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GoHealth, a Web-Based Medicare Plan Broker, Shows Its Financials

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A web-based health insurance broker is trying to turn itself into a publicly traded company — and giving the world a peek at how its revenue works.

The web broker, GoHealth, aims to use an initial public offering (IPO) of stock to help the partners who now own the company cash out, and to raise money for general corporate purposes.

If all goes well, the 19-year-old, Chicago-based company could end up getting about $705 million in extra cash.


Here are seven more things to know about the IPO, based on offering documents the company has filed with the U.S. Securities and Exchange Commission.

1. The Focus

The company sells individual and family major medical insurance, and related products, such as hospital indemnity insurance.

But it’s emphasizing that it’s now focusing on selling Medicare plans, and that Medicare plan sales accounted for about 80% of revenue in 2019, up from about 50% in 2018.

The company is also emphasizing its interest in displacing traditional insurance agents.

“The insurance distribution incumbents, such as field-based and carrier-employed agents, offered neither the broad choice of health insurance plans we are able to offer nor the unbiased support in health insurance plan selection based on the years of consumer shopping data we have gathered and the sophisticated models we have developed to match health insurance plans to consumers,” the company says in the IPO registration statement.

2. The Company

As of March 31, GoHealth had 1,857 full-time employees, including 781 agents, and no part-time employees.

The company had 47 employees in Slovakia. The rest were in the United States.

The company said it hires more people to help with the Medicare annual enrollment period surge.

The main Medicare Advantage plan annual enrollment period runs from Oct. 15 through Dec. 7.

In addition to the main office in Chicago, and a second office in Chicago, the company has offices in Charlotte, North Carolina; Lindon, Utah; and Slovakia.

3. The Financials

GoHealth reported a net loss of $57 million for 2019 on $231 million in revenue, compared with $28 million in net income on 226 million in revenue for 2018.

Commission revenue increased to $176 million, from $144 million.

For the first quarter of 2020, GoHealth is reporting a $937,000 net loss on $141 million in revenue, compared with $5 million in net income on $69 million in revenue for the first quarter of 2019.

The company has arranged for about $467 in loans and borrowing capacity since September 2019. As of March 31, it owed lenders $415.5 million. It had $30 million of borrowing capacity available in a revolving credit facility.

The company submitted 132,014 applications for Medicare plans in the first quarter, up from 43,283 in the year-earlier quarter.

About 124,000 applications submitted were for Medicare Advantage plans; 4,483 were for Medicare supplement insurance (Medigap) policies; and 3,292 were for Medicare Part D prescription drug plans.

4. Commissions

GoHealth assigns each customer a lifetime value, based on how much revenue the customer relationship might produce. That’s based partly on estimates of how long a customer will keep coverage, and partly on commission levels.

For 2019, here was the estimated lifetime value for three types of products. compared with the 2018 lifetime value estimate:

  • Medicare Advantage: $978 ($1,024)
  • Medigap: $957 ($944)
  • Medicare Part D drug coverage: $206 ($213)

5. Carrier Relationships

GoHealth runs its own brokerage operations, and it also helps carriers sell their own products.

The main Medicare Advantage annual enrollment period, or selling season, runs from Oct. 15 through Dec. 7.

During the fourth quarter of 2019, which includes the most recent Medicare annual enrollment period, carriers owned by Humana Inc. accounted for 46% of GoHealth’s revenue, and carriers owned by Anthem Inc. accounted for 22% of the company’s revenue.

For all of 2018, Humana accounted for 25% of GoHealth’s revenue, and Anthem accounted for 8% of the company’s revenue.

Carriers owned by UnitedHealth Group Inc. accounted for 27% of GoHealth’s non-Medicare revenue in 2019.

6. Risk Factors

GoHealth notes that it faces a wide range of risk factors, including COVID-19.

The company shifted 99% of its agents to working at home in three days.

Since the shift happened, sales per agent and total sales have been up, the company says.

GoHealth also talks about a risk that may be of interest to other agents and brokers: its reliance on insurers to prepare accurate commission reports, and to send the reports out in a timely manner.

“We use carriers’ commission reports to calculate our revenue, prepare our financial reports, projections, and budgets and direct our marketing and other operating efforts,” GoHealth says in the registration statement. “It is often difficult for us to independently determine whether carriers are reporting all commissions due to us, primarily because the majority of the purchasers of our insurance products who terminate their policies do so by discontinuing their premium payments to the carrier instead of informing us of the cancellation. For example, there have been instances where we have determined that policy cancellation data reported to us by a carrier has not been accurate. ”

Commission reporting problems could hurt the accuracy of GoHealth’s own financial reports and hurt the company’s financial condition, the company says.

7. The Offering

Originally, in a preliminary registration statement filed with the SEC in June, GoHealth suggested that it might raise about $100 million, have its stock trade on Nasdaq, and adopt the stock symbol “GHTH.”

The company now says it expects to have its stock trade on Nasdaq under the symbol “GOCO.”

The company intends to sell 39.5 million shares of Class A common stock, and it expects the shares to sell for an IPO price of $18 to $20.

If GoHealth is right about the price, the total value of the offering could range from $711 million to $790 million.

If the total value of the offering is at the middle of that range, or $750.5 million, GoHealth would pay about $45 million in offering costs and keep about $705 million.

The deal underwriters could add another $107 million to $119 million to the total deal value, by exercising an option to buy extra GoHealth shares for themselves.

Companies and individuals that already have stakes in GoHealth would come out of the IPO with at least 72.6% of the common stock voting power.

Goldman Sachs & Co. LLC leads the list of underwriters. BoA Securities and Morgan Stanley are also at the top of the underwriter list.

— Read Lemonade Files for IPO, Says It May Sell Life Insuranceon ThinkAdvisor.

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