eHealth Inc. Bullish on Growth

Credit Suisse https://www.credit-suisse.com hosted top management from eHealth Inc. (EHTH) https://www.ehealthinsurance.com CEO Scott Flanders and Kate Sidorovich, VP Finance & Investor Relations, at a small group investor dinner meeting during Credit Suisse’s Annual Healthcare Conference.

Management reports that positive Annual Enrollment Period (AEP) trends mean that the company sees the outlook for 2019 to be positive. One month into AEP, EHTH is encouraged with the plans that EHTH has in place are delivering. The Year to Year increase in agents and agent productivity and EHTH’s call center investments are yielding positive results.

EHTH, a private online health insurance exchange enables individuals, families, and small businesses to compare health insurance products from brand name insurers plus purchase and enroll in coverage online and over the phone. The company also offers educational resources, telephone support, along with online and pharmacy-based tools to help Medicare beneficiaries navigate Medical health insurance options and enroll in select plans.

The company is seeing strong productivity ahead of expectations from their in-house agents. In terms of measuring agent productivity, the company focuses more on the conversion rate than the time agents are spending with seniors. Conversion rates have been trending higher, which is one reason why the company feels pretty confident about revenue outperformance in 2019.

EHTH has doubled the agent count this year versus last year, and the company believes that they are very well positioned for the last two weeks of AEP. However, the size of outperformance will be driven by how much increase in the conversion rate the company can achieve for bottom tier agents. Management notes that bottom tier agents are benefitting the most from the recent technology upgrades made by the company.

The company has not lost agents to competitors which is attributed to the fact that they pay their agents 100% commission upfront unlike some of their competitors. The company is evaluating their compensation plan for agents for next year. However, management recognizes that while this might lead to some agent turnover, it would help the company move 30% of the commission out and then be better able to match the collection of revenue.

Management believes that the growth in Medicare equivalent enrollment this year could exceed last year’s growth. While the company is upbeat about enrollment growth prospects in 4Q19, management also realizes that there are fewer days from Thanksgiving through the end of AEP in December which can affect enrollment. However, the company feels pretty confident that their expanded agent capacity and improved productivity might actually provide a competitive advantage.

The company’s online fulfillment was 21% in 3Q19. Roughly half of the company’s online orders filled are unassisted. The company wants to see their online order fulfillment rise to 50% by 2023, but the company’s internal goal is to hit 50% unassisted online order fulfillment which the company believes could be harder to achieve given the strong growth generated by the company’s call center business.  Almost 80% of the company’s Medicare Prescription Drug Plan (PSP) members enroll online which shows that seniors are comfortable enrolling online.

Credit Suisse research experts realize that “Medicare For All” noise could keep EHTH shares volatile near term, but experts continue to see a significant upside in shares over the next 12 months and believe EHTH shares are highly attractive.

For more information or to provide feedback, email Jailendra Singh, jailendra.singh@credit-suisse.com or call 212-326-8121.

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