Benefits Firms Wrestle With Storms

A web broker continues to pivot toward the Medicare market

(Photo: Thinkstock) (Photo: Thinkstock)

Benefits market players are facing a strange year: Clients and prospects are desperate to hear ideas from them about how to cope with the storm in Washington, but the all of the confusion is increasing uncertainty about what insurers will sell and what individuals and employers should try to buy.

(Related: ‘Senior Officials’ Want to Close HealthCare.gov, Exec Says)

Executives at eHealth Inc., a company that sells insurance through the web, and Benefitfocus Inc., a company that sells systems for selling and administering benefits online, last week took pains to reassure investors and securities analysts about their ability to handle choppy seas.

Here's a look at some of what those and other benefits players, such as Aflac Inc., have been saying about their operations and market conditions, based on the companies' earnings reports for the first quarter and the conference calls the companies' executives held with securities analysts to go over the earnings reports. All of the companies have posted recordings of the conference calls on the investor relations sections of their websites.


EHealth Inc.

EHealth, a Mountain View, California-based company, is reporting $33 million in net income for the first quarter on $79 million in revenue, compared with $18 million in net income on $74 million in revenue for the first quarter of 2016.

The number of Medicare product applications increased to 31,300, from 30,900.

The number of applications for commercial individual and family major medical coverage fell to 22,000 during the quarter, from 74,300 during the year-earlier quarter.

The company runs eHealthInsurance.com, a pioneer in efforts to sell ordinary major medical coverage through the web. The company originally hoped that the Affordable Care Act public exchange system, the ACA health plan standardization rules, and the ACA curbs on medical underwriting would help it, by making it much easier for the company to sell major medical coverage to consumers.

Instead, managers of the ACA exchange system have always limited eHealth's ability to connect with exchange system data pipes, and, this year, carriers have mostly eliminated or sharply reduced the commissions they are willing to pay for coverage sales made outside the main ACA individual major medical open enrollment period, according to Scott Flanders, eHealth's chief executive officer.

For 2017, the open enrollment period extended from Nov. 1 through Jan. 31.

The individual major medical business is still very profitable, but eHealth is trying to improve results by eliminating major medical marketing after the end of the ACA open enrollment period, focusing more on year-round sales of Medicare products, and seeking contracts to help large insurers and benefit plan sponsors with sales and enrollment processes, Flanders said. UnitedHealth Group Inc., for example, is using eHealth systems to provide online enrollment services for small groups, and to reduce involvement of brick-and-mortar agents in the small-group enrollment process, he said. He said eHealth also has major new relationships with USAA and with a union benefits enrollment platform affiliated with the AFL-CIO.

Flanders praised recent efforts by the Centers for Medicare & Medicaid Services to try to stabilize the individual market.

He said eHealth also likes recent efforts by Republicans in Congress to give states more control over their essential health benefits packages, or standard ACA benefits packages.

Consumers who take eHealth surveys say they want lower premiums, and that they also want more choices, Flanders said. The current Republican ACA-change proposals could help provide those choices, he said.


Benefitfocus Inc.

Benefitfocus, a Charleston, South Carolina-based company, is reporting a $7.7 million net loss for the quarter on $64 million in revenue, compared with a $13 million net loss on $55 million in revenue for the first quarter of 2016.

Shawn Jenkins, the chief executive officer, said that the number of employers using the company's systems is increasing, and that retention rates have been high.

Many employers like the idea of using cloud-based systems from Benefitfocus, Jenkins said.

In the near term, uncertainty in Washington about health insurance policy could affect sales, but, in the long-term, Benefitfocus should be in a good position to handle whatever comes out of Washington, Jenkins said.

Flowchart (Image: Aflac)

Aflac CEO Dan Amos says work on fast claim processing systems can set Aflac apart from the competition. (Image: Thinkstock)

 

"Whether there is repeal and replace or whether there are incremental changes, all of that really proves to why an employer needs the modern cloud infrastructure to communicate these benefits to employees, to be able to keep up with the regulatory environment, to be able to adapt to the economic changes that are happening with the way employers are funding benefits," Jenkins said.

Employers appear to be operating under the assumption that they will still have to comply with Affordable Care Act coverage reporting rules for at least a few more years, and that's helping compliance services volume, Jenkins said.

Jenkins said Benefitfocus is also seeing strong demand for a service that consolidates all of the benefits program bills going to an employer.


Aflac Inc.

Aflac, a Columbus, Georgia-based insurer, is reporting $592 million in net income for the latest quarter on $5.3 billion in revenue, compared with $731 million in net income on $5.5 billion in revenue for the first quarter of 2016.

Aflac gets more of its revenue from selling cancer insurance and other supplemental health insurance products in Japan than it gets from selling its products in the United States.

The U.S. unit posted $310 million in pretax operating earnings for the first quarter on $1.6 billion in revenue.

Operating earnings were down 6.7%, but revenue was up 1.7%, the company said.

Aflac says the profit margin is lower in the United States partly because the company has been investing in expanding its U.S. distribution force and in claim processing systems.

Dan Amos, Aflac's chief executive officer, said during the company's earnings call that surveys show the investments in claim processing speed are producing strong policyholder satisfaction levels.

"American consumers need cash quickly," Amos said. "Paying claims fast and fairly sets us apart from the competition."

Company executives said the company will continue a strategy of using use agents to go after groups with fewer than 100 employees, and broker sales reps to go after brokers. The company expects to assign more reps to focus on midsize brokers, and it will depend on the sales management team to avoid conflicts between the agents and the brokers, executives said.

About a year ago, Aflac said it was developing a private exchange system, Everwell.

Teresa White, the president of Aflac U.S., said Everwell adoption has been helping U.S. results, by increasing employer plan participation rates.


Hartford Financial Services Group Inc.,

Hartford Financial, a Hartford, Connecticut-based insurer, is reporting $378 million in net income for the first quarter on $4.7 billion in in revenue, compared with $385 million in net income on $4.4 billion in revenue for the first quarter of 2016.

The group benefits unit is reporting $45 million in net income on $938 million in revenue, compared with $50 million in net income on $885 million in revenue.

Talcott Resolution, the unit that manages the company's run-off annuity block, is reporting $68 million in net income on $531 million in revenue, up from $17 million in net income on $482 million in revenue.

Hartford Financial now focuses mainly on the property-casualty market. One of the noteworthy items in its latest earnings reports is a special charge, for $13 million, for a guaranteed fund assessment.

The assessment is Hartford Financial's share of the cost of helping a guaranty fund protect the policyholders of a failed long-term care insurance issuer, Penn Treaty American Corp.

--- Read Freedom Caucus Endorses GOP Health Bill, Reviving Its Chances on ThinkAdvisor.

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