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What really happened to open enrollment sales?

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Quarterly results from a major Web-based health insurance broker have raised questions about what’s really going on in the U.S. individual health insurance market.

The company, eHealth Inc. (Nasdaq:EHTH), is reporting a net loss of $19 million for the fourth quarter of 2014 on $45 million in revenue, compared with a net loss of $2 million on $54 million in revenue for the fourth quarter of 2013.

Some securities analysts welcomed the news: Gary Lauer, the company’s president, warned investors in January that fourth-quarter results would be poor. Company revenue ended up beating analysts’ revised estimates.

The number of people who used the company’s sales websites to buy Medicare plans increased to 143,500, from 118,200 a year earlier, and the number who used the sites to buy other types of sites, such as dental insurance increased to 408,000, from 330,600.

But the number of applications for individual and family medical coverage fell to 100,400, from 169,800, and the number who completed the approval process fell to 66,600, from 125,300.

Commission revenue per estimated member fell about 8 percent, to $33.71, but total commission revenue fell to $38 million, from $44 million.

One reason for the drop in revenue was a change in Medicare revenue recognition rules, and another reason may have been changes in the Patient Protection and Affordable Care Act (PPACA) major medical open enrollment period. The PPACA enrollment period for 2014 started Oct. 1; the enrollment period for 2015 did not start until Nov. 15.

See also: PPACA calendar slams broker’s medical sales

But half of the scheduled PPACA open enrollment period was over by Dec. 31, 2014, just as half of the first PPACA open enrollment period was over by Dec. 31, 2013.

For a look at ideas about why major medical product performance was so much worse than Medicare product performance, read on.

Confused man

1. For the uninsured people who still lack coverage, the individual health insurance now available may not be that appealing.

Lauer acknowledged Wednesday during a conference call with securities analysts that eHealth itself is still trying to figure out why major medical application volume was lower than expected.

The public exchange systems worked better, and eHealth has been able to enroll customers who are eligible for PPACA subsidies in public exchange qualified health plans (QHP) that offer subsidies.

The QHP business accounted for about 25 percent of eHealth’s fourth quarter major medical applications and half of its major applications for the period from Jan. 1, 2015, through Feb. 15, 2015. Volume on both the subsidized QHP side and the non-subsidy side has been weaker than expected, Lauer said. 

Lauer said eHealth is trying to figure out how much of the drop has been due to internal problems and how much due to general market trends.

The Obama administration recently announced a special enrollment period (SEP) for consumers who pay PPACA non-insured penalties for 2014, but eHealth isn’t sure if Web brokers can help with tax season SEP enrollment, Lauer said.

Before the open enrollment period started, some PPACA watchers predicted insurers would have trouble getting the remaining uninsured people to sign up for coverage, because many were hard to reach, hostile toward the idea of buying health coverage, or unable to find what they think of as affordable coverage.

Early in the open enrollment period, eHealth reported that only about 25 percent of its shoppers were uninsured before they started shopping for coverage.

Rick Lindquist, president of Zane Benefits, a company that sells an Internal Revenue Code (IRC) Section 105 health premium reimbursement plan administration program for small employers, said he believes that the individual major medical market really has become heavily shaped by the PPACA subsidies.

Call center reps

2. Consumers may be shifting to firms that offer more access to live humans.

Lindquist said he himself has been buying individual health coverage through Web-based systems for years, but that he shifted to using a broker that offered easy access to call center representatives for 2015.

Lindquist’s firm has tried to help employers understand PPACA implementation, and he co-authored a book about health insurance market trends, “The End of Employer-Provided Health Insurance.”

PPACA drafters wanted the restrictions they put on medical underwriting, and the standards they set on major medical insurance, to make buying and selling health coverage easier.

But, this year, Lindquist found that, when he tried to get coverage, applying was difficult. “I had questions,” he said.

Even when a Web broker’s application systems work well, insurers might have questions for the applicants. A firm with live humans on hand can simplify the application experience by taking over the job of managing consumer-insurer communications, Lindquist said.

Piggy bank in a vise

3. Pressure on employers to push more consumers into the individual health insurance market may be stronger than it looks.

Most of the big, publicly traded health insurers reported at least a small increase in overall enrollment between Dec. 31, 2013, and Dec. 31, 2014.

Any complaints by brokers or insurers about the PPACA exchange program may have more to do with specific companies’ strategies than with any big, obvious shifts in the well-being of the commercial health insurance market, Lindquist said.

Change “creates an opportunity to pivot,” he said. “Not everyone can win.”

But Lindquist said his firm has seen a steady increase in small employer interest in finding alternatives to traditional group coverage. That’s increasing individual market sales now and should increase individual sales more over time, he said.

See also: Baucus Bill Not Cheap For Middle-Income Families: CBO


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