For-Profit Online Insurance Brokers Gear Up To Sell Obamacare
When the Affordable Care Act was working its way through Congress, Gary Lauer was nervous. Part of the bill sounded grim. It said people could buy required health coverage online, but only through websites run by state and federal governments.
"That was going to pretty much delete us from the landscape," he says.
That's because his company, eHealth Inc., is the country's biggest online health insurance broker. If he could work with the government, the new requirement for Americans to buy health insurance sounded great. And subsidies would help lower-income people afford the product he sells.
"We're facing a market here that's easily gonna double if not triple in size," Lauer says.
So Lauer made dozens of flights between Silicon Valley and Washington, D.C., lobbying for access to the new market. This summer he got it. The federal government agreed to allow eHealth and five other online brokers to sell plans in the new subsidized marketplaces.
The White House's point person for signing up as many people as possible for health coverage, Marilyn Tavenner, says the government is going to need help.
"It's one more avenue for individuals to access coverage to health insurance. Agents and brokers do a tremendous amount of work, so to that extent they're valued partners and we want to work with them," she says.
Lauer is happy to be a partner. But there's a new rub: He's also competing with the federal government, which is running online health insurance markets in 34 states. And he's at a disadvantage.
For starters, the company has yet to sell a single policy on the new marketplaces, since they don't open until Oct. 1. Second, insurance companies pay eHealth a commission for each policy it sells as a result of listings on its website. The federal government's websites won't charge insurers this commission.
Steve Halper, an analyst with Lazard Capital Markets in New York, says he thinks insurance companies are going to keep paying eHealth to market their products, even if they can get the same service free of charge from the federal government.
"The insurance companies view eHealth as an effective vehicle for distribution," he says. "That's why they're willing to pay the commission. Nobody really knows if the federal exchange on its own will be as effective as eHealth."
Insurance companies need customers and want as many young and healthy ones as they can get. Halper says health insurance is a complicated product to sell. People don't go online shopping for it for fun like they do for shoes or cars or new TVs, and eHealth has expertise in taking customers all the way from window shopping to closing a sale.
"Only around 50 or 60 percent of applicants actually complete the process; eHealthInsurance can help. That's the value," Lauer says.
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