Boom in Medicare business fueling eHealth’s growth, expansion into Indianapolis

Medicare
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Why is business growing so fast for eHealth Inc., the California-based private health-insurance exchange that announced Monday it was opening a regional headquarters in Indianapolis with up to 500 new jobs?

A big factor: the bulging boomer bubble.

Every day, about 10,000 Americans turn 65, and many of them are shopping for private insurance for the first time in years. Often it is a private Medicare plan, as opposed to the traditional government-run Medicare plans.

But the plans are not easy to navigate, and many seniors are reaching out for help.

“The Medicare plans, every year, become more complicated,” said Scott Flanders, CEO of eHealth. “In many cases, seniors are choosing health plans for the first time because many of them have been on employer plans. They need help.”

Flanders is an Indianapolis native who is a graduate of Ben Davis High School and the Indiana University Maurer School of Law. He was a longtime executive in Indianapolis, leading Macmillan Publishing and founding Telstreet.com.

His company operates a private online health insurance exchange, where individuals, families and small businesses can compare health plans from insurers and enroll in coverage online. It is licensed to sell in all 50 states.

Business has been growing at a rapid clip, with revenue last year of $251.4 million, up 32% from a year earlier.

Last week, eHealth announced that second-quarter earnings had jumped 101%, to $65.8 million, blowing away Wall Street estimates of $41.6 million.

Adjusted earnings before interest, taxes, depreciation and amortization was $800,000, a huge improvement over an EBITDA loss of $10.1 million for the quarter a year ago. The company rang up a net loss for the quarter of $5.8 million, an improvement from a loss of $12 million a year ago.

The company’s Medicare segment is a shining light for profitable growth. The company had Medicare revenue of $52.3 million in the quarter, up 105% from the same period a year ago. It said it expects its Medicare segment profits for the year to come in at between $96 million and $99 million.

So business is booming, but the company sees an opportunity to grab even more business, and to move its income statement into the black.

In each of the last two years, the company said it had 135,000 calls from seniors during the annual enrollment period it was unable to answer, Flanders said.

“We did not have adequate phone capacity to help these seniors get into the right Medicare plan.”

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The company has already expanded its three existing call centers in California, Utah and Texas and decided it needed to add another location, preferably in the eastern time zone. So it is opening a large regional operation in Indianapolis in hopes of catching up to demand and turning a profit.

eHealth Inc. plans to invest more than $10 million over the next three years to establish Indianapolis as its eastern headquarters.

Many of the jobs will be for sales agents who answer phones and help customers select insurance plans.

The company said it trains the workers to become licensed insurance agents. The company is also hiring technology engineers and product specialists.

Average wages will be $88,000 a year but about one quarter of the workers will make six-figure salaries, Flanders said.

The Indiana Economic Development Corp. offered eHealth up to $11.3 million in conditional tax credits and $200,000 in training grants based on the company’s job creation plans.

The company is calling the Indianapolis operation its eastern technology and operations headquarters.

eHealth said it has recently hired 125 employees in Indianapolis and already has taken over two floors of the building on Priority Way West Drive, totaling 56,276 square feet of space. It has signed a lease to take over the entire 81,515 square foot building by November 2023.

The company said the expansion was driven by a huge growth in business that is requiring more people to answer phones and help customers, many of them senior citizens, seeking information on health insurance.

It had conducted an evaluation of 19 cities, and Indianapolis was ranked highly on the list. Flanders said he decided to push Indianapolis to the top.

“I intervened, which I don’t do often as CEO, and I said ‘look, let’s go to Indy,’” he said. “I guarantee you from my experience and my relationships there we will have a terrific workforce pool. The city and the state will be receptive to our arrival.”

Flanders joined the company three years ago, leaving his previous job as CEO of Chicago-based Playboy Enterprises Inc. to take the position. He was already serving on eHealth’s board of directors and was asked by other board members to take over the company when the previous CEO retired.

Flanders’ first executive role was as president of Macmillan Publishing in Carmel. In 1999, he founded Telstreet.com in Indianapolis, an Internet retailer of wireless phones, services and accessories that was bought in 2000 by Buy.com Inc., now known as Rakuten.com, for $4 million.

Before joining Playboy 2009, he was CEO of newspaper and broadcast chain Freedom Communications Inc. in Irvine, Calif. He was a member of IBJ’s 40 Under 40 class of 1995.


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