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What the health Web brokers are seeing

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The Medicare product market looks good.

The major medical looks more challenging, but maybe higher prices will create opportunities for other health-related products.

Executives from eHealth Inc. (Nasdaq:EHTH) and Health Insurance Innovations Inc. (Nasdaq:HIIQ) shared observations supporting those assessments in conference calls with securities analysts.

For eHealth, the first company to figure out how to sell substantial amounts of private health coverage through the Web, the arrival of competition from the Patient Protection and Affordable Care Act (PPACA) exchange system has been challenging: The company was not able to help customers sign up for exchange plan subsidies during the first open enrollment period, and the second open enrollment period was also challenging.

Now, every summer, it has to deal with PPACA rules that sharply limit major medical coverage sales outside the open enrollment period.

See also: Web health broker rides open enrollment rollercoaster

The company reported $3.6 million in net income for the third quarter on $38 million in revenue, compared with $1.5 million in net income on $41 million in revenue for the third quarter of 2014.

The number of individual and family major medical applications fell to 22,500, from 23,800 in the third quarter of 2014, and the number approved for coverage during the quarter fell to 23,700, from 28,100.

The company has been focusing more on the sales of Medicare plans, and the number of customers with Medicare plan coverage increased to 182,700, from 121,300 a year earlier.

Health Insurance Innovations, a company that focuses on selling short-term medical insurance and supplemental insurance products, is reporting $1.5 million in net income for the quarter on $26 million in revenue, compared with a $612,000 net loss on $23 million in revenue in the third quarter of 2014.

The total number of policies in force increased 32 percent year-over-year, to 137,000, and the number of applications submitted increased 55 percent, year-over-year.

The Medicare Advantage open enrollment period started Oct. 15 and will run until Dec. 7.

The individual major medical open enrollment period started Nov. 1 and will run until Jan. 31.

Gary Lauer said that the individual major medical business the company has is “very profitable,” but that the company is trying to maintain that profitability, in part by spending less on major medical marketing and customer service.

“The growth driver, and where we’re moving right now, is Medicare,” Lauer said. “It’s a very exciting place for us to be.”

Lauer said he was not sure what to expect out of the public exchange system during the third open enrollment period in the way of marketing, but he said he was somewhat surprised to hear that program managers expect to bring in only 1 million additional enrollees this year.

Commissions on the major medical business the company still has are higher than they were a year ago, Lauer said.

At Health Insurance Innovations, a company that has traditionally sold products through networks of agents, executives said the birth of the company’s direct sales website has brought in new business, but that the budget-conscious consumers who use the website tend to spend less than the consumers who buy coverage through agents.

The company has also added more of its own brokers.

See also: Health Insurance Innovations adds Assurant Health alumni

Patrick McNamee, the company’s chief executive officer, said it’s hoping having its own brokers will reduce some of the competition for broker attention from major medical coverage that the company faced during the open enrollment period for 2015 coverage.

“For the first time, we’re really playing offensive during open enrollment,” McNamee said.

The increasing cost of major medical coverage could also increase interest in the kinds of products Health Insurance Innovations offers, company executives said.


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