10,554)		(319)		Purchases of property and equipment	(5,491)		(4,215)
Business acquisition, net of cash acquired		(210,492)		(174,090)
Business acquisitions, net of cash acquired						Business acquisitions, net of cash acquired	(310)		(18,624)
Net cash used in investing activities	Net cash used in investing activities	(368,221)		(452,127)		Net cash used in investing activities	(633,127)		(56,275)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from issuance of preferred stock	Proceeds from issuance of preferred stock	0		211,200		Proceeds from issuance of preferred stock	747,481		—
Proceeds from issuance of common stock	Proceeds from issuance of common stock	9,616		131		Proceeds from issuance of common stock	257		4,893
Proceeds from short-term borrowings	Proceeds from short-term borrowings	200,000		0		Proceeds from short-term borrowings	—		200,000
Repayments of short-term borrowings	Repayments of short-term borrowings	(200,000)		0		Repayments of short-term borrowings	(155,000)		—
Payments for debt issuance costs	Payments for debt issuance costs	(3,391)		0		Payments for debt issuance costs	—		(3,391)
Proceeds from IPO		887,328		0
Payments for IPO offering costs	Payments for IPO offering costs	(4,530)		0		Payments for IPO offering costs	—		(1,268)
Net cash provided by financing activities	Net cash provided by financing activities	889,023		211,331		Net cash provided by financing activities	592,738		200,234
Net increase (decrease) in cash and cash equivalents		1,017,948		(153,752)
Net increase in cash and cash equivalents						Net increase in cash and cash equivalents	444,368		487,562
Cash and cash equivalents – beginning of year	Cash and cash equivalents – beginning of year	488,371		522,910		Cash and cash equivalents – beginning of year	1,061,179		488,371
Cash and cash equivalents – end of period	Cash and cash equivalents – end of period	$	1,506,319	$	369,158	Cash and cash equivalents – end of period	$	1,505,547	$	975,933
Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Changes in unrealized (loss) gain on available-for-sale securities in OCI	Changes in unrealized (loss) gain on available-for-sale securities in OCI	$	(1,893)	$	3,335	Changes in unrealized (loss) gain on available-for-sale securities in OCI	$	(26,340)	$	(1,042)
Cash paid for interest	Cash paid for interest	3,195		0		Cash paid for interest	1,168		244
Supplemental schedule of non-cash activities:	Supplemental schedule of non-cash activities:					Supplemental schedule of non-cash activities:
Redeemable convertible preferred stock issued for acquisitions	Redeemable convertible preferred stock issued for acquisitions	$	134,944	$	80,000	Redeemable convertible preferred stock issued for acquisitions	$	—	$	32,982
Conversion of redeemable convertible preferred stock to common stock upon initial public offering		$	1,815,916	$	0
Offering costs included in accounts payable and accrued expenses		$	2,156	$	0

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 ~~connecting and~~ 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,~~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 ~~optimize clinical outcomes.~~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.

~~Stock Split:~~ ~~On June~~Beginning January 1, 2022, 2 ~~2021, we effected a stock split of~~Direct Contracting Entities (“DCEs”) aligned with our NeueHealth segment began participating in the ~~Company’s common stock on a 1-for-3 basis (the “Stock Split”~~Centers for Medicare and Medicaid Services' (“CMS”) Global and Professional Direct Contracting model (“DC Model”). ~~In connection with the Stock Split, the conversion rate~~Both DCEs assume full risk for the ~~Company’s preferred stock was proportionately adjusted such that the common stock issuable upon conversion~~total cost of such preferred stock was increased in proportion to the Stock Split. Accordingly, all common stock share and per share amounts for all periods presented in these financial statements have been retroactively adjusted to reflect this Stock Split.care of aligned beneficiaries.

~~Initial Public Offering:~~ ~~On June 28, 2021,~~In April 2022, we ~~completed our initial public offering (“IPO”)~~announced that Bright HealthCare will be exiting the Commercial marketplace in ~~which we issued~~6 states for the 2023 plan year: Illinois, New Mexico, Oklahoma, South Carolina, Utah, and ~~sold~~ 51,350,000 shares of common stock, par value $0.0001 per share, at an offering price of $18.00 per share. We received net proceeds of $887.3 million from the sale of our common stock, after deducting underwriting discounts and commissions of $37.0 million. We used a portion of the net proceeds from our IPO to repay in full our outstanding borrowings under our revolving credit facility,Virginia, as well as ~~to fund the acquisition of Centrum Medical Holdings, LLC (Centrum). Refer to Note 2,~~ ~~Business Combinations, and~~ ~~Note 7,~~ ~~Short-Term Borrowings~~ ~~for more information.~~

~~The Company’s Common Stock is traded on the New York Stock Exchange (the “NYSE”) under the symbol “BHG”.~~

~~We incurred $6.7 million of deferred offering costs consisting primarily of accounting, legal and other fees related to~~discontinuing our ~~IPO, which were recorded against IPO proceeds within additional paid-in capital upon closing of our IPO.~~

~~Conversion of Preferred Stock into Common Stock:~~ OnJune 28, 2021, the Company issued 427,897,381 shares of common stock upon conversion (the “Conversion”) of all outstanding shares of its Series A Convertible Preferred Stock, par value $0.0001 per share, Series B Convertible Preferred Stock, par value $0.0001 per share, Series C Convertible Preferred Stock, par value $0.0001 per share, Series D Convertible Preferred Stock, par value $0.0001 per share, and Series E Convertible Preferred Stock, par value $0.0001 per share (collectively, the “Preferred Stock”), pursuant to its eighth amended and restated certificate of incorporation. Conversion of the preferred stock into shares of common stock occurred automatically immediately prior to the closing of our IPO.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)~~(“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, ~~2020~~2021 included in our Form 10-K for the ~~prospectus dated June 23,~~year ended December 31, 2021 ~~(File No.333-256286) (the “Prospectus”~~(“2021 Form 10-K”)~~, as filed with the United States Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended.~~. 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, valuation and impairment of investments and estimates of share-based compensation.~~assets. Actual results could differ from these ~~estimates.~~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 ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ are as follows (in ~~thousands)~~thousands):


		Three months ended June 30,				Six months ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Compensation and fringe benefits	Compensation and fringe benefits	$	77,379	$	31,447	$	134,405	$	57,001	Compensation and fringe benefits	$	132,067	$	57,026
Professional fees	Professional fees	42,303		15,424		81,765		32,636		Professional fees	66,811		39,463
Marketing and selling expense		63,988		14,474		114,193		23,115
Marketing and selling expenses										Marketing and selling expenses	91,807		50,205
Premium taxes and fees										Premium taxes and fees	69,781		37,731
General and administrative expenses										General and administrative expenses	40,710		14,440
Other operating expenses	Other operating expenses	77,390		27,482		138,937		50,519		Other operating expenses	17,742		9,375
Total operating costs	Total operating costs	$	261,060	$	88,827	$	469,300	$	163,271	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 ~~$232.4~~$222.4 million and $75.0 million of common stock, for total purchase consideration of ~~$306.2~~$296.2 million, net of $1.2 million of cash acquired. Centrum is a value-based primary care focused, multi-specialty medical group ~~with which our Bright HealthCare business partners within~~based in Florida. Centrum operates 17 health centers in Florida, Texas and North Carolina serving Commercial, Medicare, and Medicaid consumers across multiple ~~payors, with secured expansion locations in Texas and North Carolina.~~payors. Centrum is included in our NeueHealth reportable segment. ~~Transaction costs of~~ ~~$0.9~~ million incurred in connection with the acquisition are included in operating costs in the Condensed Consolidated Statements of Income (Loss) for the three and six months ended June 30, 2021, respectively.

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 ~~predominately~~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 ~~not~~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)~~thousands):


Accounts receivable	$	1,874
Prepaids and other current assets	627
Property and equipment	2,557
Intangible assets	~~157,040~~102,370
Other ~~Assets~~assets	308,917
Total ~~Assets~~assets	~~162,128~~116,345
Medical ~~costs payable~~payables	19
Accounts payable	359
Other current liabilities	861
Other liabilities	~~2,609~~11,636
Total liabilities	~~3,848~~12,875
Net identified assets acquired	~~158,280~~103,470
Goodwill	~~233,022~~275,066
Redeemable noncontrolling interest	~~(85,075)~~(82,310)
Total purchase consideration, net of cash acquired	$	~~306,227~~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.

The acquisition accounting is preliminary, as we have not obtained enough information to determine the fair value of operating lease right of use assets and liabilities. We also have not finalized the valuation of acquired intangible assets. 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 ~~names,~~name was determined using the relief of royalty method and the ~~values~~excess earnings method was used to value the customer relationships; both methods are ~~based on the allocation of total purchase consideration to identified intangible assets in past acquisitions by the Company and analysis of comparable third-party business combinations.~~considered Level 3 fair value measurements. The fair value of noncontrolling interest was determined using ~~an income approach and~~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 ~~and six~~ months ended ~~June 30, 2021 and 2020.~~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 ~~$271.7~~$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”) ~~HMO~~Health Maintenance Organization (“HMO”) services. CHP is included in our Bright HealthCare reportable segment. ~~Transaction costs~~ of $0.2 million incurred in connection with the acquisition are included in operating costs in the Condensed Consolidated Statements of Income (Loss) for the six months ended June 30, 2021, out of $1.4 million of total transaction cost~~s we have incurred.~~

The total ~~preliminary~~ 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)~~thousands):


~~Accounts receivable~~	$	~~16,361~~
~~Short-term investments~~	~~19,041~~
~~Prepaids and other current assets~~	~~25,520~~
~~Property and equipment~~	~~370~~
~~Intangible assets~~	~~102,000~~
~~Total Assets~~	~~163,292~~
~~Medical costs payable~~	~~79,450~~
~~Accounts payable~~	~~2,371~~
~~Other current liabilities~~	~~17,212~~
~~Other liabilities~~	~~28,622~~
~~Total liabilities~~	~~127,655~~
~~Net identified assets acquired~~	~~35,637~~
~~Goodwill~~	~~236,037~~
~~Total purchase consideration~~	$	~~271,674~~


	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 investments	19,041		—		19,041
Prepaids and other current assets	25,520		10		25,530
Property and equipment	370		—		370
Intangible assets	102,000		—		102,000
Other assets	—		1,249		1,249
Total assets	163,292		2,138		165,430
Medical costs payable	79,450		(3,807)		75,643
Accounts payable	2,371		—		2,371
Other current liabilities	17,212		(9,228)		7,984
Other liabilities	28,622		(2,347)		26,275
Total liabilities	127,655		(15,382)		112,273
Net identified assets acquired	35,637		17,520		53,157
Goodwill	236,037		(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. The fair values of certain assets and liabilities have changed from previous disclosure. We reclassified $19.0 million to short-term investments from cash and cash equivalents, and we obtained additional information to estimate the fair value of risk adjustment receivables and payables, pharmacy rebates and other medical costs within accounts receivable, prepaids and other current assets, medical costs payable and other current liabilities. We also updated the fair value of identified intangible assets based on the methodologies described below and identified a $28.5 million deferred tax liability related to the intangible assets.

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.

~~The following pro forma financial information presents our revenue and net loss as if~~If CHP had been included in the consolidated results of the Company for the ~~six~~three months ended ~~June 30,~~March 31, 2021 our pro forma revenue would have been $1.0 billion and ~~the three and six months ended June 30, 2020~~ ~~(in thousands)~~:

Pro Forma Consolidated Statements of Income (Loss)
(Unaudited)
Three Months Ended Six Months Ended June 30,
June 30, 2020 2021 2020
Revenue $ 430,200 $ 2,117,268 $ 760,638
Net Loss (15,123) (58,271) (21,763)

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 ~~$3.4~~$(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 ~~$73.5~~$73.0 million, including $55.1 million in Series E preferred ~~stock.~~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 ~~$70.3~~$69.8 million. Zipnosis is included in our NeueHealth reportable segment.

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~~Bright Health Group, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Transaction costs of $0.5 million incurred in connection with these acquisitions are included in operating costs in the Condensed Consolidated Statements of Income (Loss) for the three and six months ended June 30, 2021.

The total ~~preliminary~~ 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 ~~preliminary estimated~~ fair values of assets and liabilities acquired by the Company in the THNM and Zipnosis acquisitions (in ~~thousands)~~thousands):


		THNM		Zipnosis			THNM		Zipnosis
Accounts receivable	Accounts receivable	$	714	$	1,062	Accounts receivable	$	714	$	1,062
Short-term investments	Short-term investments	4,677		0		Short-term investments	4,705		—
Prepaids and other current assets	Prepaids and other current assets	8,337		141		Prepaids and other current assets	8,337		141
Property and equipment	Property and equipment	0		232		Property and equipment	—		232
Intangible assets	Intangible assets	7,300		8,970		Intangible assets	7,300		9,180
Long-term investments	Long-term investments	13,081		0		Long-term investments	13,644		—
Other non-current assets	Other non-current assets	1,324		766		Other non-current assets	1,324		766
Total Assets		35,433		11,171
Total assets						Total assets	36,024		11,381
Medical costs payable	Medical costs payable	13,268		0		Medical costs payable	12,617		—
Accounts payable	Accounts payable	14,663		136		Accounts payable	14,663		136
Unearned revenue	Unearned revenue	3,645		120		Unearned revenue	3,645		120
Other current liabilities	Other current liabilities	2,682		665		Other current liabilities	11,406		665
Other liabilities	Other liabilities	2,499		2,730		Other liabilities	2,499		2,730
Total liabilities	Total liabilities	36,757		3,651		Total liabilities	44,830		3,651
Net identified assets acquired		(1,324)		7,520
Net identified assets (liabilities) acquired						Net identified assets (liabilities) acquired	(8,806)		7,730
Goodwill	Goodwill	4,739		62,827		Goodwill	4,148		62,067
Total purchase consideration		$	3,415	$	70,347
Total purchase consideration, net of cash acquired						Total purchase consideration, net of cash acquired	$	(4,658)	$	69,797

~~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~~We recognized measurement period adjustments for THNM for post-close working capital ~~adjustments, becomes available.~~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.

~~Our preliminary estimate of intangible~~Intangible assets initially recognized related to the THNM acquisition ~~consists~~consisted of customer relationships with ~~10-to-14-year~~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.

~~Table of Contents~~

~~Bright Health Group, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~The following pro forma financial information presents our revenue and net loss as if~~If THNM and Zipnosis had been included in the consolidated results of the Company for the ~~six~~three months ended ~~June 30,~~March 31, 2021 ~~and three and six months ended June 30, 2020~~ ~~(in thousands)~~:

Pro Forma Consolidated Statements of Income (Loss)
(Unaudited)
Three Months Ended Six months ended June 30,
June 30, 2020 2021 2020
Revenue 325,278 $ 2,036,297 558,488
Net Loss (20,623) $ (71,651) (28,954)

~~PMA Acquisition:~~ On December 31, 2020, we acquired a 62% controlling interest in Premier Medical Associates of Florida, LLC (“PMA”) in exchange for $74.2 million. PMA provides care services to Medicare and Medicaid patients in Florida through a network of primary care providers and population health-focused specialists. The acquisition of PMA is expected to enhance our clinical capabilities to better serve enrollees as part of our Florida market expansion. The total purchase consideration for the PMA acquisition was 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 was recorded as goodwill. The purchase price allocation is preliminary and subject to change, including the valuation of property, equipment and capitalized software and intangible assets, among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date.

~~BND Acquisition:~~ On April 30, 2020, we acquired all of the outstanding shares of Universal Care, Inc. (d.b.a. Brand New Day) (“BND”). BND is a leader in providing healthcare services in California and serves Medicare eligible seniors and special needs populations through their extensive network of primary care providers and specialists. BND combines analytics and evidence-based clinical programs with aligned provider relationships to provide high quality, affordable care for complex and vulnerable populations. The total consideration included $206.9 million in cash and $80.0 million in Bright Health Series D preferred stock. We have since applied indemnity escrow adjustments of $44.0 million to the acquisition price, bringing total consideration to $210.1 million, net of cash acquired of $32.8 million. The escrow adjustments are made up of $40.2 million of tangible net equity adjustments and $3.8 million of target gross margin adjustments. Transaction costs of $3.8 million incurred in connection with the acquisition are included in operating costs in the Consolidated Statements of Income (Loss) for the year ended December 31, 2020. If BND had been included in the consolidated results of the Company for the three and six months ended June 30, 2020, our pro forma revenue would have been ~~$346.5~~$922.5 million ~~and $691.6 million, respectively,~~ and our pro forma net loss would have been ~~$(22.8) million, and $(41.8) million, respectively.~~$27.1 million.

~~Table of Contents~~

~~Bright Health Group, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The total purchase consideration for the BND acquisition was 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 was recorded as goodwill. The goodwill is attributable to synergies from leveraging BND’s strong clinical model of care to drive growth in our MA business outside of California. The goodwill from the BND acquisition is not deductible for tax purposes. The following table discloses the preliminary estimated fair values of assets and liabilities acquired by the Company in the BND acquisition, as well as measurement adjustments made inDuring the three months ended ~~June 30, 2021 to the amounts initially recorded in 2020~~ March 31, 2022, we completed an immaterial business combination which increased goodwill.

~~(in thousands)~~:

Amount Recognized as of
Acquisition Date
(as previously reported) Measurement
Period
Adjustments Amounts Recognized as of
Acquisition Date
(as adjusted)
Accounts receivable $ 74,128 $ 0 $ 74,128
Prepaid and other currents assets 30,583 0 30,583
Property and equipment 4,375 0 4,375
Intangible assets 72,600 1,900 74,500
Other non-current assets 2,906 0 2,906
Total Assets 184,592 1,900 186,492
Medical costs payable 119,408 0 119,408
Other current liabilities 51,744 174 51,918
Other liabilities 1,236 108 1,344
Total liabilities 172,388 282 172,670
Net identified assets acquired 12,204 1,618 13,822
Goodwill 197,886 (1,618) 196,268
Total purchase consideration $ 210,090 $ 0 $ 210,090

The measurement period adjustments above primarily resulted from completing valuations for certain intangible assets. The related impact to net earnings that would have been recognized in previous periods if the adjustments were recognized as of the acquisition date is immaterial to the consolidated financial statements. We recognized intangible assets related to the BND acquisition, which consist of $25.6 million for the BND trade name with an estimated useful life of 15 years, customer relationships valued at $46.9 million with a 12-year useful life, and $2.0 million of other intangibles related to the provider network with a 10-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.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 3. INVESTMENTS

Fixed Maturity Securities

Available-for-sale securities are reported at fair value as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. Held-to-maturity securities are reported at amortized cost as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. The following is a summary of our investment securities as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in ~~thousands)~~thousands):


		June 30, 2021									March 31, 2022
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Value
Cash equivalents	Cash equivalents	$	344,084	$	0	$	0	$	344,084	Cash equivalents	$	586,011	$	—	$	(41)	$	585,970
Available for sale:	Available for sale:									Available for sale:
U.S. government and agency obligations	U.S. government and agency obligations	498,098		773		(461)		498,410		U.S. government and agency obligations	752,881		69		(7,366)		745,584
Corporate obligations	Corporate obligations	264,662		657		(115)		265,204		Corporate obligations	392,440		56		(15,316)		377,180
State and municipal obligations	State and municipal obligations	17,352		69		(4)		17,417		State and municipal obligations	18,654		2		(215)		18,441
Commercial paper		1,000		0		0		1,000
Certificates of deposit	Certificates of deposit	19,326		0		0		19,326		Certificates of deposit	14,340		—		(2)		14,338
Mortgage-backed securities	Mortgage-backed securities	2,745		113		0		2,858		Mortgage-backed securities	126,271		75		(4,564)		121,782
Asset-backed securities										Asset-backed securities	62,104		9		(1,766)		60,347
Other	Other	1,097		0		0		1,097		Other	392		—		(11)		381
Total available-for-sale securities	Total available-for-sale securities	804,280		1,612		(580)		805,312		Total available-for-sale securities	1,367,082		211		(29,240)		1,338,053
Held to maturity:	Held to maturity:									Held to maturity:
U.S. government and agency obligations	U.S. government and agency obligations	6,650		0		0		6,650		U.S. government and agency obligations	7,055		—		—		7,055
Certificates of deposit	Certificates of deposit	1,518		0		0		1,518		Certificates of deposit	1,447		—		—		1,447
Total held-to-maturity securities	Total held-to-maturity securities	8,168		0		0		8,168		Total held-to-maturity securities	8,502		—		—		8,502
Total investments	Total investments	1,156,532		1,612		(580)		1,157,564		Total investments	$	1,961,595	$	211	$	(29,281)	$	1,932,525


		December 31, 2020									December 31, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Value
Cash equivalents	Cash equivalents	$	153,743	$	0	$	(3)	$	153,740	Cash equivalents	$	192,623	$	—	$	—	$	192,623
Available for sale:	Available for sale:									Available for sale:
U.S. government and agency obligations	U.S. government and agency obligations	291,834		1,246		(1)		293,079		U.S. government and agency obligations	311,936		259		(2,200)		309,995
Corporate obligations	Corporate obligations	280,557		1,104		(30)		281,631		Corporate obligations	313,965		326		(1,104)		313,187
State and municipal obligations	State and municipal obligations	18,459		107		0		18,566		State and municipal obligations	16,122		33		(38)		16,117
Commercial paper		14,990		1		0		14,991
Certificates of deposit	Certificates of deposit	53,504		2		(1)		53,505		Certificates of deposit	18,752		—		—		18,752
Mortgage-backed securities										Mortgage-backed securities	38,558		63		(67)		38,554
Other	Other	5,534		2		0		5,536		Other	42,889		13		(30)		42,872
Total available-for-sale securities	Total available-for-sale securities	664,878		2,462		(32)		667,308		Total available-for-sale securities	742,222		694		(3,439)		739,477
Held to maturity:	Held to maturity:									Held to maturity:
U.S. government and agency obligations	U.S. government and agency obligations	6,677		0		0		6,677		U.S. government and agency obligations	7,739		—		—		7,739
Certificates of deposit	Certificates of deposit	1,119		0		0		1,119		Certificates of deposit	1,447		—		—		1,447
Total held-to-maturity securities	Total held-to-maturity securities	7,796		0		0		7,796		Total held-to-maturity securities	9,186		—		—		9,186
Total investments	Total investments	826,417		2,462		(35)		828,844		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 ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 were as follows (in ~~thousands)~~thousands):


		June 30, 2021													March 31, 2022
		Less Than 12 Months				12 Months or Greater				Total					Less Than 12 Months				12 Months or Greater				Total
Description of Investments	Description of Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Description of Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Cash equivalents														Cash equivalents	204,916		(41)		—		—		204,916		(41)
U.S. government and agency obligations	U.S. government and agency obligations	$	348,290	$	(461)	$	0	$	0	$	348,290	$	(461)	U.S. government and agency obligations	715,592		(6,884)		13,148		(482)		728,740		(7,366)
Corporate obligations	Corporate obligations	160,409		(115)		0		0		160,409		(115)		Corporate obligations	358,350		(15,311)		127		(5)		358,477		(15,316)
State and municipal obligations	State and municipal obligations	3,311		(4)		0		0		3,311		(4)		State and municipal obligations	15,113		(215)		—		—		15,113		(215)
Certificates of deposit														Certificates of deposit	936		(2)		—		—		936		(2)
Mortgage-backed securities														Mortgage-backed securities	112,180		(4,564)		—		—		112,180		(4,564)
Asset-backed securities														Asset-backed securities	56,979		(1,766)		—		—		56,979		(1,766)
Other														Other	382		(11)		—		—		382		(11)
Total bonds	Total bonds	$	513,127	$	(580)	$	0	$	0	$	513,127	$	(580)	Total bonds	$	1,464,448	$	(28,794)	$	13,275	$	(487)	$	1,477,723	$	(29,281)


		December 31, 2020													December 31, 2021
		Less Than 12 Months				12 Months or Greater				Total					Less Than 12 Months				12 Months or Greater				Total
Description of Investments	Description of Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Description of Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Cash equivalents		$	25,007	$	(3)	$	0	$	0	$	25,007	$	(3)
U.S. government and agency obligations	U.S. government and agency obligations	12,507		(1)		0		0		12,507		(1)		U.S. government and agency obligations	286,823		(2,200)		—		—		286,823		(2,200)
Corporate obligations	Corporate obligations	121,006		(30)		0		0		121,006		(30)		Corporate obligations	234,070		(1,104)		—		—		234,070		(1,104)
Commercial paper		999		0		0		0		999		0
Certificates of deposit		14,003		(1)		0		0		14,003		(1)
State and municipal obligations														State and municipal obligations	10,442		(38)		—		—		10,442		(38)
Mortgage-backed securities														Mortgage-backed securities	32,715		(67)		—		—		32,715		(67)
Other														Other	29,115		(30)		—		—		29,115		(30)
Total bonds	Total bonds	$	173,522	$	(35)	$	0	$	0	$	173,522	$	(35)	Total bonds	$	593,165	$	(3,439)	$	—	$	—	$	593,165	$	(3,439)

As of ~~June 30, 2021,~~March 31, 2022, we had ~~705~~1,704 investment positions out of ~~1,919~~1,976 that were in an unrealized loss position. As of December 31, ~~2020,~~2021, we had ~~117~~1,343 investment positions out of ~~1,917~~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 ~~June 30, 2021,~~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.

~~As of June 30, 2021, 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 $ 194,644 $ 195,191
Due after one year through five years 609,636 610,121
Due after five years through 10 years 0 0
Due after 10 years 0 0
Total debt securities $ 804,280 $ 805,312

Investment income in the Condensed Consolidated Statements of Income (Loss) for the six months ended June 30, 2021 and 2020, was $2.4 million, and $5.3 million, respectively, related to our fixed maturity securities. Realized gains (losses) from our

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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 years	502,915		486,128
Due after five years through 10 years	228,247		217,160
Due after 10 years	8,192		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 ~~$0.2~~$(1.7) million and $0.1 million are included within total investment income, and reclassified out of accumulated other comprehensive income, for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ 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 ~~June 30,~~March 31, 2022 and December 31, 2021, the equity securities had a carrying value of ~~$102.9~~$79.4 million and $120.4 million, respectively, which is included in short-term investments in the Condensed Consolidated Balance Sheet. We recognized an unrealized ~~gain~~(losses) gains of ~~$58.5~~$(41.0) million and ~~$62.8~~$4.2 million in investment income (loss) in the Condensed Consolidated Statements of Income (Loss) for the three ~~and six~~ months ended ~~June 30,~~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~~condensed consolidated financial statements or have fair values disclosed in the ~~Notes~~notes to the ~~Condensed Consolidated Financial Statements.~~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 ~~except for the equity securities,~~ see Note 5 ~~of Notes~~ to the ~~Audited Consolidated Financial Statements~~audited consolidated financial statements included in our ~~Prospectus filed with the SEC.~~

~~Equity Securities —~~ ~~The fair value of the equity securities was determined based on the quoted market price of the underlying securities in an active market.~~2021 Form 10-K.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following tables set forth our fair value measurements as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, for assets measured at fair value on a recurring basis (in ~~thousands)~~thousands):


		June 30, 2021									March 31, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets	Assets									Assets
Cash equivalents	Cash equivalents	$	332,305	$	0	$	0	$	332,305	Cash equivalents	$	563,876	$	21,103	$	—	$	584,979
Fixed maturity securities, available for sale:	Fixed maturity securities, available for sale:									Fixed maturity securities, available for sale:
U.S. government and agency obligations	U.S. government and agency obligations	342,365		156,045		0		498,410		U.S. government and agency obligations	724,519		21,065		—		745,584
Corporate obligations	Corporate obligations	2,368		262,836		0		265,204		Corporate obligations	2,255		374,925		—		377,180
State and municipal obligations	State and municipal obligations	0		17,417		0		17,417		State and municipal obligations	—		18,441		—		18,441
Commercial paper		0		1,000		0		1,000
Certificates of deposit	Certificates of deposit	18,726		600		0		19,326		Certificates of deposit	—		14,338		—		14,338
Mortgage-backed securities	Mortgage-backed securities	2,858		0		0		2,858		Mortgage-backed securities	—		121,782		—		121,782
Asset-backed securities										Asset-backed securities	—		60,347		0		60,347
Other	Other	0		1,097		0		1,097		Other	—		381		—		381
Total fixed maturity securities, available for sale:	Total fixed maturity securities, available for sale:	366,317		438,995		0		805,312		Total fixed maturity securities, available for sale:	726,774		611,279		—		1,338,053
Equity securities	Equity securities	102,886		0		0		102,886		Equity securities	79,396		—		—		79,396
Total assets at fair value	Total assets at fair value	$	469,203	$	438,995	$	0	$	908,198	Total assets at fair value	$	1,370,046	$	632,382	$	—	$	2,002,428
Liabilities	Liabilities									Liabilities
Contingent consideration	Contingent consideration	$	0	$	0	$	6,775	$	6,775	Contingent consideration	$	—	$	—	$	1,495	$	1,495


		December 31, 2020									December 31, 2021
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets	Assets									Assets
Cash equivalents	Cash equivalents	$	149,499	$	4,019	$	0	$	153,518	Cash equivalents	$	192,063	$	250	$	—	$	192,313
Fixed maturity securities, available for sale:	Fixed maturity securities, available for sale:									Fixed maturity securities, available for sale:
U.S. government and agency obligations	U.S. government and agency obligations	197,886		95,193		0		293,079		U.S. government and agency obligations	220,801		89,194		—		309,995
Corporate obligations	Corporate obligations	0		281,631		0		281,631		Corporate obligations	2,323		310,864		—		313,187
State and municipal obligations	State and municipal obligations	0		18,566		0		18,566		State and municipal obligations	—		16,117		—		16,117
Commercial paper		0		14,991		0		14,991
Certificates of deposit	Certificates of deposit	0		53,505		0		53,505		Certificates of deposit	—		18,752		—		18,752
Mortgage-backed securities										Mortgage-backed securities	2,404		36,150		—		38,554
Other	Other	0		5,536		0		5,536		Other	—		42,872		—		42,872
Total fixed maturity securities, available for sale:										Total fixed maturity securities, available for sale:	225,528		513,949		—		739,477
Equity securities										Equity securities	120,364		—		—		120,364
Total assets at fair value	Total assets at fair value	$	347,385	$	473,441	$	0	$	820,826	Total assets at fair value	$	537,955	$	514,199	$	—	$	1,052,154
Liabilities	Liabilities									Liabilities
Contingent consideration	Contingent consideration	$	0	$	0	$	5,716	$	5,716	Contingent consideration	$	—	$	—	$	1,495	$	1,495

~~The following tables set forth the Company’s fair value measurements as of June 30, 2021 and December 31, 2020, for certain financial instruments not measured at fair value on a recurring basis~~
~~(in thousands)~~:

June 30, 2021
Level 1 Level 2 Level 3 Total
Cash equivalents, held to maturity $ 11,779 $ 0 $ 0 $ 11,779
Fixed maturity securities, held to maturity:
U.S. government and agency obligations 6,681 0 0 6,681
Certificates of deposit 1,518 0 0 1,518
Total held to maturity $ 19,978 $ 0 $ 0 $ 19,978

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

December 31, 2020
Level 1 Level 2 Level 3 Total
Cash equivalents, held to maturity $ 222 $ 0 $ 0 $ 222
Fixed maturity securities, held to maturity:
U.S. government and agency obligations 6,732 0 0 6,732
Certificates of deposit 0 1,119 0 1,119
Total held to maturity $ 6,954 $ 1,119 $ 0 $ 8,073
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 1		Level 2		Level 3		Total
Cash equivalents, held to maturity	$	991	$	—	$	—	$	991
Fixed maturity securities, held to maturity:
U.S. government and agency obligations	7,055		—		—		7,055
Certificates of deposit	—		1,447		—		1,447
Total held to maturity	$	8,046	$	1,447	$	—	$	9,493


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents, held to maturity	$	310	$	—	$	—	$	310
Fixed maturity securities, held to maturity:
U.S. government and agency obligations	7,732		—		—		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 ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and year ended December 31, ~~2020~~2021 (in ~~thousands)~~thousands):


		2021		2020			2022		2021
Balance at beginning of period	Balance at beginning of period	$	5,716	$	5,716	Balance at beginning of period	$	1,495	$	5,716
Change in fair value of contingent consideration	Change in fair value of contingent consideration	1,059		0		Change in fair value of contingent consideration	—		(4,221)
Balance at end of period	Balance at end of period	$	6,775	$	5,716	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. The carrying value for short-term borrowings under our credit facility approximate fair value due to the short-term nature of this obligation and is categorized within Level 2 of the fair value hierarchy based on observable market borrowing rates. 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)~~thousands):

Bright HealthCare NeueHealth
Gross Carrying
Amount Cumulative
Impairment Gross Carrying
Amount Cumulative
Impairment
Balance at December 31, 2020 $ 197,886 $ 0 $ 65,149 $ 0
Acquisitions 240,776 62,827
Purchase adjustments (1,618) — 0 —
Balance at June 30, 2021 $ 437,044 $ 0 $ 127,976 $ 0

~~The gross carrying value and accumulated amortization for definite-lived intangible assets were as follows~~ ~~(in thousands)~~:

June 30, 2021 December 31, 2020
Gross Carrying
Amount Accumulated Amortization Gross Carrying
Amount Accumulated Amortization
Customer relationships $ 201,051 $ 11,459 $ 117,451 $ 3,664
Trade names 64,131 3,365 38,161 1,604
Developed technology 6,200 148 0 0
Other 6,400 390 2,000 133
Total $ 277,782 $ 15,362 $ 157,612 $ 5,401


	Bright HealthCare				NeueHealth
	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	$	—

1917

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

The ~~acquisition date fair values~~gross carrying value and ~~weighted-average useful lives assigned to~~accumulated amortization for definite-lived intangible assets ~~acquired during the six months ended June 30, 2021~~ were as follows (in ~~thousands)~~thousands):


						March 31, 2022				December 31, 2021
		Fair Value		Weighted-Average Useful Life (in years)		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Customer relationships	Customer relationships	$	82,400	10.3	Customer relationships	$	206,321	$	26,632	$	209,421	$	21,728
Trade names	Trade names	25,270		14.7	Trade names	96,041		8,205		99,241		6,738
Reacquired contract					Reacquired contract	59,000		9,833		59,000		6,556
Developed technology	Developed technology	6,200		7.0	Developed technology	6,300		900		6,300		675
Other	Other	4,400		7.0	Other	5,400		875		6,400		805
Total	Total	$	118,270	10.9	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 ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ was ~~$6.3~~$10.5 million and ~~$1.4~~$3.7 million, ~~respectively, and amortization expense for the six months ended June 30, 2021 and 2020 was~~ ~~$10.0~~ ~~million and~~ ~~$1.8 million,~~ respectively. Estimated amortization expense relating to intangible assets for the remainder of ~~2021~~2022 and for each of the next five full years ending December 31 is as follows (in ~~thousands)~~thousands):


2021 (July-December)		$	20,018
2022		39,840
2022 (April-December)				2022 (April-December)	$	31,120
2023	2023	39,840		2023	41,471
2024	2024	39,840		2024	41,332
2025	2025	39,840		2025	41,332
2026	2026	39,725		2026	28,104
2027				2027	28,065

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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 ~~six~~three months ended ~~June 30~~March 31 (in ~~thousands)~~thousands):


		2021		2020			2022		2021
Medical costs payable - January 1	Medical costs payable - January 1	$	249,777	$	44,804	Medical costs payable - January 1	$	817,975	$	249,777
Incurred related to:	Incurred related to:					Incurred related to:
Current year	Current year	1,604,472		373,901		Current year	1,576,725		689,572
Prior year	Prior year	334		(8,157)		Prior year	5,218		(3,076)
Total incurred	Total incurred	1,604,806		365,744		Total incurred	1,581,943		686,496
Paid related to:	Paid related to:					Paid related to:
Current year	Current year	1,183,622		313,166		Current year	710,804		307,442
Prior year	Prior year	198,059		30,094		Prior year	533,959		153,240
Total paid	Total paid	1,381,681		343,260		Total paid	1,244,763		460,682

Acquired claims liabilities	Acquired claims liabilities	92,718		118,662		Acquired claims liabilities	—		13,268
Medical costs payable - June 30		$	565,620	$	185,950
Medical costs payable - March 31						Medical costs payable - March 31	$	1,155,155	$	488,859

Medical costs payable attributable to prior years increased by ~~$0.3~~$5.2 million and decreased by ~~$8.2~~$3.1 million for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ 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.

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~~Bright Health Group, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The table below details the components making up the medical costs payable as of ~~June 30~~March 31 (in ~~thousands)~~thousands):


							March 31,
		2021		2020			2022		2021
Claims unpaid	Claims unpaid	$	23,040	$	24,408	Claims unpaid	$	102,293	$	19,652
Provider incentive payable	Provider incentive payable	64,453		10,391		Provider incentive payable	45,805		36,592
Claims adjustment expense liability	Claims adjustment expense liability	9,718		3,294		Claims adjustment expense liability	15,479		5,038
Incurred but not reported (IBNR)		468,409		147,857
Incurred but not reported						Incurred but not reported	991,578		427,577
Total medical costs payable	Total medical costs payable	$	565,620	$	185,950	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

~~On March 1, 2021, we entered into~~We have a $350.0 million revolving credit agreement with a syndicate of banks (the “Credit Agreement”)~~. On August 2, 2021,~~, 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 ~~was amended to change the definition~~as of ~~“Qualified IPO” by reducing the net proceeds required to be received by the Company from $1.0 billion to $850.0 million. In addition, prior to such amendment,~~December 31, 2021. As of March 31, 2022, we had no short-term borrowings under the Credit Agreement.

The Credit Agreement ~~contained~~contains a covenant that ~~required~~requires the Company to maintain a total debt to capitalization ratio of (a) 0.25 to 1.00 prior to a Qualified IPO, and (b) 0.30 to 1.00 after a Qualified IPO. The Amendment changed this covenant by removing the increase in the ratio after a Qualified IPO such that the Company is now required to maintain a total debt to capitalization ratio of 0.25 to 1.00. ~~On August 4, 2021, we elected to extend the maturity date of the~~The Credit Agreement ~~from February 28, 2022~~also contains a covenant that require us to ~~February 28, 2024.~~maintain a minimum liquidity of $150.0 million. We ~~utilized a portion~~were in compliance with our debt covenants as of ~~the net IPO proceeds to repay the $200.0 million principal balance of indebtedness outstanding under our revolving credit agreement originally entered into on~~ March ~~1, 2021 and the associated interest and other costs of $3.2 million. As of June 30, 2021, we repaid the full amount and have no borrowings outstanding under the Credit Agreement.~~31, 2022.

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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 ~~42.0~~73.4 million shares of common stock authorized for issuance under the 2021 Incentive Plan. As of ~~June 30, 2021,~~March 31, 2022, a total of ~~27.3~~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 ~~$19.1~~$32.9 million and $~~2.2~~5.2 million for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, which is included in operating costs in the Condensed Consolidated Statements of Income (Loss).

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~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

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. ~~The option awards~~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 ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:


	~~2021~~2022
Risk-free interest rate	~~0.8~~1.7	%
Expected volatility	~~33.3~~55.0	%
Expected dividend rate	0.0	%
Forfeiture rate	~~14.5~~10.0	%
Expected life in years	~~6.1~~6.0

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.~~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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Notes to Condensed Consolidated Financial Statements

(Unaudited)

The activity for ~~the~~ stock options for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 is as follows (in ~~thousands,~~thousands, except exercise price and contractual life):


		Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (In Years)	Aggregate Intrinsic Value			Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (In Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2021		63,925	$	1.47	8.7	$	53,573
Outstanding at January 1, 2022								Outstanding at January 1, 2022	69,244	$	1.84	8.2	$	113,908
Granted	Granted	20,241	2.53					Granted	6,896	1.79
Exercised	Exercised	(8,781)	1.05					Exercised	(338)	0.76
Forfeited	Forfeited	(3,155)	1.60					Forfeited	(2,416)	2.24
Expired	Expired	(11)	1.09					Expired	(412)	2.22
Outstanding at June 30, 2021		72,219	$	1.81	8.7	$	1,108,293
Outstanding at March 31, 2022								Outstanding at March 31, 2022	72,974	$	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 ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 was ~~$10.92~~$0.94 per share. At ~~June 30, 2021,~~March 31, 2022, there was ~~$158.3~~$124.4 million of unrecognized compensation expense related to stock options that is expected to be recognized over a weighted-average period of ~~1.4~~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 RSUs	Weighted Average Grant Date Fair Value
Unvested RSUs at December 31, 2021	15,651	$	3.98
Granted	23,154	1.79
Vested	(36)	8.95
Forfeited	(1,977)	3.64
Unvested RSUs at March 31, 2022	36,792	$	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 4 equal tranches, each of which are eligible to vest based on the achievement of predetermined stock price goals and a minimum service period of ~~three~~3 years. ~~This grant is intended to retain and incentivize our executive leadership to lead~~The fair value of the ~~Company to sustained, long-term financial and operational performance.~~PSUs was determined using a Monte-Carlo simulation.

2221

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table summarizes PSU award activity for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 (in ~~thousands,~~thousands, except weighted average grant date fair value):

PSU
Number of PSUs Weighted Average Grant Date Fair Value
Unvested PSUs at December 31, 2020 0 $ 0
PSUs granted 14,700 9.30
PSUs canceled 0 0
Unvested PSUs at June 30, 2021 14,700 $ 9.30


	Number of PSUs	Weighted Average Grant Date Fair Value
Unvested PSUs at December 31, 2021	14,700	$	9.30
Granted	—	—
Forfeited	—	—
Unvested PSUs at March 31, 2022	14,700	$	9.30

We recognized share-based compensation expense related to ~~the PSU grant~~PSUs of ~~$0.3~~$10.3 million for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, which is included in operating costs in the Condensed Consolidated Statements of Income (Loss). At ~~June 30, 2021,~~March 31, 2022, there was ~~$116.9~~$91.1 million of unrecognized compensation expense related to the PSU grant, which is expected to be recognized over a weighted-average period of ~~three~~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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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 9.10. 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 ~~and six~~ months ended ~~June 30~~March 31, (in ~~thousands,~~thousands, except for per share amounts):


		Three Months Ended June 30				Six Months Ended June 30					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Net loss attributable to Bright Health Group, Inc. common shareholders	Net loss attributable to Bright Health Group, Inc. common shareholders	$	(44,518)	$	(18,074)	$	(69,680)	$	(25,354)	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 diluted	Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted	160,942		135,801		150,616		135,719		Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted	628,765		140,175
Net loss per share attributable to common stockholders, basic and diluted	Net loss per share attributable to common stockholders, basic and diluted	$	(0.28)	$	(0.13)	$	(0.46)	$	(0.19)	Net loss per share attributable to common stockholders, basic and diluted	$	(0.32)	$	(0.18)

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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 ~~six~~three months ended ~~June 30~~March 31 (in ~~thousands)~~thousands):


		Six Months Ended June 30			Three Months Ended March 31,
		2021	2020		2022	2021
Redeemable convertible preferred stock (as converted to common stock)	Redeemable convertible preferred stock (as converted to common stock)	0	341,352	Redeemable convertible preferred stock (as converted to common stock)	166,852	421,697
Stock options to purchase common stock	Stock options to purchase common stock	72,219	57,689	Stock options to purchase common stock	72,974	76,913
Restricted stock units				Restricted stock units	36,792	—
Total	Total	72,219	399,041	Total	276,618	498,610

NOTE ~~10.~~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 ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~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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Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE ~~11.~~12. SEGMENTS AND GEOGRAPHIC INFORMATION

Our 2 reportable segments are Bright HealthCare and NeueHealth.

The following tables ~~presents~~present the reportable segment financial information for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in ~~thousands)~~thousands):


Three Months Ended June 30, 2021		Bright HealthCare		NeueHealth		Eliminations		Consolidated
Three Months Ended March 31, 2022										Three Months Ended March 31, 2022	Bright HealthCare		NeueHealth		Eliminations		Consolidated
Premium revenue	Premium revenue	$	1,023,759	$	18,327	$	—	$	1,042,086	Premium revenue	$	1,593,501	$	86,949	$	—	$	1,680,450
Direct contracting revenue										Direct contracting revenue	—		182,797		—		182,797
Service revenue	Service revenue	90		11,995		—		12,085		Service revenue	36		12,392		—		12,428
Investment income	Investment income	1,158		58,511		—		59,669		Investment income	868		(40,968)		—		(40,100)
Total unaffiliated revenue	Total unaffiliated revenue	1,025,007		88,833		—		1,113,840		Total unaffiliated revenue	1,594,405		241,170		—		1,835,575
Affiliated revenue	Affiliated revenue	—		25,481		(25,481)		—		Affiliated revenue	—		379,782		(379,782)		—
Total segment revenue	Total segment revenue	1,025,007		114,314		(25,481)		1,113,840		Total segment revenue	1,594,405		620,952		(379,782)		1,835,575
Operating income (loss)	Operating income (loss)	(115,964)		56,919		—		(59,045)		Operating income (loss)	(107,022)		(69,958)		—		(176,980)

Depreciation and amortization	Depreciation and amortization	$	4,583	$	2,612	$	—	$	7,195	Depreciation and amortization	$	6,039	$	7,002	$	—	$	13,041


Three Months Ended June 30, 2020		Bright HealthCare		NeueHealth		Eliminations		Consolidated
Three Months Ended March 31, 2021										Three Months Ended March 31, 2021	Bright HealthCare		NeueHealth		Eliminations		Consolidated
Premium revenue	Premium revenue	$	288,980	$	1,992	$	—	$	290,972	Premium revenue	$	841,925	$	18,706	$	—	$	860,631
Direct contracting revenue										Direct contracting revenue	—		—		—		—
Service revenue	Service revenue	0		3,604		—		3,604		Service revenue	—		8,438		—		8,438
Investment income	Investment income	2,280		0		—		2,280		Investment income	1,246		4,243		—		5,489
Total unaffiliated revenue	Total unaffiliated revenue	291,260		5,596		—		296,856		Total unaffiliated revenue	843,171		31,387		—		874,558
Affiliated revenue	Affiliated revenue	—		2,742		(2,742)		—		Affiliated revenue	—		17,152		(17,152)		—
Total segment revenue	Total segment revenue	291,260		8,338		(2,742)		296,856		Total segment revenue	843,171		48,539		(17,152)		874,558
Operating income (loss)	Operating income (loss)	(25,054)		(2,182)		—		(27,236)		Operating income (loss)	(24,215)		1,382		—		(22,833)

Depreciation and amortization	Depreciation and amortization	$	1,595	$	490	$	—	$	2,085	Depreciation and amortization	$	2,357	$	2,224	$	—	$	4,581

Six Months Ended June 30, 2021 Bright
HealthCare NeueHealth Eliminations Consolidated
Premium revenue $ 1,865,684 $ 37,033 $ — $ 1,902,717
Service revenue 90 20,433 — 20,523
Investment income 2,404 62,754 — 65,158
Total unaffiliated revenue 1,868,178 120,220 — 1,988,398
Affiliated revenue — 42,633 (42,633) —
Total segment revenue 1,868,178 162,853 (42,633) 1,988,398
Operating income (loss) (140,179) 58,301 — (81,878)
Depreciation and amortization $ 6,940 $ 4,836 $ — $ 11,776

~~Table~~As a percentage of ~~Contents~~

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 ~~Health Group, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Six Months Ended June 30, 2020 Bright
HealthCare NeueHealth Eliminations Consolidated
Premium revenue $ 477,713 $ 3,996 $ — $ 481,709
Service revenue 0 8,424 — 8,424
Investment income 5,289 0 — 5,289
Total unaffiliated revenue 483,002 12,420 — 495,422
Affiliated revenue — 5,449 (5,449) —
Total segment revenue 483,002 17,869 (5,449) 495,422
Operating income (loss) (31,164) (3,352) — (34,516)
Depreciation and amortization $ 1,857 $ 1,015 $ — $ 2,872

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 ~~12.~~13. INCOME TAXES

Income tax ~~benefit~~expense was ~~$19.5~~$3.2 million and ~~$18.3~~$1.2 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, respectively. ~~This was primarily attributable to the release of valuation allowance in connection with new deferred tax liabilities recorded on identifiable intangibles as part of business combination accounting.~~ 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 ~~six~~three months ended ~~June 30,~~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 ~~variance is primarily due~~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 ~~BND, Zipnosis,~~Universal Care, Inc. (d.b.a. Brand New Day) and THNM ~~and CHP~~ 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 ~~June 30, 2021.~~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 ~~2021~~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 ~~13.~~14. REDEEMABLE NONCONTROLLING INTEREST

~~There~~ ~~was 0 redeemable~~Redeemable noncontrolling ~~interest during the three and six months ended June 30, 2020.~~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 ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 (in ~~thousands)~~thousands):


	Three Months Ended March 31,
	2022		2021
Balance at beginning of period	$	128,407	$	39,600
Earnings attributable to noncontrolling interest	(2,681)		288
Measurement adjustment	17,285		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 2 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):


	Redeemable Noncontrolling InterestMarch 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
~~Balance at January 1, 2021~~Amortization of Direct contracting performance year receivable	$	~~39,600~~75,127
~~Earnings attributable to noncontrolling interest~~Amortization of Direct contracting performance year obligation	~~288~~182,797
~~Measurement adjustment~~Direct contracting revenue	~~329~~
~~Balance at March 31, 2021~~	$	~~40,217~~
~~Earnings attributable to noncontrolling interest~~	~~640~~
~~Measurement adjustment~~	~~155~~
~~Balance at June 30, 2021~~	$	~~41,012~~182,797

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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 ~~Bright Health Group, Inc.’s Prospectus dated June 23,~~our 2021 ~~(File No. 333-256286), as filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Prospectus”).~~Form 10-K. Unless the context otherwise indicates or requires, the terms “we”, “our”, and the “Company” as used herein refer to Bright Health Group, Inc. and its consolidated subsidiaries.

Business Overview

Bright Health Group was founded in 2015 to transform healthcare. Our mission of Making Healthcare Right. Together.is built upon the belief that by ~~connecting and~~ aligning the best local resources in healthcare delivery with the financing of care we can drive a superior consumer experience, optimize clinical outcomes, reduce systemic waste, ~~lower costs,~~ and optimize clinical outcomes. We believe that for too long, U.S. healthcare, primarily designed to cater to employers and large institutions, has failed the consumer through unnecessary complexity, a lack of transparency, and risinglower costs. We are ~~making~~a healthcare ~~simple, personal, and affordable.~~

~~To execute~~company building a national Integrated System of Care in close partnership with our Care Partners. Our differentiated approach is built on our mission, we have developed a model for healthcare transformation built upon the delivery, financing, and optimization of care. By bringing these three core pillars together, we aim to build the national, integrated healthcare system of the future, designed to break down historical barriers and create an environment in which all stakeholders — fromalignment, focused on the consumer, ~~to the provider, to the payor — can win.~~

and powered by technology. Bright Health Group consists of two reportable segments: NeueHealth and Bright ~~HealthCare~~HealthCare::

NeueHealth is critical to our differentiated, aligned model of care. While Bright HealthCare is currently a larger contributor to revenue, due in part to the significant health plan premium revenue contribution from our consumers, we believe NeueHealth has a disproportional impact on our enterprise today and anticipate it will become increasingly important to our business and prospects, contributing an increasing percentage of our overall revenue in the long-term. We have presented NeueHealth first in the following discussion, consistent with management’s view of our business.

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 ~~July 2021,~~March 2022, NeueHealth ~~works with over 235,000 care provider partners and~~ delivers high-quality virtual and in-person clinical care through our 4475 owned primary care clinics within its integrated care delivery system. Through those risk-bearing clinics, NeueHealth maintains over ~~200,000~~570,000 unique patient relationships as of ~~July 2021, nearly 170,000~~March 31, 2022, over 530,000 of which are served through value-based arrangements, across multiple payors. ~~In addition to our directly owned clinics, NeueHealth manages care for an additional 87 clinics through its additional affiliated clinics.~~

~~NeueHealth engages in local, personalized care delivery in multiple ways, including:~~

•~~Integrated Care Delivery~~ ~~– NeueHealth operates clinics providing comprehensive care to all populations.~~

•~~Bright Health Network~~ ~~– A key component of our NeueHealth business is our ecosystem of Care Partners with whom we contract in service of Bright HealthCare today.~~

•~~Value Services Organization~~ ~~– NeueHealth empowers high-performing primary care practices and care delivery organizations to succeed in their evolution towards risk-bearing care delivery.~~

NeueHealth receives network rental fees from Bright HealthCare for the delivery of NeueHealth’s Care Partner and network services. In addition, NeueHealth contracts directly with Bright HealthCare to provide care through its managed and affiliated

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~~clinics. Other NeueHealth customers include external payors and TPAs, affiliated providers and direct-to-government programs.~~

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 ~~approximately 663,000~~over 1.1 million consumers through its various offerings, serving consumers across multiple product lines in ~~14 states and 99 markets. We also participate in a number of specialized plans and recently began offering employer group plans.~~

17 states. Bright HealthCare’s customers include commercial health plans across 1116 states, which serve ~~approximately 553,000~~over 1.0 million individuals, as well as ~~Medicare Advantage~~MA products in 116 states, which serve ~~approximately 110,000~~over 120,000 lives and generally focus on higher risk, special needs populations. ~~We believe we are well-positioned to grow our Medicaid and Employer ASO products, which would provide strategic diversification and be highly complementary to our aligned model.~~

~~Key Factors Affecting Our Performance~~

We believe that the growth and future success of our business depends on a number of factors described below. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address to sustain our growth and continue to improve results of operations.

~~Bright HealthCare’s ability to grow membership and retain consumers drives revenue growth~~

~~Bright HealthCare products are primarily sold for the following year through an annual selling season, which includes the open enrollment period for~~ ~~Individual and Family Plan (~~IFP) products and annual enrollment period for Medicare Advantage (MA). Outside of an annual selling season, IFP and MA products typically can only be sold during special enrollment periods based on the consumer’s eligibility status and certain life events. It is critical to effectively engage both prospective and existing consumers through our multi-channel distribution strategy. For both IFP and MA products, we aim to offer competitive benefits at an affordable price to meet the needs of our consumers. Our IFP products membership typically peaks after the open enrollment period and experiences modest levels of attrition until year-end. We have historically increased our MA consumer base during special enrollment periods, given our consumers' eligibility to enroll during those periods.

Our MA business is afforded additional in-year growth opportunity due to its focus on serving low-income seniors and special needs individuals, who can enroll in and change MA health plans at any time. Therefore, constant engagement with this population is critical to effectively retain membership and drive in-year growth. MA products are generally associated with higher revenue and higher medical cost ratios (MCR) as compared to IFP products, particularly with respect to special needs plans.

~~Bright HealthCare’s ability to capture complete and accurate risk adjustment data affects revenue~~

Portions of premium revenue from our IFP products and MA plans are determined by the applicable CMS risk adjustment models, which compensate insurers based on the underlying health status (acuity) of insured consumers. CMS requires that a consumer’s health status be documented annually and accurately submitted to CMS to determine the appropriate risk adjustment. Ensuring that complete and accurate health conditions of our consumers are captured within documentation submitted to CMS is critical to recognizing accurate risk adjustment, which is reflected in our revenue year-over-year.

~~Bright HealthCare’s ability to drive lower unit costs and medical utilization reduces medical costs and MCR~~

Bright HealthCare utilizes our Bright Health Network to provide healthcare services primarily within its exclusive provider networks under capitated contracts and fee-for-service arrangements. Certain provider and payor contracts include value-based incentive compensation based on providers meeting contractually defined quality and financial performance metrics. To effectively manage medical costs, Bright HealthCare must ensure a consumer’s healthcare needs are primarily delivered through its Care Partners to recognize discounted contracted rates, which limits the amount of out-of-network utilization that can have an adverse financial impact on medical costs and MCR. Out-of-network utilization is typically higher upon entry into new markets, which increases medical costs during periods of market expansion.

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Our business is generally affected by the seasonal patterns of medical expenses. With respect to IFP products, medical costs tend to be lower early in the year and increase toward the end of year, driven by high deductible plan designs and out-of-pocket maximums over the course of the policy year, which shifts more costs to us in the second half of the year as we pay a higher proportion of claims. With respect to MA plans, medical costs are impacted by the severity of the flu season, generally from December to March, and we typically experience slightly higher Part D medical costs early in the year, which decline toward the end of year due to standard plan design.

~~NeueHealth’s ability to identify and align with high-performing care delivery partners drives performance~~

NeueHealth engages providers through a variety of alignment options ranging from having providers participate in our networks to having providers employed by us. As we enter new markets and expand our offerings, we must build an ecosystem of care delivery assets capable of supporting both our Bright HealthCare business as well as third-party payors.

~~NeueHealth’s ability to deliver and enable high-quality, value-based care drives revenue~~

NeueHealth supports and manages providers in fee-for-service and value-based contracts with payors. We help organizations enter value-based arrangements designed around their needs, while simultaneously empowering them with the tools and capabilities necessary to maximize their success. In order to drive financial performance, NeueHealth must effectively manage risk and continue to develop and deliver tools and services supporting both managed and affiliated providers.

~~Bright Health Group’s ability to achieve operating cost efficiencies and scale profitably~~

Bright Health Group, including Bright HealthCare and NeueHealth, will need to continue investing in operating platforms, processes, people, and resources to enable our businesses to scale profitably. We leverage centralized shared services for operational, clinical, technological, and administrative functions to support the segments in a cost-effective and efficient manner.

~~Components of Our Results of Operations~~

~~Revenue~~

~~We generate revenue from premiums, including value-based provider revenue, and fee-for-service provider revenue received from consumers and payors, as well as income from our investments.~~

~~Premium revenue~~

~~Premium revenue is derived primarily from Bright HealthCare IFP products and MA plans sold to consumers as well as NeueHealth value-based provider revenue from serving patients.~~

~~Bright HealthCare Commercial premium revenue~~

The sources of commercial premium revenue are primarily IFP products which are comprised of advanced premium tax credits subsidies that are based on consumers income levels and compensated directly by the federal government, as well as billed consumer premiums. IFP products reflect adjustments related to the Patient Protection and Affordable Care Act risk adjustment program, which adjusts premium revenue based on the demographic factors and health status of each consumer as derived from current-year medical diagnoses.

~~Bright HealthCare MA premium revenue~~

The sources of MA premium revenue are Medicare Part C premiums related to consumers’ medical benefit coverage and Part D premiums related to consumers’ prescription drug benefit coverage. Medicare Part C premiums are comprised of CMS monthly capitation premiums that are risk adjusted based on CMS defined formulas using consumers’ demographics and prior-year medical diagnoses. Medicare Part D premiums are comprised of CMS monthly capitation premiums that are risk adjusted,

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consumer billed premiums and CMS low-income premium subsidies for the Company’s insurance risk coverage. Medicare Part D premiums are subject to risk sharing with CMS under the risk corridor provisions based on profitability of the Part D benefit. As a percentage of our total consolidated revenue, premium revenues from CMS were 29% and 28% for the six months ended June 30, 2021 and 2020, respectively, which are included in our Bright HealthCare segment.

~~NeueHealth premium revenue~~

NeueHealth premium revenue represents revenue under value-based arrangements entered into by NeueHealth’s Value Services Organization and affiliated medical groups in which the responsibility for control of an attributed patient’s medical care is transferred, in part or wholly, to such medical groups. Such revenue includes capitation payments, as well as quality incentive payments, and shared savings distributions payable upon achievement of certain financial and quality metrics. Value-based revenue shifts responsibility for control over the medical care delivered to attributed patients to the Company and aligns incentives around the overall well-being of the payor’s consumers.

~~We expect that as our NeueHealth business continues to grow, NeueHealth premium revenue will become an increasing proportion of our overall revenue.~~

~~Service revenue~~

Service revenue primarily represents revenue from fee-for-service payments received by NeueHealth’s affiliated medical groups. These include patient copayments and deductibles collected directly from patients and payments from private and government payors based upon contractual terms that define the fee-for-service reimbursement for specific procedures performed.

~~In addition, service revenue includes network service revenue generated by NeueHealth’s Bright Health Network. Bright HealthCare is currently the only customer of Bright Health Network.~~

~~Investment income~~

The sources of investment income are interest income and realized gains and losses derived from the Company’s investment portfolio that is comprised of debt securities of the U.S. government and other government agencies, corporate investment grade, money market funds and various other securities, as well as realized and unrealized gains and losses from equity securities.

~~Operating Costs~~

~~Medical costs~~

Medical costs consist of reimbursements to providers for medical services, costs of prescription drugs, supplemental benefits, reinsurance and quality incentive and shared savings compensation to providers. The Company contracts with hospitals, physicians and other providers of healthcare primarily within its exclusive provider networks under fee-for-service and value-based arrangements. Emergency medical services incurred out-of-network are a covered benefit to consumers and reimbursed to providers according to the Company’s payment policies that are based on applicable regulations. Prescription drug costs are determined based on the contract with our pharmacy benefits manager, which includes pharmacy rebates that are received for certain drug utilization levels or contracted minimums. Dental, vision, and other supplemental medical services are provided to consumers under capitated arrangements. Reinsurance arrangements enable us to cede a specified percent of our premiums and claims to our third-party reinsurers. Under such contracts, the reinsurer is paid to cover claims-related losses over a specified amount, which mitigates catastrophic risk. We make quality incentive and shared savings compensation payments to certain providers in accordance with the terms of the contractual arrangement upon the achievement of certain financial and quality metrics.

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~~Operating Costs~~

Operating costs are comprised of the expenses necessary to execute the Company’s business operations. These include employee compensation for salaries and related benefit costs, share-based compensation, outsourced vendor contracted service and technology fees, professional services, technological infrastructure and service fees, facilities costs and other administrative expenses. Operating costs also include payments made by Bright HealthCare to NeueHealth for the provision of Bright Health Network services; selling and marketing expenses from external broker commissions and advertising, primarily related to consumer acquisition; and premium taxes, exchange fees and other regulatory costs, which are primarily based on premium revenue. We expect operating costs to increase in absolute amounts as our business grows, but to decrease as a percentage of our revenue in the long-term.

~~Depreciation and Amortization~~

Depreciation and amortization consist of depreciation of property, equipment and capitalized software, as well as amortization of definite-lived intangible assets acquired in business combinations, including trade names and customer relationships.

~~Other Income~~

~~Income Tax (Benefit) Expense~~

~~Income tax (benefit) expense consists primarily of changes to our current and deferred federal tax assets and liabilities net of applicable valuation allowances.~~

~~Initial Public Offering~~

On June 23, 2021, the Company’s Registration Statement on Form S-1 for the initial public offering of shares of common stock was declared effective by the U.S. Securities & Exchange Commission. The Company’s common stock began trading on the NYSE under the ticker symbol “BHG” on June 24, 2021. The IPO closed on June 28, 2021 and the Company sold 51,350,000 shares of common stock at a price of $18.00 per share. In aggregate, the shares issued in the offering generated $887.3 million in net proceeds, the amount of which is net of $37.0 million in underwriters’ discounts and commissions. Immediately effective upon the closing of our IPO, all 167,731,830 shares of our then outstanding preferred stock were converted into 427,897,381 shares of common stock, causing the Company to reclassify $1.8 billion from redeemable preferred stock within temporary equity to common stock and additional paid-in capital on our consolidated balance sheet.

We utilized a portion of the net proceeds to repay the $200.0 million principal balance of indebtedness outstanding under our revolving credit agreement originally entered into on March 1, 2021 and the associated interest a~~nd other costs of $3.2 million. Additionally, we used a portion of the proceeds to fund the acquisition of Centrum as described in Note 2,~~ ~~Business Combinations. The remainder of the net proceeds will be used for general corporate purposes.~~

~~See further discussion related to the IPO as described in Note 1,~~ ~~Basis of Presentation,~~ ~~to Bright Health Group, Inc.’s unaudited condensed consolidated financial statements.~~

COVID-19 Update

The ongoing COVID-19 pandemic, including its effect on the macroeconomic environment, and the response of ~~our~~ local, state, and federal governments to contain and manage the virus, continues to impact our business. ~~Governmental authorities have begun to lift or have already lifted restrictions on elective medical services, but the~~The emergence of COVID-19 variants in the United States and abroad continues to prolong the risk of additional surges of ~~COVID-19.~~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 ~~MCR~~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.

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We have experienced impacts to our business from COVID-19, which have varied as the pandemic progressed. Initially, as a result of the suspension of elective surgeries and deferral of medical care, we experienced decreased medical utilization, particularly in the second quarter of 2020. Since then, medical utilization has returned to more normal levels and adverse financial impacts from inpatient admissions emerged primarily due to increased average length of stays. For the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the impact of COVID-19 increased our MCR by ~~320~~310 basis points and ~~220~~410 basis points, respectively, reflecting an increase in medical costs of ~~$33.6~~$58.4 million and $6.4 million, respectively. For the six months ended June 30, 2021 and 2020, the impact of COVID-19 increased our MCR by 360 basis points and 130 basis points, respectively, reflecting an increase in medical costs of $68.4 million and $6.4$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

~~We are a healthcare company at our core, and because of that, our~~Our mission ~~is central to what we do at Bright Health Group each day.~~– 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.

~~Bright Health Group is well~~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 ~~its way~~optimizing the Company and executing on our strategic initiatives. We have made investments to ~~building the national, integrated system of care needed to change healthcare in the United States. Both~~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 are demonstrating significant growth and diversification. As we enter the second half of 2021, Bright HealthCare has seen tremendous growth, and currently serves a diverse customer base, with nearly 663,000 total consumers across our commercial and MA lines ofcare delivery business. Our NeueHealth business has also seen remarkable growth, with 131 total owned and affiliated primary care clinics and nearly 170,000 patients served under value-based arrangements through our owned clinics following our acquisition of Centrum on July 1, 2021.

We ~~began~~expect the next phase of our ~~journey~~growth to be more capital efficient, as ~~a public company~~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 ~~strong second quarter results, demonstrating significant growth across both NeueHealth, our personalized care delivery business,~~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 ~~healthcare financing~~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 ~~distribution business.~~lower overall impact from new market entries. Bright Health Group total revenue of $1.1 billion in the second quarter of 2021 increased by $817.0 million, or 275.2%, compared to the prior-year period. These results were driven primarily by organic membershipHealthCare’s Medicare Advantage business produced year over year growth, ~~in Bright HealthCare, both during the 2020 open enrollment period and in the special enrollment period for our commercial business that began on February 15, 2021, as well as~~ both organic and ~~inorganic growth at NeueHealth.~~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 ~~experienced an increase in investment income due~~becoming a meaningful contributor to ~~a $58.5 million unrealized gain on equity securities.~~our overall results.

~~Our GAAP net loss was $43.7 million in~~We have made meaningful progress on the ~~second quarter of 2021, an increase in net loss of $25.6 million compared~~following specific actions to ~~the prior-year period. Our non-GAAP adjusted EBITDA was a loss of $35.3 million in the second quarter of 2021, compared to a loss of $23.2 million in the prior-year period.~~

~~When reviewing our results of operations for the second quarter and first half of 2021, we believe it is important to keep five key themes in mind:~~drive improved year-over-year results:

~~(1)~~1.~~We have demonstrated significant growth~~Net Pricing Action in Core Markets: ~~– Bright HealthCare ended 2020~~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 ~~approximately 207,000~~their members ~~approximately 145,000~~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 ~~62,000 MA members. As~~we expect to have all of ~~the end of the second quarter of 2021, Bright HealthCare served nearly 663,000 consumers, an increase of 220.0%.~~our Commercial membership on Panorama by 2023.

~~(2)We have delivered consistent performance~~ – Critical to our model is our ability to price to our underlying capabilities and cost structure in each market. Even with our significant growth, we have been able to demonstrate a medical cost ratio below 80% across our enterprise during the first half of 2021 after factoring in the impact of COVID-19 and prior period developments. Critical to this measure is our model’s ability to drive in-network utilization within our integrated systems of care.

~~(3)We are driving differentiation through NeueHealth~~ ~~– We have been building our NeueHealth business since the beginning of Bright Health; however, we are now starting to see it come to life. Focused on serving all populations,~~

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NeueHealth builds and operates local, integrated systems of care that clinically, financially, and with data and technology, align all stakeholders in a local market. Today, NeueHealth directly manages care for approximately 170,000 value-based care patients through our 44 owned primary care clinics following our acquisition of Centrum. This represents over 700% growth from the approximately 19,400 patients we managed at the end of the second quarter of 2020.

~~(4)~~5.We are ~~building one technology platform~~Addressing Talent and Cost Structure: ~~– Core~~We remain disciplined on our expenses, as we continue to focus on productivity gains and operating expense leverage, while also adding selectively to our ~~model is a single technology platform, purpose built for the aligned model of care. This platform, which leverages~~team to support growth and enhance our ~~provider~~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 ~~consumer-facing tools, branded as DocSquad, connects~~where we believe we can deliver on our ~~consumers and patients to their personalized care teams.~~financial targets. We are ~~also moving to a single operating system that spans~~focusing our ~~care financing and care delivery businesses, which will enable us to continue demonstrating differentiated performance and outcomes.~~

~~(5)Continued future growth~~ ~~– Bright Health Group has significant near and long-term growth prospects as we plan~~Commercial business to offer ~~Bright HealthCare products~~Individual and Family Plans in ~~four new~~10 states ~~during~~where we believe we can drive differentiated value through our Fully Aligned Care Model. We believe these decisions place us in the ~~2022 open enrollment period~~best position to achieve long-term success for our members and ~~expand our NeueHealth integrated care delivery footprint into~~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 June 30,			As of March 31,
		2021	2020		2022	2021
Bright HealthCare Consumers Served	Bright HealthCare Consumers Served			Bright HealthCare Consumers Served
Commercial(1)	Commercial(1)	552,759	153,083	Commercial(1)	1,040,000	480,000
Medicare Advantage	Medicare Advantage	110,066	54,141	Medicare Advantage	120,000	60,000

NeueHealth Patients	NeueHealth Patients			NeueHealth Patients
Value-based Care Patient Lives	Value-based Care Patient Lives	42,305	19,419	Value-based Care Patient Lives	530,000	30,000

(1) Commercial plans include IFP and employer plans. ~~Prior to 2021, our commercial business was solely comprised of IFP products.~~

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.

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		Three Months Ended June 30			Six Months Ended June 30				Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020	2021		2020	($ in thousands)	2022		2021
Net Loss	Net Loss	$	(43,723)	(18,074)	$	(68,268)	(25,354)	Net Loss	$	(180,629)	(24,545)
Adjusted EBITDA(1)	Adjusted EBITDA(1)	$	(35,255)	(23,248)	$	(44,839)	(27,104)	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, ~~and~~ changes in the fair value of contingent ~~consideration.~~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 June 30,				Six Months Ended June 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Net loss	Net loss	$	(43,723)	$	(18,074)	$	(68,268)	$	(25,354)	Net loss	$	(180,629)	$	(24,545)
Interest expense	Interest expense	4,142		—		4,688		—		Interest expense	1,193		546
Income tax (benefit) expense		(19,464)		(9,162)		(18,298)		(9,162)
Income tax expense (benefit)										Income tax expense (benefit)	3,240		1,166
Depreciation and amortization	Depreciation and amortization	7,195		2,085		11,776		2,872		Depreciation and amortization	13,041		4,581
Impairment of intangible assets										Impairment of intangible assets	6,720		—
Transaction costs (a)	Transaction costs (a)	3,130		653		5,150		2,347		Transaction costs (a)	111		2,020
Share-based compensation expense (b)	Share-based compensation expense (b)	13,878		1,250		19,054		2,193		Share-based compensation expense (b)	32,921		5,176
Change in fair value of contingent consideration (c)		(413)		—		1,059		—
Change in fair value of equity securities (c)										Change in fair value of equity securities (c)	40,968		(4,243)
Change in fair value of contingent consideration (d)										Change in fair value of contingent consideration (d)	—		1,472
Contract termination costs (e)										Contract termination costs (e)	741		—
Restructuring costs (f)										Restructuring costs (f)	6,864		—
Adjusted EBITDA	Adjusted EBITDA	$	(35,255)	$	(23,248)	$	(44,839)	$	(27,104)	Adjusted EBITDA	$	(74,830)	$	(13,827)

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(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. ~~There~~

(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 ~~no material activity~~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 ~~periods prior~~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 ~~the first quarter~~enhance our overall margin potential.

Table of ~~2021.~~Contents

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 ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021.


($ in thousands)	($ in thousands)	Three Months Ended June 30,						Six Months Ended June 30,						($ in thousands)	Three Months Ended March 31,
Consolidated Statements of Income (loss) and operating data:		2021			2020			2021			2020
Condensed Consolidated Statements of Income (loss) and operating data:														Condensed Consolidated Statements of Income (loss) and operating data:	2022		2021

Revenue:	Revenue:													Revenue:
Premium revenue	Premium revenue	$	1,042,086		$	290,972		$	1,902,717		$	481,709		Premium revenue	$	1,680,450	$	860,631
Direct contracting revenue														Direct contracting revenue	182,797		—
Service revenue	Service revenue	12,085			3,604			20,523			8,424			Service revenue	12,428		8,438
Investment income		59,669			2,280			65,158			5,289
Investment income (loss)														Investment income (loss)	(40,100)		5,489
Total revenue	Total revenue	1,113,840			296,856			1,988,398			495,422			Total revenue	1,835,575		874,558
Operating expenses	Operating expenses													Operating expenses
Medical costs	Medical costs	904,630			233,180			1,589,200			363,795			Medical costs	1,580,596		684,570
Operating costs	Operating costs	261,060			88,827			469,300			163,271			Operating costs	418,918		208,240
Depreciation and amortization	Depreciation and amortization	7,195			2,085			11,776			2,872			Depreciation and amortization	13,041		4,581
Total operating expenses	Total operating expenses	1,172,885			324,092			2,070,276			529,938			Total operating expenses	2,012,555		897,391
Operating loss	Operating loss	(59,045)			(27,236)			(81,878)			(34,516)			Operating loss	(176,980)		(22,833)
Interest expense	Interest expense	4,142			—			4,688			—			Interest expense	1,193		546
Other income														Other income	(784)		—
Loss before income taxes	Loss before income taxes	(63,187)			(27,236)			(86,566)			(34,516)			Loss before income taxes	(177,389)		(23,379)
Income tax (benefit) expense		(19,464)			(9,162)			(18,298)			(9,162)
Income tax expense														Income tax expense	3,240		1,166
Net loss	Net loss	(43,723)			(18,074)			(68,268)			(25,354)			Net loss	(180,629)		(24,545)
Net earnings attributable to non-controlling interest	Net earnings attributable to non-controlling interest	(795)			—			(1,412)			—			Net earnings attributable to non-controlling interest	(14,605)		(617)
Series A preferred stock dividend accrued														Series A preferred stock dividend accrued	(8,938)		—
Net loss attributable to Bright Health Group, Inc. common shareholders	Net loss attributable to Bright Health Group, Inc. common shareholders	$	(44,518)		$	(18,074)		$	(69,680)		$	(25,354)		Net loss attributable to Bright Health Group, Inc. common shareholders	$	(204,172)	$	(25,162)
Adjusted EBITDA	Adjusted EBITDA	$	(35,255)		$	(23,248)		$	(44,839)		$	(27,104)		Adjusted EBITDA	$	(74,830)	$	(13,827)
Medical Cost Ratio(1)	Medical Cost Ratio(1)	86.8		%	80.1		%	83.5		%	75.5		%	Medical Cost Ratio (1)	84.8%		79.5%
Operating Cost Ratio(2)	Operating Cost Ratio(2)	23.4		%	29.9		%	23.6		%	33.0		%	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 ~~revenue~~srevenues increased by ~~$817.0~~$961.0 million, or ~~275.2%~~109.9%, for the three months ended ~~June 30, 2021~~March 31, 2022 as compared to the same period in ~~2020,~~2021, which was ~~primarily~~ driven by premium revenue due to an increase inof 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 ~~approximately 455,000 consumer lives, or 219.6%, primarily from organic growth~~the increase in ~~IFP within our Commercial business, including~~total revenue. The increases in premium revenue and Direct Contracting revenue were partially offset by an investment loss for the ~~2021 special enrollment period, as well as organic and inorganic contributions from the MA business. The~~ three months ended ~~June 30, 2021~~ ~~included $203.6~~March 31, 2022, as a result of $41.0 million of unrealized losses from ~~the acquisitions of PMA, THNM, Zipnosis and CHP.~~ investments in equity securities.

~~Total revenues~~

Medical costs increased by ~~$1.5 billion,~~$896.0 million, or ~~301.4%~~130.9%,

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for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 as compared to the same period in 2020, primarily driven by organic volume growth in our Commercial business, as well as favorable rate impacts in our Commercial business. The six months ended June 30, 2021 included $506.4 million from acquisitions for which there was no comparable amount in the six months ended June 30, 2020. The three and six months ended June 30, 2021 also experienced an increase in investment income compared to the same periods in 2020, driven by unrealized gains from investments in equity securities of $58.5 million and $62.8 million, respectively.

~~Medical costs increased by $671.5 million,~~ ~~or 288.0%, for the three months ended June 30, 2021 as compared to the same period in 2020.~~2021. The increase in medical costs was driven by an increase in consumers through both organic growth in ~~our Commercial and MA businesses~~

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consumers and inorganic growth attributable to the acquisitions of ~~PMA, THNM~~CHP and ~~CHP, as well as increased medical~~Centrum. Medical costs ~~from COVID-19. Medical~~ ~~costs increased by $1.2 billion, or 336.8%, for the six months ended June 30, 2021 as~~ ~~compared~~incurred associated with beneficiaries aligned to our DCEs also contributed to the ~~same period in 2020. The increase in medical costs was driven by consistent factors with~~increase.

Our MCR of 84.8% for the three months ended ~~June 30, 2021 with additional impact from the acquisition of Brand New Day, which was acquired on April 30, 2020.~~

~~Our MCR of 86.8% for the~~ ~~three months~~ ~~ended June 30, 2021~~March 31, 2022 increased ~~670~~530 basis points compared to the same period in ~~2020.~~2021. Our MCR ~~for the three months ended June 30, 2021~~ included a ~~320~~310 basis point ~~unfavorable impact from COVID-19 related costs~~ and a ~~160 basis point unfavorable impact from non-COVID prior period developments (“PPD”), and MCR for the three months ended June 30, 2020 included a 220~~410 basis point unfavorable impact from COVID-19 costs ~~and a 30 basis point favorable impact from non-COVID PPD. We also estimate that~~for the three months ended ~~June 30, 2020 included~~March 31, 2022 and 2021, respectively. In addition, our MCR was impacted by Direct Contracting revenue recorded at a ~~favorable impact of 440~~96.6% MCR, which increased our MCR by 130 basis ~~points due to eliminated or deferred care driven by reduced demand for services during the COVID-19 pandemic.~~points.

~~The~~Operating costs increased ~~MCR~~ ~~of 83.5%~~by $210.7 million, or 101.2%, for the ~~six~~three months ended ~~June 30, 20~~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.

~~21 increased 800~~

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 ~~2020.~~ Our MCR for the six months ended June 30, 2021 included a 360 basis point unfavorable impact from COVID-19 related costs and a 90 basis point unfavorable impact from non-COVID PPD, and our MCR for the six months ended June 30, 2020 included a 130 basis point unfavorable impact from COVID-19 costs, a 30 basis point favorable impact from non-COVID PPD and a 260 basis point favorable impact due to deferred utilization. 2021. The MCR in both 2021 periods was also impacted by increased medical costs from MA product mix as a result of the Brand New Day and CHP acquisitions, which were partially offset by favorable market mix and rate in IFP.

Operating costs increased by $172.2 million, or 193.9%, for the three months ended June 30, 2021 as compared to the same period in 2020. Operating costs increased by $306.0 million, or 187.4%, for the six months ended June 30, 2021 as compared to the same period in 2020. The increase in operating costs in both periods was primarily due to increases in operating costs from new market entry, increased marketing and selling expenses related to the 2021 special enrollment period in our Commercial business and increased compensation and benefit costs driven by an increase in employees and an increase in share-based compensation costs.

Our operating cost ratio of 23.4% for the three months ended June 30, 2021, improved 650 basis points compared to the same period in 2020, and the operating cost ratio of 23.6% for the six months ended June 30, 2021 improved 900 basis points compared to the same period in 2020. The improved operating cost ratio in both periodsdecrease 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.~~grow, partially offset by an increase in compensation and benefit costs and an impairment of intangible assets.

Depreciation and amortization increased by ~~$5.1~~$8.5 million ~~or 245.1%,~~ for the three months ended ~~June 30, 2021~~March 31, 2022 as compared to the same period in ~~2020,~~2021, primarily due to the ~~$4.4~~$7.0 million of amortization expense resulting from intangible assets acquired in the ~~PMA, THNM,~~Centrum, CHP and Zipnosis ~~and CHP~~ acquisitions, for which there were no comparable amounts in the three months ended June 30, 2020. Depreciation and amortization increased by $8.9 million, or 310.0%, for the six months ended June 30, 2021 as compared to the same period in 2020, primarily due to $8.2 million from intangible assets acquired for which there were no comparable amounts in the six months ended June 30, 2020.March 31, 2021.

Interest expense was ~~$4.1~~$1.2 million and ~~$4.7~~$0.5 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and, 2021, respectively, which was due to interest on the Credit Agreement we entered into in March ~~2021, as well as amortization of debt issuance costs. We did not have any interest expense for either of the comparable periods in 2020.~~2021.

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Income tax ~~benefit~~expense was ~~$19.5 million and $18.3~~$3.2 million for the three ~~and six~~ months ended ~~June 30,~~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, ~~respectively~~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 ~~CHP acquisition in April 2021. The income tax benefit for the six months ended June 30, 2021 was also impacted by an adjustment to goodwill and intangible assets acquired in the~~ Brand New Day ~~transaction resulting from a measurement period adjustment in 2021. We recognized an income tax benefit~~and THNM acquisitions.


Bright HealthCare
($ in thousands)	Three Months Ended March 31,
Statement of income (loss) and operating data:	2022			2021

Bright HealthCare:
Commercial revenue	$	1,163,224		$	621,056
Medicare Advantage revenue	430,313			220,869
Investment income	868			1,246
Total revenue	1,594,405			843,171
Operating expenses:
Medical costs	1,323,724			675,056
Operating costs	371,664			189,973
Depreciation and amortization	6,039			2,357
Total operating expenses	1,701,427			867,386
Operating loss	$	(107,022)		$	(24,215)
Medical Cost Ratio (MCR)	83.1		%	80.2		%

Table of ~~$9.2 million during the three and six month periods ended June 30, 2020, which was due to the impact of goodwill and intangible assets acquired in the Brand New Day acquisition in April 2020.~~Contents

Bright HealthCare
($ in thousands) Three Months Ended June 30, Six Months Ended June 30,
Statement of income (loss) and operating data: 2021 2020 2021 2020
Bright HealthCare:
Commercial revenue $ 683,943 $ 164,919 $ 1,304,999 $ 340,481
Medicare Advantage revenue 339,906 124,061 560,775 137,232
Investment income 1,158 2,280 2,404 5,289
Total revenue 1,025,007 291,260 1,868,178 483,002
Operating expenses:
Medical costs 894,059 233,180 1,569,115 363,795
Operating costs 242,329 81,539 432,302 148,514
Depreciation and amortization 4,583 1,595 6,940 1,857
Total operating expenses 1,140,971 316,314 2,008,357 514,166
Operating loss $ (115,964) $ (25,054) $ (140,179) $ (31,164)
Medical Cost Ratio (MCR) 87.3 % 80.7 % 84.1 % 76.2 %

Commercial ~~reven~~uerevenue increased by ~~$519.0~~$542.2 million, or ~~314.7%~~87.3%, for the three months ended ~~June 30, 2021~~March 31, 2022 as compared to the same period in ~~2020.~~ ~~Commercial~~ ~~revenue increased by $964.5 million, or 283.3%, for the six months ended June 30, 2021 as compared to the same period in 2020.~~2021. The increase in revenues ~~in both 2021 periods compared to 2020,~~ was driven by an increase in consumer lives of approximately ~~381,000~~560,000 due to organic growth and ~~higher net premium rates~~entry into new markets in ~~certain markets and mix of plans, as well as inorganic growth from the acquisition of THNM.~~2022 – particularly entry into Texas, which is partially offset by an increase in risk adjustment payable.

~~MA reven~~ueMedicare Advantage revenue increased by $~~215.8~~$209.4 million, or ~~174.0%~~94.8%, for the three months ended ~~June 30, 2021~~March 31, 2022 as compared to the same period in ~~2020. MA revenue increased by $423.5 million, or 308.6%, for the six~~2021. The three months ended ~~June 30, 2021 as compared to the same period in 2020. The three and six months ended June 30, 2021~~March 31, 2022 included ~~$141.1~~$129.2 million of revenue from our acquisition of CHP, ~~acquired~~which occurred on April 1, 2021. The remaining increase was primarily driven by ~~volume increases due to~~ organic ~~growth.~~growth and favorable premium rates.

Medical costs increased by ~~$660.9~~$648.7 million, or ~~283.4%~~96.1%, for the three months ended ~~June 30, 2021~~March 31, 2022 as compared to the same period in ~~2020.~~2021. For the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the impact of COVID-19 increased our medical costs ~~$33.6~~$58.4 million and ~~$6.4 million, respectively.~~ ~~Medical costs increased by $1.2 billion, or 331.3%, for the six months ended June 30, 2021 as compared to the same period in 2020.~~ ~~For the six months ended June 30, 2021 and 2020, the impact of COVID-19 increased our medical costs $68.4 million and $6.4~~$34.8 million, respectively. The remaining increase in ~~both 2021 periods~~2022 is ~~also~~ due to an increase in consumers ~~driven~~and medical costs from our acquisition of CHP, partially offset by ~~organic growth, unfavorable~~favorable medical cost rates ~~and inorganic growth as a result of acquisitions.~~in our Commercial business.

Our MCR of ~~87.3%~~83.1% for the three months ended ~~June 30, 2021~~March 31, 2022 increased ~~660~~290 basis points compared to the same period in ~~2020.~~2021. Our MCR for the three months ended June 30, 2021 included a 330 basis point unfavorable impact from COVID-19 related costs and a 170 basis point unfavorable impact from non-COVID PPD, and MCR for the three months ended June 30, 2020 included a 220 basis point unfavorable impact from COVID-19 costs and a 30 basis point favorable impact from non-COVID PPD. We also estimate the three months ended June 30, 2020 included a favorable impact of 440 basis points due to eliminated or deferred care driven by reduced demand for services during the COVID-19 pandemic.

~~Our MCR of 84.1% for the six months ended June 30, 2021 increased 800 basis points compared to the same period in 2020. Our MCR for the six months ended June 30, 2021~~March 31, 2022 included a 370 basis point unfavorable impact from COVID-19 ~~related costs~~

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~~and a 90 basis point unfavorable impact from non-COVID PPD, and our~~costs. Our MCR for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 included a ~~130~~410 basis point unfavorable impact from COVID-19 ~~costs, a 30 basis point favorable impact from non-COVID PPD and a 260 basis point favorable impact~~costs. The increase in MCR is primarily due to ~~deferred utilization.~~ ~~The MCR~~an increase in both 2021 periods also impacted by increased medical costs from MA product mix as a result of the Brand New Day and CHP acquisitions, which were partially offset by favorable market mix and rate in IFP.risk adjustment payable.

Operating c~~osts~~costs increased by ~~$160.8~~$181.7 million, or ~~197.2%~~95.6%, for the three months ended ~~June 30, 2021~~March 31, 2022 as compared to the same period in ~~2020. Operating costs~~ ~~increased by $283.8 million, or 191.1%, for the six months ended June 30, 2021 as compared to the same period in 2020.~~2021. The increase ~~in both periods during 2021 compared to the same periods in 2020~~ was primarily due to ~~increases in operating costs from new market entry, increased marketing and selling expenses related to the 2021 special enrollment period in our Commercial business and~~ increased compensation and benefit costs driven by an increase in employees and an increase in share-based compensation costs. In addition, ~~the 2021 periods also have increased~~we experienced increases in operating costs from ~~acquisitions, which don’t have~~new market entry and increased marketing and selling expenses. Operating costs for the three months ended March 31, 2022, also include a ~~comparable prior period impact.~~$6.7 million impairment of intangible assets.

Depreciation and amortization increased by ~~$3.0~~$3.7 million ~~or 187.3%,~~ for the three months ended ~~June 30, 2021~~March 31, 2022 as compared to the same period in ~~2020. Depreciation and amortization increased by $6.9 million, or 273.7%, for the six months ended June 30, 2021 as compared to the same period in 2020.~~2021. The increase ~~in the three and six month periods ended June 30, 2021~~ was primarily due to amortization expense of $2.6 million ~~and $4.6 million, respectively,~~ resulting from intangible assets acquired in the ~~THNM and~~ CHP ~~acquisitions,~~acquisition on April 1, 2021, for which there ~~were~~are no comparable amounts in the ~~2020 periods.~~three months ended March 31, 2021.

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NeueHealth	NeueHealth													NeueHealth
($ in thousands)	($ in thousands)	Three Months Ended June 30,						Six Months Ended June 30,						($ in thousands)	Three Months Ended March 31,
Statement of income (loss) and operating data:	Statement of income (loss) and operating data:	2021			2020			2021			2020			Statement of income (loss) and operating data:	2022			2021

NeueHealth:	NeueHealth:													NeueHealth:
Premium revenue	Premium revenue	$	36,172		$	1,992		$	64,846		$	3,996		Premium revenue	$	455,002		$	28,674
Direct contracting revenue														Direct contracting revenue	182,797			—
Service revenue	Service revenue	19,631			6,346			35,253			13,873			Service revenue	24,121			15,622
Investment income		58,511			—			62,754			—
Investment income (loss)														Investment income (loss)	(40,968)			4,243
Total revenue	Total revenue	114,314			8,338			162,853			17,869			Total revenue	620,952			48,539
Operating expenses	Operating expenses													Operating expenses
Medical costs	Medical costs	28,415			—			47,897			—			Medical costs	624,994			19,482
Operating costs	Operating costs	26,368			10,030			51,819			20,206			Operating costs	58,914			25,451
Depreciation and amortization	Depreciation and amortization	2,612			490			4,836			1,015			Depreciation and amortization	7,002			2,224
Total operating expenses	Total operating expenses	57,395			10,520			104,552			21,221			Total operating expenses	690,910			47,157
Operating income (loss)	Operating income (loss)	$	56,919		$	(2,182)		$	58,301		$	(3,352)		Operating income (loss)	$	(69,958)		$	1,382
Medical Cost Ratio (MCR)	Medical Cost Ratio (MCR)	78.6		%	—		%	73.9		%	—		%	Medical Cost Ratio (MCR)	98.0		%	67.9		%

Premium revenue increased by ~~$34.2~~$426.3 million ~~or 1,715.9%,~~ for the three months ended ~~June 30, 2021~~March 31, 2022 as compared to the same period in ~~2020. Premium~~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 ~~$60.8~~$8.5 million, or ~~1,522.8%~~54.4%, for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 as compared to the same period in ~~2020. The increase in premium revenue in both periods during 2021 were driven by an increase in patient lives both organically and inorganically as a result of the PMA acquisition.~~

~~Service revenue~~ ~~increased by $13.3 million, or 209.3%, for the three months ended June 30, 2021 as compared to the same period in 2020. Service revenue increased by $21.4 million, or 154.1%, for the six months ended June 30, 2021 as compared to the same period in 2020.~~2021. The increase in service revenue ~~in both 2021 periods~~ 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 ~~acquisitions~~acquisition of ~~PMA on December 31, 2020 and~~ Zipnosis on March 31, 2021 also contributed to the year-over-year increase in service revenue.

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~~Investment income was $58.5~~We experienced a $41.0 million ~~and $62.8 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 ~~six months ending June 30, 2021, respectively,~~loss in both periods was due to unrealized gains and losses on equity ~~securities acquired in 2021. NeueHealth did not hold any investments during the six months ended June 30, 2020.~~securities.

Medical costs were ~~$28.4 million and $47.9~~$625.0 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022, an increase of $605.5 million as compared to the same period in 2021, ~~respectively,~~ which ~~were~~was primarily driven by an increase in patient lives as a result of the ~~PMA~~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 ~~organic growth in~~a higher MCR for our ~~value-based arrangements. MCR was 78.6% and 73.9% in the three and six months ended June 30, 2021, respectively. There were no medical costs in the three and six months ended June 30, 2020.~~DCEs of 96.6%.

Operating costs increased by $1~~6.3~~$33.5 million, or ~~162.9%~~131.5%, for the three months ended ~~June 30, 2021~~March 31, 2022 as compared to the same period in ~~2020. Operating costs increased~~ ~~by $31.6 million, or 156.5%, for the six months period ended June 30, 2021 as compared to the same period in 2020.~~2021. The increase ~~in both 2021 periods~~ 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 ~~PMA and Zipnosis acquisitions.~~Centrum acquisition.

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Depreciation and ~~amortizatio~~namortization increased by ~~$2.~~1$4.8 million ~~or 433.1%,~~ for the three months ended ~~June 30, 2021~~March 31, 2022 as compared to the same period in ~~2020. Depreciation and amortization~~ ~~increased by $3.8 million, or 376.5%, for the six months ended June 30,~~ 2021, ~~as compared to the same period in 2020. The increase in the three and six months ended June 30, 2021~~which was primarily due to amortization expense of ~~$1.9~~$4.4 million ~~and $3.6 million, respectively,~~ resulting from intangible assets acquired inas part of the ~~PMA and Zipnosis acquisitions, for~~Centrum acquisition, which ~~there were no comparable amounts in the 2020 periods.~~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. ~~Our expected primary uses on a short-term and long-term basis are for geographic and service offering expansion, acquisitions, and other general corporate purposes.~~ We have historically funded our operations and acquisitions primarily through the sale of ~~preferred~~ stock, ~~and more recently,~~including the issuance of Series A Preferred Stock in January 2022, which generated cash proceeds of $750.0 million, as well as through ~~sales~~the issuance of ~~our~~ common stock in June 2021 in connection with our initial public offering, which generated cash proceeds of $887.3 ~~million upon closing of our IPO on June 28,2021.~~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 ~~from~~related to administrative services agreements with the parent company. The Company ~~has~~ declared ~~one dividend~~no dividends from the regulated insurance entities to the parent company during the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022 and ~~had no dividends for the same period in 2020.~~2021. The regulated legal entities are required to hold certain minimum levels of risk-based capital and surplus to ~~meet~~satisfy regulatory requirements. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the amounts held in risk-based capital and surplus at regulated insurance legal entities was in excess of the minimum ~~requirements.~~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 ~~and generate negative cash flows from operations~~ for the foreseeable ~~future due~~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 ~~investments~~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 ~~intend to~~serve, focusing our growth on NeueHealth, carefully managing expenses, and potentially increasing our use of quota share reinsurance. We continue to ~~make in expanding~~evaluate our ~~operations and due to additional general and administrative costs~~future capital needs; however, we ~~expect to incur in connection with operating as a public company. As a result, we may require additional capital resources to execute strategic initiatives to grow our business. We~~ believe ~~however,~~ that existing cash on hand, ~~plus~~investments and amounts available under our Credit Agreement described below ~~and the proceeds from the closing of our IPO~~ will be sufficient to satisfy our anticipated cash requirements for the next twelve months. ~~Our~~However, we may seek additional capital to support our future ~~capital requirements will depend on many factors, including funding for potential acquisitions, investments,~~growth plans and other ~~growth and~~ strategic opportunities that ~~might require use of existing cash.~~may arise.

~~Indebtedness~~Credit Agreement

~~On March 1, 2021, we entered into~~We have a $350.0 million ~~revolving credit agreement with a syndicate of banks (the “Credit Agreement”). On August 2, 2021, the~~ Credit Agreement, was amended to change the definition of “Qualified IPO” by reducing the net proceeds required to be received by the Company from $1.0 billion to $850.0 million. In addition, prior to such amendment, thewhich matures on February 28, 2024. The Credit Agreement ~~contained~~contains a covenant that ~~required~~requires the Company to maintain a total debt to capitalization ratio of (a) 0.25 to ~~1.00 prior to a Qualified IPO, and (b) 0.30 to 1.00 after a Qualified IPO. The Amendment changed this~~

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~~covenant by removing the increase in the ratio after a Qualified IPO such that the Company is now required to maintain a total debt to capitalization ratio of 0.25 to~~ 1.00. On August 4, 2021, we elected to extend the maturity date of the Credit Agreement from February 28, 2022 to February 28, 2024. We utilized a portion of the net IPO proceeds to repay the $200.0 million principal balance of indebtedness outstanding under our revolving credit agreement originally entered into on March 1, 2021 and the associated interest and other costs of $3.2 million. As of June 30, 2021, we repaid the full amount and have no borrowings outstanding under the Credit Agreement. The Credit Agreement also ~~contain~~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.

~~Commitments~~

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.

~~As of June 30, 2021, we had committed to acquire 75% of~~For additional information on the outstanding equity interests of Centrum Medical Holdings, LLC (“Centrum”) for estimated consideration of approximately $306.2 million, of which $75.0 million would be paid in the form of common stock based on fair market value determined at the time of closing, with the remaining consideration to be paid in cash. We completed the acquisition of Centrum on July 1, 2021. For a description of the Centrum acquisition,Series A Preferred Stock, see Note 2,9, ~~Business Combinations~~Redeemable Convertible Preferred Stock, in our ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements of this Quarterly ~~Report on Form 10-Q.~~Report.

Cash and Investments

As of ~~June 30, 2021,~~March 31, 2022, we had ~~$1.5 billion~~$1,505.5 million in cash and cash equivalents, ~~$283.3~~$692.5 million in short-term investments and ~~$633.0~~$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 ~~June 30, 2021,~~March 31, 2022, we had non-regulated cash and cash equivalents of ~~$760.1~~$284.7 million, short-term investments of ~~$136.6~~$80.5 million and no long-term ~~investments of $61.0 million.~~investments.

As of ~~June 30, 2021,~~March 31, 2022, we had regulated insurance entity cash and cash equivalents of ~~$746.2~~$1,220.8 million, of which $1.2 million was restricted, short-term investments of ~~$146.7~~$612.0 million, of which ~~$3.8~~$4.4 million was restricted, and long-term investments of ~~$572.0~~$733.5 million, of which ~~$3.4~~$3.0 million was restricted.

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Cash Flows

The following table presents a summary of our cash flows for the periods shown:


		Six Months Ended June 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		($ in thousands)	2022		2021
Net cash provided by operating activities	Net cash provided by operating activities	$	497,146	$	87,044	Net cash provided by operating activities	$	484,757	$	343,603
Net cash used in investing activities	Net cash used in investing activities	(368,221)		(452,127)		Net cash used in investing activities	(633,127)		(56,275)
Net cash provided by financing activities	Net cash provided by financing activities	889,023		211,331		Net cash provided by financing activities	592,738		200,234
Net increase (decrease) in cash and cash equivalents		1,017,948		(153,752)
Net increase in cash and cash equivalents						Net increase in cash and cash equivalents	444,368		487,562
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	488,371		522,910		Cash and cash equivalents at beginning of period	1,061,179		488,371
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,506,319	$	369,158	Cash and cash equivalents at end of period	$	1,505,547	$	975,933

Operating Activities

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, net cash provided by operating activities increased by ~~$410.1~~$141.2 million compared to the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, primarily driven by the increase in consumer growth driving the increased ~~medical costs and~~ risk adjustment and medical cost payables, as well as accounts payables and other liabilities, ~~and increased medical costs in the MA business driven by the Brand New Day acquisition,~~ partially offset by an increase in our net loss.

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Investing Activities

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, net cash used in investing activities ~~decreased $83.9~~increased by $576.9 million compared to the ~~six-month~~three-month period ended ~~June 30, 2020.~~March 31, 2021. The ~~decrease~~increase was primarily attributable to a ~~decrease~~$593.9 million increase in purchases of investments, net of proceeds from sales, ~~paydown~~paydowns and maturities of ~~investments.~~investments, which was driven by additional investments at our regulated entities to support continued consumer growth. The ~~net~~increase of cash used for investments was partially offset by a $18.3 million decrease in cash used for ~~investment activities was partially offset by a $36.4 million increase of cash used for acquisitions.~~acquisitions compared to the three months ended March 31, 2021.

Financing Activities

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, net cash provided by financing activities increased by ~~$677.7~~$392.5 million compared to the ~~six-month period~~three months ended ~~June 30, 2020,~~March 31, 2021, primarily driven by ~~$887.3~~$750 million of proceeds from ~~our IPO~~the issuance of Series A Preferred Stock in ~~June 2021,~~January 2022, offset by ~~$4.5~~$2.5 million of cash paid for ~~IPO offering costs, and an~~issuance costs. This increase ~~in proceeds from~~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 ~~common stock resulting from stock option exercise in the six~~Series A Preferred Stock. The three months ended ~~June 30, 2021. These increases were partially offset by $211.2~~March 31, 2021 also included $200.0 million of ~~proceeds~~cash from ~~issuance of preferred stock in the six months ended June 30, 2020.~~borrowings under our Credit Facility.

Critical Accounting Policies and Estimates

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

~~There~~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 asfor 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 ~~critical accounting policies~~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, ~~disclosed~~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 ~~Prospectus.~~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 on Form 10-Q.~~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. ~~At June 30, 2021~~Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies and other factors outside of our ~~net unrealized gain position was $1.0 million, compared~~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 ~~a net unrealized gain position of $2.4 million at December 31, 2020.~~our regulated and unregulated portfolios would be approximately $18.6 million.

ITEM 4. CONTROLS AND PROCEDURES

Limitations on ~~effectiveness~~Effectiveness of ~~controls~~Controls and ~~procedures~~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~~Disclosure Controls and ~~procedures~~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 ~~June 30, 2021,~~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 ~~the section entitled Risk Factors in~~ our ~~Prospectus,~~2021 Form 10-K, we previously identified a material weakness ~~in Brand New Day’s internal control over financial reporting. In addition, we identified a material weakness in our internal control over financial reporting~~ related to ~~the valuation~~claims pertaining to our IFP business, which were processed by a third-party service provider. The claims were processed inaccurately according to terms of ~~our common stock underlying stock options granted during the three months ended~~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, 2021, as well as the valuation of our Series E preferred stock issued as equity consideration to the seller in the Zipnosis and CHP acquisitions. We believe the material weakness related to stock valuation was inherently remediated upon the closing of our IPO on June 28, 2021, as we now determine the fair value of our common stock based on readily determinable prices in the public market.

~~As of June 30, 2021,~~2022, we continue to have a material weakness in ~~Brand New Day’s internal control over financial reporting. So far in 2021,~~IFP third-party claims processing. Since the identification of this material weakness, we have ~~taken a number~~been expanding the comprehensiveness of ~~remediation steps~~our pre-pay and post-pay claims quality assurance procedures and datamining capabilities designed to ~~enhance~~enable targeted identification of potential claims payment discrepancies or other process gaps. Additionally, over the control environment at Brand New Day, including actions to further centralize accounting and other financial responsibilities, enhance controls and procedures over key accounts and processes, and hire additional resources to oversee accounting, reporting and other activities occurring within Brand New Day. With these improvements, management is now focused on demonstrating consistency in the performancecourse of ~~these controls and procedures from period to period. Additionally,~~2022, we will be ~~migrating Brand New Day’s financial accounting~~improving provider data (e.g., provider roster data) and ~~reporting activities over~~the processes of updating that data, both of which have contributed to ~~Bright Health’s legacy enterprise resource planning system in~~ the ~~third quarter of 2021.~~identified claims processing errors.

Changes in Internal Control over Financial Reporting

~~We consider~~Other than the material weakness remediation actions discussed above, asthere 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~~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 ~~Prospectus.~~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 ~~Prospectus.~~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

~~We have granted~~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 ~~issued the following securities that were not registered under the Securities Act:~~$1,000 per share to certain subsidiaries of Cigna Corporation and certain affiliates of New Enterprise Associates.

•~~26,065,406 shares of Series C preferred stock to 37 accredited investors at a price of $7.673 per share, for aggregate proceeds of approximately $200.0 million;~~

•~~48,101,474 shares of Series D preferred stock to 44 accredited investors at a price of $15.0247 per share, for aggregate proceeds of approximately $635.0 million;~~

•~~24,488,556 shares of Series E preferred stock to 71 accredited investors at a price of $20.4177 per share, for aggregate proceeds of approximately $500.0 million;~~

•stock options to employees, directors, consultants and other service providers of the Registrant to purchase an aggregate of 88,806,393 shares of common stock under the Registrant’s 2016 Equity Plan, with per share exercise prices ranging from $0.54 to $4.18;

•16,602,300 shares of common stock to employees, directors, consultants and other service providers of the Registrant upon the exercise of stock options granted under the Registrant’s 2016 Equity Plan, with per share purchase prices ranging from $0.01 to $1.77.

~~On April 1, 2021, we issued 2,062,194 shares of Series E preferred stock to security holders of CHP in connection with our acquisition of CHP.~~

On June 28, 2021, we issued 427,897,381 shares of common stock upon conversion of all of our outstanding shares of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock, Series D Convertible Preferred Stock, and Series E Convertible Preferred Stock pursuant to our eighth amended and restated certificate of incorporation.

~~None of the~~The foregoing ~~transactions involved~~transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. ~~Unless otherwise stated, the sales~~The sale of the above securities ~~were~~was deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act ~~(or Regulation D or Regulation S promulgated thereunder) or Rule 701 promulgated under Section 3(b) of the Securities Act~~ as ~~transactions~~a transaction by an issuer not involving any public ~~offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701.~~offering. The recipients of the securities in ~~each of these transactions~~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 ~~stock certificates~~securities issued in ~~these transactions.~~

~~Use of Proceeds from Initial Public Offering of Common Stock~~

~~On June 28, 2021, we completed our IPO in which we issued and sold~~ 51,350,000 shares of common stock, par value $0.0001 per share, at an offering price of $18.00 per share. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to the Company’s registration statement on Form S-1 (File No. 333-256286), as amended, which was declared effective by the SEC on June 23, 2021. We received net proceeds of $880.6 million from the sale of our common stock, after deducting underwriting discounts and commissions of $37.0 million and other offering expenses of $6.7 million. We used a portion of the net proceeds from our IPO to repay the $200.0 million principal balance of indebtedness outstanding under our revolving credit facility ~~agreement originally entered into on March 1, 2021 and the associated interest and other~~

~~Table of Contents~~

~~costs of $3.2 million. We used $232.4 million to fund the acquisition of Centrum as described in Note 2,~~ ~~Business Combinations. The remainder of the net proceeds will be used for general corporate purposes.~~

The representatives of the underwriters of our IPO were J.P. Morgan Securities LLC, Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and Barclays Capital Inc. No payments were made by us to directors, officers, or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and to non-employee directors pursuant to our director compensation policy.this transaction.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Table of Contents

Item 6. Exhibits

EXHIBIT INDEX


Exhibit Number						Description
3.1						Ninth Amended and Restated Certificate of Incorporation of Bright Health Group, Inc. (incorporated by reference to Exhibit 4.1 filed with the Registrant’s Registration Statement on Form S-8 filed on June 28, 2021)
3.2						Certificate of Designations of Series A Convertible Perpetual Preferred Stock of Bright Health Group, Inc. (incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K filed on January 3, 2022)
3.3						Amended and Restated Bylaws of Bright Health Group, Inc. (incorporated by reference to Exhibit 4.2 filed with the Registrant’s Registration Statement on Form S-8 filed on June 28, 2021)
10.1						Second Amendment to the Second Amended and Restated Registration Rights Agreement, dated as of ~~May 19, 2021,~~January 3, 2022, by and among Bright Health Group, Inc. ~~(formerly known as Bright Health Inc.)~~ and the ~~Majority Holders (as defined therein)~~other parties named therein. (incorporated by reference to Exhibit ~~10.3~~10.1 filed with the Registrant’s ~~Registration Statement~~Current Report on Form ~~S-1~~8-K filed on ~~June 15, 2021)~~January 3, 2022)
10.2†						Bright Health Management Inc. Severance Benefits Plan and Summary Plan Description (incorporated by reference to Exhibit 10.7 filed with the Registrant’s Registration Statement on Form S-1 filed on June 15, 2021)
~~10.3†~~						Bright Health Group, Inc. 2021 Omnibus Incentive Plan, effective as of June 5, 2021 (incorporated by reference to Exhibit 10.8 filed with the Registrant’s Registration Statement on Form S-1 filed on June 15, 2021)
~~10.4†~~						Form of Stock Option Agreement under the Bright Health Group, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.9 filed with the Registrant’s Registration Statement on Form S-1 filed on June 15, 2021)
~~10.5†~~						Form of Restricted Stock Unit Agreement under the Bright Health Group, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.10 filed with the Registrant’s Registration Statement on Form S-1 filed on June 15, 2021)
~~10.6†~~*						Form of Executive ~~Performance Stock Unit~~Separation Agreement ~~under the Bright Health Group, Inc. 2021 Omnibus Incentive Plan~~
~~10.7†~~						~~Form of Indemnification Agreement for Directors and Officers~~
31.1						Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1						Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
32.2						Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)

~~Table of Contents~~


Exhibit Number						~~Description~~
101						The following financial information from our Quarterly Report on Form 10-Q for the ~~second~~first quarter of fiscal ~~2021,~~2022, filed with the SEC on ~~August 11, 2021,~~May 12, 2022, formatted in Inline Extensible Business Reporting Language (“iXBRL”)
104						Cover Page Interactive Data File (formatted as ~~Inline XBRL~~iXBRL and embedded within Exhibit 101)

* Filed herewith.

†~~Denotes a management~~ Management contract or compensatory plan or arrangement.

(1) The certifications in ~~Exhibit~~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: ~~August 11, 2021~~May 12, 2022	By:	/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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	Pro Forma Consolidated Statements of Income (Loss)
	(Unaudited)
	Three Months Ended		Six Months Ended June 30,
	June 30, 2020		2021		2020
Revenue	$	430,200	$	2,117,268	$	760,638
Net Loss	(15,123)		(58,271)		(21,763)


	PSU
	Number of PSUs	Weighted Average Grant Date Fair Value
Unvested PSUs at December 31, 2020	0	$	0
PSUs granted	14,700	9.30
PSUs canceled	0	0
Unvested PSUs at June 30, 2021	14,700	$	9.30


Six Months Ended June 30, 2021	Bright HealthCare		NeueHealth		Eliminations		Consolidated
Premium revenue	$	1,865,684	$	37,033	$	—	$	1,902,717
Service revenue	90		20,433		—		20,523
Investment income	2,404		62,754		—		65,158
Total unaffiliated revenue	1,868,178		120,220		—		1,988,398
Affiliated revenue	—		42,633		(42,633)		—
Total segment revenue	1,868,178		162,853		(42,633)		1,988,398
Operating income (loss)	(140,179)		58,301		—		(81,878)

Depreciation and amortization	$	6,940	$	4,836	$	—	$	11,776


Six Months Ended June 30, 2020	Bright HealthCare		NeueHealth		Eliminations		Consolidated
Premium revenue	$	477,713	$	3,996	$	—	$	481,709
Service revenue	0		8,424		—		8,424
Investment income	5,289		0		—		5,289
Total unaffiliated revenue	483,002		12,420		—		495,422
Affiliated revenue	—		5,449		(5,449)		—
Total segment revenue	483,002		17,869		(5,449)		495,422
Operating income (loss)	(31,164)		(3,352)		—		(34,516)

Depreciation and amortization	$	1,857	$	1,015	$	—	$	2,872