Credit Suisse, https://www.credit-suisse.com an international financial services company, hosted eHealth (EHTH) CEO Scott Flanders, and Vice President of Investor Relations, Kate Sidorovich for a day of investor meetings in New York City. Despite the company’s strong growth, eHealth still views itself as in the early stages of top-line growth in terms of gross sales or revenues.
The company was founded as an e-commerce business in 1997, with the goal to help individuals find the right health insurance coverage given their needs. In 2011, the company entered the Medicare space to achieve that same goal for seniors.
The company derives the majority of their revenues from commission payments by health insurance carriers. As a result, eHealth has no underwriting risk, making it an attractive investment in the growing Medicare market. The company reports that they expect 89% of their revenues in 2019 to come from Medicare.
Originally, Medicare brokerage was a call center based business. Over the last three years, the company has invested significantly in technology to better enable the call center agents to operate more efficiently.
The company helps insurance carriers accelerate growth in membership and through their integrated technology platform. Today there is a growing consumer demand to use online tools to compare and enroll in Medicare insurance plans. If the company was able to enroll all members online, rather than through call centers, the margins would improve by approximately 30 percentage points.
The company is also piloting a new tool called Balta to help improve conversion rates. This technology will provide real-time feedback to agents on calls and feedback on what questions to ask. The technology uses machine learning to analyze the past ten years of conversations to determine the best questions to ask to convert leads. To date, the pilot results indicate the technology is increasing conversion rates by 4% and the company expects to start deploying the tool in 2020.
The company’s goal is to place all customers in the correct Medicare Advantage plan. The biggest driver of high churn rates which indicates the rate people are switching policies, can sometimes indicate that seniors have been placed in the wrong plan by agents. This often happens when agents do not have the correct and complete information on hand.
The company also employs a multi-channel customer acquisition strategy to identify marketing leads. The company’s multi-channel marketing strategy has allowed the company to significantly reduce their marketing costs per approved member. Customers have access to digital marketing, direct-to-consumer marketing, and assistance if needed.
In questioning Amazon’s potential interest in the company, management notes that Amazon’s acquisition history shows that the company tends to buy businesses like eHealth rather than build their own as it is more cost efficient. In order for Amazon to buy eHealth, the company would most likely have to be close to the 50% mark of conducting business online before Amazon would look to purchase a company such as eHealth.
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