Positive Outlook for eHealth Inc.

Credit Suisse https://www.credit-suisse.com hosted eHealth Inc. (EHTH) https://ehealth.com CEO Scott Flanders and Vice President for Finance & IR, Kate Sidorovich recently at a series of investor meetings held in London and Geneva.

Management talked about 4Q trends and 2020 long term expectations for eHealth Inc. The company has confidence in their outlook at or above the high end of their revenue guidance of $375-$385 million. Credit Suisse experts have raised their 4Q19 revenue estimate by $17 million which puts the 2019 revenue estimate at $405 million.

One of the trends contributing to positive projections is the company’s focus on the use of online tools and resources by seniors. The company believes the majority of their competitors have not yet recognized that the shift of the senior population to online is inevitable.

Online leads and online enrollment continues to be one of EHTH’s fastest growing channels. Roughly 20% of EHTH’s sign-ups in 3Q were online and the company expects the percentage to be higher 4Q19. The company also expects their online order fulfillment percentage to grow 300-400 basis points annually over the next several years. The company believes it will be 4-5 years, before they see more than half of their enrollment being online-only.

As for hiring brokers/agents, the company has more than doubled their agents from 88 in 2018 to almost 1,800 in 2019. For 1Q20, the company’s total agent count will decline primarily driven by the decline in the number of external agencies. However, the company expects their peak agent count in 2020 to be higher than the 1,800 the company had in 2019.

So far, EHTH hasn’t lost any agents to competitors which the company attributes to the fact that the company pays their agents 100% commission upfront, however, the company is evaluating their compensation plan for agents for next year.

Brokers play a role with so many different MA plans and multiple carriers. There is an increased level of confusion when seniors are making their plan selections which is driving a need for brokers in the marketplace. Currently, around half of all MA enrollment happens through brokers while another half enroll directly through carriers.

The company notes that they will always have a higher churn as they actively move seniors into the best plans for them. The company notes that only 10% of seniors are in the perfect plan for their conditions and preferences. Given all the changes seniors go through and the changes made by insurance carriers, it is unusual for a senior to be in an optimal MA plan for more than 2-3 years.

EHTH sees the CMS Medicare Plan Finder as a comprehensive shopping and information site, but seniors aren’t able to enroll on the Medicare Plan Finder site, so they are directed to the carrier for enrollment. Management notes that a very small percentage of seniors enroll via the Medicare Plan Finder website.

Management also realizes that a horizontal consolidation among managed care companies is a net negative of their business model since having more plans and more choices in the MA marketplace is favorable for EHTH.

Regulatory barriers are also often a factor. For instance, EHTH currently interfaces with 175 insurance carriers electronically. The company believes that it would be an uphill task for any entrant including a strong e-commerce player such as Amazon to present a comprehensive selection of MA plans.

In response to a question on Amazon’s interest in this industry, management notes that the most logical way for Amazon to enter the market is to either partner with or buy an existing player in the industry. With e-commerce being the DNA of Amazon, it is likely to prefer the companies with some e-commerce/online presence versus companies focusing primarily just on call centers.

EHTH believes that for a new entrant to enter the market with some technology tool, it is going to be hard to replicate the carrier relationships EHTH has built over the years.

For more information or to provide feedback, email Jailendra Singh, Research Analyst at jailendra.singh@credit-suisse.com or call 212-325-8121.

Share Button