Why Health Insurance Innovations Is Rallying 11.1% Today

What happened

Health Insurance Innovations (NASDAQ: HIIQ) was plagued last year by short-sellers questioning the viability of its business model. Today, however, the company told investors it's been cleared to do business in Florida, alleviating some concerns and sending shares 11.1% higher at 12:00 p.m. EST.

So what

Health Insurance Innovations markets short-term health insurance and hospital indemnity plans online and through third-party distributors. It's been a good business to be in over the past few years, but short-sellers took issue with the company last year, citing concerns over its lack of a license in its home state of Florida and a 42-state investigation into whether the company discloses to consumers that the plans it sells aren't compliant with Obamacare requirements.

Today, management reported in a Securities and Exchange Commission filing that Florida's Office of Insurance Regulation granted its subsidiary, Health Plan Intermediaries Holdings, LLC, a certificate of authority that allows it to do business in the state as a third-party administrator. The company also revealed that it will pay a $140,000 fine for doing business in the state prior to submitting its application for the certificate last fall.

Finally, it said that an inquiry into its business by the Texas Department of Insurance that began last year was closed on Feb. 2, 2018, without a violation noted or disciplinary action taken.

Now what

Checking the certificate off the list is good news because it suggests that investors might begin focusing more on the company's improving revenue and profitability. In Q3 2017, revenue grew 37.4% year over year to $63.3 million and earnings per share increased 39% to $0.46. That performance led to its upping its full-year sales outlook to at least $235 million, which would be up 27% from 2016.

The situation in Florida and Texas weren't the only question marks hanging over the company, though. The multistate investigation remains a headwind so investors might therefore want to rein in a little of their optimism until there is more clarity on how that will shake out.

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Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.