Gap-Filler Distributor Pays More Commissions

A new short-term health rule took effect April 1

Consumers can buy short-term health insurance outside the open enrollment period without qualifying for a special enrollment period. (Image: Thinkstock) Consumers can buy short-term health insurance outside the open enrollment period without qualifying for a special enrollment period. (Image: Thinkstock)

Health Insurance Innovations Inc. produced strong sales and revenue growth in the first quarter, in spite of the approach of new federal regulations meant to curb sales of one of its main products.

(Related: HealthPocket Asks CMS for Short-Term Health Help)

The Tampa, Florida-based company distributes short-term health insurance, hospital indemnity insurance, and other health insurance products that are not classified as individual major medical coverage and are not directly affected by Affordable Care Act major medical rules.

The company reported $8.5 million in net income for the quarter on $56 million in revenue, up from $2.3 million in net income on $42 million in revenue for the first quarter of 2016.

Commission payments to outside agents and brokers increased 21%, to $31 million.

Because revenue grew faster than commission obligations, the share of revenue going to commissions fell to 56%, from 61% in the year-earlier quarter.

Health Insurance Innovations combines policy counts for short-term health policies and hospital indemnity policies. The total number of policies in force in that combined category increased to 174,000 in the first quarter, from 115,000 a year earlier.

In the past, short-term health insurance coverage issuers could provide coverage and continuation coverage with total terms lasting up to almost a year in most states.

Under President Barack Obama, the Centers for Medicare & Medicaid Services completed work on final regulations that require an issuer to limit the duration of short-term health insurance it provides for a consumer to three months. The regulations took effect April 1.

The company has tried to prepare for that change by adding more hospital indemnity insurance products, which are not affected by the new three-month duration limit, company executives said during a conference call with securities analysts.

The company continues to benefit from a key feature of the ACA individual major medical risk control system.

Insurers now try to persuade consumers to pay premiums while they are healthy, and not to wait to pay for coverage until they get sick, by letting consumers buy coverage only during a limited open enrollment period. At other times of the year, consumers must show they qualify for a special enrollment period before they can buy major medical coverage.

Because the products Health Insurance Innovations distributes are not major medical coverage, they are not affected by the open enrollment period system. That means the company can sell its products year-round.

--- Read Short-Term Health Distributor Gets New Chairman, New CEO on ThinkAdvisor.

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