Credit Suisse https://www/credit-suisse.com hosted eHealth https://ehealthinsurance.com management including CEO Scott Flanders, CFO Derek Yung, CRO Tim Hannan, CDO Philip Morelock, and VP of IR Kate Sidorovich at a virtual meeting held with investors.
The company’s management sees a 50% large scale opportunity to continue to grow the business and preserve unit economics for both customer acquisition and customer care enrollment costs. The company believes they can grow their top line within the 50% range annually while still capturing increased unit economics.
To hit such a growth target, the company’s assumptions around broker productivity (conversion rate, recapture rate, churn etc.) would not have to improve materially, however, there are some low hanging fruit on each of these metrics.
Management is excited about the newfound capability for remote work-from-home agents which management did not expect to achieve so soon. Remote working capabilities will help to improve the company’s economics in 2020 by lowering variable costs. As for the online enrollment percentage, the company is on track to achieve the full goal of 34% vs 27% in 2019. The member turnover ratio jumped from 32% in 1Q19 to 38% in 1Q20.
Management highlighted two key drivers for the higher churn rate which is calculated by the number of customers who leave a product over a period of time. As it turns out, over 40% of the membership consists of newly approved members this year vs 30% in the prior year.
Additionally, the company noted that more seniors are taking advantage of the Open Enrollment Period (OEP) this year to change plans that they enrolled in during the Annual Enrollment Period in 2019, when the churn declined from the first quarter OEP as the year progressed. The company has observed improving trends in April vs Q1.
In recent years, eHealth has focused on capturing market share aggressively but has had to rely on external agents. Although the agents are flexible, the quality of the agent workforce sourced externally is significantly lower than that of internal agents.
For 2020, eHealth sees the mix changing which will help avoid the 30-40% productivity deficit and the company aims to increase their internal agents by a larger absolute number than their external agents.
In order to increase agent productivity, the company has begun to implement digitally oriented recapture techniques such as customer account centers and communication platforms, etc. Recapture is a major focus in 2020 as the company plans to launch an integrated recapture and customer management tool. With the significant growth in the membership base, the ROI on these investments seems to be much more worthwhile going forward.
As the company starts up their online marketing capability, it will be possible to gather data provided from the call center, feed the information into the communication platforms, and then on to the customer account center.
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