We estimate that the net proceeds from our sale of shares of common
stock in this offering at an assumed initial public offering price of $ per
share after deducting estimated underwriting discounts and commissions and
estimated offering expenses, will be approximately $ million, or $
million if the underwriters’ over-allotment option is exercised in full. A
$1.00 increase (decrease) in the assumed initial public offering price would
increase (decrease) the net proceeds to us from this offering by $
million, assuming the number of shares offered by us remains the same and after
deducting the estimated underwriting discounts and commissions.
The principal purposes of this offering are to increase our financial
flexibility, increase our visibility in the marketplace and, with respect to
this offering, create a public market for our common stock. As of the date of
this prospectus, we cannot specify with certainty all of the particular uses
for these proceeds or the amounts that we plan to use for any particular
purpose. However, we currently intend to use these proceeds primarily for
general corporate purposes, which may include working capital, sales and
marketing activities, general and administrative matters and capital
expenditures. We may use a portion of the net proceeds to repay some or all of
the amounts outstanding under our debt facility with Silicon Valley Bank. In
addition, we may use a portion of the net proceeds for the acquisition of, or
investment in, technologies, solutions or businesses that complement our
business, although we have no present commitments or agreements to enter into
any acquisitions or investments. We will have broad discretion over the uses
of the net proceeds in this offering. Pending these uses, we intend to invest
the net proceeds from this offering in short-term, investment-grade interest-
bearing securities such as money market accounts, certificates of deposit,
commercial paper and guaranteed obligations of the U.S. government.
We believe the principal factors on which we compete include the following:
• number of available Medicare insurance plans;
• ability to deliver a solution that is fully-integrated throughout the
pre-enrollment, enrollment and post-enrollment processes;
• experience transitioning groups of all sizes to individual plans;
• scalable and flexible exchange platform;
• channel partnerships across various market segments; and
• quality and experience of benefit advisors.
We believe that we compete favorably with our competitors that offer insurance
exchange platforms on the basis of these factors.
We believe we are uniquely positioned as the largest Medicare exchange platform
with the most experience transitioning members of employer group plans to the
individual Medicare market. However, there are other companies and government-
run health insurance exchanges that compete with portions of our solution. Some
of these entities utilize online technology to accept applications and enroll
individuals. For example, CMS offers plan information, comparison tools, an
enrollment services center and online enrollment for Medicare Advantage and
Medicare Part D prescription drug plans, all of which compete with our
solutions.
We also generally compete with entities and individuals that offer and sell
health insurance plans utilizing traditional distribution channels. These
competitors include traditional local insurance agents, large benefit
consulting organizations and insurance carriers. Some traditional insurance
agents utilize online quoting services and other tools to obtain quotes from
multiple insurance carriers and prepare electronic benefit proposals to share
with their potential customers.
Many insurance carriers directly market and sell their plans to consumers
through call centers and their own websites. We offer health insurance plans
for many of these insurance carriers and, as a result, we compete with these
carriers directly. Most of these insurance carriers have superior brand
recognition, extensive marketing budgets and significant financial resources to
influence consumer preferences for searching and buying Medicare health
insurance online.
Company Description
Extend Health is a leading provider of health benefit management services and
operates the largest private Medicare exchange in the United States. As a
technology leader in the health insurance industry, we are redefining the
manner in which health benefits are offered and delivered. Our
solutions
create cost savings for our employer clients and provide our individual
customers with improved choice and control over their health benefits. Our
core solution, ExtendRetiree, enables our employer clients to transition
their retirees to individual, defined contribution health plans that provide
individuals with a tax-free allowance or “contribution” to spend on their
healthcare at an annual cost that the employer controls versus group-based,
defined benefit health plans that provide groups of individuals with defined
healthcare benefits such as doctor visits, hospitalization and prescription
drugs at an uncertain annual cost. ExtendRetiree allows our clients to provide
their post-65 retirees with the same or better healthcare benefits at a lower
cost to our clients. To date, we have provided an effective alternative to
traditional group Medicare health plans for over 150 private and public sector
clients, including over 30 Fortune 500 companies such as Caterpillar, General
Motors, Honeywell and Whirlpool, and we have helped hundreds of thousands of
retirees and their dependents navigate to, evaluate and choose a health plan
using our proprietary exchange platform and decision support tools. In
addition, we are developing and expanding our solutions to address the
pre-65 retiree, or early retiree, and active employee exchange opportunities
for our existing and prospective clients.
We provide our solutions through our proprietary technology platform, which
integrates our patented call-routing technology, efficient Medicare quoting
and enrollment engine, custom-developed CRM system and comprehensive
insurance carrier connectivity. We deliver our solutions by:
• analyzing and optimizing employer healthcare benefit subsidies and
developing healthcare coverage strategies so that our clients can predict
their future healthcare liabilities and realize immediate and significant
cost savings by transitioning their retirees to defined contribution plans;
• managing an exchange of over 75 national and regional insurance carriers
offering thousands of health plans that compete on price, coverage and
quality;
• simplifying the complexities of Medicare by helping individuals navigate
through a meaningful choice of health plans using our proprietary software
to analyze employer subsidies, health plan details and individuals’ doctor,
hospital and prescription drug needs;
• offering retirees and employees unbiased guidance about their expanded
healthcare options and our enrollment services that match their individual
health status and financial resources to a specific plan; and
• providing lifelong advocacy and support services for each individual as
they engage with insurance carriers beginning with their initial enrollment
and continuing as their healthcare needs evolve.
While we have provided health benefit management services to hundreds of
thousands of retirees and their dependents, our core market opportunity
remains largely unaddressed, with an estimated 12 million Medicare-eligible
retirees currently receiving some form of employer-sponsored group Medicare
coverage. Moreover, we believe that this market will grow significantly as
the number of Americans over age 65 continues to grow.
We believe there are significant opportunities to further penetrate our core
market and expand into new target markets. For instance, we are broadening
our presence among public sector employers, such as through our engagement
with the State of Nevada to transition its 10,000 retirees to individual
Medicare plans. In addition, we are developing and expanding our solutions
to address the early retiree and active employee markets.
We generate most of our revenue from the commissions that we receive from
insurance carriers for enrolling individuals into their health plans. These
commissions result in increasing recurring revenue as our number of active
members grows. The vast majority of our revenue is currently derived from
Medicare-related plans, including Medicare supplement, Medicare Advantage and
Medicare Part D prescription drug plans. As of March 31, 2012, we had 213,900
active core members enrolled in a Medicare supplement or Medicare Advantage
plan. Our revenue has grown from $12.4 million in the fiscal year ended
June 30, 2008 to $51.1 million in the fiscal year ended June 30, 2011.
-------
We were incorporated in April 2002 as a Delaware limited liability company.
In July 2007, we became Extend Health, Inc., a Delaware corporation.
Our principal executive offices are located at 2929 Campus Drive, Suite 400,
San Mateo, California 94403, and our telephone number is (650) 288-4800.
Our website address is www.extendhealth.com.