May 23, 2019
Michael D. Hershberger
Chief Financial Officer, Secretary, and Treasurer
Health Insurance Innovations, Inc.
15438 N. Florida Avenue
Suite 201
Tampa, Florida 33613
Re: Health Insurance Innovations, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2018
Filed March 14, 2019 and Amended May 7, 2019
Form 10-Q for the Quarterly Period Ended March 31, 2019
Filed May 7, 2019
File No. 001-35811
Dear Mr. Hershberger:
We have reviewed your filings and have the following comments. In some
of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within 10 business days by providing
the requested
information or advise us as soon as possible when you will respond. If you do
not believe our
comments apply to your facts and circumstances, please tell us why in your
response.
After reviewing your response to these comments, we may have additional
comments.
Form 10-K for the Fiscal Year Ended December 31, 2018
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Business Metrics, page 34
1. You characterize "premium equivalents" as representing your "total
collections, including
the combination of premiums, fees for discount benefit plans, enrollment
fees, and third-
party commissions and referral fees." It is clear that the revenue you
recognized after the
adoption of ASC 606 includes variable consideration in the form of
future payments to be
made by your members and excludes the portion related to unrecognized
member
management performance obligation. Please tell us why it is appropriate
to characterize
premium equivalents as representing your "total collections" when you
apparently include
significant uncollected amounts related to the sales and marketing
services performance
Michael D. Hershberger
Health Insurance Innovations, Inc.
May 23, 2019
Page 2
obligations net of the deferal related to the unrecognized member
management
performance obligation. In this regard, we note no reconciling item for
this net uncollected
amount in your reconciliation of premium equivalents to revenues on page
34.
2. Although you identify "expected duration units" as being an important
indicator of your
expected revenues, you do not describe the metric. It appears from
discussion during your
earnings conference call for the fourth quarter of 2018 that this metric
represents the
number of total months you expect to collect premium equivalents from
new members
enrolled during the period. Please address the following :
Define for us an "expected duration unit." Confirm whether our
understanding of
these units is correct.
Tell us why this metric is an important indicator of your expected
revenues when you
disclose that approximately 95% of your revenues relate to a point in
time recognition
and only about 5% is recognized over time.
Tell us how you intend to disclose significant changes in your
estimate of expected
duration units from prior periods.
3. Although you identify "constrained lifetime value per submitted
application" (LVSA) as a
key measure, you do not explain what it is or how it is calculated.
Please address the
following :
Tell us how you compute the revenue amounts per submitted application
disclosed in
the table on page 36. In your response, tell us whether the revenue
amount presented
represents the total of both performance obligations that you expect
to receive
consistent with your constrained policy duration estimates.
Tell us why the number of submitted applications (621,600) in the
table on page 36
does not agree with the number of submitted applications (367,600)
during the year as
disclosed in the table on page 34.
4. You disclose that the following metrics are non-GAAP financial measures:
Premium equivalents
Submitted applications
Expected duration units
LVSA
Please tell us how each of these measures is a non-GAAP measure. In your
response tell
us your consideration of the guidance in Item 10(e)(4) of Regulation
S-K.
Notes to Consolidated Financial Statements
Note 17: Concentrations of Credit Risk and Significant Customers, page 88
5. Please tell us how your concentration disclosures being based on
"total collections" is
FirstName LastNameMichael D. Hershberger
consistent with the guidance in ASC 280-10-50-42 to disclose
information about major
Comapany NameHealth Insurance Innovations, Inc. it does not appear that total
collections are
customers in terms of revenues. In this regard,
May 23, 2019with your revenues after the adoption of ASC 606 given that you
record variable
in line Page 2
FirstName consideration associated with amounts to be billed/collected in
future periods.
LastName
Michael D. Hershberger
FirstName LastNameMichael D. Hershberger
Health Insurance Innovations, Inc.
Comapany NameHealth Insurance Innovations, Inc.
May 23, 2019
Page 3
May 23, 2019 Page 3
FirstName LastName
Form 10-Q for the Quarterly Period Ended March 31, 2019
Notes to Condensed Consolidated Financial Statements
Note 9: Income Taxes, page 15
6. You disclose that the adoption of ASC 606 created an opening balance
sheet tax liability
adjustment, the impact of which is spread over four years starting
with 2018. Please
address the following:
Tell us the nature of this adjustment and clarify why it is spread
over four years.
Clarify whether the opening balance sheet you refer to is for fiscal
2018 or 2019. In
this regard, we note no mention of this adjustment in your 2018
Form 10-K.
To the extent you reflect this adjustment in your opening 2019
balance sheet, explain
why it was not reflected in 2018 as part of the cumulative effect
of adopting ASC 606.
Explain why this adjustment doubles your effective tax rate in Q1
2019. In this
regard, although the impact of adopting ASC 606 may result in
additional taxes that
are payable over four years, explain why the ongoing effective tax
rate is impacted
when it appears that the tax impact of adopting ASC 606 should be
recorded in
deferred tax assets or liabilities upon adoption.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Mark Brunhofer at (202) 551-3638 or Sharon Blume at (202)
551-
3474 with any questions.
Sincerely,
Division of
Corporation Finance
Office of
Healthcare & Insurance