January 5, 2015 by Tony Novak
Yesterday the “Seeking Alpha ” investment newsletter issued a negative report on the stock valuation and future prospects of eHealth, the nation’s largest health insurance enrollment company. The health insurance that the enrollment field is growing overall but return on equity for eHealth and other participants is declining due to a range of factors including increased competition from government web sites expanding their product lines into supplemental insurance, increased competition from health insurance companies now handling their own direct online enrollment and lackluster consumer behavior that isn’t excited about the products. I’ve written various pieces on this same theme for several years; this is a long term trend that is not likely to change in the foreseeable future. While more recent entrants feel that they have business models that can improve ROI, we have yet to see that happen. In short, I think that observers within the enrollment industry saw this a long time ago but investors are just beginning to realize how difficult it is to make money in the over-regulated post-ACA health insurance field.
Looking back, I am glad that Freedom Benefits sold MedSave, our major medical insurance enrollment platform, prior to ACA implementation and I’m still not sure that a winning business model exists in the health insurance enrollment industry today. Freedom Benefits continues to build revenue and brand value but the pace of growth is so agonizingly slow that new investors would wisely not be interested in the brand or the industry at this stage.