eHealth, Inc. (NASDAQ:EHTH)

This stock was clobbered hard over concern about the "Medical Loss Ratio"(MLR) requirement in the health care reform bill in section 2718. Well, the worst has happened and eHealth still remains cash generating.

The MLR requirement requires health insurance carriers to spend 80% of all individual health plan premiums on clinical services or activities improving health care, excluding taxes. In other words, only 20% of premium revenue was left for administrative costs like paying commissions to brokers like eHealth.

Everyone knew that health insurers would have to reduce premiums starting 2011. Only recently has the CEO, Gary Lauer, discussed this. Now, investers have been told that eHealth's cut of premium revenue has gone from 10% to ~7%. The other shoe has dropped. The "worst" requirement of Health Care Reform has hit, dropping eHealth's primary source of revenue by 30+%. ~7% is still a good share.

However, eHealth guidance still forcast generation of over $20+ million profit for 2011. eHealth's balance sheet still has over $100 million in cash, despite buy back stock purchases in 2010. More buy backs might occur in 2011.

eHealth has moved agressively into other revenue producing areas, sales of Medicare plans, and hosting government health exchanges.

eHealth won the HHS service contract to power insurance quotes for the national health insurance exchange (links below). eHealth has won state exchange contracts for Florida, Utah, and Massachusetts. For years, eHealth has hosted carrier quote & apply web sites. In other words, commissions are not eHealth's only source of revenue.
https://www.fbo.gov/index?s=opportunity&mode=form&id=b2e0193cd8b04c1c17e5b70ce1e87976&tab=core&_cview=0

http://www.kaiserhealthnews.org/Stories/2010/July/30/ehealth-gets-web-portal-contract.aspx

Also, eHealth should not be compared to all the other web sites that just quote rates for health insurance. Unlike these other companies, eHealth doesn't just gather leads.

eHealth is a top broker for most health insurance carriers, across 50 states. It takes years to become licensed and appointed to sell health insurance for hundreds of carriers across 50 states. For many carriers, eHealth has been a top broker for 10 years or more. eHealth technology has eliminated the need for backend paper application processing for many carriers. eHealth will do better than most brokers.

A little late on this longshot. Will have to catch him next go around,as he he will still be here regardless of opinions. Eats reform for a snack.