America鈥檚 biggest online health insurance retailer is getting ready for some stiff new competition from Uncle Sam.
The federal government will be opening new online marketplaces for health insurance聽聽on Oct. 1. State governments are opening their own on the same day in the remaining states.
They鈥檙e getting into a business that聽聽currently dominates. It鈥檚 operated a clearinghouse-style online exchange since 1999 that鈥檚 very similar to what state and federal governments plan to launch next month, where people who want to buy individual insurance policies enter some personal information and get the chance to buy plans from multiple carriers.聽
(Photo courtesy eHealthInsurance)
贰贬别补濒迟丑听聽says he views his company as more of a partner than a competitor with the federal government as it works to get the Affordable Care Act (ACA) up and running.
鈥淚f we don鈥檛 utilize all the viable means to get people enrolled, this legislation may very well fail,鈥� Lauer said, adding: 鈥淚f we don鈥檛 get broad and deep enrollment across the country, this legislation is not going to work. We鈥檙e really good at this. Hopefully, these government exchanges will be good at it as well.鈥�
The woman in charge of the federal exchanges,聽聽is confident they鈥檒l work. And she says the White House is welcoming all the help it can get to reach its goal of enrolling 7 million Americans in new health coverage in 2014.
鈥淎gents and brokers do a tremendous amount of work, so, to that extent, they鈥檙e valued partners and we want to work with them,鈥� she said during a recent visit to Colorado.
Business Opportunity Or Defeat?
But before recent regulations were written, it wasn鈥檛 clear what the relationship would be between online brokers like eHealthInsurance and the ACA. Would states and the federal government have a virtual monopoly on selling individual and small group polices online?聽
鈥淭hat was going to pretty much delete 鈥� remove? Obviate? Whatever word you want to use 鈥� us, from the landscape,鈥� Lauer said.
He spent a lot of time in Washington lobbying for access to the market. And he got it: On July 31, eHealth and four other online brokers inked a deal with the federal government to sell Obamacare policies and link their customers to the subsidies. In 2015, new ACA subsidies an estimated 11 million Americans afford coverage they don鈥檛 have now. Lauer views that as a business opportunity.
鈥淲e鈥檙e facing a market here that鈥檚 easily going to double, if not triple, in size,鈥� Lauer said.
As of now, eHealth will sell insurance in the 34 states that will have federal exchanges. The company is currently negotiating for access to the 16 state-run marketplaces but hasn鈥檛 signed any agreements yet.
And while Lauer downplays competition with the federally-run marketplaces, he鈥檚 confident that his Silicon Valley-based company has some advantages over the governmental players.
鈥淭his is new for government. Government鈥檚 going into the e-commerce business, it鈥檚 as simple as that.鈥� Lauer said. 鈥淏ut e-commerce is not simple. It鈥檚 very complex, it鈥檚 very fast-moving. Consumers are very aware, and they鈥檙e very demanding.鈥�
Still, e-brokers have at least one competitive disadvantage: Insurance companies pay a commission on every policy brokers sell for them. They鈥檒l pay no commission on policies sold in the new online government marketplaces.
The federally-run marketplaces will assess a 3.5 percent fee on every policy they sell, but policies sold in private marketplaces have to pay that, too, in addition to whatever sales commission they negotiate.
Insurers Covering Their Bases
So why would insurance companies continue pay commissions to e-brokers, if they can get listed on the federally-run online marketplaces essentially for free?
鈥淭he answer is, insurance companies view eHealth as an effective vehicle for distribution,鈥� said聽, a health care technology market analyst at Lazard Capital Markets in New York.聽
He says eHealth has invested over $100 million building its web presence over more than a decade. It has a track record of finding customers online and successfully shepherding them all the way from window shopping to sale.
鈥淭hat鈥檚 why they鈥檙e willing to pay the commission,鈥� Halper said. 鈥淣obody really knows if the federal exchange on its own will be as effective as eHealth.鈥�
eHealth also works hard to keep its site at the top of internet search engine results, so people hunting for coverage that meets the ACA鈥檚 requirements may well end up at eHealthInsurance.com instead of the online marketplace the federal government is running in their home state.
Halper won鈥檛 speculate on whether government or privately-run online marketplaces will win more customers. He thinks a substantial number of Americans will blow off the health law鈥檚 requirement that everyone have insurance and choose to pay a tax penalty instead.
But how people respond to the health law鈥檚 new provisions next year is contingent on a complicated mix of politics, technology and market behavior 鈥� and it is very much an open question.
鈥淚鈥檓 not betting on anybody,鈥� Halper said. 鈥淭he problem with trying to forecast the outcome, is that you really don鈥檛 know how many people are actually going to buy insurance in 2014.鈥�
This story is part of a reporting partnership that includes聽and Kaiser Health News.