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Health Insurance Innovations (HIIQ) Enters Regulatory Settlement Agreement with Lead State Regulators

December 13, 2018 12:56 PM EST

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On December 12, 2018, Health Insurance Innovations, Inc. (Nasdaq: HIIQ), together with its subsidiary Health Plan Intermediaries Holdings, LLC (“HPIH”), entered into a Regulatory Settlement Agreement (the “RSA”) with the lead state regulators in the Company’s previously disclosed multistate market conduct examination. As previously disclosed, in April 2016 the Company became the subject of a multistate market conduct examination that reviewed the Company’s sales, marketing, and administration practices (the “MCE”). The MCE was joined by 43 states, including Indiana (the “Participating Jurisdictions”). The MCE is led by the insurance regulators in Indiana, Florida, Kansas, Montana, and Utah (the “Lead States”), with the Indiana Department of Insurance serving as the managing Lead State.

The provisions of the RSA are subject to the execution of the RSA by a total of at least 25 of the Participating Jurisdictions (the “Settling Jurisdictions”), including the Lead States, which have already executed the RSA. On the date on which the Company is notified that a total of 25 Participating Jurisdictions have executed the RSA, the RSA will become finally effective (the “Final Effective Date”). If the Final Effective Date does not occur within 90 days of the date the RSA was entered into, the RSA will become null and void, subject to an extension of the 90-day period upon agreement by the Company and the Lead States.

As stated in the RSA, the Company denies any wrongdoing or activities that violate the insurance laws, and the RSA states that the RSA shall not be deemed or construed as evidence, or an admission, or acknowledgment by the Company of any wrongdoing or liability.

The following is a summary of other material terms and conditions of the RSA:

● The Company will submit a third-party administrator licensure application in any jurisdiction where the Company may make such application and where the Company is not otherwise licensed as a third-party administrator, and the Company will maintain such licenses in good standing in all applicable jurisdictions.

● The Company will pay to the Settling Jurisdictions a “Multistate Payment” in the aggregate amount of $3.4 million for the examination, administrative costs, and compliance in connection with the MCE. Such payment will become due within 30 days of the Final Effective Date.

● The Company will improve its monitoring of sales calls through the recording and retention of all internal and external sales calls and will require external distributors to conduct such recording and retention.

● The Company’s compliance with the RSA will be monitored by representatives of the Lead States (collectively, the “Monitoring Regulators”). The Company will be required to periodically submit reports to the Monitoring Regulators. The Company will bear the reasonable costs of monitoring by the Monitoring Regulators and their designees.

● The Company will prepare and implement (i) a “disclosures plan” to ensure that consumers are made fully aware of policy details and fees when purchasing insurance products, (ii) a “compliance plan” to provide for the monitoring and improvement of the sales practices of the Company, and (iii) a “training plan” to provide training for all internal and external sales personnel and other related parties regarding compliance with applicable insurance laws. All plans will be submitted to and require the approval of the Monitoring Regulators.

● The Participating Jurisdictions will release the Company and HPIH from all claims, demands, interest, penalties, actions, or causes of action that each Settling Jurisdiction has or could have against the Company and HPIH relating to the matters within the scope of the MCE for the period covered by the MCE (which was March 23, 2010 through December 31, 2016).

The RSA provides that any failure of the Company to comply with the RSA will subject the Company to such administrative and enforcement actions and penalties as each state party to the RSA deems appropriate and consistent with each such state’s respective laws, rules, and regulations.

The foregoing description of the RSA is incomplete and is qualified by reference to the full text of the RSA, which is filed as Exhibit 10.1 to this Form 8-K.



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