eHealth Inc (EHTH)’s Preliminary Fourth Quarter and Full Year 2014 Results Conference Call Transcript

Gary Lauer, Chief Executive Officer

Good morning and thanks for joining us as we review our preliminary result from fourth quarter fiscal year 2014. We thought it was important to share this preliminary results with you given that our projected 2014 revenue and earnings are expected to fall short of the guidance ranges we provided previously. Since we haven’t finalized the closing process for the fourth quarter, and don’t have full financial and membership matrix that we typically report, today’s conference call will be limited to our prepared remarks.

What I’d like to do today is update you on our fourth quarter performance in our Medicare business and our individual Family Plan business and discuss key factors that affect our performance relative to our expectations. I’ll then turn the call over to Stuart who review projected ranges for our fourth quarter and 2014 financial results and provides some additional color around this numbers.

In our Medicare business, we completed a successful annual enrollment rate during the fourth quarter, generated submitted application growth above our expectations at attractive acquisition cost per member. We’re especially pleased with submitted application growth rates for our Medicare advantage and Medicare supplement products which are both characterized by high expected lifetime revenues.  Primarily as a result of the strong application growth, we spent considerably more on Medicare marketing during the fourth quarter than we planned, although our per member acquisition cost was lower than it was in the fourth quarter a year ago. I’ll talk more about our Medicare business in a few minutes.

In our Individual and Family Plan business, we are currently in the middle of the 2015 open enrollment period. This is the second open enrollment period under the Affordable Care Act and there are several important differences this going-on open enrollment period and the one one that began on October 13th over a year ago. The first major difference is timing. Given that this enrollment period started on November 15, we have 45 selling days in the fourth quarter of 2014, while on the fourth quarter of 2013, we have a full 90 days. Also during the inaugural open enrollment period, we saw a large number of Individual and Family Plan applications during the last two weeks of December, driven by consumers enrolling in the so called grandmother plans. To remind you late in 2013 the Obama administration allowed carriers to sell non-ACA compliant plans and gave consumers a deadline of December 31, 2013 to enroll in them. More than half of our fourth quarter 2013 individual and family plan applications or for this grandmother plans, this products are not available to be sold in this current open enrollment period that started on November 15th. Importantly during this on-going open enrollment period we are assisting subsidy eligible consumers and submitting applications for qualified health plans, something we did not do on the fourth quarter a year ago to the technology issues with We are enthused to be able to offer this capability.

During the fourth quarter of 2014, we sold over 150,000 individuals applied for health insurance on roughly 100,000 individual and family plan submitted applications. Over 25% of these submitted applications were for qualified health plans. The submission volumes were less than we anticipated. I’d like to note that historically we’d seen consumer demands in our markets increased in our application deadlines. During the current open enrollment period, these trend has been even more pronounced. With peak application volumes around the first major enrollment deadline of December 15th, significantly exceeding last years. As a reminder, December 15th was the deadline to apply for the individual family plan policy, with the January 1, 2015 covered effective date.