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