A dollar puzzle

Executives at eHealth Inc. say the high cost of individual major medical insurance now shuts out almost all of its off-season shoppers.

The Mountain View, California-based company helped invent “web-based supermarkets for health insurance.”

Dave Francis, eHealth’s chief operating officer. said Thursday, during a conference call with securities analysts, that eHealth expects sales of short-term health insurance to increase and sales of major medical  insurance that complies with Affordable Care Act requirements to fall.

(Related: Much Consumer Interest in Medicare Advantage Is Soft: Deft)

“We really see the mix shifting away from ACA-compliant plans, because of the high premiums,” Francis said. “We were having an exceptionally low conversion rate, because of the affordability issue.”

The Individual Major Medical Enrollment Calendar

Most consumers now buy individual major medical coverage during an ACA annual open enrollment period that runs from Nov. 1 through Dec. 15.

Consumers who want to buy coverage in the off-season must first go through a life change, such as a marriage, or a loss of employer-sponsored health benefits, that makes them eligible for a “special enrollment period,” or SEP.

The ACA individual major medical framework came to life January 2014. The designers of the framework included the SEP system to try to give healthy people an incentive to pay for health coverage all year-round, and not simply to pay for coverage when they think they’ll be running up big hospital bills.

Real SEP Customers

In the real world, eHealth executives said, people who qualify for SEPs have tight budgets.

“Because of the high premiums, 95 plus percent of the customers who reach out to us outside of the open enrollment period can’t afford an ACA-compliant plan unless they have a full subsidy,” Francis said.

2019 Open Enrollment Period

In spite of eHealth executives concerns about major medical prices, they said the company remains committed to the individual major medical market.

The company expects to market major medical products during the open enrollment period for 2019.

Earnings

The company held the conference call to go over earnings for the second quarter.

The company is reporting a $12 million net loss for the quarter on $33 million in revenue, compared with a net loss of $1.5 million on $35 million in revenue for the second quarter of 2017.

The company has been emphasizing sales of Medicare plans.

Revenue from Medicare plans increased to $25 million, from $24 million.

Revenue from other products fell to $7.2 million, from $10 million.

Commissions

The company reports a “constrained lifetime value” for each enrollee that includes anticipated commission payments along with other factors, such as how long eHealth expects to keep the customer.

Here’s what happened to the lifetime value estimates for five types of customers:

  • Major medical plans eligible for ACA subsidies: $100 (Down 17% from a year-earlier)
  • Medicare Advantage: $851 (Unchanged)
  • Medicare supplement: $1,026 (Up 13%)
  • Dental: $64 (Up 10%)
  • Short-term health: $57 (Up 2%)

— Read Medicare Supplement Issuers Keep Claim Ratios Under Controlon ThinkAdvisor.

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