eHealth brought e-commerce to the insurance business. Through its eHealthInsurance subsidiary, the company sells health insurance online to more than 3 million individual, family, Medicare, and small business members. The company is licensed to sell insurance policies throughout the US. It has partnerships with some 180 health insurance carriers, for which it processes and delivers potential members' applications in return for commission on policy sales. It lets consumers compare some 10,000 products online -- including health, dental, and vision insurance products from the likes of Aetna, Humana, UnitedHealth, and Wellpoint. The company was founded in 1997.
eHealth fills a gap in the health insurance brokerage business left by large brokers who cater to large and midsized companies and local agents who sell to individuals and small businesses but offer plans from a limited number of carriers. eHealth's technology platform and nationwide presence allow customers to get online rate quotes and side-by-side plan comparisons from a much wider range of providers. The company's online applications are delivered electronically to insurance carriers' information systems, reducing the time it takes to process and enroll new members.
Though the company operates a technology center in China, where more than half of its IT staff resides, almost all its revenues come from the US. However, it has launched a pilot program in China to sell insurance online in select markets within the country.
The company gets most of its revenue (about 80%) from commissions off sales of policies. A much smaller amount comes from advertising sponsorships on its website; licensing agreements with agents and carriers who use the company's e-commerce technology; and fees for referrals for Medicare clients. Following health reform laws passed in the US, however, commission sales fell 11% in 2011 as insurance carriers reduced their commission rates due to new medical loss ratio requirements. Despite increased revenues from Medicare lead referrals, the decreased commission rates caused an overall 5% drop in revenues for eHealth for 2011 to some $152 million. Annual enrollment and administrative expenses rose as well, and as a result net income also fell by more than 60% to about $7 million.
eHealth uses direct marketing and other means to build brand awareness and attract new customers to its website, with the hopes of increasing commission payouts from its insurance partners. The company has marketing partnerships with online financial services firms and medical information providers to help get potential customers to its site. It is also enhancing its technologies to keep pace with competitive pressures, aiming to provide the highest level of reliability and functionality.
In addition, eHealth is working to increase the number of partners who license its online sales platform to sell policies on their own websites. The company is also looking to benefit from licensing opportunities from federal health reform laws that will require states to provide online health exchanges for consumers by 2014.
As it strives to attract customers by providing more products from an ever-growing network of carriers, eHealth has especially been focused on growing its Medicare business since 2010. It began actively marketing Medicare policies through its eHealthMedicare and PlanPrescriber websites following the 2010 acquisition of privately-held PlanPrescriber for roughly $30 million. PlanPrescriber provides online and pharmacy-based tools to help seniors navigate Medicare health insurance options. The acquisition has helped accelerate eHealth's penetration of the large and steadily growing senior market. eHealth intends to continue to expand its online Medicare enrollment capabilities as the Baby Boomer generation continues to shift into the Medicare bracket. – less