Private health insurance exchange eHealth lost $2.1 million in the first quarter this year and has lost hundreds of thousands of individual exchange members in the past year, the company reported Friday.
But in typical Wall Street logic, the stock price of eHealth actually swelled more than 20% in early morning trading as revenue came in higher than expected while losses were not as bad as expected.
eHealth caters to people and small businesses looking to buy health insurance online. The company offers health plans from large health insurers, and it collects commission fees from insurers after people sign up for coverage. eHealth also owns Medicare.com, helping seniors sign up for private Medicare plans.
However, eHealth's business model has suffered since the Affordable Care Act went into effect. More people are buying health plans through HealthCare.gov and state exchanges, which were established under the ACA and have become competitors to eHealth. The decline in paying members forced eHealth to lay off 15% of its workforce in March.
The second open-enrollment period officially ended in February, and approximately 12 million people bought coverage through ACA exchanges. The government's special enrollment period, announced in February to help Americans avoid tax penalties, ends Thursday.
So far, people appear to be very happy with their ACA exchange plans—exchange enrollees showed higher rates of satisfaction with their 2015 health coverage than those who have employer-based coverage, according to a J.D. Power and Associates study.
The number of individual and family plan applications submitted to eHealth in the first three months of 2015 dropped 17%, totaling 140,000. eHealth's overall individual and family plan membership stood at 584,900, a 27% decline from the end of the first quarter in 2014.
Financial analysts continued to show concerns about the challenges facing the company's individual enrollment. Yet executives said they are committed to the core business, though they gave no details about how enrollment could be increased in the future.
“Although we've seen lower individual and family plan application volume over the past several quarters … the individual business remains a very important part of eHealth as it generates significant annual revenues,” eHealth CEO Gary Lauer told investors on a call Friday morning.
Medicare sign-ups again were the silver lining for eHealth. Medicare membership increased 39% year over year to 155,600. Medicare's annual open-enrollment period for medical and prescription drug plans runs from October to December every year, and eHealth was able to recognize more revenue in the first quarter as Medicare policies went into effect.
“The investment that we've made in our Medicare business is working,” said Lauer, who made $2.3 million in 2014. “And our first-quarter financial results demonstrate the beneficial impact that this business can have on our top and bottom line.”
eHealth did not release financial projections for the remainder of 2015, a question that was on the minds of many Wall Street observers. “We're going to need to see how things develop,” eHealth Chief Financial Officer Stuart Huizinga said.
Shares of eHealth were selling at $13.90 after morning trading. The company's stock has decreased more than 44% so far in 2015 and is down 67% in the past 12 months.