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5 eHealth earnings takeaways

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A Web broker that may be a pretty good indicator of the state of the traditional commercial health insurance markets says the third quarter was an adventure.

The broker, eHealth Inc. (Nasdaq:EHTH), helped turning the idea of “creating an Amazon.com for health insurance” into a reality. It’s been selling health insurance online since 1997. Like Health Insurance Innovations Inc., a distributor of short-term health insurance and hospital indemnity insurance, the health insurance unit at Assurant Inc., eHealth focuses on reaching the kinds of individuals, families and mom-and-pop businesses that brick-and-mortal agents and brokers serve.

See also: Assurant and Cigna: More health earnings takeaways

The new Patient Protection and Affordable Care Affordable Act (PPACA) enrollment calendar system sent the company’s new major medical insurance sales down toward the center of the earth. Revenue fell a little. Marketing and advertising spending decreased a lot.

Profits were up.

Now, Gary Lauer, eHealth’s chief executive officer, is keeping his fingers crossed, and hoping the U.S. Department of Health and Human Services (HHS) will get the HealthCare.gov HHS exchange enrollment and administration system working well enough that they can expand efforts to help consumers use the PPACA public exchange system.

“We’re largely dependent on the stability of HealthCare.gov and some of the state exchanges,” Lauer said Thursday during a conference call with securities analysts. “If they are working reliably and up and running for most hours of the day, if not all, we really do believe that we can achieve some very good scale here.”

To learn more about what eHealth is seeing that might affect other players in the health insurance market — including, possibly, you, read on.

Hiatus calendar.

1. The percentage of consumers who qualified for special enrollment periods (SEPs) and had the energy to get through the SEP qualification process was small.

In the third-quarter earnings release, eHealth is reporting $1.5 million in net income on $41 million in revenue, compared with $174,000 in net income on $42 million in revenue for the third quarter of 2013.

Starting this year, federal and state regulators have implemented PPACA in a way that mostly limits health insurers to selling all major medical insurance, on and off the PPACA public system, during an open enrollment period. 

The first open enrollment period officially ran from Oct. 1, 2013, through April 1, 2014. This year, HHS says it wants the second open enrollment period to extend from Nov. 15 through Feb. 15. 

To buy health coverage outside the open enrollment period, consumers must show that they qualify for a “special enrollment period” (SEP) because of a major life change or a major problem with their coverage.

Because of the new enrollment period rules, the number of major medical applications submitted via eHealth’s eHealthInsurance.com website fell 81 percent, to 23,800.

Error 404

2. Executives close to the public exchange system nightmares of late 2013 are starting to recover enough from the terror to talk about it.

The total number of people eHealth-sold major medical programs were covering fell to 653,700 at the end of the third quarter, from 765,500 a year earlier — partly because eHealth had a hard time serving all of the consumers who wanted to use its services to sign up for public exchange qualified health plans (QHPs).

Earlier in the year, one challenge eHealth faced was that it could help high-income consumers apply for QHP coverage if the consumers did not need a premium subsidy. But, if the consumers were likely to qualify for QHP subsidies, eHealth needed to get those consumers’ applications through exchange computer systems that did not actually work until very late in the open enrollment period.

Executives at eHealth and other companies were diplomatic about the problems while the first open enrollment period was under way, but Lauer acknowledged during the call yesterday that HHS took months to get the premium eligibility systems working well enough that eHealth could connect with the systems.

“We had gotten commitments a year ago about technology, solutions and help from the government that just never came to pass,” Lauer said. “We’re not looking for any of that right now. What we’ve decided to do is take what’s there and do everything we can to optimize that.”

Executives at eHealth are hoping HealthCare.gov and related state and federal systems will be more stable this year, Lauer said. 

handshake

3. Carriers are promising to improve the systems they need to handle exchange-related business.

Lauer noted that some of the public exchange headaches eHealth faced related to a complaint coming from many agents and brokers who have tried to work with public exchange applicants: Problems with getting credit from exchanges and insurers for helping applicants.

At eHealth, executives said some of the problems had to do with the insurers’ systems, not with the exchange systems.

When many exchanges had trouble with their computers and shifted to traditional, paper-based processes, the insurers themselves had trouble with all of the new paper documents coming in, according to Stuart Huizinga, eHealth’s chief financial officer.

In some cases, Huizinga said, even if an insurer knew which broker had served which customer, the insurer had a hard time keeping track of the customer’s premium payments.

“With those carriers, we’ve either had them commit to improving systems that broke down or worked with carriers to reduce the amount of nonelectronic options for consumers going through those carriers,” Huizinga said. 

Tax

4. Tax preparers may be health insurance brokers’ new best friends.

Lauer spent some talking about eHealth’s relationship with TurboTax, a company that offers an online tax filing system.

Many premium subsidy users are likely to need help with complicated PPACA-related tax forms, and eHealth is hoping TurboTax itself will send referrals its way.

Sylvia Mathews Burwell

5. Sylvia needs to get HealthCare.gov running smoothly.

Last year, Kathleen Sebelius, the old HHS secretary, was in charge of HealthCare.gov.

This year, the new HHS secretary, Sylvia Mathews Burwell, will be in charge of HealthCare.gov.

“All we want is for it to be stable,” Lauer said. “We’re optimistic, and we’re hopeful that it is, but it is a risk factor.”