By Allison Bell | February 01, 2021 at 02:02 PM
The web broker says
its own agents and website performed well. Outside agents and TV performed
poorly.
EHealth
Inc., a web broker, says it had a hard time getting Medicare plans sales from
outside agents and direct response TV campaigns in the latest Medicare plan
annual election period (AEP).
The
Santa Clara, Clara-based company told investors Friday that it’s responding by
cutting costs, raising capital, and tightening its focus on sales through the
web, its own agents and relationships with major distribution partners.
“We
are acting with a sense of urgency, executing a plan for 2021 that addresses
head-on the issues that impacted our AEP results,” Scott Flanders, eHealth’s
chief executive officer, said in comments about the company’s recent
performance, which were included in an earnings preview announcement for the
fourth quarter of 2020. “Our initiatives are already gaining traction, and we
are seeing positive enrollment trends in the first weeks of 2021.”
The Background
EHealth
was one of the pioneers in efforts to ell financial services to retail
customers through the internet. It’s been selling health insurance online since
1997.
The
company reported a net loss of $15 million for the third quarter of 2020 on $94
million in revenue.
Executives
were hoping to gain significant ground in the fourth quarter.
Health
insurance operations that court individual consumers tend to get a large share
of their business in the fourth quarter.
One
major source of individual sales is the Medicare Advantage plan annual election
period. The annual sales period for Medicare Advantage plans runs and Medicare
Part D prescription drug plans runs from Oct. 15 through Dec. 7 each year.
Another
major source of individual sales is the Affordable Care Act public individual
major medical insurance open enrollment period, which affects sales of all
individual major medical coverage. In the 36 states where the federal
government’s HealthCare.gov program provides ACA exchange services, and in some
states with locally run ACA public exchange plans, the individual major medical
coverage open enrollment periods run from Nov. 1 through Dec. 15.
At
the end of the third quarter, eHealth executives said the company was getting
ready for the fourth quarter by building up its own in-house agent force and by
adding a new customer retention team, in an effort to keep customers happy and
to hold on to their business longer.
The Sales
Executives
at eHealth still expect the company to report a profit for the fourth quarter
of 2020.
The
company probably will report about $57 million to $59 million in net income for
the quarter, on $291 million to $293 million in revenue, executives said.
Net
income for the full year will probably be about $43.5 million to $45.5 million,
compared to a company forecast of $79 million to $94 million, executives said.
The
number of approved members for Medicare Advantage products increased 30% in the
fourth quarter, but the fourth-quarter increase was down from an average
increase of 39% for all of 2020.
The
number of approved members in individual and family major medical insurance
products fell 2% in the fourth quarter. The fourth-quarter individual major
medical policy decrease compared with a 4% increase for all of 2020.
The
share of eHealth Medicare sales completed at least partially online increased
to 43% in the fourth quarter, from 36% in the fourth quarter of 2019, and the
share coming in at least partially through the company’s own in-house
agents increased to 57% in the latest quarter, from 33%.
The Thinking
EHealth
managers said they believe intense competition from carriers and other brokers
hurt eHealth’s sales through external agents and direct response TV.
“The
company believes that its fourth quarter performance was also impacted by
external factors, such as the global pandemic and an extended election cycle,
both of which influenced consumer and competitive behavior,” eHealth said.
Flanders,
the eHealth CEO, said eHealth increased its own Medicare plan membership
level more than the overall Medicare program did but fell short of the
company’s expectations.
The Strategy
Executives
said that its own, in-house agents have been significantly more productive than
outside agents, and that continuing the shift toward use of in-house agents
should increase both sales and customer retention levels.
“In
customer acquisition, eHealth will be emphasizing enrollment growth in online
marketing and strategic partner channels — areas where the company can more
effectively differentiate itself from the competition and deliver higher
returns on its investment,” eHealth said.
EHealth
will also work harder to cut costs, and to acquire and retain customers who
look as if their relationships will have more value to eHealth, over the entire
customer relationship lifetime, than to acquire and retain customers with what
appear to be less valuable relationships, the company said.
In
related news, eHealth said it has arranged about $225 million in financing
from an affiliate of H.I.G. Capital, a Miami-based investment firm.
H.I.G.
has entered into a binding agreement to make the investment by buying
convertible shares of preferred eHealth stock.
H.I.G.
and eHealth hope to close on the financing transaction by March 31.
After
closing, H.I.G. would get a seat on the eHealth board and hold an 8% ownership
interest in eHealth, eHealth said.
H.I.G.
started up in 1993. One founder, Tony Tamer, was a partner at Bain &
Company.
The
other founder, Sami Mnaymneh, was a managing director at The Blackstone Group.
The
list of H.I.G. portfolio companies includes Buck Global LLC, which is a New
York-based human resources consulting and benefits administration firm, and
MagnaCare, a New York-based benefit plan administration company.
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