Online Health Insurance Broker That Once Feared Overhaul Now Sees New Opportunities

EHealthInsurance, a large online health insurance broker, had once feared that its business might be imperiled by the health care overhaul.

But now, the company is looking to profit from the law.

The Mountain View, Calif., company’s website helps consumers compare prices and benefits of selected health insurance policies. The company is bidding for a government contract to run an updated version of the new federal website, www.healthcare.gov, that Congress required as part of the health care overhaul to help individuals and small businesses shop for insurance. In October, the federal site is slated to expand to include health plans’ prices and benefits, as well as detailed eligibility criteria for government health plans.

The contract is expected to be worth $5 million to $10 million in each of the next few years, according to industry sources, and the Department of Health and Human Services could announce a vendor by mid-July.

Even if it doesn’t win the contract to run the HHS site, eHealthInsurance officials say, the increased consumer interest generated by the government site – which doesn’t have an enrollment option for private health insurance — could  help the company’s business by spurring consumers to go to www.eHealthInsurance.com to enroll in health plans. The company gets a commission for each customer it enrolls.

EHealthinsurance was in an uncertain position during the health care overhaul debate as Congress weighed whether to create a government-funded health insurance option – called a public plan – and debated whether to have a single national health insurance exchange or 50 state-based exchanges for individuals and small businesses to shop for affordable insurance.

A public plan could have hurt business because eHealthInsurance makes money by getting commissions from private health insurers. A public plan could have cost it potential customers since it’s unlikely the government would have paid brokers a commission to help consumers join a public plan.

Also, if lawmakers had opted for only one, federally-run exchange, it likely would have undermined the need for private online brokers, particularly if the government ran a national exchange website by itself.

Instead, Congress opted to give states the option to set up their own exchanges. The new HHS website is seen as a precursor to help consumers until those exchanges are operating in 2014.

Site Will Not Offer Enrollment Feature

The eHealthInsurance website hopes to attract business from people who can’t enroll at the federal site. Congress nixed an enrollment feature because it was concerned that consumers wouldn’t understand that insurers will still be able to reject adults with pre-existing health conditions until 2014.

“An enrollment button would have implied automatic enrollment and Congress did not want to leave that impression,” said Jim Yocum, executive vice president of DestinationRx Inc., a Los Angeles company that also is bidding to run the federal site.

Still, he said, the lack of an enrollment option on the new web portal could lower users’ satisfaction. “If you don’t provide info to allow people to act on information you essentially stop any forward motion for most people,” he said.

For the past five years, DestinationRx has provided the software that helps seniors on www.Medicare.gov choose a prescription-drug plan. That site does allow seniors to enroll directly in the plan they choose.

The federal website launched today with a listing of the health plans available in each state for individuals and small groups, including contact information and links to doctors and hospitals in each plan’s network. The site also provides links to government health insurance programs, such as Medicare, Medicaid and the Children’s Health Insurance Program.

HHS, while evaluating contractors to run the expanded site and to pull information together for it, hasn’t released the number and names of bidders.

EHealthInsurance, perhaps the most well known online insurance broker, is considered a leading contender for the contract by industry experts.

“We feel good about our chances,” said John Dresser, vice president of government relations of eHealthInsurance.

Yet some consumer advocates are concerned about having companies that are involved in the insurance business running the government website.

DeAnn Friedholm, director of health reform for Consumers Union, said she would prefer a nonprofit organization be chosen to operate the website to lessen the chance of a conflict of interest.

She declined to say whether an online health insurance broker would have a conflict. “They would need to be put through a conflict of interest test,” she said.

Jennifer Sullivan, a senior health policy analyst at Families USA, another consumer group, said since the federal website will not have an enrollment feature, it will not replace existing online insurance brokers, which typically don’t sell all insurance plans or direct users to government health programs.

Started in 1997 and taken public in 2006, EHealthInsurance handles virtually every step of buying health-insurance — providing quotes, processing online applications and telling users whether the insurance company has accepted them.
In addition, the company last year began providing software technology for part of Utah’s health insurance exchange that offers coverage to small businesses and individuals.

With the recession causing more people to lose insurance coverage, online brokers have seen an increase in business. EhealthInsurance revenues jumped 21 percent to $135 million in 2009.

EHealthInsurance still faces the same pressure all insurance brokers face under the health law – the threat that insurers will lower their commission rates, said Carl Doty, a vice president at Merkle Inc., a consulting firm. That’s because starting next year, the law requires insurers to devote 80 percent to 85 percent of their premiums to payment of medical claims and other expenses that improve health. That will put pressure on insurers to clamp down administrative costs such as agent commissions.

The new federal site has a lot more information than eHealthInsurance’s website. It has a wider array of health plans because all insurers have to submit their cost and benefit data to the government. EHealthInsurance limits which carriers it lists partly to restrict carriers with low financial credit ratings and partly because it doesn’t want to overwhelm consumers, the company says.

EHealthInsurance does not list government health insurance options like the federal site does.