The company that defined health insurance e-commerce is struggling in the new market, despite an attempt to sell subsidized health plans, and is now looking to Medicare.
eHealth, the publicly-traded operator of eHealthInsurance.com, is laying off 15 percent of its workforce, about 160 employees, amid losses and declining revenue and enrollment.
In 2014, eHealth lost $16 million on revenue of $180 million, which was down about 17 percent year-over-year. The company is now planning to book $3.7 million to $4.7 million in restructuring charges related to the layoffs.
"We've been taking a close look at eHealth's cost structure and the allocation of resources across our company," said Gary Lauer, CEO of the Mountain View, California-based company. "While our current and projected unit economics for new sales of individual and family health insurance plans remain attractive, we recognize the need to adjust our fixed cost structure as the result of lower membership than we expected in our individual and family health insurance business."
Individual and family applications for health plans on eHealth declined by more than 40 percent last year, even with the company's bid to sell Affordable Care Act-subsidized plans as a "web-based entity" linked to Healthcare.gov and state exchanges.
Like traditional agents and brokers, web-based brokers can receive commissions from insurers for enrolling consumers, and Lauer saw a large opportunity.
"Having multiple ladders in the pool ensures that there are more people getting into the pool," Lauer wrote to state exchange officials in 2013. eHealth also launched a website promoting the idea of partnering with state exchanges, called Costfreeenrollment.com.
But it doesn't seem that eHealth sold many public exchange plans, and with open market sales down as well, investors are worried about when if ever the e-commerce company will be able to be profitable.
One strategy could be serving the growing market of Baby Boomers, particularly web-savvy retirees. eHealth is expanding in Medicare Advantage, after seeing enrollment in MA plans on its exchange increase 46 percent last year.
"Our Medicare business is strong, and we have continued to successfully generate and convert demand, as evidenced by our Medicare application growth in 2014," said Lauer, a cancer survivor who's run eHealth since 1999.
"We believe that our cost-reduction actions, while difficult to take, will help create a stronger eHealth that is more focused on the expansion of our Medicare business, while preserving the flexibility to adapt quickly and capitalize on future developments in the individual and family marketplace."