Health Insurance Innovations doubles 2016 commission spending

A company that sells health insurance products outside the reach of the Affordable Care Act is paying a lot more compensation to outside distributors.

Health Insurance Innovations Inc. says it spent $108 million on third-party commissions for all of 2016. That was about 100 percent higher than the $54 million third-party commission spending total for 2015.

The Tampa, Florida-based company hopes to cut the share of revenue going to commissions as it makes more sales through its own web-based store, AgileHealthInsurance.com. But Gavin Southwell, the company's chief executive officer, said today during a conference call with securities analysts that he sees plenty of room for revenue to grow.

"We've got the potential for some favorable tailwinds," Southwell said, suggesting that the new atmosphere in Washington could be good for Health Insurance Innovations.

Health Insurance Innovations distributes short-term medical insurance and hospital indemnity insurance for insurance companies. It also distributes what it classifies as supplemental insurance products, such as cancer insurance, vision plans, critical illness insurance plans and life insurance.

The company reported a net loss of about $200,000 for the latest quarter on $51 million in revenue, compared with a net profit of $200,000 on $34 million for the fourth quarter of 2015, because of costs associated with the departure of two top executives.

But the company took in 85,300 applications for short-term medical policies and hospital indemnity policies in the fourth quarter, 23 percent more than it received during the fourth quarter of 2015.

The number of applications for supplemental policies increased 11 percent, to 93,600.

Customers seem to be keeping their policies in force longer, because the number of short-term medical and hospital indemnity policies in force on Dec. 31 increased 58 percent between the end of 2015 and the end of 2016, to 133,600.

Gavin Southwell says investments in flexible computer systems have paid off. (Photo: Thinkstock)

Scalable systems

Traditionally, insurers have thought of short-term medical policies as being health insurance policies designed to stay in force less than 12 months.

Regulators have treated both short-term medical and hospital indemnity insurance "excepted benefits," or products exempt from the benefits mandates and underwriting rules that apply to major medical coverage.

Since key ACA individual major medical rules took effect in January 2014, the products' excepted benefits status has given them a major sales boost.

The ACA now prohibits issuers of individual major medical coverage from thinking about whether applicants have cancer or need liver transplants when selling them coverage, or deciding how much the coverage should cost.

Regulators and insurers have designed an "open enrollment period" system, or limits when consumers have an easy time buying individual major medical coverage, to frighten health people away from seeing the ban on medical underwriting as an invitation to wait until they get sick to pay for coverage.

Insurers want healthy consumers to understand that, if they get hurt or sick outside the open enrollment period, which has been running from Nov. 1 through Jan. 31, they may have no way to buy major medical coverage until the next open enrollment period. To buy individual major medical coverage outside the open enrollment period, a consumer must qualify for a special enrollment period.

Issuers of most of the products Health Insurance Innovations sells can still use medical underwriting, if they want, and the issuers can sell all of the products outside the individual major medical open enrollment period.

Since Feb. 1, Health Insurance Innovations and its agents have been able to sell short-term medical insurance and indemnity medical insurance without worrying about substantial competition from individual major medical coverage. Consumers who want individual major medical coverage must show they qualify for a SEP.

The young, healthy consumers who can qualify for short-term medical insurance often find that the short-term medical coverage may come with a relatively low benefits cap, such as $100,000, but that the deductible is much lower than the deductible for major medical coverage, the provider network is bigger, and the monthly premium is lower.

Health insurers see competition from short-term medical insurance as a potential threat to the stability of the individual major medical risk pool. The Obama administration completed work on regulations that could limit an insurer's ability to sell short-term medical policies that will stay in effect more than three months.

Health Insurance Innovations is hoping the Trump administration will be friendlier.

Southwell said the company believes it's well-prepared for any changes, because it invested in 2015 in flexible technology systems.

The company can support much higher levels of business without adding many people or systems, and it can add new products to its systems quickly, Southwell said.

Sales growth could also improve Health Insurance Innovation's profit margins, by increasing the company's ability to negotiate for better deals with insurers, Southwell said.

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