Publicly traded Medicare eBrokers (or sometimes called “Direct-to-Consumer distributors”) collectively sold 361,572 policies, generated $446 million in Revenues, and spent $561 million during Q2 2023.
Last month we looked at Medicare carrier financials side-by-side. As part of that analysis we saw that Carriers increased their Medicare advantage membership by 9% year-over-year (“YoY”). But, how do those Carriers acquire new customers?
Well, at least partially through eBrokers! Today we are going to look at the following company’s Q2 2023 financial results side-by-side.
- GoHealth
- eHealth
- SelectQuote
- e-Telequote – part of Primerica
Note: There are a few other large eBrokers that are part of publicly traded companies, but they do not report segment financials. Two examples being:
- Tranzact – part of Willis Towers Watson
- AssuranceIQ – part of Prudential
What are eBrokers?
Each of these companies have fairly similar business models.
First, they generate and/or purchase leads through numerous marketing methods. Consumer facing websites, social media, television, mail, search, to name a few.
Second, the majority of these leads go to large call centers where agents help consumers pick plans among numerous products, carriers, and plan types.
Finally, the agent helps the consumer complete and submit an application to the chosen insurance carrier.
Note: There is a small but growing portion of consumers who submit applications on their own through the broker’s online application without the help of an agent.
If the policy is approved and sticks, the eBroker gets paid commissions. In the traditional model, the commissions include both initial year, and renewal commissions for the life of the policy.
Recent Results
In recent years, these company’s stock prices and market caps have suffered. Partially due to general economy dynamics, but also due to the following.
- The cost to acquire new customers has gone up ⬆
- The Lifetime Value (“LTV”) of each new customer has gone down⬇
- note: LTV = commission revenues expected to be earned over the life of a policy
- In addition, capital is needed to generate new sales. The cost of capital (as we all know) is significantly higher now than 2 years ago.
Because of this reality, all of these companies have been focusing on improving customer acquisition costs along with customer retention (to improve LTV).
In addition, there have been some tweaks to strategies.
GOCO has pivoted to a model where they are not the agent of record, don’t receive agent commission, but instead get paid an up-front fee to generate warm leads to carrier partners. They refer to this model as Encompass.
SLQT has added a healthcare vertical in order to increase revenue per customer by cross selling Rx benefits.
Side-By-Side Results
To compare and contrast Q2 2023 results we are looking at the Income Statement, a few key Balance Sheet items, LTV metrics, and Sales metrics.