eHealth, Inc. (NASDAQ:EHTH) Q4 2023 Earnings Call Transcript

eHealth, Inc. (NASDAQ:EHTH) Q4 2023 Earnings Call Transcript February 27, 2024

eHealth, Inc. misses on earnings expectations. Reported EPS is $1.61 EPS, expectations were $1.94. eHealth, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, everyone, and welcome to eHealth, Inc.’s conference call to discuss the company’s Fourth Quarter and Fiscal 2023 Financial Results. At this time all participants have been placed on a listen-only mode. [Operator Instructions]. I will now turn the floor over to Eli Newbrun-Mintz, Senior Investor Relations Manager. Please go ahead.

Eli Newbrun-Mintz: Good morning, and thank you all for joining us today. On the call today, Fran Soistman, eHealth’s Chief Executive Officer; and John Stelben, Chief Financial Officer, will discuss our fourth quarter and fiscal year 2023 financial results. Following these prepared remarks, we will open up the line for a Q&A session with industry analysts. As a reminder, this call is being recorded and webcast from the Investor Relations section of our website. A replay of the call will be available on our website later today. Today’s press release, our historical financial news releases and our filings with the SEC are also available on our Investor Relations site. We will be making forward-looking statements on this call about certain matters that are based upon management’s current beliefs and expectations relating to future events impacting the company and our future financial or operating performance.

Forward-looking statements on this call represent eHealth’s views as of today, and actual results could differ materially. We undertake no obligation to publicly address or update any forward-looking statements and future filings or communications regarding our business or results. The forward-looking statements we will be making during this call are subject to a number of uncertainties and risks, including, but not limited to, those described in today’s press release and in our most recent annual report on Form 10-K and our subsequent filings with the SEC. We will also be discussing certain non-GAAP financial measures on this call. Management’s definitions of those non-GAAP measures and reconciliations to the most directly comparable GAAP financial measures are included in today’s press release.

With that, I’ll turn the call over to Fran Soistman.

Fran Soistman: Thank you, Eli, and good morning, everyone. Today, we will discuss our fourth quarter and fiscal year 2023 results and 2024 outlook. Our fourth quarter results demonstrate the success of our transformation program and our company-wide AEP preparedness efforts. One of our primary goals this year was to return to fourth quarter Medicare enrollment growth on a profitable basis and a substantially enhanced operational foundation. I am pleased to announce that we have successfully accomplished this objective, delivering strong growth in Medicare enrollment and revenue as well as a significant improvement in our profitability metrics compared to Q4 of 2022. Our execution in 2023 has positioned us well for this year with an expanded and more productive telesales organization supported by technology enhancements and continuous reinforcement of training, positive momentum in our brand-building initiatives, a wider and more diversified portfolio of marketing channels and a promising start for Amplify, our new dedicated carrier business.

We are excited to continue building on this foundation in 2024 as we plan to drive growth, further enhance our profitability metrics and pursue business diversification. Before diving into our operational performance, I want to share some thoughts on the current industry landscape. Medicare Advantage has proven to be highly valued by seniors with over 30 million Americans enrolled and continuous share gains relative to the traditional Medicare program. During this AEP, carriers continue to offer robust plan selection, strong provider networks and attractive benefits. In fact, the average beneficiary had access to 43 Medicare Advantage plans, the largest number of options ever. As of January 2024, the individual MA market grew 2.3% sequentially and 9.4% year-over-year, representing a slight acceleration from last January when it grew 1.1% and 9.2%, respectively.

The agnostic nature of our platform allows eHealth to succeed by providing great selection and plan match advisory to our customers regardless of competitive and market share dynamics. This was evident in our fourth quarter MA enrollments, which grew 22% year-over-year, ahead of overall market growth. eHealth’s value proposition is rooted in our customer-centric marketplace that provides beneficiaries with free access to data power tools and our staff of full-time benefit advisors who are licensed agents to help them find health insurance that best fits their needs. The increasingly local market focus of our sales and marketing strategy further enhances our ability to find optimal plan matches. Specifically, we are improving our ability to use the unique aspects of each market, such as provider and pharmacy networks to get beneficiary tailored plan recommendations.

Moving into 2024, several national carriers have publicly commented on their plans to emphasize profit over enrollment growth this year. While it’s premature to speculate on final planned filings for next AEP, we do expect changes in benefit structure and potential market exits by carriers. This sets the stage for more shopping and creates an opportunity for eHealth and our carrier agnostic choice platform. We are fully prepared to assist beneficiaries in evaluating their options and choosing the right plan should their networks or benefits change. This may involve transitioning to a different plan or remaining with their coverage depending on their individual needs. Given our differentiated value proposition, we expect to grow in 2024 by gaining market share, and what we see is a more rational marketplace as reflected in our outlook.

I also want to comment on the CMS’ proposal for Medicare policy and technical changes for contract year 2025. First and foremost, eHealth fully supports CMS’ efforts to increase transparency and provide protections for Medicare beneficiaries. With respect to this specific proposal, the full scope and practical implications are not yet clear. Industry participants, including eHealth, have already submitted comments seeking clarifications and are raising important questions and concerns. Given the complexity and ambiguity of the proposal, combined with the nature of the commentary we are seeing, the implementation time line and scope is uncertain. As we and other industry participants await clarification on many of the questions we have raised, it is plausible that this will not be finalized and implemented in 2024, especially as it pertains to compensation issues.

It appears that at least one of the issues that CMS is trying to solve is Medicare market share consolidation with certain national carriers getting larger. However, in our view, the manner in which they are approaching this trend may not result in CMS’ desired impact. Brokers and agents bring choice to consumers. eHealth in particular, represents over 55 Medicare carriers and whether carriers are gaining or losing share on our platform speaks to the strength of their plan offerings and not their payments to eHealth. For example, Stronger Stars performance yields larger CMS rebates for carriers, allowing them to offer rich plan benefits and potentially attract more customers. National carriers have disproportionately larger geographic footprints in comparison to local and regional health plans.

Similarly, we have observed that plans featuring value-based care typically experience greater provider network stability and as a result, are more attractive to beneficiaries. It’s important to note that eHealth’s recommendation algorithm is blind to carrier payment arrangements. Further, it is essential to assess the impact of the significant MA regulations implemented over the past two years around sales and marketing practices. We believe it is prudent to give the existing regulations and opportunity to demonstrate their effectiveness and evaluate their impact before introducing further changes. Based on the public comments we’ve reviewed other industry players agree with our assessment. Moving now to our fourth quarter operational performance.

Throughout AEP, we emphasize agility in our execution. We made dynamic resource shifts into the best-performing areas, allowing us to deliver strong growth at attractive margins despite what many characterized as a challenging AEP environment. Specifically, we saw great results and lean into our branded marketing channels, including TV, paid search, social media and e-mails. A major contributor to the success of our direct marketing channels was our rebranding initiative, featuring an effective messaging strategy to support our efforts to cut through the clutter that we launched ahead of AEP. Our new TV campaigns had a particularly powerful impact. We believe our branding efforts, combined with audience segmentation and targeting strategies can create a flywheel effect in future enrollment periods as we focus on increasing eHealth’s recognition nationwide as a trusted and unbiased Medicare matchmaker.

During AEP, our telesales organization benefited from our enhanced training protocol and earlier hiring ramp. We were also pleased to witness the continued success of our local market model. This success further reinforces our belief that health care is local and that by specializing, our benefit advisors can serve customer needs more effectively. Fourth quarter telephonic conversion rates were slightly down year-over-year, reflecting a significant mix shift towards non-tenured advisors. Controlling for length of tenure though, telephonic conversion rates increased compared to last AEP, with the most substantial year-over-year conversion rate increases seen with our newly hired advisors. We attribute this success to the implementation of our redesigned training program, enhanced advisor scripts and ongoing professional development initiative called Sales Mastery University.

In 2024, we plan for tenured advisors to represent a larger percentage of our total advisor mix, which we expect to have a favorable impact on our telephonic conversions. In terms of online performance, our fourth quarter unassisted conversion rate increased more than 20% year-over-year, driven by further enhancements to our online user tools and stronger alignment between audience-driven marketing campaigns and landing page experience. Another important development during the AEP was the successful expansion of our new dedicated carrier business, Amplify. Amplify is a revenue diversification initiative within our broader strategy of supplementing our core Medicare Advantage Agency business with new margin accretive initiatives. Within the Amplify model, carriers generate and drive inbound calls to our dedicated advisors.

This reduces variable marketing investment needed to grow our revenue and earnings and improves our cash flow profile. It is also an opportunity to expand our value proposition to carrier partners. While we delivered outstanding customer experience to our Amplify Partners and set successful foundation for this business, volumes that we expected in this channel came in below forecast. This was reflective of AEP performance for those Amplify carrier partners. During the quarter, we opportunistically shifted some of our resources, including call center advisors towards our best-performing channels in our agency model, mitigating volume shortfall in Amplify. Importantly, we came away with meaningful takeaways for forecasting and growing this business and have already added a significant new carrier contract for 2024.

Amplify remains an attractive growth and diversification opportunity for eHealth. Moving now to our retention initiatives. Through AEP, we maintained our steadfast focus on enrollment quality and customer experience. We continue to make progress in our member retention program through the onboarding, engagement and renewal phases of the customer journey. Strategies introduced this year included overhauling the onboarding experience to be more tailored to each customer circumstances, the establishment of a loyalty program and increasingly intentional year-round outreach to our existing members. The impact can be seen in the 11% year-over-year improvements to our fourth quarter MA LTVs, which reflects positive retention trends for last year’s AEP cohort, among other factors.

It is also seen in the positive net adjustment revenue of just under $15 million that we recognized in 2023. John will cover these metrics in greater detail. In terms of the early indicators of our enrollment quality for the cycle, we are experiencing stable trends relative to this time last year in terms of CTM performance and carrier feedback. Generally, we are performing in line with internal call centers for some of our top carrier partners, which we view as a very positive indicator. In our earnings presentation, you can find our updated operational priorities for 2024. I’ll briefly address each of them now. First, grow our revenues year-over-year by gaining share in the Medicare market and continuing our push for diversification. We also remain committed to increasing adjusted EBITDA profitability and building on last year’s cash flow achievements.

This will be accomplished through greater operational efficiencies and further reductions in our fixed cost through opportunities we identified as part of our 2024 planning process. Second, advance our local market-focused omnichannel enrollment engine to drive higher conversions and greater LTV to CAC ratio in our Medicare Choice model. Specifically, we will continue working towards building a distinctive consumer brand, a major competitive advantage in a sector where no distributor enjoys strong brand awareness. This has become increasingly important given recent regulatory changes aimed at industry lead generation practices. We plan to continue diversifying our marketing channel mix with emphasis on scaling our direct branded channels as well as our best-performing strategic partnerships.

eHealth’s digital organization is constantly exploring ways of enhancing our beneficiaries experience with the goal of driving greater adoption of our online, unassisted and omnichannel tools. Our broader objective is to maintain the personal touch of an in-person interaction between an advisor and beneficiary while increasing efficiency through the use of technology. We were pioneers in introducing co-browsing technology in our industry. And we’re now thrilled to announce our newest innovation, which builds on that capability with plans to pilot in the second quarter. Advisor in the Room or AIR will allow beneficiaries to see their advisor via video as they navigate the platform and look at available plan options together. Establishing connectivity to beneficiaries is often the key to building credibility confidence and trust, ultimately leading to stronger conversion performance.

Looking ahead, we plan to continue building out our competitive moat, advancing our position as a technology leader in the space. Third, launch the next phase of our member loyalty and retention strategy. As I covered earlier, we made encouraging progress on our retention goals and are beginning to reap the rewards of that progress in the form of higher LTVs and positive net adjustment revenue. The second phase of our retention strategy involves developing a single unified view of the member across their full journey with eHealth. This includes tracking all channels and interactions with our platform, including lead nurturing, service, support and value-added programs. We will be making our retention initiatives increasingly personalized to each member’s unique situation and needs.

Fourth, Drive our B2B strategy and fortify the organizational foundation that supports our strategic partners and direct-to-employer opportunities. This includes scaling our dedicated carrier business, expanding our value proposition for strategic partners and growing our employer offering from our legacy focus on small businesses to a broader audience of employers that can benefit from our services. Fifth and finally, enhanced eHealth’s comprehensive product portfolio beyond Medicare Advantage Agency business to drive year-round growth. The business transformation that we launched two years ago focused primarily on our core Medicare Advantage business. Investing in new revenue streams and innovative products is an important part of our future growth strategy.

Specifically, we plan to scale existing products and services, including MedSupp, Medicare ancillaries, ICHRA and employer and individual plans. eHealth was originally established as an online insurance marketplace catering to individuals under the age of 65 and small businesses. However, our strategy shifted rapidly towards Medicare after the implementation of the Affordable Care Act. The landscape now is rapidly evolving, presenting us with a compelling opportunity to reclaim our leadership position through our employer and individual business segment. There are a few particular themes that drive our conviction in our non-MA business lines. The first is growth trends within individual exchanges, fueled by Medicaid redetermination, expanded product offerings from leading carriers and attractive pricing and subsidies.

Next, we see ICHRA or Individual Coverage Health Reimbursement Arrangement, as a potential significant opportunity lifted by rising premiums for employer coverage and the growing consumerization of health care. Within Medicare, we believe that Medicare Supplement is an additional diversification opportunity as we may see an uptick in demand for these plans in certain demographics as carriers pare down their MA benefits and focus on margins in that product line. In conclusion, when I joined the company in November of 2021, we established a set of important goals and commitments. Through the successful implementation of our business transformation and cost reduction programs, we have effectively fulfilled these commitments as evidenced by our 2023 results.

As we move forward, we are setting new commitments aligned with our strategic priorities in 2024 financial guidance. I look forward to reporting on our achievements of these objectives. Additionally, I want to recognize the strong culture that we have fostered here at eHealth and the significant contributions made by our employees and management team. And now I will turn the call over to John, who will cover our financial performance in greater detail and discuss our 2024 guidance. John?

John Stelben: Thank you, Fran, and good morning. Fourth quarter results reflect significant year-over-year improvements across our critical financial and operating metrics. Medicare segment profit, consolidated GAAP net income and adjusted EBITDA all improved significantly compared to Q4 a year ago. Importantly, fourth quarter and full year 2023 operating cash flow exceeded our expectations, reflecting favorable retention trends in our Medicare book of business, among other factors. Fourth quarter 2023 revenue was $247.7 million, representing 26% year-over-year growth, driven by strong performance within our Medicare segment. Fourth quarter Medicare segment revenue was $233.7 million, up 30% year-over-year, reflecting approved [ph] member growth, increase in our MA LTVs and positive net adjustment or tail revenue.

Excluding tail revenue in both periods, Q4 2023 total revenue grew 25% and Medicare segment revenue grew 28% compared to Q4 of 2022. Fourth quarter Medicare Advantage approved members were approximately 160,000, an increase of 22% year-over-year. Total Medicare approved members grew 16% year-over-year to approximately 187,000, reflecting growth in Medicare Advantage and Medicare Supplement enrollments and a decline in Part D applications, which we view as part of a continued market-wide shift away from standalone drug plans. Fourth quarter Medicare Advantage lifetime value increased 11% year-over-year to 1,151. The increase in our MA LTV is primarily reflective of improved retention on the AEP cohort we enrolled in Q4 of 2022 as well as favorable carrier mix and contract mix.

Positive persistency dynamics on our existing book of business, along with strong cash collections also drove positive tail revenue during the quarter. I’d now like to spend a moment explaining the interdependencies between several important metrics of our business. Member retention, lifetime values, net adjustment or tail revenue and cash flow. In accordance with U.S. GAAP, specifically Accounting Standards 606, we record our initial revenue in a manner that makes significant negative reversals in future periods not probable. In order to satisfy this guideline, we, among other factors, apply a 7% constraint to the Medicare Advantage LTVs generated by our actuarial models. That means if future cash receipts are in line with initial unconstrained estimates, we would expect to recognize tail revenue over the life of that cohort.

While there may be other factors in our initial revenue estimates that could lead to future tail, meaning adjustments that are either positive or negative, these are the basics of our revenue recognition process. Between 2021 and 2023, initial revenue was constrained by approximately $90 million across all products, which is the difference between our revenue recorded on a constrained basis over that period and what we would have estimated on an unconstrained basis. Some of that has already come through its tail in 2023 and prior years. And based on my previous statements, we see a high likelihood of future recovery stemming from these constraints, assuming cohort performance in line with our unconstrained expectations. Again, given our accounting policy to book initial revenue in a constrained manner in accordance with U.S. GAAP under ASC 606, positive tail is an expected outcome of this process.

Positive tail revenue in a given year speaks to stable or improving retention trends and commission rates within our member base and is a testament to the high quality of our contract asset receivable. In 2023, we recognized total tail revenue of $48.1 million including $15.6 million in the fourth quarter. This compares to tail of $6.4 million in fiscal year 2022 and $11.1 million in Q4 of 2022. The strong cash performance of our existing book of business, combined with continued cost discipline, also drove our outperformance on operating cash flow, which came in well above guidance range for the full year 2023. In sum, tail revenue is a reflection of key operational trends in our business and not simply an accounting notion. Strong enrollment quality also contributed to the increased fourth quarter MA unit margin, measured as the spread between LTV and total variable marketing and CC&E costs per approved member.

As you can see in our earnings presentation, we achieved significant margin expansion in Q4 of 2022 and built on that improvement in the fourth quarter of 2023. Taking a closer look at enrollment margins. Fourth quarter CC&E per MA equivalent approved member increased 25% year-over-year. This was driven by our meaningfully larger advisor base relative to last year, including a larger contribution from non-tenured advisors, coupled with lower volumes than anticipated in our carrier dedicated and strategic partner channels. While our year-over-year Q4 approved apps grew 16% overall for Medicare and 22% for Medicare Advantage, eHealth staffed in anticipation of even higher volumes. Medicare variable marketing costs per MA equivalent approved member decreased by 3% year-over-year.

This was a result of a more measured approach to spend and the high-quality leads from our direct channels, which we believe is indicative of the positive impact of our rebrand. This AEP also saw a greater coordination between our marketing campaigns and online customer experience, which was one of the drivers behind an increase of more than 20% in online, unassisted conversions. Overall, fourth quarter total acquisition cost per MA equivalent approved member was $779 an increase of 7% year-over-year. Q4 2023 enrollment margin was 32% compared to 29% in Q4 of 2022 and 12% in Q4 of 2021. We expect to make further improvements in this metric going forward. A combination of enrollment margin expansion fixed cost savings and tail revenue contributed to a $27.1 million year-over-year increase in our fourth quarter Medicare segment profit, which was $80.3 million compared to $53.2 million in Q4 of 2022.

I’ll now move to our E&I segment. As Fran discussed, we are investing in this area to reset the foundation of our legacy business and are broadening its scope. Fourth quarter segment revenue was $14 million, a decrease of 12% year-over-year, driven primarily by a decline in enrollments year-over-year and roughly flat LTVs. The segment did generate $4.8 million in tail revenue as we continue observing favorable retention trends on our major medical IFP products. Fourth quarter segment profit was $7.1 million compared to $9.2 million a year ago. Despite its smaller contribution to our overall revenue relative to Medicare, this segment continues to generate attractive margins that we believe can be scaled going forward. Moving to our operating expenses and consolidated profitability metrics, total fourth quarter non-GAAP operating expense, which excludes stock-based compensation and impairment and restructuring charges was $182.8 million, a 20% increase compared to Q4 of 2022.

This reflects roughly flat fixed costs, which we define as a combination of technology and content, fixed marketing and general and administrative. And on the variable cost side, our investments in demand generation and advisor compensation as we return to enrollment growth in our Medicare segment. The increase in our non-GAAP marketing and advertising expense was smaller than our year-over-year increase in MA enrollment growth, reflecting greater effectiveness of our demand generation strategies. Total Q4 non-GAAP CC&E expense grew 47%, reflecting an increase in advisor head count within our agency and dedicated carrier businesses. On a consolidated basis, fourth quarter GAAP net income was $52.2 million, compared to $20.7 million in Q4 a year ago.

Fourth quarter adjusted EBITDA was $69.6 million, an increase of 41% from $49.5 million in Q4 of 2022. For the full year 2023, total revenue was $452.9 million, a 12% increase year-over-year and 1% increase ex-tail [ph]. Total 2023 Medicare Advantage approved members or 291,000, representing a decrease of 4% and total 2023 Medicare approved members or 337,000, representing a decrease of 7%. Recall that we entered 2023 on a much lower run rate in terms of our advisor head count and demand generation spend versus prior year. This is reflective of our significant cost reductions implemented in April of 2022 and our focus on execution of the business transformation plan while temporarily pulling back on growth. As a result, the first quarters of the year show year-over-year enrollment declines combined with improved profitability on both an adjusted EBITDA and GAAP net income basis.

On a year-over-year basis, fiscal year 2023 GAAP net income improved $60.5 million to a GAAP net loss of $28.2 million, and adjusted EBITDA improved $55.7 million to $14.1 million compared to fiscal year 2022 or improvements of $29.1 million and $14.1 million, respectively, when excluding tail revenue. Moving to cash flow. Fiscal year 2023 operating cash flow was a negative $6.7 million well ahead of the high end of our guidance range and a significant improvement relative to fiscal 2022 operating cash flow of negative $26.9 million. As I mentioned earlier, it is critical to understand the increases in LTV estimates and recognition of tail revenue are a direct result of collecting cash at or above our constrained expectations. Fourth quarter operating cash flow was negative $33.4 million versus a negative $18.6 million in Q4 of 2022.

As a reminder, fourth quarter reflects our investment in AEP-related enrollment growth, while the majority of initial commission payments from these policies come in during Q1. We ended the year with $121.7 million in cash, cash equivalents and marketable securities. We believe, we have more than sufficient liquidity to continue delivering on our operational and financial objectives. The ending position of combined short- and long-term contract asset receivable was $918 million up from $884 million a year ago. This reflects Q4 enrollment growth and the upward revisions to our contract asset that flowed through our income statement in the form of tail revenue. I’ll now review our financial guidance for 2024. We expect total revenue to be in the range of $450 million to $475 million.

We expect GAAP net loss to be in the range of $40 million to $20 million. We expect adjusted EBITDA to be in the range of negative $5 million to positive $20 million. Operating cash flow is expected to be in the range of negative $15 million to negative $5 million. These ranges are based on our plans to continue growing Medicare enrollments across our agency and carrier dedicated platforms. Our guidance also reflects the positive impact from advisor mix shift towards a greater percentage of tenured advisors as the large cohort of first year advisors we hired in 2023 enters their second year with eHealth. We are also expecting a positive impact from the expansion of our best-performing marketing channels and continued traction of our brand strategy.

2024 revenue guidance ranges include an estimate for positive net adjustment revenue in the range of $0 million to $15 million reflective of potential tail revenue that was previously constrained. This again speaks to the stability of our member cohorts and ultimately, the quality of our enrollments. Excluding the impact of tail in both years, the midpoint of our 2024 guidance reflects approximately 12% year-over-year revenue growth and a substantial improvement in GAAP net income and adjusted EBITDA. Similar to last year, we expect that all our positive adjusted EBITDA will be generated in the fourth quarter of 2024, reflecting the seasonality of the Medicare business. Fiscal year 2024 cash flow guidance reflects our investment in Medicare enrollment growth and business diversification.

We expect to be around breakeven operating cash flow for the trailing 12 months ended March 2024 and to generate positive operating cash flow for the trailing 12 months ending March 2025. This compares to negative $13.2 million we reported for the trailing 12 months ended March of 2023. Looking ahead to Q1 of 2024, on an ex-tail basis, we expect revenue to increase in the teens relative to the first quarter of 2023, reflecting our larger benefit advisor count and enrollment volume. We also expect a slight year-over-year improvement in profitability. Operator, please open the line for Q&A.

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Q&A Session

Operator: Thank you. [Operator Instructions] And our first question will come from George Sutton with Craig-Hallum. Please go ahead.

George Sutton: Thank you. And I appreciate all the details on the call. Fran, you wrote a very interesting open letter to CMS. And I’m just curious what sort of a response you got from both carriers and if any, from CMS relative to the thought that let’s give some of these changes a chance to actually be able to evaluate if they work before we make a lot of other changes. And you had some other interesting ideas. Just curious the response you got.

Fran Soistman: Good morning, George. Good to hear you. Thanks for the question. That letter was really – think of that as sort of an op-ed and we use it social media and it got a lot of attention and overwhelming support for being a very – well, number one, addressing the concerns about the AEP process. And then secondly, the regulatory environment were more regulatory changes follow before, for the New Year before those that were put in place in the previous year have time to really affect outcome. I haven’t received anything from CMS. I didn’t expect to. Carriers largely supported because they face the same challenges in terms of year-after-year their surgery. It’s a question of is it major surgery or less invasive surgery, but nevertheless, it’s disruptive, it’s expensive.

And in the end, there tends to be unintended consequences to beneficiary usually through more confusion. So it doesn’t clear things up, but actually oftentimes muddies the water, some more. They don’t like beneficiaries don’t like three minutes of disclaimers, right out of the gate. I mean think about it. But that’s the world we live in right now, and it’s not very customer-friendly. I am a senior. I think you know that, and I have a lot of friends who of my same age band. And I talked with them frequently about their experiences. And so it’s not just one person’s opinion, it’s fairly widespread. But my goal was to start a dialogue. I didn’t expect a seismic shift initially, but I do think it has been received well by carriers.

I will let you know that our Public Policy Advisory Council, we have two former governors at that serve on that Advisory Council, and they have pended an op-ed that will follow mine. So that would be coming out likely this week. And these are two highly respected former governors, one representing democratic policy, one representing Republican policy, but they’re absolutely in lockstep on this regulatory environment. And giving regulations a chance to affect before new ones follow. So let me see if that answers your question.

George Sutton: That’s good. And I’ll just – I’m here to tell you that I think you would be relatively young for a U.S. Presidential candidate for what that’s worth. I did want to talk about your comment about profitability over enrollment from the carriers, which is obviously something they’ve been clear about. You can read that as carriers are planning to spend less money to try to go after a larger audience, which I wouldn’t see as positive for you. I believe you were suggesting that it could increase the amount of shopping because the quality of the options for the beneficiaries would not necessarily be as exciting and therefore, more moving around. Is that effectively what you’re saying?

Fran Soistman: I think you’ve captured it largely, George. I spent most of my career on the carrier side, and I sort of know the playbook when these situations occur. And I think it will likely play itself out again, and that is that they’re very disciplined about where they grow and how they grow. So I think that when rates get tough, margins get pressured. You will see in markets where star scores are closer to 3.5%, let’s say, than versus 4%, 4.5%, you’re going to see more benefit changes there. That’s going to create some volatility with beneficiaries and an opportunity to see if there’s a 4.5, 5 star plan alternative that they should consider that still preserves the rich supplemental benefits that they’ve grown accustomed to over the last few years.

I think that the national carriers will be very strategic and where they focus the growth. And where they concede share because there – it could be the provider dynamics have changed. They don’t have the unit cost favorability that they may have had previously. So I think we’ll see some market exits. I do think that preservation of the $0 premium product will continue to be paramount. It eliminates the barrier to sales and introducing a premium to someone that here to [indiscernible] had $0 monthly premium would be very disruptive. And I think carriers will avoid that at all costs.

George Sutton: Perfect. Thanks for the thoughts.

Fran Soistman: Thanks for the question.

Operator: Our next question will come from Ben Hendrix with RBC Capital. Please go ahead.

Michael Murray: Hi. This is Michael Murray on for Ben. So you guys saw declines in MA approved members if you’re just giving lower agent headcount. And I’m sorry if I missed this, but do you anticipate increasing head count this year?

Fran Soistman: Michael, we actually grew year-over-year in the fourth quarter. So – and that’s when the full effect of our marketing, reengineering went in place. We were – marketing was the last area of transformation by design because it started with bringing on a new leader in November of 2022, Michelle Barbeau. So rebuilding her team, implementing new strategies, we saw that play out very, very nicely in the fourth quarter. So, I’m thrilled with that demonstration of great progress. The agent counts, it’s going to be a little different in 2024 than 2023 because of our Amplify business. So we will be growing our agent resources for Amplify, because we’re bringing on more business, a nice new customer. But we’ll be on the agency side will be relatively flat.

And – let me also point out, Michael, that while we will be relatively flat to a modest increase, the tenured relationship to new agents will be much better, in other words, we’ll have a larger proportion of our agent base with more experience than what we had in 2023 and where we had a large influx of new agents. So let’s deliver it, and we believe that’s going to help with conversion performance at the upcoming AEP.

Eli Newbrun-Mintz: Yes, Michael. So expect enrollments to grow again this year and probably very similar to the midpoint of the revenue growth that we provided in the guidance. We don’t break out how this will be spread between Amplify, which is the dedicated carrier unit and our agency choice, but the overall growth will be sort of in that roll bar.

Michael Murray: Okay. That’s really helpful. And then just a quick one on the cost side. Regarding customer care and enrollment, that increased – those costs increased throughout the year. I wanted to see how we should be thinking about that for 2024?

Fran Soistman: John?

John Stelben: Yes. In the 2024 guidance, again, as Fran mentioned earlier, on the agency side, while the agent counts will be up a little bit year-over-year. The growth is predominantly in the Amplify business due to the new customer contract and some other dynamics in there. I would say that year-over-year, the absolute increase in CC&E will be less than what you saw in absolute terms in 2023 over 2022.

Michael Murray: Okay. That’s helpful. Thank you.

John Stelben: I was just going to say, you should expect – we do expect to see continued expansion in our LTV to CAC on MA in fourth quarter of 2024 versus fourth quarter of 2023.

Michael Murray: Okay. Thank you.

Operator: [Operator Instructions] And with no further questions, I’d like to turn the call back to Fran Soistman for any additional or closing remarks.

Fran Soistman: Well, thank you, operator. Well, I want to thank everyone again for joining our earnings call. As we continue to build momentum in 2024, I am confident in this organization’s ability to navigate our dynamic industry and seize new opportunities throughout the year. This is a battle-tested team that brings discipline to everything we do with the courage to make changes when necessary. As eHealth builds on our foundation of steady profitable growth, we will continue to innovate to reflect the needs of beneficiaries and our carrier partners. We look forward to updating you on our progress in the coming quarters. Thank you very much.

Eli Newbrun-Mintz: Good bye.

Operator: And that will conclude today’s conference. Thank you for your participation and you may now disconnect.