HealthEquity was incorporated in January 2002, in Tucson, Arizona, by Stephen D. Neeleman MD and David Hall to re-introduce consumerism into health care. It moved its incorporation to Draper, Utah in February 2004.
HealthEquity, Inc. provides various solutions for managing health care accounts, health reimbursement arrangements, and flexible spending accounts for health plans, insurance companies, and third-party administrators in the United States. Its products and services include healthcare saving and spending platform, a cloud-based platform for individuals to make health saving and spending decisions, pay healthcare bills, compare treatment options and prices, receive personalized benefit and clinical information, earn wellness incentives, grow their savings, and make investment choices; and health savings accounts. The company also offers online-only investment advisory services through HealthEquity Advisor, a Web-based tool; and healthcare incentives that enable its employer partners and health plan partners to offer, and its members to earn, financial incentives for participation in wellness programs. HealthEquity, Inc. was founded in 2002 and is headquartered in Draper, Utah.
(Summary) (Company) (Chart)
6 August 2017
1yr Target $56.50
Payout Ratio 0.00%
1yr Cap Gain 20.80%
1yr Tot Return 20.80%
EPS (ttm) $0.53
EPS next yr $0.70
Forward P/E 67.10
EPS next 5yr 32.50%
1yr Price Support $22.75
Market Cap $2.84 Bil
Revenues $189.80 Mil
Earnings $32.30 Mil
Profit Margin %
Quick Ratio 21.20
Current Ratio 21.30
1yr RevGR 40.68%
3yr RevGR ---
5yr RevGR ---
1yr EarnGR 57.14%
3yr EarnGR ---
5yr EarnGR ---
1yr DivGR ---
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HealthEquity is the leader and an innovator in the high growth category of technology-enabled services platforms that empower consumers to make healthcare saving and spending decisions. The Company's platform provides an ecosystem where consumers can access their tax-advantaged healthcare savings, compare treatment options and pricing, evaluate and pay healthcare bills, receive personalized benefit and clinical information, earn wellness incentives, and make educated investment choices to grow their tax-advantaged healthcare savings. HealthEquity can integrate with any health plan or banking institution to be the independent and trusted partner that enables consumers as they seek to manage, save and spend their healthcare dollars. The Company believes that the secular shift to greater consumer responsibility for healthcare costs will require a significant portion of the approximately 189 million consumers under the age of 65 with private health insurance in the United States to use a platform like HealthEquity's platform.
The core of the Company's ecosystem is the health savings account, or HSA, a financial account through which consumers spend and save long term for healthcare on a tax-advantaged basis. As of January 31, 2017, the Company was the integrated HSA platform for 87 health plans in the country and employees at more than 34,000 employer clients. Their customers include individuals, employers of all sizes and health plans (The Company refers to their individual customers as members, their health plan customers as Health Plan Partners and employer clients with more than 1,000 employees as Employer Partners). The Company's Health Plan Partners and Employer Partners collectively constitute Network Partners. Through existing Network Partners, the Company has the potential to reach over 87 million consumers, representing more than a third of the under-age 65 privately insured population in the United States. As of January 31, 2017, HealthEquity had over 2.7 million HSAs on their platform, representing over 5.9 million lives. During the years ended January 31, 2017, 2016 and 2015, the Company added approximately 703,000, 751,000 and 476,000 new HSA Members, representing approximately 1.5 million, 1.7 million and 1.1 million lives, respectively.
The Company has developed technology and a differentiated focus on the consumer to facilitate the transition to a more consumer-centric approach to healthcare saving and spending. HealthEquity's solution is deployed as a cloud-based platform that is accessible to customers through the Internet and on mobile devices and is hosted on private servers, which allows the Company to scale on demand. Core to their technology is a configurable framework and open platform that they believe provides them greater functionality and flexibility than generic technologies used by competitors and requires less investment and time to configure and customize to our customers’ needs.
The Company is able to seamlessly integrate third-party applications into the platform, which has afforded the Company an advantage in an expanding consumer healthcare landscape. A growing number of companies are attempting to integrate into the consumer's daily healthcare spending experience by leveraging HealthEquity's platform. These companies offer functions such as price transparency, benefits enrollment, population health, wellness, analytics, health insurance and investment services, and are looking to reach the consumer at the critical "save" and "spend" moment. In an effort to capitalize on this opportunity, the Company continues to expand the number of ecosystem partners with whom the platform is integrated.
The Company's business model provides strong visibility into their future operating performance. As of the beginning of the past several fiscal years, the Company had approximately 90% visibility into the revenue of the subsequent fiscal year. HealthEquity earns monthly service revenue, primarily through multi-year contracts with our Health Plan Partners and employer clients, and our custodial agreements with individual members. The Company earns custodial revenue primarily from custodial cash assets that are deposited with the Company's FDIC-insured custodial depository bank partners or invested in an annuity contract with an insurance company partner. In addition, HealthEquity earns record keeping fees in respect of assets held with their investments partner and they earn fees for investment advisory services through a registered investment advisor subsidiary. The Company also earns interchange revenue, which is primarily interchange fees charged to merchants on payments made with the Company's cards via payment networks. Monthly service revenue, custodial revenue, and interchange revenue are recurring in nature, providing strong visibility into the Company's future business.
Products and Services
Healthcare saving and spending platform. HealthEquity offers a cloud-based platform, accessed by members online via a desktop or mobile device, through which individuals can make health saving and spending decisions, pay healthcare bills, compare treatment options and prices, receive personalized benefit and clinical information, earn wellness incentives, grow their savings and make investment choices. The platform provides users with access to services the Company provides as well as services provided by third parties or by Network Partners.
Among other features, the platform includes the capability to present to users medical bills upon adjudication by a health plan, including details such as the amount paid by insurance, specific nature of the medical service provided, and diagnostic code. Users of the platform can pay these bills from an account of ours or from any bank account, online, via a mobile device, or using our payment card. All users of the platform gain access to the healthcare consumer specialists, available every hour of every day, via a toll-free telephone number or email. Specialists can assist users with such tasks as contacting a medical provider to dispute a bill, negotiating a payment schedule, optimizing the use of tax-advantaged accounts to reduce medical spending or selecting from among medical plans offered by an employer or health plan.
Health savings accounts. The Medicare Modernization Act of 2003 created HSAs a tax-exempt trust or custodial account managed by a custodian that is a bank, an insurance company, or a non-bank custodian specifically authorized by the U.S. Department of the Treasury as meeting certain ownership, capitalization, expertise and governance requirements. HealthEquity is an Internal Revenue Services, or IRS, approved non-bank custodian of members' HSAs. In December 2016, the Company submitted a request to the IRS for approval to serve as both a passive and non-passive non-bank custodian of HSAs.
To be eligible to contribute to an HSA, an individual must be covered under a high deductible healthcare plan, or HDHP, have no additional health coverage, not be enrolled in Medicare, and not be claimed as a dependent on someone else’s tax return. HSAs have several tax-advantaged benefits, which we call the "triple tax savings": (1) individuals can claim a tax deduction for contributions they, or someone other than their employer, make to their HSAs; contributions to their HSAs made by their employer may be excluded from their gross income for purposes of federal and most state income and employment tax; (2) the interest or earnings on the assets in the account, including reinvestment, are tax free; and (3) distributions may be tax free if they pay qualified medical expenses. There is no requirement to provide receipts to substantiate HSA distributions to members, whether made through a payment card or directly from the online platform. Additionally, distributions other than for qualified medical expenses are permitted penalty-free after age 65. Balances remain in the account until used, i.e. , there is no “use or lose” requirement. An HSA is owned by the account holder; it remains the account holder’s property upon a change of employment, health plan or retirement.
Investment advisory services. HealthEquity offers an online-only automated investment advisory service to all members whose account balances exceed a stated threshold. This service is entirely elective to the member. The advisory service is delivered through a web-based tool, HealthEquity Advisor, which is offered and managed by HealthEquity Advisors, LLC, the Company's SEC-registered investment adviser subsidiary. HealthEquity Advisors, LLC provides investment advice to its clients exclusively through the HealthEquity Advisor tool on an interactive website. Members who subscribe for HealthEquity Advisor pay asset-based fees, which include the cost of the advisory service and all trading commissions and other expenses associated with transactions made through the online tool.
HealthEquity Advisor provides guidance and management, including how much cash (liquidity) to maintain in an HSA and how to diversify optimally among the mutual funds and other investment vehicles offered on the HealthEquity platform. Advice reflects the personal risk preferences of the individual member.
HealthEquity offers three levels of service to investors:
- Self-driven: For members who do not subscribe for HealthEquity Advisor the Company provides a mutual fund investment platform to invest HSA balances. Neither the Company nor HealthEquity Advisor provides advice to members in respect of platform investments;
- GPS: HealthEquity Advisor provides guidance and advice, but the member makes the final investment decisions and implements portfolio allocation and investment advice through the HealthEquity platform; and
- Auto-pilot: HealthEquity Advisor manages the account and implements portfolio allocation and investment advice automatically for the member.
Reimbursement arrangements. Reimbursement arrangements, or RAs, include health reimbursement arrangements, or HRAs, and flexible spending arrangements, or FSAs. An HRA may be administered by any third-party administration, or TPA, firm. Most HSA custodians are not TPAs, and most TPAs are not HSA custodians. HealthEquity is among only a few firms that are able to administer HSAs and HRAs on the same technology platform.
RAs are employee benefits wherein an employer provides a fixed dollar amount of reimbursement for qualified medical or dependent care expenses. Payments must be substantiated with electronic claims from a health plan, data gleaned from operation of our payment card where permitted, or submission of receipts or other documentation by the employee. RAs have the tax benefit that, like HSAs, their value may be excluded from employees’ gross income for federal and most state income and employment tax purposes. RAs are not portable; any remaining value is lost upon termination of employment, but are subject to COBRA requirements. An HRA must be paid for entirely by the employer with no salary reduction, is typically integrated with a major medical plan, and typically allows unused benefits to be rolled over from year to year. An FSA is typically paid for entirely through salary reduction from the employee, is typically a stand-alone, voluntary offering, and is subject to “use or lose” restrictions limiting to $500 the amount that may be rolled over from year to year. As of January 31, 2017, HealthEquity had approximately 528,000 RAs on our platform.
Healthcare incentives. HealthEquity enables their Employer Partners and Health Plan Partners to easily offer, and our members to earn, financial incentives for participation in wellness programs. The Company's technology platform includes a financial incentives framework and integration with several wellness providers used by Network Partners. Once earned, incentives may be deposited directly into an HSA, RA or cash account, with Network Partner-specific messaging to make clear to the member the source of funds. The platform routes incentives to the right type of account to maintain tax compliance, for example, by creating and routing funds to an RA where an HSA Member is ineligible to receive HSA contributions due to disqualifying coverage.
My Path Forward
I'm not an expert on healthcare or health savings accounts, but this company is a great company in a new and expanding area. And HSA's may just be the answer for at least part of the healthcare problem in this country. But HealthEquity isn't one of those undiscovered companies. It's already been discovered and it's not cheap by any means. Just notice the P/E and PEG above and you start to get the idea of how expensive it really is. And it's not getting any cheaper.
A closer look at the weekly chart and it instantly becomes apparent that the stock has been bouncing off it's 20 week moving average for over a year. Today it's doing it once again. So this week may be the perfect time to start a position in HealthEquity Inc. And that's exactly what I intend to do. I believe this company has the potential to grow 30% per year for the remainder of the decade and beyond.
I expect this to be a very long term position for me as I believe this company is poised to be a cornerstone in the solution to the healthcare crisis in this country. It's a crisis the United States is bent on solving but the crisis may last for many years to come.