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Keeping Customers Is Hot: Web Broker to Wall Street

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A health insurance web broker, eHealth, is promising Wall Street that it will work harder to please and keep customers, not just record new sales.

EHealth executives emphasized their focus on renewals last week, when it went over its results for the third quarter with securities analysts.

The Santa Clara, California-based company sells Medicare Advantage plans through the web and through call centers. It also sells individual and major medical insurance, Medicare supplement insurance, and related products and services, such as dental insurance and short-term health insurance.

Scott Flanders, the company’s chief executive officer, said the company has tried to improve customer retention rates by tying a percentage of agents’ compensation to enrollment persistency, and by creating a team of about 200 customer care employees.


The new team “will include enrollment specialists and a dedicated retention team comprised of agents who will handle inbound inquiries from our existing members, and outbound agents, who will target policies ranked at higher risk for churn based on our data analytics,” Flanders said.

Tim Hannan, eHealth’s chief revenue officer, said that, in the past, eHealth managed to keep only about 10% of the customers and said they wanted to cancel or change their coverage.

Since eHealth deployed the new customer care team, eHealth has been keeping about 90% of the eHealth customers who call to cancel or change coverage, Hannan said.

(Related: Renewals, Renewals, Renewals)

Hannan said eHealth is always using proprietary methods to focus more on customers who seem likely to stick with eHealth, not simply on converting prospects into customers. “We can now see there unprofitable pockets of customers, customer types that we should avoid and certainly not prioritize,” he said.

EHealth has de-emphasized efforts to market individual and family major medical insurance in recent years, because the rules governing that market have changed frequently and commissions per enrollee have been below.

But the financial performance of eHealth’s individual major medical coverage business has improved, in part because the purchasers of major medical policies are keep their coverage longer, Hannan said.

Because the major medical customers’ policy durations are getting longer, eHealth can recognize more total revenue per major medical customer, Hannan said.

Hannan said that he thinks agents are accepting new customer retention efforts, partly because the new retention programs are giving agents a chance to earn more.

The Big Retention Picture

Retention may be on securities analysts’ minds partly because some investors who invested in an eHealth competitor, GoHealth, say GoHealth should have given them more information about the effects of customer churn on a web brokers’ results.

The new focus on retention could also end up having implications for agents and distributors in the life and annuity markets.

Life and annuity market players may be having some of the same problems with customer churn that health insurance market players are having. It may be that the nature of health web broker reporting simply makes churn issues at those companies more obvious to outsiders.

The EHealth Results

EHealth is reporting a net loss of $15 million for the third quarter of the year, which ended Sept. 30, on $94 million in revenue, compared with a net loss of $11 million on $70 million in revenue for the third quarter of 2019.

Here’s what happened to revenue for certain types of products between the third quarter of 2019 and the latest quarter:

  • Individual major medical medical policies, family policies, and related products: $24 million (up 88%)
  • Medicare Plans: $70 million (Up 23%

The major medical unit recorded a profit of $18 million, up from $3.8 million for the year-earlier quarter.

One change for the major medical unit may be that, in many states, the government created special opportunities for people to buy major medical coverage outside of the usual annual open enrollment period, which runs from Nov. 1 through Dec. 15 in many states.

The Medicare plan unit recorded a $16 million loss, compared with an $11 million loss for the year-earlier unit.

Here’s what happened to eHealth’s estimates of the “constrained lifetime value of commissions per approved member” for certain product types:

  • Affordable Care Act Major Medical Coverage: $244 (up 48%)
  • Non-ACA Major Medical Coverage: $188 (up 9%)
  • Medicare Advantage Plans: $898 (down 3%)
  • Medicare Supplement Insurance: $1,071 (up 13%)
  • Medicare Part D Drug Plans: $245 (down 8%)

Yung said eHealth lost money in the third quarter partly because the fourth quarter is the major selling quarter, and eHealth intentionally allocated resources toward gearing up for the fourth quarter.

The Medicare Advantage annual election period started Oct. 15.

Phillip Morelock, eHealth’s chief digital officer, said the company’s preparation strategy seems to have paid off.

The percentage of website visitors who buy coverage is up 50%, and conversion rates for consumers who call the company’s customer contact centers are also up, Morelock said.

“And, it’s early, but we’re optimistic that will have a positive impact on our retention figures as well,” Morelock said.

— Read Medicare Advantage Plans May Have More Search Buzzon ThinkAdvisor.

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