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Web health broker rides open enrollment rollercoaster

By Allison Bell

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A Web-based health insurance broker says it sees reasons for optimism in its second-quarter results.

The company, eHealth Inc. (Nasdaq:EHTH), is reporting $5.8 million in net income for the latest quarter on $40 million in revenue, compared with $3 million in net income on $43 million in revenue for the second quarter of 2014.

The number of individual and family medical applications submitted to 23,900, from 24,800 in the year-earlier quarter, and the total number of approved major medical members fell to 125,200 from 208,000.

The Patient Protection and Affordable Care Act of 2010 (PPACA) has led to major changes in the flow of major medical applications. Regulators, PPACA exchanges and insurers now use an “open enrollment period” system to discourage consumers from waiting until they get sick to pay for coverage. Consumers who want to buy coverage outside the open enrollment period must qualify for a special enrollment period (SEP).

The number of Medicare Advantage and Medicare supplement plan applications submitted through eHealth systems jumped to 15,600 in the second quarter, from 9,500 and the number of Medicare Part D prescription drug plan applications increased to 18,600 from 13,100.

See also: Web broker to focus more on Medicare sales

The number of Medicare plan enrollees served increased to 169,100 from 113,200.

The total average level of commission revenue per enrollee increased to $32.45 from $30.40.

The company did not give per-application commission averages for major medical coverage, but the company says the average level of commission revenue per major medical enrollee increased.

Stuart Huizinga, the company’s chief financial officer, said during a conference call with securities analysts that the company saw insurers processing initial commission payments on approved policies more quickly.

The company also has seen an increase in the percentage of approved major medical applicants who actually end up paying for coverage, Huizinga said.

PPACA requires the state-based health insurance exchanges to pay for their own operations starting this year.

Gary Lauer, the eHealth chairman, said the company is looking closely to see how a reduction in federal exchange support will affect the exchange program.

“The question will be how much the federal government is spending this year,” Lauer said. “What does that mean in terms of what the market looks like? We’re certainly going to be very active in that market.”

But eHealth is still deciding how much to spend to go after major medical business, Lauer said.

See also: What’s PPACA World really like?

In a response to a question about health insurer consolidation, Lauer said the major medical market may end up looking more like the Medicare market, with the players having a bigger share of the market but being even more competitive.

Lauer also questioned the sustainability of the current version of the PPACA public exchange system. A typical public exchange is paying about $1,100 to acquire an enrollee, while the lifetime revenue value of the enrollee is only about $250 to $275 Lauer said.

“The math just doesn’t work at all,” Lauer said.

One way for a state to do the work is to put eHealth in charge of acquiring the individual enrollees, Lauer said.

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