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.
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.
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.