Shiny Well being Group’s monetary image continues to darken, new disclosures from the struggling medical insurance firm reveal.
The insurtech reported a $12.9 million shortfall throughout its state-regulated insurance coverage divisions as of Dec. 31, in response to an annual report filed to the Securities and Change Fee on Thursday.
Shiny Well being additionally stated its high executives are getting more cash. This month, CEO Mike Mikan acquired a $1.69 million money bonus and Chief Monetary Officer Cathy Smith bought $585,000. The corporate additionally handed Mikan and Smith extra fairness grants and restricted inventory items. Their base salaries are unchanged.
As in earlier stories, Shiny Well being included a disclosure that, absent its potential to boost extra capital, it might go underneath. Executives stated final month the insurtech wants to boost about $300 million to remain afloat.
States require insurers to take care of minimal reserves to cowl excellent claims and Shiny Well being is out of compliance with the rule in a number of states, the corporate stated within the submitting. The corporate reported deficits in Florida, Texas and Illinois, particularly. Florida regulators positioned Shiny Well being underneath supervision final yr and extra not too long ago stated it reserves the authority to position it underneath receivership.
The insurtech continues to battle to pay claims from 2021 and concedes in its submitting that this represents a “materials weak spot” in its potential to supply correct monetary info to shareholders. Two years in the past, a third-party claims processor didn’t correctly pay suppliers in accordance with their contracts and charge schedules, and didn’t re-price the claims, Shiny Well being stated within the submitting. On the time, the insurer blamed a expertise error that pressured it to evaluation all claims by hand and will have led to overpayments.
In response, Shiny Well being applied a brand new claims processing system. However after asserting its exit from the medical insurance change enterprise, the corporate “decreased its give attention to performing sure management actions” associated to change income, membership, enrollment and eligibility, claims processing, reserves, threat adjustment, and dealer commissions, the submitting says. This will have triggered extra overpayments, in response to the corporate.
Shiny Well being’s monetary difficulties might have unfavorable downstream results on different insurance coverage corporations. Underneath the Inexpensive Care Act’s risk-adjustment program, market insurers with comparatively wholesome policyholders should switch funds to people who with sicker members.
In June, the Facilities for Medicare and Medicaid Providers will finalize risk-adjustment funds for final yr. Shiny Well being expects to owe $1.9 billion, a sum that may seemingly comprise a notable portion of the entire risk-adjustment {dollars} CMS collects from insurers. That might jeopardize different carriers’ potential to recoup funds via this system.
Shiny Well being additionally disclosed it settled a shareholder class-action lawsuit throughout the fourth quarter of 2022. Plaintiffs alleged that the corporate’s settlement with Cigna and New Enterprise Associates breached its fiduciary duties. Cigna and New Enterprise invested $750 million in Shiny Well being in 2021. Shiny Well being has reserved $800,000 to resolve the case.
