This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

An IPO to Play the Aging Boomers

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Tom Taulli, InvestorPlace Writer

NEW YORK ( InvestorPlace) -- Back in the 1980s, U.S. companies moved away from defined-benefit pensions to defined-contribution, or 401(k) plans, essentially pushing the responsibility for retirement saving to employees. Of course, the main reason was to help reduce corporate costs.

Interestingly enough, the same trend is happening in the U.S. health care industry: Employers are moving away from group-based plans to individual arrangements.

  • Also see: WebMD is rushed to emergency

  • That's creating opportunity for health care operators. Just take a look at Extend Health, which has the largest exchange for Medicare coverage and is preparing for a public offering. The lead underwriters include Morgan Stanley, Barclays and Wells Fargo.

    Extend Health's platform focuses primarily on programs like Medicare supplement, Medicare Advantage or Medicare Part D prescription drug coverage. These involve some federal subsidies and offer additional benefits, such as dental.

  • Also see: Facebook makes another IPO move
  • For the most part, Extend Health allows employers to transition post-65 retirees to get the same or better health coverage -- at a lower cost. Its system uses sophisticated analytics to evaluate coverage of more than 75 carriers, which involve more than 4,000 health plans.

    Consider that Extend Health has 30 of the Fortune 500 as customers already. Some of the biggies are Caterpillar (CAT), General Motors (GM), Honeywell (HON) and Whirlpool (WHR).

  • Also see: Health care IT provider Cerner is a game-changer
  • Based on government data, Extend Health's addressable market opportunity is 12 million retirees. So far, the company has roughly 171,000 active core members enrolled.

    For the year ended June 30, Extend Health posted revenues of $51.1 million, up from $44 million in 2010. Pretax earnings came to $9.96 million.

    As should be no surprise, Extend Health has plans to move aggressively into new categories of the Medicare market. These include early retirees who aren't yet eligible for Medicare, active employees with group coverage and Medicare enrollees who don't have employer-sponsored health care coverage.

    All in all, the market potential is enormous. Keep in mind that about 10,000 people per day reach 65 and become eligible for Medicare. In fact, this segment of the population is expected to go from 40.2 million in 2010 to 54.8 million by 2020. And as the costs escalate, employers will have little choice but to look for alternative solutions like Extend Health.

    Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of All About Short Selling and All About Commodities. Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.

    Also see:

  • Where to invest during the last stage of the market recovery
  • 5 companies increasing dividends
  • 3 health care, tech sector buys for January
  • This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

    Select the service that is right for you!

    Action Alerts PLUS
    Try it NOW

    Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

    Product Features:
    • $2.5+ million portfolio
    • Large-cap and dividend focus
    • Intraday trade alerts from Cramer
    • Weekly roundups
    TheStreet Quant Ratings
    Try it NOW
    Only $49.95/yr

    Access the tool that DOMINATES the Russell 2000 and the S&P 500.

    Product Features:
    • Buy, hold, or sell recommendations for over 4,300 stocks
    • Unlimited research reports on your favorite stocks
    • A custom stock screener
    • Upgrade/downgrade alerts
    Stocks Under $10
    Try it NOW

    David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

    Product Features:
    • Model portfolio
    • Stocks trading below $10
    • Intraday trade alerts
    • Weekly roundups
    Dividend Stock Advisor
    Try it NOW

    Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

    Product Features:
    • Diversified model portfolio of dividend stocks
    • Alerts when market news affect the portfolio
    • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
    Real Money Pro
    Try it NOW

    All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

    Product Features:
    • Real Money + Doug Kass Plus 15 more Wall Street Pros
    • Intraday commentary & news
    • Ultra-actionable trading ideas
    Options Profits
    Try it NOW

    Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

    Product Features:
    • 100+ monthly options trading ideas
    • Actionable options commentary & news
    • Real-time trading community
    • Options TV
    To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
    Submit an article to us!


    DOW 17,959.44 +154.64 0.87%
    S&P 500 2,078.54 +7.89 0.38%
    NASDAQ 4,781.4240 +16.0440 0.34%

    Brokerage Partners

    Rates from

    • Mortgage
    • Credit Cards
    • Auto

    Free Newsletters from TheStreet

    My Subscriptions:

    After the Bell

    Before the Bell

    Booyah! Newsletter

    Midday Bell

    TheStreet Top 10 Stories

    Winners & Losers

    Register for Newsletters
    Top Rated Stocks Top Rated Funds Top Rated ETFs