BRIGHT HEALTH GROUP INC. – 10-K – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, Inc. ("Bright Health," "we," "our," "us," or the "Company")
was founded in 2015 to transform healthcare. Although 2022 was a year of
significant transition for our business, our mission remains the same: Making
Healthcare Right. Together. It is built upon the belief that by connecting and
aligning the best local resources in healthcare delivery with the financing of
care, leveraging what we call the "Value Layer" of healthcare, we can drive a
superior consumer experience, reduce systemic waste, lower costs, and optimize
clinical outcomes. Bright Health Group consists of two reportable segments
within our continuing operations: Consumer Care and Bright HealthCare.
Additionally, we have one reportable segment in our discontinued operations:
Bright HealthCare - Commercial.

Consumer Care. Our value-driven care delivery business that manages risk in
partnership with external payors. Consumer Care, aims to significantly reduce
the friction and current lack of coordination between payors and providers to
enable a truly consumer-centric healthcare experience. As of December 2022,
Consumer Care delivers high-quality virtual and in-person clinical care through
its 74 owned primary care clinics within an integrated care delivery system.
Through these risk-bearing clinics and our affiliated network of care providers,
Consumer Care maintained over 579,000 unique patient relationships as of
December 31, 2022, approximately 530,000 of which are served through value-based
arrangements, across multiple payors.

Bright HealthCare. Our delegated senior managed care business that partners with
a tight group of aligned providers in California. Bright HealthCare delivers
simple, personal, and affordable financing solutions that are focused on
consumer retail healthcare and delivered through Bright Health's alignment
model. As of December 31, 2022, Bright HealthCare's MA products served over
125,000 lives and generally focus on higher risk, special needs, or other
traditionally underserved populations.

Bright HealthCare - Commercial. Included in our discontinued operations, our
Commercial healthcare financing and distribution business focused on commercial
plans. In October 2022, we announced that we will no longer offer commercial
health plans in 2023.

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.

Consumer Care's ability to deliver and enable high-quality, value-based care
drives revenue

Our Consumer Care business supports and manages providers in value-based and
fee-for-service 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, our Consumer Care business must effectively manage
risk and continue to develop and deliver tools and services supporting both
managed and affiliated providers.





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Consumer Care's ability to identify and align with high-performing care delivery
partners drives performance

Our Consumer Care business engages providers through a variety of alignment
options ranging from having providers participate in our networks to having
providers employed by us. We must continue to build and maintain an ecosystem of
care delivery assets capable of supporting our third-party payors.

Consumer Care's ability to grow our consumer base, inclusive of growth in our
ACO Reach membership

Consumer Care grows its consumer base through contractual relationships with
third party payors, alignment of consumers participating in the ACO Reach
program as well as patient satisfaction.

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

Bright HealthCare MA products are primarily sold for the following year through
an annual enrollment period. Outside of an annual selling season, MA products
typically can only be sold during Special Enrollment Periods ("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. We aim to offer competitive benefits at an
affordable price to meet the needs of our consumers. Historically, we have
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.

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

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

Bright HealthCare's ability to drive lower unit costs and medical utilization
reduces medical costs and Medical Cost Ratio ("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.

Our business is generally affected by the seasonal patterns of medical expenses.
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.

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

Bright Health Group, including Bright HealthCare and Consumer Care, needs to
continue to adjust our costs to our more focused business. We must continue to
act on our restructuring plan, aligning our expenses with the business over the
course of the run-out period of the exited markets.

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Components of Our Results of Operations

Revenue

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

Premium revenue

Premium revenue within continuing operations is derived from Bright HealthCare
MA plans sold to consumers, as well as Consumer Care value-based capitation
revenue from serving patients.

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.

Consumer Care premium revenue

Consumer Care premium revenue represents revenue under value-based arrangements
entered into by Consumer Care's Value Services Organization and affiliated
medical groups in which the responsibility for control of an attributed
patient's medical care is wholly transferred 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.

Direct Contracting revenue

Direct Contracting revenue represents the revenue from participation in CMS'
Global and Professional Direct Contracting model ("DC Model") on our Consumer
Care segment. Our two Direct Contracting Entities ("DCE's") participate in the
DC Model through the global risk arrangement and assuming full risk for the
total cost of care of aligned beneficiaries. As part of our participation in the
DC Model, we are guaranteeing the performance of our care network of
participating and preferred providers. The intention of the DC Model is to
enhance the quality of care for Medicare FFS beneficiaries while reducing the
administrative burden, supporting a focus on complex, chronically ill patients,
and encouraging physician organizations that have not typically participated in
Medicare FFS programs to serve Medicare FFS beneficiaries. Our Direct
Contracting revenue is presented net of reinsurance costs. CMS redesigned the DC
Model and renamed the model the ACO Realizing Equity, Access, and Community
Health (REACH) Model ("ACO REACH Model") effective January 1, 2023.

Service revenue

Service revenue primarily represents revenue from fee-for-service payments
received by Consumer Care'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.

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

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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, risk share payments to payors, and
quality incentive, management fees and shared savings compensation to providers
net of any reinsurance recoveries. 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.

For value-based arrangements in which we bear limited risk, we recognize revenue
on a net basis. Medical costs incurred from these arrangements are presented net
of the associated premium revenue.

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. We expect
operating costs to decrease with our exit of the Commercial market beginning
with the 2023 plan year and the restructuring of our operations.

Restructuring Charges

Restructuring charges are comprised of contract termination costs and severance
costs as part of a workforce reduction in 2022. The charges included within our
continuing operations are those not directly attributable to our decision to
exit the Commercial business for the 2023 plan year.

Goodwill Impairment

Goodwill impairment within our continuing operations is primarily comprised of
the impairment of our Bright HealthCare reporting unit, formerly Medicare
Advantage, that was primarily driven by an increase in the discount rate, which
was impacted by higher interest rates and other market factors.

Intangible Assets Impairment

The intangible assets impairment within our continuing operations is primarily
related to a full impairment of Centrum's reacquired contract with Bright
HealthCare Florida as a result of our announcement that we will no longer offer
Commercial products for the 2023 plan year.

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.

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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 Expense (Benefit)

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

Loss from Discontinued Operations

Commercial premium revenue

Premium revenue within discontinued operations is derived from commercial plans
sold to consumers. 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.

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. Impairments
recognized on our investments are also included within investment income of our
discontinued operations.

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 in relation to our Commercial
products. 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 within discontinued operations are direct expenses incurred in
the operation of our Commercial business. These include employee compensation
for salaries and related benefit costs, outsourced vendor contracted service and
technology fees, professional services, technological infrastructure and service
fees and other administrative expenses. Operating costs also include payments
made by the discontinued operations to Consumer Care 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, in prior years, the premium deficiency
reserve expense for expected future losses in certain markets is included in
operating costs.

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Restructuring Charges

Restructuring charges are comprised of contract termination costs and severance
costs as part of a workforce reduction in 2022 and impairment of long-lived
assets. The charges included within our discontinued operations are those
directly attributable to our decision to exit the Commercial business for the
2023 plan year.

Goodwill Impairment

Goodwill impairment within our discontinued operations is comprised of the
impairment of our Bright HealthCare - Commercial reporting unit, specifically
Commercial business, that was driven by our decision to exit the Commercial
markets beginning for the 2023 plan year.

Intangible Assets Impairment

Intangible assets impairment within our discontinued operations is comprised of
the impairment of intangible assets related to our TrueHealth New Mexico
("THNM") acquisition, that was driven by our decision to exit the Commercial
markets beginning for the 2023 plan year.

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, certain new variants have
emerged that appear more transmissible and more resistant to current vaccines.
Some individuals have also 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.

For the years ended December 31, 2022, 2021, and 2020 the impact of COVID-19
increased our medical costs by $36.4 million, $59.4 million, and $30.2 million
respectively.
Overall measures to contain the COVID-19 outbreak may remain in place for a
significant period of time, as new strains of COVID-19 that appear to be more
transmissible and may potentially evade vaccines have emerged. 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.

In October 2022, we announced that our business will be focused on delivering
affordable healthcare for aging and underserved populations in the largest
healthcare markets in the country and continuing to leverage our Fully Aligned
Care Model with external payor partners and affiliate care providers. We will
continue to build on the value-driven care model that we have been advancing
since the start of the company.

We have started implementing restructuring plans to adjust our costs to our more
focused business in order to achieve our 2023 gross margin and operating expense
targets. We will continue to take steps to adjust our expenses in-line with
milestones in the marketplace business over the course of the run-out period of
the exited markets.

As we move forward into 2023, we are focusing our business on our Consumer Care
care delivery business and our Medicare Advantage health plans in California. We
have a scaled Medicare Advantage business in California, the largest market for
seniors and underserved populations, and we have built a high performing Fully
Aligned Care Model with our Care Partners. In Florida and Texas, our Consumer
Care risk-bearing care delivery and provider affiliate management business
continues to deliver differentiated results. We expect to expand our footprint
over time serving the aging and
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underserved consumers in Medicare and the consumer marketplace, together with
our key health plan partners. We will also continue to grow our Direct
Contracting business in the new ACO Reach program, building on our 2022
performance.

While we wind down the marketplace business, we will remain focused on the
growth opportunities for our Bright HealthCare and Consumer Care businesses. We
believe both businesses are in attractive markets with strong tailwinds, where
we have differentiated offerings. We intend to manage each business to maximize
operating profitability in 2023, as well as working to manage corporate expenses
to maximize consolidated Adjusted EBITDA profitability.

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

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,

                                           2022                  2021       

2020

Bright HealthCare Consumers Served
Medicare Advantage                      125,000               117,000                62,000

Consumer Care Patients
Value-Based Care Consumers              530,000               170,000                21,000



Key Metrics

Bright HealthCare Consumers Served

Consumers served include Bright HealthCare individual lives served via MA plans
in markets across the country. We historically believed growth in the number of
consumers for both our Commercial plans and Medicare Advantage plans was a key
indicator of the performance of our Bright HealthCare business. However, given
Bright HealthCare's decision to exit the commercial marketplace for the 2023
plan year, we expect Commercial consumers to decline to zero, and we will focus
on growth in our Medicare Advantage consumers in California. The number of
consumers served also informs our management of the operational, clinical,
technological and administrative functional area needs that will require further
investment to support future consumer growth.

Value-Based Care Consumers

Value-based care consumers are consumers 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 Consumer Care managed medical groups. We believe growth in the
number of value-based care consumers is a key indicator of the performance of
our Consumer Care 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. While we
expect the number of value-based consumers Consumer Care supports in 2023 to
decline compared to 2022 due to Bright HealthCare's commercial market exits, we
expect external value-based payor contracts as well as the conversion of fee for
service patients into value-based patients, will increase the number of patients
managed in value-based arrangements over time.
                                        Year Ended December 31,
($ in thousands)                 2022                    2021             2020
Net Loss              $             (1,359,880)       (1,178,365)       (248,442)
Adjusted EBITDA (1)   $               (233,489)         (321,317)       (151,692)

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

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Non-GAAP Financial Measures

Adjusted EBITDA

We define Adjusted EBITDA as net loss excluding loss from discontinued
operations, interest expense, income taxes, depreciation and amortization, any
impairment of goodwill or intangible assets, adjusted for the impact of
acquisition and financing-related transaction costs, share-based compensation,
changes in the fair value of equity securities, changes in the fair value of
contingent consideration, contract termination costs and restructuring 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 consistent
basis by excluding items that we do not believe are indicative of our core
operating performance. Management believes Adjusted EBITDA is useful to
investors in highlighting trends in our operating performance, while other
measures can differ significantly depending on long-term strategic decisions
regarding capital structure, the tax jurisdictions in which we operate and
capital investments. Management uses Adjusted EBITDA to supplement GAAP measures
of performance in the evaluation of the effectiveness of our business
strategies, to make budgeting decisions, to establish discretionary annual
incentive compensation and to compare our performance against that of other peer
companies using similar measures. Management supplements GAAP results with
non-GAAP financial measures to provide a more complete understanding of the
factors and trends affecting the business than GAAP results alone.

Adjusted EBITDA is not a recognized term under GAAP and should not be considered
as an alternative to net income (loss) as a measure of financial performance or
cash provided by operating activities as a measure of liquidity, or any other
performance measure derived in accordance with GAAP. Additionally, this measure
is not intended to be a measure of free cash flow available for management's
discretionary use as we do not consider certain cash requirements such as
interest payments, tax payments and debt service requirements. The presentation
of this measure has limitations as an analytical tool and should not be
considered in isolation, or as a substitute for analysis of our results as
reported under GAAP. Because not all companies use identical calculations, the
presentation of this measure may not be comparable to other similarly titled
measures of other companies and can differ significantly from company to
company.


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

                                                                       Year Ended December 31,
(in thousands)                                             2022                  2021                 2020
Net loss                                              $ (1,359,880)         $ (1,178,365)         $ (248,442)
Loss from discontinued operations (a)                      721,915               855,255              87,220
EBITDA adjustments from continuing operations:
Interest expense                                            12,821                 7,230                   -
Income tax expense (benefit)                                 3,680               (26,521)             (9,161)
Depreciation and amortization                               50,430                35,049               8,289
Goodwill impairment                                         71,225                     -                   -
Intangible assets impairment                                42,611                     -                   -
Transaction costs (b)                                        1,661                 2,064               4,950
Share-based compensation expense (c)                       109,713                68,423               5,452
Change in fair value of equity securities (d)               80,231               (80,231)         $        -
Change in fair value of contingent consideration (e)           332                (4,221)                  -
Contract termination costs (f)                               1,241                     -                   -
Restructuring costs (g)                                     30,531                     -                   -
EBITDA adjustments from continuing operations              404,476                 1,793               9,530
Adjusted EBITDA                                       $   (233,489)         $   (321,317)         $ (151,692)



(a)Beginning in the fourth quarter of 2022, Adjusted EBITDA excludes the impact
of discontinued operations. The comparable period in 2021 has been recast to
exclude these impacts. Loss from discontinued operations represents losses
associated with the Commercial business segment that we exited at the end of
2022. The loss from discontinued operations includes over $180 million of
investment impairments, restructuring costs, goodwill and intangibles
impairments and other exit related costs for the twelve months ended December
31, 2022, respectively.
(b)Transaction costs include accounting, tax, valuation, consulting, legal and
investment banking fees directly relating to business combinations and certain
costs associated with our initial public offering. These costs can vary from
period to period and impact comparability, and we do not believe such
transaction costs reflect the ongoing performance of our business.

(c)Represents non-cash compensation expense related to stock option and
restricted stock unit award grants, which can vary from period to period based
on a number of factors, including the timing, quantity and grant date fair value
of the awards.
(d)Beginning in 2022, Adjusted EBITDA excludes the impact of changes in
unrealized gains and losses on equity securities. The comparable prior periods
have been recast to exclude changes in unrealized gains and losses on equity
securities.

(e)Represents the non-cash change in fair value of contingent consideration from
business combinations, which is remeasured at fair value each reporting period.
(f)Represents amounts paid for early termination of existing vendor contracts.
(g)Restructuring costs represent severance costs as part of a workforce
reduction in 2022 and impairment of certain long-lived assets relating to our
decision to exit the Commercial business for the 2023 plan year.
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Acquisitions

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 Consumer Care 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. Included in our discontinued operations,
this 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 Consumer Care 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 Consumer Care acquisition was completed
for the incremental financial benefits achievable through our Fully Aligned Care
Model, whereby Commercial, Medicare, and Medicaid consumers across multiple
payors are cared for under value-based arrangements with Centrum. This model
brings together the financing, distribution, and delivery of high-quality
healthcare.

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, 2022, 2021 and 2020.

(in thousands)                                                           Year Ended December 31,
Consolidated Statements of Income (loss) and                2022                    2021                   2020
operating data:
Revenue:
Premium revenue                                      $        1,764,949       $      1,390,330       $        487,905
Direct Contracting revenue                                      654,087                      -                      -
Service revenue                                                  48,013                 42,469                 18,514
Investment income (loss)                                       (55,019)                 80,234                  8,468
Total revenue                                                 2,412,030              1,513,033                514,887
Operating costs
Medical costs                                                 2,206,243              1,294,158                451,918
Operating costs                                                 632,030                527,453                225,063
Restructuring charges                                            31,739                      -                      -
Goodwill impairment                                              71,225                      -                      -
Intangibles impairment                                           42,611                      -                      -
Depreciation and amortization                                    50,430                 35,049                  8,289
Total operating costs                                         3,034,278              1,856,660                685,270
Operating loss                                                (622,248)              (343,627)              (170,383)
Interest expense                                                 12,821                  7,230                      -
Other income                                                      (784)                (1,226)                      -
Loss from continuing operations before income taxes           (634,285)              (349,631)              (170,383)
Income tax expense (benefit)                                      3,680               (26,521)                (9,161)
Net loss from continuing operations                           (637,965)              (323,110)              (161,222)
Loss from discontinued operations, net of tax (Note           (721,915)              (855,255)               (87,220)

4)

Net loss                                                    (1,359,880)            (1,178,365)              (248,442)
Net earnings from continuing operations attributable           (95,664)                (6,497)                      -
to noncontrolling interests
Series A preferred stock dividend accrued                      (37,889)                      -                      -
Series B preferred stock dividend accrued                       (1,798)                      -                      -
Net loss attributable to Bright Health               $      (1,495,231)       $    (1,184,862)       $      (248,442)
Group, Inc. common shareholders
Adjusted EBITDA                                      $        (233,489)       $      (321,317)       $      (151,692)
Operating Cost Ratio (1)                                      26.2  %                34.9  %                43.7  %


_______________________

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

2022 Compared to 2021

Total revenue increased by $899.0 million, or 59.4%, for the year ended
December 31, 2022 as compared to the same period in 2021. The increase is
largely attributable to our two DCEs aligned with our Consumer Care segment that
began participating in the DC Model effective January 1, 2022, which contributed
$654.1 million of the increase in total revenue. In addition, premium revenue
increased $374.6 million, or 26.9%, due to organic growth of our Bright
HealthCare business as well as a full year of CHP operations that was acquired
on April 1, 2021. Also contributing to the premium revenue increase was an
increase of over 360,000 value-based care consumers as well as organic increases
in consumers served by our Bright HealthCare business. The increases in premium
revenue and Direct Contracting revenue were partially offset by a reduction in
investment income driven by changes in the fair value of investments in equity
securities.

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Medical costs increased by $912.1 million, or 70.5%, for the year ended
December 31, 2022, as compared to the same period in 2021. Medical costs
incurred associated with beneficiaries aligned to our DCEs contributed to the
increase as well as organic growth in our Bright HealthCare business. In 2022,
we also had a full year of medical costs from CHP that was acquired on April 1,
2021.

Operating costs increased by $104.6 million, or 19.8%, for the year ended
December 31, 2022 as compared to the same period in 2021. The increase in
operating costs was primarily due to a $97.3 million increase in compensation
and fringe benefits inclusive of share-based compensation expense. This increase
is partially offset by the release of the $9.4 million premium deficiency
reserve in the year ended December 31, 2022 that was accrued in the year ended
December 31, 2021 for the then future expected losses in certain markets in 2022
in our Bright HealthCare segment.

Our operating cost ratio of 26.2% for the year ended December 31, 2022 improved
870 basis points as compared to the same period in 2021. The decrease was
primarily due to operating costs increasing at a slower rate than the increased
premium revenues earned due to consumer growth and participating in the DC
Model, as we gain leverage on our operating costs as we grow.

We recognized $31.7 million of restructuring costs for the year ended
December 31, 2022 for employee termination benefits, contract termination costs
and long-lived asset impairments incurred in relation to the actions we have
taken to restructure the Company's workforce and reduce expenses based on our
updated business model. There were no restructuring costs in the year ended
December 31, 2021.

We recognized $71.2 million of non-cash goodwill impairment for the year ended
December 31, 2022, which included $70.0 million in our Bright HealthCare
segment. We also recognized $42.6 million of non-cash intangible assets
impairment for the year ended December 31, 2022, which included impairments at
our Consumer Care segment. There were no impairments of goodwill or intangibles
in the year end December 31, 2021.

Depreciation and amortization increased by $15.4 million, or 43.9%, for the year
ended December 31, 2022 as compared to the same period in 2021. The increase is
primarily due to a full year of amortization expense from 2021 acquisitions in
the 2022 period compared to only portions of the 2021 period specifically the
acquisition of CHP on April 1, 2021 and Centrum on July 1, 2021. Additionally,
depreciation expense increased in 2022 due to depreciation related to
capitalized software projects completed in the past year.

Interest expense increased $5.6 million, or 77.3%, for the year ended
December 31, 2022 as compared to the same period in 2021 due to increased
borrowings on the credit agreement we entered into March 1, 2021.

Income tax expense was $3.7 million for the year ended December 31, 2022 as
compared to the $26.5 million income tax benefit for the year ended December 31,
2021. The impact from income taxes varies from the federal statutory rate of
21.0% due to state income taxes, changes in the valuation allowance for deferred
tax assets and adjustments for permanent differences. The expense for the year
ended December 31, 2022 largely relates to amortization of originating goodwill
from asset acquisitions and estimated state income taxes attributable to income
earned in separate filing states without state net operating loss carryforwards.
The overall tax benefit recognized during the year ended December 31, 2021
primarily relates to adjustments to the valuation allowance for federal and
state deferred tax assets, as well as the effect of deferred taxes recorded as
part of business combination accounting for the BND, Zipnosis, and CHP
acquisitions

2021 Compared to 2020

Total revenue increased by $1.0 billion, or 193.9%, for the year ended
December 31, 2021 as compared to the same period in 2020. The increase was
largely driven by an increase in our Medicare Advantage consumers of
approximately 55,000 consumer lives, or 88.7%, through both organic and
inorganic growth. The year ended December 31, 2021 also included $781.8 million
from the acquisitions of PMA, Zipnosis, CHP and Centrum and a full year of BND,
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 $842.2 million, or 186.4% 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

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Bright HealthCare business and inorganic growth attributable to the acquisitions
of PMA, CHP and Centrum, as well as a full year of BND. We also experienced an
increase in medical costs from COVID-19 during the year ended December 31, 2021.

Operating costs increased by $302.4 million, or 134.4%, for the year ended
December 31, 2021 as compared to the same period in 2020. The increase in
operating costs was primarily due to increased marketing and selling expenses
and increased compensation and benefit costs driven by an increase in employees
and an increase in share-based compensation costs.

Operating cost ratio of 34.9% for the year ended December 31, 2021 improved 880
basis points as compared to the same period in 2020. This was primarily due to
operating costs increasing at a slower rate than revenue increases as the
Company grew.

Depreciation and amortization increased by $26.8 million, or 322.8%, for the
year ended December 31, 2021 as compared to the same period in 2020. The
increase was primarily due to an increase in amortization expense resulting from
intangible assets acquired in the PMA, Zipnosis, CHP, and Centrum acquisitions,
for which there were no comparable amounts in 2020 as well as the full year of
amortization expense of the intangible assets acquired as part of the BND
acquisition on April 30, 2020.

Income tax benefit was $26.5 million and $9.2 million for the years ended
December 31, 2021 and 2020 respectively. The overall tax benefit recognized
during the year ended December 31, 2021 was primarily related to adjustments to
the valuation allowance for federal and state deferred tax assets, as well as
the effect of deferred taxes recorded as part of business combination accounting
for the BND, Zipnosis, and CHP acquisitions. The overall tax benefit recognized
during the year ended December 31, 2020 was primarily due to the tax impact of
goodwill and intangible assets acquired as part of the BND acquisition in 2020.

Bright HealthCare
(in thousands)                                                         Year Ended December 31,
Statements of income (loss) and operating data:           2022                  2021                  2020

Revenue:
Premium revenue                                            1,652,045             1,297,273               480,112
Investment income (loss)                                         410                  (80)                 8,468
Total revenue                                              1,652,455             1,297,193               488,580
Operating expenses
Medical costs                                              1,550,934             1,262,407               454,858
Operating costs                                              187,636               189,648                75,879
Goodwill impairment                                           70,017                     -                     -
Depreciation and amortization                                 17,702                14,245                 1,477
Total operating expenses                                   1,826,289             1,466,300               532,214
Operating loss                                       $     (173,834)       $     (169,107)       $      (43,634)
Medical Cost Ratio (MCR)                                     93.9  %               97.3  %              94.7  %



2022 Compared to 2021

Premium revenue increased by $355.3 million, or 27.4%, for the year ended
December 31, 2022 as compared to the same period in 2021. The increase was
driven by favorable premium rates and an increase in consumer lives of
approximately 15,000 year over year. Additionally, the increase is attributable
to a full year of revenue from our acquisition of CHP, which occurred on April
1, 2021

Medical costs increased by $288.5 million, or 22.9%, for the year ended
December 31, 2022 as compared to the same period in 2021. The impact of COVID-19
increased our medical costs $36.4 million and $59.4 million for the years ended
December 31, 2022 and 2021, respectively. The increase in medical costs was
primarily driven by an increase in members,
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partially offset by favorable medical cost rates. Additionally, the increase is
attributable to a full year of medical costs from our acquisition of CHP, which
occurred on April 1, 2021

Our MCR of 93.9% for the year ended December 31, 2022 decreased 340 basis points
as compared to the same period in 2021. Our California Medicare Advantage
operations achieved a MCR of 92.0%, excluding prior period claims; this metric
excludes the MA markets that we have exited as of December 31, 2022. Our MCR for
the year ended December 31, 2022 included a 220 basis point unfavorable impact
from COVID-19 related costs as compared to 460 basis point unfavorable impact
from COVID-19 included in our MCR for the year ended December 31, 2021.

Operating costs decreased by $2.0 million, or 1.1%, for the year ended
December 31, 2022 as compared to the same period in 2021. Operating costs
remained relatively flat year over year due to increases in costs as a result of
consumer growth and compensation and benefit costs that were offset by the
release of the PDR.

We recognized a $70.0 million non-cash impairment of goodwill during the year
ended December 31, 2022 which was primarily driven by an increase in the
discount rate due to higher interest rates and other market factors.

Depreciation and amortization increased by $3.5 million, or 24.3%, for the year
ended December 31, 2022 as compared to the same period in 2021. The increase was
primarily due to a full year of amortization expense of the intangible assets
acquired in the CHP acquisition that occurred on April 1, 2021.

2021 Compared to 2020

Premium 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 BND, which was
acquired on April 30, 2020. We also experienced volume increases due to organic
growth.

Medical costs increased by $807.5 million, or 177.5%, 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 $59.4 million and $30.2 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 the acquisition of CHP.

Our MCR of 97.3% for the year ended December 31, 2021 increased 260 basis points
as compared to the same period in 2020. Our MCR for the year ended December 31,
2021 included a 460 basis point unfavorable impact from COVID-19. Our MCR for
the year ended December 31, 2020 included a 630 basis point unfavorable impact
from COVID-19 costs. Our MCR for the year ended December 31, 2021, was also
impacted by an increase in medical costs from product mix as a result of a full
year of activity from BND and the acquisition of CHP.

Operating costs increased by $113.8 million, or 149.9%, for the year ended
December 31, 2021 as compared to the same period in 2020. The increase in
operating costs was primarily a result of higher compensation and benefit costs
driven by an increase in employees to support the growing business.
Additionally, operating costs increased from a full year of operating costs
related to BND and the CHP acquisition.

Depreciation and amortization increased by $12.8 million, or 864.5%, for the
year ended December 31, 2021 as compared to the same period in 2020. The
increase was primarily due to a full year of amortization expense of the
intangible assets acquired in the BND acquisition as well as nine months of
amortization expense of the intangible assets acquired in the CHP acquisition.

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Consumer Care
($ in thousands)                                                            Year Ended December 31,
Statements of income (loss) data:                           2022                      2021                      2020

Revenue:
Premium revenue                                     $          1,141,936       $           338,391       $            7,793
Direct Contracting revenue                                       654,087                         -                        -
Service revenue                                                   48,013                    42,469                   29,354
Investment income (loss)                                        (55,429)                    80,314                        -
Total revenue                                                  1,788,607                   461,174                   37,147
Operating expenses
Medical costs                                                  1,844,578                   432,318                        -
Operating costs                                                  191,702                   125,444                   43,959
Goodwill impairment                                                1,208                         -                        -
Intangible assets impairment                                      42,611                         -                        -
Depreciation and amortization                                     24,252                    18,333                    1,895
Total operating expenses                                       2,104,351                   576,095                   45,854
Operating loss                                      $          (315,744)       $         (114,921)       $          (8,707)



2022 Compared to 2021

Consumer Care premium revenue increased by $803.5 million, or 237.5%. for the
year ended December 31, 2022 as compared to the same period in 2021. The
increase in premium revenue is primarily due to the full risk transfer for a
portion of our commercial business in Florida and Texas to our Consumer Care
segment. Also contributing to the increase is the full year of revenue from
Centrum, acquired on July 1, 2021.

We began participating in the DC Model beginning in January 2022 through two
DCEs aligned with our Consumer Care business. Direct Contracting revenue was
$654.1 million for the year ended December 31, 2022. This revenue was
attributable to the alignment of beneficiaries to our DCE entities, which
numbered approximately 46,000 at December 31, 2022.

Service Revenue increased by $5.5 million, or 13.1%, for the year ended
December 31, 2022 as compared to the same period in 2021. The acquisition of
Zipnosis on March 31, 2021 contributed to the year-over-year increase in service
revenue.

We had investment loss of $55.4 million for the year ended December 31, 2022 as
compared to investment income of $80.3 million for the year ended December 31,
2021. The investment income and loss in both periods was due to gains and losses
on equity securities. As of December 31, 2022 we hold no equity securities, so
we do not expect investment income or losses within the Consumer Care segment
going forward.

Medical costs increased by $1.4 billion, or 326.7%, for the year ended
December 31, 2022 as compared to the same period in 2021. The increase in
medical costs was primarily driven by an increase in patient lives as a result
of the Centrum acquisition, new market expansion and our participation in Direct
Contracting beginning in January 2022.

Operating costs increased $66.3 million, or 52.8%, for the year ended
December 31, 2022 as compared to the same period in 2021. The increase in
operating costs was primarily due to higher compensation and benefit costs as a
result of more employees and outsourced vendor fees in support of consumer
growth. In addition, the year ended December 31, 2022 included two additional
quarters of costs from Centrum as a result of the acquisition on July 1, 2021.

We recognized $42.6 million of intangible assets impairment during the year
ended December 31, 2022, which related to a full impairment of Centrum's
reacquired contract with Bright HealthCare Florida as a result of our decision
to no longer

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offer Commercial products for the 2023 plan year. We also recognized a
$1.2 million goodwill disposition during the year ended December 31, 2022.

Depreciation and amortization increased $5.9 million, or 32.3%, for the year
ended December 31, 2022 as compared to the same period in 2021. The increase was
primarily due to the full year of amortization expense resulting from intangible
assets acquired as part of the Centrum acquisition, which occurred on July 1,
2021.
2021 Compared to 2020

Premium revenue increased by $330.6 million, or 4,242.2%, 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 of
premium revenue from the acquisitions of PMA and Centrum, as well as an organic
increase in patient lives.

Service revenue increased by $13.1 million, or 44.7%, for the year ended
December 31, 2021 as compared to the same period in 2020. The acquisitions of
PMA, Zipnosis and Centrum contributed $23.7 million to the year-over-year
increase in service revenue.

Investment income was $80.3 million for the year ended December 31, 2021 due to
unrealized gains on equity securities acquired in 2021. Our Consumer Care
business 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.

Operating costs increased by $81.5 million, or 185.4%, for the year ended
December 31, 2021 as compared to the same period in 2020. The increase was
primarily due to higher compensation and benefit costs as a result of additional
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 $16.4 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.

Discontinued Operations
($ in thousands)                                     Year Ended December 

31,

Statements of income (loss) data:             2022                  2021             2020

Revenue:
Premium revenue                     $              3,998,622    $   2,512,384    $    692,433
Service revenue                                          147              232               -
Investment income (loss)                            (41,221)            3,740               -
Total revenue                                      3,957,548        2,516,356         692,433
Operating expenses
Medical costs                                      3,732,755        2,659,516         595,382
Operating costs                                      883,318          710,934         184,271
Restructuring costs                                   50,704                -               -
Goodwill impairment                                    4,147                -               -
Intangible assets impairment                           6,720                -               -
Depreciation and amortization                            145              435               -
Total operating expenses                           4,677,789        3,370,885         779,653
Operating loss                      $              (720,241)    $   (854,529)    $   (87,220)
Medical Cost Ratio (MCR)                             93.4  %       105.9  %         86.0  %



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In October 2022, we announced that we will no longer offer commercial plans
through Bright HealthCare in 2023. As a result, we exited the Commercial
marketplace effective December 31, 2022. We determined this exit represented a
strategic shift that will have a material impact on our business and financial
results that requires presentation as discontinued operations. The discontinued
operations presentation has been retrospectively applied to all periods
presented.

2022 Compared to 2021

Premium revenue increased by $1.5 billion, or 59.2%, for the year ended
December 31, 2022 as compared to the same period in 2021. The increase in
revenue, was driven by an increase in consumer lives of approximately 410,000
due to organic growth and entry into new markets in 2022 - particularly entry
into Texas. The increase was partially offset by increases in risk adjustment of
$1.1 billion, inclusive of a $93.1 million increase in risk adjustment based on
final settlement of the 2021 risk adjustment payable.

Service revenue was immaterial to the Bright HealthCare - Commercial segment for
the years ended December 31, 2022 and 2021.

Investment income for the year ended December 31, 2022 was a loss of $41.2
million compared to income of $3.7 million due to a $67.7 million impairment of
our available-for-sale securities portfolio resulting from our conclusion, as of
December 31, 2022, that it was more likely than not that we would have to sell
some of the securities before recovering the amortized cost basis due to our
decision to exit the commercial business. This impairment is related to the
decrease in the fair value of debt securities primarily driven by an increase in
market interest rates since the time the securities were purchased.

Medical costs increased by $1.1 billion, or 40.4%, for the year ended
December 31, 2022 as compared to the same period in 2021. For the years ended
December 31, 2022 and 2021, the impact of COVID-19 increased our medical costs
$81.7 million and $148.5 million, respectively. The remaining increase is due to
an increase in consumers, partially offset by favorable medical cost rates.

Our MCR of 93.4% for the year ended December 31, 2022 decreased 1,250 basis
points compared to the same period in 2021. Our MCR for the year ended December
31, 2022 included a 200 basis point unfavorable impact from COVID-19 costs. Our
MCR for the year ended December 31, 2021 included a 590 basis point unfavorable
impact from COVID-19 costs. The decrease in MCR in 2022 compared to 2021, was
primarily due to improved utilization and care management as well as the risk
transfer agreement with our Consumer Care segment for the Florida and Texas
markets.

Operating costs increased by $172.4 million, or 24.2%, for the year ended
December 31, 2022 as compared to the same period in 2021. The increase in
operating costs was driven by increases in operating costs from new market entry
and increased marketing and selling expenses, partially offset by a net release
of $93.4 million of PDR.

We recognized $50.7 million of restructuring costs for the year ended
December 31, 2022 for employee termination benefits, contract termination costs
and long-lived asset impairments incurred in relation to the actions we have
taken to restructure the Company's workforce and reduce expenses based on our
updated business model. There were no restructuring costs in the year ended
December 31, 2021.

We recognized non-cash impairments of goodwill and intangible assets of $4.1
million and $6.7 million, respectively, for the year ended December 31, 2022, as
a result of our decision to exit the Commercial market for the 2023 plan year.

Depreciation and amortization was immaterial to the Bright HealthCare -
Commercial segment for the years ended December 31, 2022 and 2021.

2021 Compared to 2020

Premium revenue increased $1.8 billion, or 262.8%, for the year ended December
31, 2022 compared to the same period in 2021. 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.

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Medical costs increased by $2.1 billion, or 346.7%, 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 $148.5
million and $16.4 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 105.9% for the year ended December 31, 2021 increased 1,990 basis
points as compared to the same period in 2020. Our MCR for the year ended
December 31, 2021 included a 590 basis point unfavorable impact from COVID-19
related costs as compared to a 240 basis point unfavorable impact from COVID-19
related costs in our MCR for the year ended December 31, 2020. Our MCR for the
year ended December 31, 2021, was also impacted by an increase in risk
adjustment payable.

Operating costs increased by $526.7 million, or 285.8%, 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. In addition, the year ended December 31, 2021 also includes $93.4
million of premium deficiency reserve expense due to expected future losses in
certain markets in 2022, as well as increased operating costs from the
acquisition of THNM.

Depreciation and amortization was immaterial to the Bright HealthCare -
Commercial segment for the years ended December 31, 2021 and 2020.

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 sales of our common stock.

We believe that existing cash on hand, investments and amounts available under
our Credit Agreement described below may not be sufficient to satisfy our
anticipated cash requirements for the next twelve months for items such as risk
adjustment payable associated with the IFP business we are exiting, medical
costs payable, accounts payable and other current liabilities. We are evaluating
additional capital sources through other strategic opportunities to ensure we
have the liquidity to satisfy these obligations. The Company is actively engaged
with the Board of Directors and outside advisors to evaluate additional
financing. However, the Company may not be able to obtain financing on
acceptable terms, as any potential financing will be subject to market
conditions that are not within the Company's control.

As of December 31, 2022, we had $1.9 billion in cash and cash equivalents,
$290.9 million in short-term investments and $849.1 million long-term
investments on the Consolidated Balance Sheet. 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. Our cash and investments
are held at non-regulated entities and regulated insurance entities.

As of December 31, 2022, we had non-regulated cash and cash equivalents of
$275.5 million and short-term investments of $1.6 million. 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, 2022, we had regulated insurance entity cash and cash
equivalents of $1.7 billion, short-term investments of $289.3 million and
long-term investments of $849.1 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.

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 no dividends
from the regulated insurance entities to the parent company during the year
ended December 31, 2022, and declared two dividends during 2021. 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, 2022 and 2021,
$42.1 million and $398.5 million, respectively, was held in risk-based capital
and
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surplus at regulated insurance legal entities. We are out of compliance with the
minimum levels for certain of our regulated insurance legal entities.

Indebtedness

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, 2022, we had $303.9 million borrowed on the Credit
Agreement at an effective annual interest rate of 8.41% as well as $46.1 million
of outstanding, undrawn letters of credit under the Credit Agreement, which
reduce the amount available to borrow. Further to the undrawn letters of credit
under the Credit Agreement, we had an additional $7.5 million of unused letters
of credit as of December 31, 2022.

On November 8, 2022, we executed an amendment to the Credit Agreement pursuant
to which certain collateral related defaults were waived and, in addition, it
was agreed that we would (i) not be required to test our debt to capitalization
ratio covenant during and including the four quarter test period ending
September 30, 2022 through and including the four quarter test period ending
September 30, 2023, (ii) be required to maintain a minimum liquidity of
$200.0 million from November 8, 2022 through and including September 30, 2023
and (iii) be required to maintain a minimum liquidity of $150.0 million after
September 30, 2023.

On March 1, 2023, the Company disclosed that that during the First Quarter of
2023, the Company breached the minimum liquidity covenant of the Credit
Agreement. The Company entered into a limited waiver and consent (the "Waiver")
under the Credit Agreement, which, among other matters, provides for a temporary
waiver for the period from January 25, 2023 through April 30, 2023 (the "Waiver
Period") of compliance with the minimum liquidity covenant set forth in Section
11.12.2 of the Credit Agreement. During the Waiver Period, the Company will be
subject to a minimum liquidity covenant of not less than $75 million until March
3, 2023, and not less than $85 million thereafter until the end of the Waiver
Period. In addition, during the Waiver Period, the Company will not have access
to certain negative covenant baskets and will be subject to additional cash-flow
and cash balance reporting requirements. Any non-compliance with the covenants
under the Credit Agreement or the Waiver may result in the obligations under the
Credit Agreement being accelerated.

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.

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On October 10, 2022, we issued 175,000 shares of the Company's Series B
Convertible Perpetual Preferred Stock, par value $0.0001 per share, for an
aggregate purchase price of $175.0 million.

Cash Flows

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

                                                                    Year Ended December 31,
(in thousands)                                            2022                 2021                2020

Net cash provided by (used in) operating activities $ 234,466 $

    82,059          $ (57,238)
Net cash used in investing activities                   (429,723)            (552,892)          (689,742)
Net cash provided by financing activities              1,066,368            1,043,641            712,441

Net increase (decrease) in cash and cash equivalents $ 871,111 $

   572,808          $ (34,539)
Cash and cash equivalents at beginning of year         1,061,179              488,371            522,910
Cash and cash equivalents at end of year             $ 1,932,290          $ 

1,061,179 $ 488,371

Operating Activities

During the year ended December 31, 2022, cash provided by operating activities
increased by $152.4 million as compared to the same period in 2021. This was
primarily driven by an increase of our risk adjustment payable of $270.6 million
as compared to 2021 as well as a $121.6 million year over year reduction in cash
used for the purchase of other current assets. The increases were partially
offset by more timely payment of our medical cost liabilities resulting in a
reduction of cash generated from medical costs payable and an increase in our
net loss.

During the year ended December 31, 2021, net cash provided by operating
activities was $82.1 million as compared to $57.2 million cash used in 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 BND and the acquisition of CHP.
These increases were partially offset by an increase in our net loss.

Investing Activities

During the year ended December 31, 2022, net cash used in investing activities
decreased by $123.2 million as compared to the same period in 2021. The decrease
was primarily attributable to a decrease in cash used in acquisitions partially
offset by an increase in the cash used in purchases of investments.

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 which was partially
offset by an increase in cash used for acquisitions.

Financing Activities

During the year ended December 31, 2022, net cash provided by financing
activities increased by $22.7 million as compared to the same period in 2021.
The increase was due to $920.4 million in preferred stock financing during 2022
as compared to $887.3 million in proceeds from our IPO in 2021.

During the year ended December 31, 2021, net cash provided by financing
activities increased by $331.2 million. 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.
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                   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
eighteen to twenty-four 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
2022, 2021, and 2020 included unfavorable medical cost development related to
prior years of $7.5 million, $3.5 million and $6.9 million, respectively.
Depending on the healthcare professional and type of service, the typical
billing lag for services can be at least 90 days from the date of service.

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
(member) 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 measures the percentage of paid claims
completion relative to an estimate of the total expected ultimate claims at a
given point in time for medical services incurred in a given month. Completion
factors are the most significant assumptions used in developing our estimate of
medical costs payable. For periods prior to the three most recent months,
completion factors are typically more complete and deemed credible for reliance
in estimating unpaid medical claims. For the most recent three months, the
completion factors are deemed less credible for reliance, and estimates of
incurred claims are derived from prior incurred medical PMPM claims experience
and adjusted as appropriate for other considerations such as seasonality, to
arrive at forecasted incurred PMPM medical costs to generate estimates of
ultimate incurred claims for the most recent three months. In certain instances,
when there is unusual disruption to claims processing, such as for CHP and BND
during 2022, it may be warranted to apply PMPM overrides to completion factors
exceeding the 75% threshold when it appears they may be overstating completion
when a review of the claim processing indicates a backlog has been building, and
the completion factors may be overstating completion.

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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, 2022:

Completion Factors
(Decrease) Increase in Factors       Increase (Decrease) in Medical Costs Payable
                                                    (in thousands)
(3.00)%                             $                                      22,218
(2.00)%                                                                    14,661
(1.00)%                                                                     7,256
1.00%                                                                      (7,113)
2.00%                                                                     (14,086)
3.00%                                                                     (20,924)



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, 2022; however, actual claim payments may differ from established
estimates as discussed above.

Assuming a hypothetical 1% difference between our December 31, 2022 estimates of
continuing operations medical costs payable and actual continuing operations
medical costs payable net earnings would have increased or decreased by
approximately $4.1 million.

See Note 2 and Note 10 in the Notes to Consolidated Financial Statements for
additional detail on our medical costs payable.

Risk Adjustment

The risk adjustment programs in our MA line of business in our continuing
operations and our IFP line of business in our discontinued operations, are
designed to mitigate the potential impact of adverse selection and provide
stability for health insurers.

Continuing operations: 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. As of December 31, 2022 the MA risk adjustment receivable was $1.2
million.

Discontinued operations: 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. As of December 31,
2022 the IFP risk adjustment payable was $1.9 billion.

For IFP, 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.

Goodwill

Historically, 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
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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 fair value of the reporting unit is
less than its carrying value, we recognize an impairment equal to the difference
between the carrying value of the reporting unit and its calculated fair value.

For our two reporting units within our continuing operations, Bright HealthCare
and Consumer Care, we estimate the fair values of our reporting units using a
combination of discounted cash flows and comparable market multiples. For the
one reporting unit within our discontinued operations, Bright HealthCare -
Commercial, we estimate the fair value of the reporting unit using discounted
cash flows. Our estimation methodology includes 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.

We determined that our decision to exit the Commercial markets and the decrease
in our enterprise market capitalization due to a decrease in the price of our
common stock, represented events that indicated the carrying values of our
reporting units may not be recoverable. As such, we performed an interim
impairment test as of September 30, 2022. We estimated 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. As a result of our interim impairment test, we recognized a
non-cash impairment loss of $70.0 million in our Bright HealthCare reporting
unit. The impairment of our Bright HealthCare reporting unit was primarily
driven by an increase in the discount rate, which was impacted by higher
interest rates and other market factors. We estimated the fair value of our, now
discontinued, Bright HealthCare - Commercial reporting unit using an adjusted
balance sheet approach as a result of our decision to exit the Commercial
business for the 2023 plan year. We recognized a $4.1 million non-cash
impairment loss related to our Bright HealthCare - Commercial reporting unit,
which represented all of the goodwill associated with the Bright HealthCare -
Commercial reporting unit.

Given the proximity of our interim impairment measurement date (last day of our
fiscal third quarter - September 30, 2022) to our annual goodwill impairment
measurement date (first day of our fiscal fourth quarter - October 1, 2022), we
performed a qualitative assessment to determine whether it was more likely than
not that the fair value of any of our reporting units was less than the carrying
value. As material changes in the business that occurred during the valuation
procedures but subsequent to our interim impairment measurement date were taken
into consideration during our interim impairment assessment, we concluded that
there would be no reasonable expectation of changes in estimates or the
reporting unit fair values and carrying values between our interim impairment
and annual impairment measurement dates.

As of December 31, 2022, we recognized a $1.2 million goodwill disposition
related to our Consumer Care reporting unit. Additionally, we determined that
the sustained decline in our stock price triggered a qualitative assessment of
our goodwill to determine if it was more likely than not that the fair value of
our reporting units were less than their respective carrying values. Through our
assessment of our reporting units, we concluded that it was not more likely than
not that the fair value of our reporting units were less than their respective
carrying values as of December 31, 2022. We will continue to closely monitor the
operational performance of our reporting units as it relates to goodwill
impairment.

                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.

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