May 17, 2022

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BRIGHT HEALTH GROUP INC. – 10-K

The following discussion summarizes the significant factors affecting our
operating results, financial condition, liquidity, and cash flows as of and for
the periods presented below. The following discussion and analysis should be
read in conjunction with the Consolidated Financial Statements and the Notes to
Consolidated Financial Statements included elsewhere in this Annual Report. The
statements in this discussion regarding industry outlook, our expectations
regarding our future performance, liquidity, and capital resources, and all
other non-historical statements in this discussion are forward-looking
statements and are based on the beliefs of our management, as well as
assumptions made by, and information currently available to, our management.
Actual results could differ materially from those discussed in or implied by
forward-looking statements as a result of various factors, including those
discussed below and elsewhere in this Annual Report, particularly under
"Forward-Looking Statements" and Item 1A - Risk Factors.

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, 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
rising costs. We are making healthcare simple, personal, and affordable.

To execute 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 - from the
consumer, to the provider, to the payor - can win.

Bright Health Group consists of two reportable segments: NeueHealth and Bright
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, 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 December 2021, NeueHealth works with over 260,000 care provider partners
and delivers high-quality virtual and in-person clinical care through its 52
owned primary care clinics within its integrated care delivery system. Through
those risk-bearing clinics, NeueHealth maintains over 200,000 unique patient
relationships as of December 31, 2021, over 175,000 of which are served through
value-based arrangements, across multiple payors. In addition to our directly
owned clinics, NeueHealth manages care for an additional 128 clinics through its
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 Networks - 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 clinics. Other NeueHealth customers include external payors and
third-party administrators, affiliated providers and direct-to-government
programs.




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Bright HealthCare. Our healthcare financing and distribution business, Bright
HealthCare, delivers simple, personal, and affordable solutions to integrate the
consumer into Bright Health's alignment model. Bright HealthCare currently
aggregates and delivers healthcare benefits to over 727,000 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
offer employer group plans.

Bright HealthCare's customers include commercial health plans across 11 states,
which serve approximately 611,000 individuals, as well as MA products in 11
states, which serve approximately 117,000 lives and generally focus on higher
risk, special needs populations.

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 IFP
products and annual enrollment period for MA. Outside of an annual selling
season, IFP and MA products typically can only be sold during SEPs 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 SEPs, 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 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. See "Risk Factors - Risks Related to
Our Business - Our health plan products are subject to risk adjustment programs,
which if not managed properly can result in risk adjustment transfers that do
not reflect our true risk profile, which could adversely impact our financial
results and cash flows."

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

Bright HealthCare utilizes our Bright Health Networks 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.

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-
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of-pocket maximums over the course of the policy year, which shift 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 and MA plans
sold to consumers, as well as NeueHealth value-based capitation revenue from
serving patients.

Bright HealthCare Commercial premium revenue

The sources of commercial premium revenue are primarily IFP products which are
comprised of APTC 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 ACA 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, 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 32%, 40% and 13% for the years ended
December 31, 2021, 2020 and 2019, respectively, which are included in our Bright
HealthCare segment.
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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 Networks. Bright HealthCare is currently the only
customer of Bright Health Networks.

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 Expenses

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 contracts with our pharmacy benefits managers, 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.

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 Networks 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. Additionally, the premium deficiency
reserve expense for expected future losses
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in certain markets is included in operating costs. 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 customer relationships,
trade names, reacquired contracts and developed technology.

Other Income and Expenses

Interest Expense

Interest expense consists of interest payments on credit facilities, as well as
amortization of debt issuance costs.

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 and other
costs of $3.2 million. Additionally, we used a portion of the proceeds to fund
the acquisition of Centrum Medical Holdings, LLC ("Centrum") as described in
Note 3 of the Notes to Consolidated Financial Statements. The remainder of the
net proceeds were used for general corporate purposes.

See further discussion related to the IPO as described in Note 1 of the Notes to
Consolidated Financial Statements.

COVID-19 Impact

The ongoing COVID-19 pandemic, including its effect on the macroeconomic
environment, and the response of local, state, and federal governments to
contain and manage the virus, continues to impact our business. The emergence of
COVID-19 variants in the United States and abroad continues to prolong the risk
of additional surges of the virus. In addition, some individuals have delayed or
are not seeking routine medical care to avoid COVID-19 exposure. These and other
responses to the COVID-19 pandemic have meant that our 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.

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.

In 2021, our results were more significantly impacted by COVID-19 than in 2020.
We experienced increased COVID-19 related costs throughout 2021, with a more
significant increase in the second half of 2021, particularly due to negative
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trends in the Southeast United States, which includes two of our largest markets
- Florida and North Carolina. For the years ended December 31, 2021 and 2020,
the impact of COVID-19 increased our MCR by 530 basis points and 400 basis
points, respectively, reflecting an increase in medical costs of $208.0 million
and $46.6 million, respectively.
Overall measures to contain the 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 and may potentially evade vaccines 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.

Business Update

Our mission - Making Healthcare Right. Together. - is built on the belief that
by connecting and aligning the best local resources in healthcare delivery with
the financing of care, we can deliver better outcomes, at a lower cost, for all
consumers. Bright Health Group is building a truly unique model that we believe
will transform how healthcare is delivered. We believe when healthcare is
delivered in a Fully Aligned and Integrated Care model, we can bend the cost
curve and, most importantly, enhance value for both consumers and providers.

We achieved substantial growth in 2021, reaching over $4.0 billion in revenue,
and we are enthusiastic about our positioning for 2022. As we executed on our
strategy to quickly gain scale in the business, we expected some variability in
our results, and we saw that play out as we closed 2021. The meaningful revenue
growth we delivered in 2021, which was driven to a combination of higher than
anticipated growth to start the year and additional growth from the Special
Enrollment Period, outpaced our operational and system capabilities.

Unique factors in 2021, including the COVID-19 pandemic and our large group of
new members without risk scores, combined with scaling up our organizational
capabilities and enterprise technologies, impacted our results into the fourth
quarter more significantly than anticipated. These factors impacted our ability
to engage with our members in order to accurately capture their underlying
health conditions and impacted prior period medical costs as we caught up on
claims processing.

Despite the challenges we faced 2021, we believe our larger base of business
along with continued growth into 2022, provides a solid platform to continue
executing on our strategy. We anticipate that through our Fully Aligned Care
model we can drive differentiated results and we are taking specific actions to
focus the Company, improve our systems and processes, and drive toward
profitable growth. We are continuing to invest in building our NeueHealth
business and have successfully expanded NeueHealth owned clinics outside of the
Florida market, while also continuing to build our affiliated Care Partner
network across the country.

Many of the challenges we encountered this past year can be attributed to
specific areas that were already on our list for improvement, but the growth we
experienced exacerbated the gaps in performance. We made significant progress
correcting these issues in our operational capabilities in 2021, which we expect
will help drive improved 2022 performance along with opportunities we see for
further improvement over the course of 2022.

We have taken the following specific actions against several areas that we
believe will impact near-term performance, which include:

1.Net Pricing Action in Core Markets: We took pricing action in excess of our
expectation for underlying medical cost trends for the majority of our
membership in legacy IFP markets, while still being able to demonstrate
meaningful growth. In addition, we priced in potential COVID related costs to
reflect the risk of future COVID related expenses. We also are focusing on
pricing as an important lever in 2023, as we continue our path to profitability.

2.Unit Cost and Medical Management Reduction Initiatives: In 2021, we identified
several unit cost and medical management opportunities across our IFP and MA
businesses that we were unable to capitalize on in 2021, which are expected to
drive value in 2022. These medical cost efforts are in addition to the net
pricing actions we have taken. As we gained scale and optimized our processes,
we were able to renegotiate ancillary and pharmacy contracts, reduce out of
network rates, optimize existing contract structures, more closely manage
high-cost cases, and improve our specialty provider network. We expect that
optimizing the care network will be an
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ongoing process that requires data on our members and volume, both of which we
now have significantly more of, as well as better systems to provide visibility.

3.Risk Adjustment Actions: Accurate risk adjustment was a challenge due to
several structural issues in 2021; however, those challenges drove us to make
significant investment in our capabilities. We are working on faster attribution
of our members to a larger network of owned and affiliated physicians that have
better ability to engage with their members earlier in the year. We have also
made technology and operational investments in suspecting analytics, outreach
and engagement teams, and our end-to-end risk adjustment process in order to
accurately capturing the risk of the population we manage. We are also working
to help members better manage and navigate their care, which we expect will
drive better in-network trends.

4.Claims and Clinical Platform Stabilization: Our growth significantly
challenged the capacity of our fully aligned provider networks, as well as the
capacity of our administrative, operational, and clinical systems. This growth
occurred while we were building BiOS and transitioning from numerous vendor
solutions to BiOS, our end state operating platform. In 2022, we transitioned to
new finance and people systems. In addition, 70% of our membership is on our
proprietary clinical system, Panorama, and all of our new market membership is
on our new claims administration platform with the remainder of our IFP
membership expected to migrate in January 2023. BiOS provides us greater
visibility and efficiency, the benefits of which include faster claims
processing times, more accurate payments, industry standard denial rates, and
more timely and complete consumer data.

5.We are Addressing Talent and Cost Structure: A high performing team is
critical to our ability to improve performance and drive sustainable results. We
continue to evolve our team, adding expertise as needed, and have taken specific
actions to reduce the cost structure, eliminate redundancies, and drive
efficiencies across the organization.

We also believe the following Company and industry factors will have an impact
of our performance in 2022:

1.Scale and Diversification: We achieved growth in the 2022 Annual and Open
Enrollment Periods, which provides improved scale, at more than 1 million health
plan members, and 400,000 lives under risk-based contracts. This scale not only
allows us to better manage population risk and reduce volatility, but our
density in specific markets such as California, Texas, Florida, and North
Carolina, allows us to better engage with providers and be a more meaningful
portion of their overall business.

2.Higher Retained Membership: Inclusive of the impact of the 2021 SEP,
approximately 85% of our IFP membership was new in 2021. To begin 2022,
including new markets, approximately 55% of our enrollment is new. We also
benefit from strong renewal rates, with a retention rate of 79% in our mature
markets - those existing for more than two years. This has multiple benefits,
including more data and information on our members to help us better manage the
population and accurately capture member risk.

3.Normalized Special Enrollment Period: The 2021 SEP, while providing us with
continued growth over the course of the year, came with unique challenges with
regards to performance. The shorter member duration and higher acute care costs
for those members, all against the backdrop of COVID, made it very difficult to
engage with this population and accurately capture their risk. We expect a much
more normalized SEP this year.

4.Reduced Operational Backlog: The operational challenges driven by our 2021
growth caused us to spend significant time and effort working through an
operational backlog. We have made significant investments in the team and
systems and we believe we are far better prepared for the growth we expect in
2022. This will allow us to better engage and respond to issues and more
effectively manage performance within our population.

5.Endemic COVID: We believe COVID will continue in some capacity for the
foreseeable future; however, do not expect it to be nearly as acute as it was in
2021. With the increase in vaccination rates, while cases of COVID may continue,
we expect direct COVID costs will be more manageable.

We believe the near-term steps that we are taking to improve our performance
will optimize the business for long-term success.

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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.

                                                      Year Ended December 

31,

                                           2021                  2020       

2019

Bright HealthCare Consumers Served
Commercial (1)                          611,078               145,459                54,782
Medicare Advantage                      116,621                61,663                 4,146

NeueHealth Patients
Value-Based Care Patient Lives          175,587                21,126                     -



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

Key Metrics

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.

Value-Based Care Patient Lives

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.
                                      Year Ended December 31,
($ in thousands)                2021                   2020            2019
Net Loss             $             (1,178,365)       (248,442)       (125,337)
Adjusted EBITDA(1)   $             (1,080,906)       (238,912)       (121,091)

(1)See “Non-GAAP Financial Measures” below for reconciliations to the most
directly comparable financial measures calculated in accordance with GAAP and
related disclosures.

Non-GAAP Financial Measures

Adjusted EBITDA

We define Adjusted EBITDA as net loss excluding interest expense, income taxes,
depreciation and amortization, adjusted for the impact of acquisition and
financing-related transaction costs, share-based compensation, changes in the
fair value of contingent consideration and contract termination costs. Adjusted
EBITDA has been presented in this Annual 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
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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.

The following table provides a reconciliation of net loss to Adjusted EBITDA for
the periods presented:

                                                                      Year Ended December 31,
(in thousands)                                             2021                 2020                2019
Net loss                                              $ (1,178,365)         $ (248,442)         $ (125,337)
Interest expense                                             7,956                   -                   -
Income tax (benefit) expense                               (26,521)             (9,161)                  -
Depreciation and amortization                               35,484               8,289               1,134
Transaction costs (a)                                        6,338               4,950               1,248
Share-based compensation expense (b)                        68,423               5,452               1,864

Change in fair value of contingent consideration (c) (4,221)

          -                   -
Contract termination costs (d)                              10,000                   -                   -
Adjusted EBITDA                                       $ (1,080,906)         $ (238,912)         $ (121,091)



(a)Transaction costs include accounting, tax, valuation, consulting, legal and
investment banking fees directly relating to business combinations and certain
costs associated with our IPO. 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, restricted
stock unit, and performance-based restricted stock unit 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)Represents non-cash change in the fair value of contingent consideration from
business combinations, which is remeasured at fair value each reporting period.
There was no material activity for periods prior to the first quarter of 2021.

(d)Represents amount paid for early termination of an existing vendor contract.

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Acquisitions

Effective December 31, 2019, we acquired substantially all of the assets of
Associates in Family Practice of Broward, L.L.C., a Florida limited liability
corporation, renaming it to AssociatesMD Medical Group, Inc. ("AMD"). This
NeueHealth acquisition was completed to enhance our clinical capabilities to
better serve enrollees as part of our planned Florida market entrance in 2020.

Effective April 30, 2020, we acquired Universal Care, Inc. (d.b.a. Brand New
Day) ("BND"), which is focused on serving primarily MA special needs consumers.
This Bright HealthCare acquisition was completed to bolster our MA platform and
provide entry into California.

Effective December 31, 2020, we acquired a 62% controlling interest in Premier
Medical Associates of Florida, LLC ("PMA"). This NeueHealth acquisition was
completed to enhance our clinical capabilities to better serve enrollees as part
of our Florida market expansion in 2021.

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. This Bright HealthCare acquisition was
completed to enter into a new state of strategic interest and to leverage THNM’s
strong local clinical model of care.

Effective March 31, 2021, we acquired Zipnosis, Inc. ("Zipnosis"), which is a
telehealth platform that offers virtual care to health systems around the U.S.
This NeueHealth acquisition was completed to enhance our proprietary technology
platform, DocSquad, and our consumer and provider connectivity with Zipnosis'
virtual care capabilities.

Effective April 1, 2021, we acquired Central Health Plan of California, Inc.
("CHP"), an insurance provider of MA health maintenance organization ("HMO")
services. This Bright HealthCare acquisition was completed to gain synergies
from leveraging CHP's clinical model and California consumer expertise to
continue to expand our MA business in the California market.

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

See Note 3 in the Notes to Consolidated Financial Statements for more
information regarding our business combinations.

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Results of Operations

The following table summarizes our audited consolidated statements of income
(loss) data for the years ended December 31, 2021, 2020 and 2019.

(in thousands)                                                           Year Ended December 31,
Consolidated Statements of Income (loss) and                2021                    2020                   2019
operating data:
Revenue:
Premium revenue                                      $        3,902,714       $      1,180,338       $        272,323
Service revenue                                                  42,701                 18,514                      -
Investment income                                                83,974                  8,468                  8,350
Total revenue                                                 4,029,389              1,207,320                280,673
Operating costs
Medical costs                                                 3,953,674              1,047,300                224,387
Operating costs                                               1,238,387                409,334                180,489
Depreciation and amortization                                    35,484                  8,289                  1,134
Total operating costs                                         5,227,545              1,464,923                406,010
Operating loss                                              (1,198,156)              (257,603)              (125,337)
Interest expense                                                  7,956                      -                      -
Other income                                                    (1,226)                      -                      -
Loss before income taxes                                    (1,204,886)              (257,603)              (125,337)
Income tax (benefit) expense                                   (26,521)                (9,161)                      -
Net loss                                                    (1,178,365)              (248,442)              (125,337)
Net earnings attributable to non-controlling                    (6,497)                      -                      -

interest

Net loss attributable to Bright Health               $      (1,184,862)       $      (248,442)       $      (125,337)
Group, Inc. common shareholders
Adjusted EBITDA                                      $      (1,080,906)       $      (238,912)       $      (121,091)
Medical Cost Ratio (MCR) (1)                                 101.3  %                88.7  %                82.4  %
Operating Cost Ratio (2)                                      30.7  %                33.9  %                64.3  %


_______________________

(1)Medical Cost Ratio is defined as medical costs divided by premium revenue.

(2)Operating Cost Ratio is defined as operating costs divided by total revenue.

2021 Compared to 2020

Total revenue increased by $2.8 billion, or 233.7%, for the year ended December
31, 2021 as compared to the same period in 2020. The increase was largely driven
by an increase in Bright HealthCare consumers of approximately 520,000 consumer
lives, or 251.3%, primarily from organic growth in IFP within our Commercial
business, including the 2021 Special Enrollment Period, as well as organic and
inorganic contributions from the MA business. Increases in our risk adjustment
liability partially offset the total revenue increases. The year ended December
31, 2021 also included $906.1 million from the acquisitions of PMA, THNM,
Zipnosis, CHP and Centrum and a full year of Brand New Day, which was acquired
on April 30, 2020. These acquisitions were the primary driver of the increase in
service revenue contributing $23.8 million for the year ended December 31, 2021.
In addition, investment income increased due to unrealized gains from
investments in equity securities of $80.2 million.

Medical costs increased by $2.9 billion, or 277.5%, for the year ended December
31, 2021, as compared to the same period in 2020. The increase in medical costs
was driven by an increase in consumers through both organic growth in our
Commercial and MA businesses and inorganic growth attributable to the
acquisitions of PMA, THNM, CHP and Centrum, as well as a full year of Brand New
Day. We also experienced an increase in medical costs from COVID-19 during the
year ended December 31, 2021.

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Our MCR of 101.3% for the year ended December 31, 2021, increased 1,260 basis
points as compared to the same period in 2020. The 2021 Special Enrollment
Period and our overall growth created challenges for capturing underlying risk,
and we were more significantly impacted by COVID-19 related costs, particularly
given the significant portion of our consumers in Florida. Our MCR for the year
ended December 31, 2021 included a 530 basis point unfavorable impact from
COVID-19 costs, and a 90 basis point unfavorable impact from non-COVID prior
period development ("PPD").

Operating costs increased by $829.1 million, or 202.5%, for the year ended
December 31, 2021 as compared to the same period in 2020. The increase in
operating costs 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 year ended December 31, 2021
also includes $102.8 million of premium deficiency reserve expense due to
expected future losses in certain markets in 2022 in our Bright HealthCare
segment.

Our operating cost ratio of 30.7% for the year ended December 31, 2021 improved
320 basis points as compared to the same period in 2020. The decrease was
primarily due to operating costs increasing at a slower rate than the increased
premium revenues earned due to consumer growth, as we continue to gain leverage
on our operating costs as we grow, partially offset by an increase in broker
commission costs associated with new membership growth.

Depreciation and amortization increased by $27.2 million, or 328.1%, for the
year ended December 31, 2021 as compared to the same period in 2020. The
increase was primarily due to a $25.5 million increase in amortization expense
resulting from intangible assets acquired in the PMA, THNM, Zipnosis, CHP, and
Centrum acquisitions, for which there were no comparable amounts in 2020.

Interest expense was $8.0 million for the year ended December 31, 2021, 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 the years ended December 31, 2020 and 2019.

Income tax benefit was $26.5 million for the year ended December 31, 2021. The
overall tax benefit recognized during the year is primarily due to the release
of valuation allowance in connection with new deferred tax liabilities recorded
on identifiable intangibles as part of business combination accounting for the
Zipnosis, THNM, and CHP stock acquisitions, as well as a measurement period
adjustment related to the BND acquisition.

2020 Compared to 2019

Total revenue increased by $926.6 million, or 330.2%, to $1.2 billion for the
year ended December 31, 2020 as compared to the same period in 2019. The
increase in revenue was driven by an increase in Bright HealthCare consumers of
251% from organic growth and inorganic contributions from the Brand New Day
Acquisition, as well as the creation of the NeueHealth segment with the
acquisition of AMD.

Medical costs increased by $822.9 million, or 366.7%, to $1.0 billion for the
year ended December 31, 2020 as compared to the same period in 2019. This was
primarily due to an increase in consumers through both organic and inorganic
growth, increased MA product mix at a higher MCR primarily due to the Brand New
Day Acquisition and the adverse financial impacts of the COVID-19 pandemic on MA
and IFP inpatient admissions. In certain new IFP markets, we experienced
increased medical costs due to greater out-of-network utilization in 2020.

Medical Cost Ratio of 88.7% for year ended December 31, 2020 increased 630 basis
points as compared to the same period in 2019. This was primarily due to the
increased medical costs from COVID-19, increased MA product mix as the result of
the Brand New Day Acquisition and an increase in out-of-network utilization in
certain new IFP markets.

Operating costs increased by $228.8 million, or 126.8%, to $409.3 million for
the year ended December 31, 2020 as compared to the same period in 2019. This
was primarily due to increased compensation and benefit costs from more
employees, outsourced vendor fees, broker commissions, marketing, premium taxes
and fees in support of consumer growth, acquisitions and business segment
expansion.

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Operating cost ratio of 33.9% for the year ended December 31, 2020 improved
3,040 basis points as compared to the same period in 2019. This was primarily
due to operating costs increasing at a slower rate than revenue increases as the
Company grows.

Depreciation and amortization increased by $7.2 million, or 631.0%, to $8.3
million for the year ended December 31, 2020 as compared to the same period in
2019. This was primarily due to $5.4 million of amortization expense resulting
from intangibles assets acquired in our acquisition of AMD and the Brand New Day
Acquisition. There was no amortization expense in 2019.

Income tax benefit was $9.2 million for the year ended December 31, 2020. The
overall tax benefit recognized during the year was primarily due to the tax
impact of goodwill and intangible assets acquired as part of the Brand New Day
Acquisition in 2020. We did not have any income tax (benefit) expense in 2019.

Bright HealthCare
(in thousands)                                                          Year Ended December 31,
Statements of income (loss) and operating data:            2021                   2020                  2019

Bright HealthCare:
Revenue:
Commercial premium revenue                           $       2,512,624       $       692,433       $       236,290
Medicare Advantage premium revenue                           1,297,273               480,112                36,033
Investment income                                                3,739                 8,468                 8,350
Total revenue                                                3,813,636             1,181,013               280,673
Operating expenses:
Medical costs                                                3,766,897             1,047,300               224,387
Operating costs                                              1,140,842               376,215               180,489
Depreciation and amortization                                   17,068                 6,394                 1,134
Total operating expenses                                     4,924,807             1,429,909               406,010
Operating loss                                       $     (1,111,171)       $     (248,896)       $     (125,337)
Medical Cost Ratio (MCR)                                     98.9  %               89.3  %               82.4  %



2021 Compared to 2020

Commercial revenue increased by $1.8 billion, or 262.9%, for the year ended
December 31, 2021 as compared to the same period in 2020. The increase in
revenue was driven by an increase in consumer lives of approximately 520,000 due
to organic growth and inorganic growth from the acquisition of THNM, as well as
higher net premium rates in certain markets and plan mix, which were partially
offset by an increase in risk adjustment payables.

MA revenue increased by $817.2 million, or 170.2%, for the year ended December
31, 2021 as compared to the same period in 2020. The year ended December 31,
2021 included $679.1 million of revenue from our acquisition of CHP on April 1,
2021, and the impact of a full year of revenue from Brand New Day, which was
acquired on April 30, 2020. We also experienced volume increases due to organic
growth.

Medical costs increased by $2.7 billion, or 259.7%, for the year ended December
31, 2021 as compared to the same period in 2020. For the years ended December
31, 2021 and 2020, the impact of COVID-19 increased our medical costs by $208.0
million and $46.6 million, respectively. The increase in 2021 is also due to an
increase in consumers driven by organic growth, unfavorable medical cost rates
and inorganic growth as a result of acquisitions.

Our MCR of 98.9% for the year ended December 31, 2021 increased 960 basis points
as compared to the same period in 2020. Our MCR for the year ended December 31,
2021 included a 530 basis point unfavorable impact from COVID-19 related costs
and a 90 basis point unfavorable impact from non-COVID PPD. Our MCR for the year
ended December 31, 2020 included a 400 basis point unfavorable impact from
COVID-19 costs, a 110 basis point favorable impact from non-COVID PPD and a 110
basis point favorable impact from deferred utilization. Our MCR for the year
ended December 31,
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2021, was also impacted by an increase in risk adjustment payable and medical
costs from MA product mix as a result of a full year of activity from Brand New
Day and the acquisition of CHP.

Operating costs increased by $764.6 million, or 203.2%, for the year ended
December 31, 2021 as compared to the same period in 2020. The increase was
primarily due to increases in operating costs from new market entry, increased
marketing and selling expenses related to the 2021 SEP 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
year ended December 31, 2021 also includes $102.8 million of premium deficiency
reserve expense due to expected future losses in certain markets in 2022, as
well as increased operating costs from the acquisitions of THNM and CHP, which
do not have a comparable prior year impact.

Depreciation and amortization increased by $10.7 million, or 166.9%, for the
year ended December 31, 2021 as compared to the same period in 2020. The
increase was primarily due to amortization expense of $9.6 million resulting
primarily from intangible assets acquired in 2021 for which there were no
comparable amounts in the 2020 period.

2020 Compared to 2019

Commercial revenue increased by $456.1 million, or 193.0%, to $692.4 million for
the year ended December 31, 2020 as compared to the same period in 2019. This
was primarily driven by a 166% increase in consumers, with the remainder
primarily attributable to higher premium rates in certain new markets.

MA revenue increased by $444.1 million to $480.1 million for the year ended
December 31, 2020 as compared to the same period in 2019. This was primarily
driven by the Brand New Day acquisition, which contributed $426.3 million of the
revenue increase, and other organic growth, which together helped drive consumer
growth of 1,387%.

Medical costs increased by $822.9 million, or 366.7%, to $1.0 billion for the
year ended December 31, 2020 as compared to the same period in 2019. This was
primarily due to increased consumers, impacts from the COVID-19 pandemic and the
Brand New Day Acquisition driving increased MA product mix. In addition, certain
new IFP markets experienced increased levels of out-of-network utilization in
2020.

MCR increased from 82.4% for the year ended December 31, 2019 to 89.3% for the
year ended December 31, 2020, representing a 690 basis points increase. This was
primarily due to the increased medical costs from COVID-19, increased MA product
mix as a result of the Brand New Day Acquisition and an increase in
out-of-network medical claims utilization in certain new IFP markets.

Operating costs increased by $195.7 million, or 108.4%, to $376.2 million for
the year ended December 31, 2020 as compared to the same period in 2019. This
was primarily due to an increase in employee headcount leading to increased
compensation and benefit costs, as well as an increase in outsourced vendor
fees, broker commissions, marketing, premium taxes and fees in support of
consumer growth and the Brand New Day acquisition.

Depreciation and amortization increased by $5.3 million, or 463.8%, to $6.4
million for the year ended December 31, 2020 as compared to the same period in
2019. This was primarily due to $3.2 million of amortization expense resulting
from intangibles assets acquired in our Brand New Day Acquisition, as well as
depreciation expense from the acquired property, equipment and capitalized
software. There was no amortization expense in 2019.
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NeueHealth
($ in thousands)                                   Year Ended December 31,
Statements of income (loss) data:               2021                 2020         2019

NeueHealth:
Revenue:
Premium revenue                       $                338,254    $     7,793    $     -
Service revenue                                         74,690         29,354          -
Investment income                                       80,235              -          -
Total revenue                                          493,179         37,147          -
Operating expenses:
Medical costs                                          432,318              -          -
Operating costs                                        129,430         43,959          -
Depreciation and amortization                           18,416          1,895          -
Total operating expenses                               580,164         45,854          -
Operating loss                        $               (86,985)    $   (8,707)    $     -
Medical Cost Ratio (MCR)                              127.8  %           -  %       -  %


No activity reflected in 2019 due to establishment of segment in 2020.

2021 Compared to 2020

Premium revenue increased by $330.5 million for the year ended December 31, 2021
as compared to the same period in 2020. The increase in premium revenue for the
year ended December 31, 2021 includes $262.4 million from the acquisitions of
PMA and Centrum, as well as an organic increase in patient lives.

Service revenue increased by $45.3 million, or 154.4%, for the year ended
December 31, 2021 as compared to the same period in 2020. The increase in
service revenue is primarily driven by increased intercompany network contract
service revenue with our Bright HealthCare segment, which is charged on a per
consumer per month basis and has increased due to market expansion and an
increase in consumer lives. The acquisitions of PMA, Zipnosis and Centrum also
contributed $23.7 million to the year-over-year increase in service revenue.

Investment income was $80.2 million for the year ended December 31, 2021 due to
unrealized gains on equity securities acquired in 2021. NeueHealth did not hold
any investments during the year ended December 31, 2020.

Medical costs were $432.3 million for the year ended December 31, 2021, which
were primarily driven by an increase in patient lives as a result of the PMA and
Centrum acquisitions, as well as organic growth in our value-based arrangements.
MCR was 127.8% for the year ended December 31, 2021. There were no medical costs
in the year ended December 31, 2020.

Operating costs increased by $85.5 million, or 194.4%, for the year ended
December 31, 2021 as compared to the same period in 2020. The increase was
primarily due to increased compensation and benefit costs from more employees,
and outsourced vendor fees in support of consumer growth, as well as costs from
the PMA, Zipnosis and Centrum acquisitions.

Depreciation and amortization increased by $16.5 million for the year ended
December 31, 2021 as compared to the same period in 2020. The increase was
primarily due to amortization expense of $15.9 million resulting from intangible
assets acquired for which there were no comparable amounts in 2020.

2020 Compared to 2019

Our NeueHealth segment was created in 2020 through the acquisition of AMD and
the establishment of our Bright Health Network service. Service revenue reflects
fee-for-service revenue attributable to AMD service patients and internal
revenue generated by Bright Health Networks for network contract services with
Bright HealthCare. Premium revenue reflects
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AMD revenue related to capitation payments and other value-based revenue from
third-party payors. There was no comparable activity in 2019.

Liquidity and Capital Resources

We assess our liquidity in terms of our ability to generate adequate amounts of
cash to meet 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, through sales of our common stock, which generated cash
proceeds of $887.3 million upon closing of our IPO on June 28, 2021.

We expect to continue to incur operating losses and generate negative cash flows
from operations for the foreseeable future due to the investments we intend to
continue to make in expanding our operations and due to additional general and
administrative costs we expect to incur in connection with operating as a public
company. We believe that existing cash on hand, investments and amounts
available under our Credit Agreement described below will be sufficient to
satisfy our anticipated cash requirements for the next twelve months for items
such as risk adjustment payable, medical costs payable, accounts payable and
other current liabilities. However, we may seek additional capital to support
our future growth plans and other strategic opportunities that may arise, as
well as anticipated cash requirements beyond that period for long-term
obligations such as operating leases and redeemable noncontrolling interest.

As of December 31, 2021, we had $1.1 billion in cash and cash equivalents,
$193.8 million in short-term investments and $675.2 million long-term
investments on the Consolidated Balance Sheet. As of December 31, 2020, we had
$488.4 million in cash and cash equivalents, $499.9 million in short-term
investments and $175.2 million long-term investments. Our cash and investments
are held at non-regulated entities and regulated insurance entities.

As of December 31, 2021, we had non-regulated cash and cash equivalents of $76.3
million and short-term investments of $121.5 million. As of December 31, 2020,
we had non-regulated cash and cash equivalents of $133.3 million, short-term
investments of $385.6 million of which $1.1 million was restricted, and
long-term investments of $5.6 million.

As of December 31, 2021, we had regulated insurance entity cash and cash
equivalents of $984.9 million, short-term investments of $72.4 million and
long-term investments of $675.2 million. As of December 31, 2020, we had
regulated insurance entity cash and cash equivalents of $355.1 million,
short-term investments of $114.3 million and long-term investments of $169.5
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 or through reimbursements from administrative
services agreements with the parent company. The Company declared two dividends
from the regulated insurance entities to the parent company during the year
ended December 31, 2021, and declared no dividends during 2020. The regulated
legal entities are required to hold certain minimum levels of risk-based capital
and surplus to meet regulatory requirements. As of December 31, 2021 and 2020,
$398.5 million and $235.8 million, respectively, was held in risk-based capital
and surplus at regulated insurance legal entities, which was in excess of the
minimum requirements in each year.

Indebtedness

On March 1, 2021, we entered into 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 (the "Amendment"). In addition, prior to such
amendment, the Credit Agreement contained a covenant that required 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 Credit Agreement from February 28, 2022 to February 28, 2024. As of
December 31, 2021, we had $155.0 million borrowed on the Credit Agreement at an
effective annual interest rate of 7.25%. The Credit Agreement also contains a
covenant that requires us to maintain a minimum liquidity of $150.0 million.

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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.

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.

Preferred Stock Financing

On January 3, 2022, we issued 750,000 shares of the Company’s Series A
Convertible Perpetual 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.

Cash Flows

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

                                                                   Year Ended December 31,
(in thousands)                                            2021                2020               2019

Net cash provided by (used in) operating activities $ 82,059 $ (57,238) $ (8,208)
Net cash used in investing activities

                   (552,892)          (689,742)           (94,643)
Net cash provided by financing activities              1,043,641            712,441            424,060

Net increase (decrease) in cash and cash equivalents $ 572,808 $ (34,539) $ 321,209
Cash and cash equivalents at beginning of year

           488,371            522,910            201,701
Cash and cash equivalents at end of year             $ 1,061,179          $ 488,371          $ 522,910



Operating Activities

During the year ended December 31, 2021, cash provided by operating activities
increased by $139.3 million as compared to the same period in 2020. This was
primarily driven by the increase in consumer growth driving the increased
medical costs and risk adjustment payables, as well as accounts payables and
other liabilities, and increased medical costs in the MA business driven by a
full year of activity from Brand New Day and the acquisition of CHP. These
increases were partially offset by an increase in our net loss.

During the year ended December 31, 2020, net cash used in operating activities
increased by $49.0 million as compared to the same period in 2019. This was
primarily driven by the year-over-year increase in our net loss, which was
partially offset by consumer growth driving the increased medical costs and risk
adjustment payables.

Investing Activities

During the year ended December 31, 2021, net cash used in investing activities
decreased by $136.9 million as compared to the same period in 2020. The decrease
was primarily attributable to a decrease in purchases of investments, net of
proceeds from sales, paydowns and maturities of investments of $362.2 million,
which was partially offset by a $201.5 million increase in cash used for
acquisitions.

During the year ended December 31, 2020, net cash used in investing activities
increased by $595.1 million as compared to the same period in 2019. The increase
was primarily attributable to growth of our investment portfolio, as purchases
more
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than offset sales and maturities of investment in 2020. In addition, we used
$230.3 million of cash to acquire Brand New Day and PMA in 2020.

Financing Activities

During the year ended December 31, 2021, net cash provided by financing
activities increased by $331.2 million as compared to the same period in 2020.
The increase was due to $887.3 million of proceeds from our IPO in June 2021,
offset by $6.7 million of cash paid for IPO offering costs, and a $155.0 million
increase in net proceeds from short-term borrowings. These increases were
partially offset by a $711.2 million decrease in proceeds from preferred stock
financings in 2020, for which there were no similar offerings in 2021.

Our net cash provided by financing activities was primarily related to cash
received from our preferred stock financings in 2020 and 2019. See Note 10 in
the Notes to Consolidated Financial Statements for additional detail on our
preferred stock.

                   Critical Accounting Policies and Estimates

Our management's discussion and analysis of our financial condition and results
of operations are based on our consolidated financial statements, which have
been prepared in accordance with GAAP. The preparation of these consolidated
financial statements requires us to make judgments and estimates that affect the
reported amounts of assets, liabilities, revenue, and expenses and the
disclosure of contingent assets and liabilities in our consolidated financial
statements. We base our estimates on historical experience, known trends and
events, and various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. On an ongoing basis, we evaluate our judgments and
estimates in light of changes in circumstances, facts, and experience. The
effects of material revisions in estimates, if any, are reflected in the
consolidated financial statements prospectively from the date of change in
estimates.

While our significant accounting policies are described in more detail in the
notes to the consolidated financial statements appearing elsewhere in this
Annual Report, we believe the following accounting policies used in the
preparation of our consolidated financial statements require the most
significant judgments and estimates.

Medical Costs Payable

Medical costs payable includes estimates for the costs of healthcare services
consumers have received but for which claims have not yet been received or
processed. Depending on the healthcare professional and type of service, the
typical billing lag for services can be up to 90 days from the date of service.
Approximately 80% of claims related to medical care services are known and
settled within 90 days from the date of service and substantially all within
twelve months.

In each reporting period, our operating results include the effects of more
completely developed medical costs payable estimates associated with previously
reported periods. If the revised estimate of prior period medical costs is less
than the previous estimate, we will decrease reported medical costs in the
current period (favorable development). If the revised estimate of prior period
medical costs is more than the previous estimate, we will increase reported
medical costs in the current period (unfavorable development). Medical costs in
2021 included unfavorable medical cost development related to prior years of
$9.5 million. In 2020 and 2019 medical costs included favorable development
related to prior years of $8.6 million and $7.4 million, respectively.

In developing our medical costs payable estimates, we apply different estimation
methods depending on the month for which incurred claims are being estimated.
For example, for the most recent months, we estimate claim costs incurred by
applying observed medical cost trend factors to the average per consumer per
month ("PMPM") medical costs incurred in prior months for which more complete
claim data is available, supplemented by a review of near-term completion
factors.

Completion Factors: A completion factor is an actuarial estimate, based upon
historical experience and analysis of current trends, of the percentage of
incurred claims in a given period adjudicated by us at the date of estimation.
Completion factors are the most significant assumptions we use in developing our
estimate of medical costs payable. For periods prior to the three most recent
months, completion factors include judgments related to claim submissions such
as the time from date of service to claim receipt, claim levels, and processing
cycles, as well as other factors. If actual claims submission
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rates from providers (which can be influenced by a number of factors, including
provider mix and electronic versus manual submissions) or our claim processing
patterns are different than estimated, our reserve estimates may be
significantly impacted. For the most recent three months, the completion factors
are informed primarily from forecasted PMPM claims projections developed from
our historical experience and adjusted by emerging experience data in the
preceding months which may include adjustments for known changes in estimates of
recent hospital and drug utilization data, provider contracting changes, changes
in benefit levels, changes in consumer cost sharing, changes in medical
management processes, product mix, and workday seasonality.

The following table illustrates the sensitivity of the completion factors and
the estimated potential impact on our medical costs payable estimates as of
December 31, 2021:

Completion Factors
(Decrease) Increase in Factors       Increase (Decrease) in Medical Costs Payable
                                                    (in thousands)
(3.00)%                             $                                      89,100
(2.00)%                                                                    58,794
(1.00)%                                                                    29,100
1.00%                                                                     (28,524)
2.00%                                                                     (56,488)
3.00%                                                                     (83,910)



The completion factors analysis above includes a wide range of possible outcomes
based on the early stage of development, combined with strong growth, that may
drive additional volatility. Management believes the amount of medical costs
payable is reasonable and adequate to cover our liability for unpaid claims as
of December 31, 2021; however, actual claim payments may differ from established
estimates as discussed above.

Assuming a hypothetical 1% difference between our December 31, 2021 estimates of
medical costs payable and actual medical costs payable net earnings would have
increased or decreased by approximately $8.2 million.

See Note 2 and Note 8 in the Notes to Consolidated Financial Statements for
additional detail on our medical costs payable.

Risk Adjustment

The risk adjustment programs in the IFP and MA lines of business are designed to
mitigate the potential impact of adverse selection and provide stability for
health insurers.

Under the individual and small group risk adjustment program, each plan is
assigned a risk score based upon demographic and current year medical encounters
information that is submitted to CMS for its consumers and calculated based on
the CMS risk adjustment methodology. Plans with a plan level risk score that is
lower than the State average risk scores will generally pay into the pool, while
plans with a plan level risk score higher than State average risk scores will
generally receive distributions.

In the MA risk adjustment program, each consumer is assigned a risk score based
on their demographic and prior year medical encounters information submitted to
CMS that reflects the consumer's predicted health costs based on the CMS risk
adjustment methodology. Plans receive higher payments for consumers with higher
risk scores than consumers with lower risk scores.

For both IFP and MA, we utilize external sources to help determine market risk
scores, and we estimate the amount of risk adjustment payable or receivable
based upon the processed claims and medical diagnosis data submitted and
expected to be submitted to CMS. We refine our estimate as new information
becomes available.

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Premium Deficiency Reserves

Premium deficiency reserve ("PDR") liabilities are established when it is
probable that expected future claims and maintenance expenses will exceed future
premium and reinsurance recoveries on existing medical insurance contracts,
including consideration of investment income. We assess if a PDR liability is
needed through review of current results and forecasts. For purposes of
determining premium deficiency losses, contracts are grouped consistent with our
method of acquiring, servicing, and measuring the profitability of such
contracts.

Goodwill

We test goodwill for impairment annually at the beginning of the fourth quarter
or whenever events or circumstances indicate the carrying value may not be
recoverable. We test for goodwill impairment at the reporting unit level. When
testing goodwill for impairment, we may first assess qualitative factors to
determine if it is more likely than not that the carrying value of a reporting
unit exceeds its estimated fair value. During a qualitative analysis, we
consider the impact of changes, if any, to the following factors: macroeconomic
trends, industry and market factors, cost factors, changes in overall financial
performance, and any other relevant events and uncertainties impacting a
reporting unit. If our qualitative assessment indicates that goodwill impairment
is more likely than not, we perform additional quantitative analyses. We may
also elect to skip the qualitative testing and proceed directly to the
quantitative testing. For reporting units where a quantitative analysis is
performed, we perform a test measuring the fair values of the reporting units
and comparing them to their aggregate carrying values, including goodwill. If
the fair value of the reporting unit is greater than its carrying value, no
goodwill impairment is recognized. If the carrying value of the reporting unit
is less than its calculated fair value, we recognize an impairment equal to the
difference between the carrying value of the reporting unit and its calculated
fair value.

We estimate the fair values of our reporting units using a combination of
discounted cash flows and comparable market multiples, which include assumptions
about a wide variety of internal and external factors. Significant assumptions
used in the impairment analysis include financial projections of free cash flow
(including significant assumptions about revenue growth rates, operating
margins, capital requirements and income taxes), long-term growth rates for
determining terminal value beyond the discretely forecasted periods and discount
rates. Underperformance to the financial projections used in the impairment
analysis could negatively impact the fair value of our reporting units.
Additionally, the passage of time and the availability of additional information
regarding areas of uncertainty with respect to the reporting units' operations
could cause these assumptions to change in the future.

As of October 1, 2021, we completed our annual impairment tests for goodwill
with all of our reporting units having fair values significantly in excess of
their carrying values.

                Recently Adopted and Issued Accounting Standards

See Note 2 in the Notes to Consolidated Financial Statements for a discussion of
accounting pronouncements recently adopted and recently issued accounting
pronouncements not yet adopted and their potential impact to our financial
statements.