Health Insurance Innovations Inc. is trying to pay for expanding its short-term medical insurance distribution business by selling stock to the public.
This is a great time to be selling short-term medical insurance business, because the Patient Protection and Affordable Care Act (PPACA) could greatly expand the market for individual medical insurance, and many major PPACA provisions exempt short-term medical insurance, Health Insurance Innovations says in a registration statement filed with the U.S. Securities and Exchange Commission (SEC).
Short-term medical policies likely will be free from the PPACA underwriting restrictions and medical loss ratio rules that will apply to major medical policies, “allowing us to offer attractive distributor commission rates while providing affordable products for individuals,” the company says.
Health Insurance Innovations has said it intends to sell two types of shares: Class A shares, which would go to members of the public, and Class B shares, which would be controlled by Kosloske. The Class B shares would have effective control over all matters requiring shareholder approval, the company says.
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would trade on the Nasdaq Global Market under the symbol HIIQ.
The top managers of the planned $86 million initial public offering (IPO) are Credit Suisse Securities (USA), Citigroup Global Markets and Merrill Lynch, Pierce, Fenner & Smith.
Raymond James Financial Inc. will be the co-manager.
Michael Kosloske, the president of the Health Insurance Innovations, has been with that company since March 2007. Before that, he was the founder and owner of Health Plan Administrators Inc., a TPA he founded in 1987.
Kosloske has a bachelor’s degree in risk management and insurance from Florida State University.
In the registration statement, the company notes that it accepts no underwriting risk.
The company acts solely as a distributor for insurers such as Starr Indemnity & Liability Company, Companion Life, U.S. Fire, ING, Markel and CIGNA.
Starr accounted for 49 percent of the company’s premium equivalents for the first 9 months of the year, and U.S. Fire accounted for 26 percent, the company says.
Health Insurance Innovations works with an independent distribution network that includes 32 agent call centers and 248 wholesalers, the company says.
Health Insurance Innovations is reporting $2.6 million in net income for the first three quarters of 2012 on $30 million in revenue, up from $1.8 million in net income on $22 million in revenue for the comparable period in 2011.