EHTH
#Thank you.
I'll take that.
This is <UNK>.
In terms of the amount of QHPs, it was a little bit more than 50% of our submits in the last open enrollment period.
If you look at our total membership as we sit here today, it's approximately a quarter of our membership, just to give you a size of the QHP component there.
The changes to the pathway with the government were made after the open enrollment period was over, so that's been a ---+ we definitely saw the impacts after the end of the open enrollment period.
It has clearly reduced our volumes and had an impact on our conversion you can see with the 59% drop in our individual and family application volumes year-over-year.
We have been talking with the government for quite a while about improvements that they're going to make.
They've made some promises early on that there were going to improvements.
To date we really have not seen anything material from them at this stage.
I'd say that, from a unit economics standpoint, our unit economics in the off season here are worse than they would be a year ago just given the low volumes that we're bringing in.
And that's mainly our agent cost per unit are now higher.
We have greatly reduced our cost of acquisition.
That piece is well below what it was a year ago, but the agent cost per unit are impacted by the lower number of units.
So overall, it is profitable per member on a lifetime basis if you include all the ancillary products that come along with an individual family, but the economics are definitely down in the soft season but we're running pretty low volumes in the off season.
The open enrollment periods are really when the volumes come.
I don't know if that can be quantified at this point.
Carriers are still making their decisions as we speak on this matter, so it's been a handful of carriers at this point, granted that they're large carriers.
The plans for their members vary, and so it really depends market by market, state by state, as to what will happen there.
We will be very focused on finding homes for those people.
We have product in the states that carriers are pulling out of to move people to.
We will zero in on those members that are being moved and be very aggressively looking to place those members.
Yes, we absolutely are looking at the small business market.
To date we do sell small business product.
We have for a long time.
It's not been a huge emphasis historically, although we do sell a lot of individual plans to small business owners and to employees of small businesses, so we're familiar with the market space.
It's absolutely something that we will consider and look as a strategic area for us.
I think it's becoming more and more attractive to the carriers themselves and we like markets where carriers are excited about selling the product, and that's one of them.
Right, so this is <UNK>.
We would like to have a cooperative and collaborative partnership with the [FSN] and we believe that we can significantly enhance their mission, which is to obtain more enrollment into QHP plans.
We would seek for this year just a restoration of the seamless enrollment path that we had in 2015 to OEP.
Longer term, we'd like to be more of a strategic partner.
It's our thesis that the private sector has competencies in consumer acquisition and activation that the government's not likely to ever possess.
And so from our perspective, we think we are good at this and we would like to play a more significant role with both the state and Federal Exchanges.
Right.
The concerns that were raised is that our enrollment process might not have been complete enough in terms of providing for every possible scenario of QHP applicant.
And so we have undertaken a process to address those issues, but as I said in my prepared remarks, the CMS had committed to making enhancements that we have seen no material improvement against as we've been in the non-OEP period here, and that has impacted conversion rates at a level that causes us to think that the federal objectives are not going to be met in terms of enrollment as they head into this OEP period.
We don't think it's a big ask, it's more of a change of policy that needs to be made at the CMS level.
Some carriers may pursue that strategy.
We have a point of view that commission reductions are likely to be largely offset by premium increases, but it's early for us to know what the strategy is for each individual carrier.
<UNK>, did you want to add anything.
No, that hits it.
Well, the path to profitability is really getting the membership levels for that business to be above the fixed cost structure.
I think a couple calls ago we mentioned that on a variable cost basis, we are covering our variable costs with the revenue that we're generating, so at this point it's really [fueling] up our membership to a level that will cover the fixed costs as well.
We're focused on continuous improvements in unit economics into the future.
It's really what kind of growth will we experience as we move forward, and we're going to aggressively go after growth.
We've also alluded to the fact that we're more and more focused over time here on Medicare supplement market and layering that into it.
We feel that we've led with Medicare Advantage and now is the time for us to pull Medicare supplement along with that given the fact that it's a major market size wise.
Medicare Advantage is about 19 million people in the market for Medicare Advantage.
Medicare supplement is about 12 million, so it's a nice market to penetrate alongside of that.
Were we to get more aggressive in Medicare supplement in the short run, just so you know, just the timing of when we recognize revenue and when we recognize our expense, it could string out our path to profitability a little bit longer.
The lifetime revenue of a Medicare supplement is we believe about equal to a Medicare Advantage, so it's a good lifetime revenue product.
But just from a GAAP perspective, we take all the marketing and advertising and agent costs upfront, just like we do with Medicare Advantage.
But with Medicare supplement, we recognize revenue monthly rather than the first year upfront, and then when it renews another year, and then when it renews again another year for Medicare Advantage.
So it takes a little longer on the path of profitability for Medicare supplement.
<UNK>, it's <UNK> <UNK>.
If I could just add real quick that as part of this operational strategic review that we're undertaking, keeping in the context that despite the growth that the company has had in the Medicare market, we're still under 1% penetration across the board.
We're actively looking at the different sub-segments of the marketplace that we can lever relative to our current technology and customer footprint to identify those areas that might be growing a little bit more faster than others and do so on a cost of acquisition basis.
It's advantageous to us from a bottom line perspective.
So all of that is on the table with a focus on the Medicare market channel.
Yes, 76 percent for all products combined, 82% for Medicare Advantage.
It does, yes.
So the membership is really a function of our growth rates for the past 12 months.
So that would be all ---+ you know the four quarters combined of our growth in applications over the base.
Whereas our current ---+ this is just our current application growth rates for these current quarters, so we're looking at two quarters, whereas for membership you're looking at a four quarter span.
So that's to get our run rate for tax provision for the year to be basically half of what it will be for the full year.
We're basically in a AMT, altered minimum tax position, and a little bit of foreign tax.
So it's essentially kind of a fixed amount of tax provision for this year.
So you saw us book a large expense when we had a large amount of income in Q1, and this essentially, this benefit basically offsets, for the most part, the provision we took in Q1 to get us to a small resulting provision year-to-date at the end of Q2.
That's right.
Of our membership, about 25% are estimated to be QHP members.
I think there is an auto enrollment of them that would keep them in those plans such that we would theoretically be able to retain them.
Right.
No, the only other way would be for if they're going to go out and shop was for us to get in front of them and hopefully they loved our service the first time and we can get them back reenrolled again, albeit in a less efficient manner.
It means that the questions that people were going through in the process of applying, you know we were hitting let's say the 80% rule in terms of the people that were shopping.
We had the questions for them to go through and shop based on those questions, and if they were an [edge] case which had a more complicated background, they would need to go through to the Exchange itself to get a complete application to go through those additional questions.
Correct.
I mean we were streamlining the process for people, the solid 80% of people out shopping.
We didn't have a streamlined process for 100% of the people.
It's not an eHealth specific issue, it's across the WV community.
^<UNK> <UNK> <UNK>^ <UNK>, this is a total web-based entity issue that CMS has kind of hit across the board rather than being an eHealth specific issue.
And as <UNK> said earlier, they had told us that there were going to be changes to the process as the year went on and we've just not seen any of that as yet.
But this isn't a company specific issue and we're making every effort possible to kind of bring the influence to get them to see the benefits of going back to where we were the last year.
I can't say that it necessarily does, that the two aren't necessarily correlated because we would like to have as much profitable IFP business as is possible.
And we believe that the web-based exchanges, including us as the largest, have an important role to play there.
And that the government, the CMS, will come around in the fullness of time to seeing the benefit that we bring.
And so we believe that we should be in that business.
The Medicare business is highly profitable, 50% contribution margins, average revenues over five years of almost $1,500.
Frontloaded customer acquisition costs obviously by the way we account and the way the cash flows.
But getting in front of that wave where we have 10,000 agents to over 65 every single day, cresting at 20,000 per day in a few short years, we feel like we should be growing that business as rapidly as we possibly can.
And hopefully that the business gets bigger faster because IFP stabilizes and then grows again.
We think that should happen.
But whether it does or it doesn't, the Medicare business standalone is one of the most attractive growth opportunities I've seen in my business career, and we want to go after it.
<UNK> made a very important point on the Med supp business, which we significantly under-index in terms of our share in Med supp.
I believe we've missed an opportunity in focusing almost solely on Medicare Advantage and selling Med supp almost as a throw in for those who specifically request it.
Those enrollments are very profitable, similar lifetime value, and we're looking very hard right now at what we can do to capture as much market share in Med supp as we do in Med Advantage.
I mean, I guess I'd say, you know we saw an opportunity to outgrow Q1 and we were able to step that up from being in the 50% to the 80% growth level for [MAs].
Came at somewhat higher marginal cost on cost acquisition.
You know cost acquisition grew a little bit more than 100% versus the 82% MA growth.
We felt that that was still well within where the lifetime revenue is.
Great margins on that.
Didn't say it in our script, our comments here, but with that volume we were able to bring down our cost per unit for our agent costs, so we saw more efficiency year-over-year there, which almost offset the cost of acquisition increase.
So overall, our unit economics were pretty close to what we had in the past.
So if we see the opportunity to continue to drive down our cost per agent and trade that off against higher cost of acquisition and still have a very good return on investment, we'll continue to do that.
That's just how we look at it.
Thank you, everyone, for participating.
We are available for conversations with you at your convenience.
