Vibrant Well being raised $924 million on a valuation of roughly $12 billion throughout its preliminary public providing on Thursday, with the Minneapolis-based insurtech reserving the most important IPO among the many medical health insurance startups that went public this yr.
The corporate’s shares failed to achieve their estimated value of $18 in the course of the IPO, that means its valuation fell about $2 billion wanting what buyers anticipated. Vibrant Well being is the final of the insurtechs anticipated to make an IPO this yr, with Alignment Healthcare, Oscar Well being and Clover Well being all going public earlier in 2021.
Vibrant Well being is the most important of those new-age insurance coverage corporations and its valuation displays the dimensions of its membership, stated Blake Madden, a healthcare analyst at VMG Well being. “Regardless of the perhaps somewhat little bit of combined critiques on the IPO, I believe it was like essentially the most invaluable digital well being IPO in historical past,” he stated.
As of April, Vibrant Well being served 623,000 particular person, group and Medicare Benefit prospects, in line with an S-1 filed with the U.S. Securities and Trade Fee in Might. Oscar Well being reported 542,220 prospects throughout the identical enterprise strains on the finish of the quarter that closed March 31. Clover Well being had 130,000 complete members and Alignment Healthcare lined 83,100 Medicare Benefit enrollees throughout the identical interval, in line with monetary filings.
“Vibrant Well being is significantly bigger than the opposite new-era well being plans which have IPO’d just lately, and they’re doing one thing very totally different from these organizations, in that they’re buying their option to development,” stated Tom Cassels, president of Rock Well being digital consultancy.
Vibrant Well being launched in 2017 as a startup well being plan geared toward disrupting the medical health insurance exchanges, and was co-founded by former UnitedHealth Group CEO Bob Sheehy. Not like Oscar Well being and Clover Well being, which have tried to construct insurtech companies from the ground-up, Vibrant Well being has developed primarily by acquisition, Cassels stated. Vibrant Well being just lately bought two Medicare Benefit plans in California for a mixed $600 million. The corporate additionally owns and manages roughly 40 risk-bearing main care clinics and it companions with native suppliers to handle look after sufferers. In April, Vibrant Well being paid an undisclosed sum to purchase Zipnosis, a telehealth platform that gives digital care software program to almost 60 well being techniques nationwide.
The startup’s goal of controlling value by merging well being plan, supplier and provider-enablement platforms is harking back to UnitedHealth Group’s technique, Cassels stated.
Vibrant Well being’s physician-enablement enterprise is analogous to OptumInsight, a subsidiary of UnitedHealth Group that operates supplier clinics and goals to remodel clinicians to value-based contractors by a wide range of digital instruments, he stated. The startup’s goal of utilizing know-how to drive risk-based contracts additionally bears a placing similarity to agilon well being and Privia Well being, physician-enablement instruments that each of which went public by outsized IPOs earlier this yr.
Cassels expects Vibrant Well being to proceed to develop by buying domestically owned Medicare Benefit plans which have sturdy ties with regional medical teams. The corporate’s continued enlargement will make open enrollment much more aggressive this coming yr, he stated. Not like its nationwide rivals, although, Vibrant Well being’s market cap can be based mostly on its capacity to draw particular person enrollees slightly than employers overlaying staff, he stated.
“Most likely the most important unknown is: Are shoppers in Medicare Benefit and the change markets going to see what they need in these new well being plans versus these sturdy legacy manufacturers?” Cassels stated.
Whereas Vibrant Well being’s $12 billion valuation could be justified in contrast with different latest IPOs by related corporations, the central query is whether or not these startups current an applicable benchmark, stated Ari Gottlieb, a healthcare guide at A2 Technique Corp.
Molina Healthcare has a $15 billion market cap and three.8 million members, as an example, greater than six occasions as many policyholders as Vibrant Well being has, which is valued at round $12 billion. Clover Well being, in the meantime, is price about $5.3 billion because of its meme-stock buyers, however has about one-sixth as many policyholders as Vibrant Well being.
“You possibly can argue that these insuretech companies, their valuations are fairly out of line with historic norms,” Gottlieb stated. “They replicate buyers that do not totally perceive the nuances of the enterprise mannequin.”
As proof, Gottlieb famous that Vibrant Well being almost doubled its year-over-year losses to $249 million on the finish of 2020, a yr when most well being insurers carried out properly because of shoppers deferring care in the course of the COVID-19 pandemic. The corporate’s challenges replicate the struggles confronted throughout the insurtech business, with Oscar Well being and Clover Well being likewise are struggling to achieve profitability by specializing in particular geographic areas, he stated.
Like Vibrant Well being, each of those corporations had disappointing public choices and their share costs have fallen within the months since. At this level, Gottlieb stated, particular person markets signify a commoditized enterprise the place shoppers primarily depend on value as a differentiator.
“You must ask the query, ‘The place’s the 10x issue?'” Gottlieb stated. “To me, that is the larger query on Vibrant on the Medicare aspect. On the person aspect, the market’s challenged general. So how do they do it?”