I welcome Derrick Duke, CEO, John Dolan, Chief Financial Officer, and Kate Sidorovich, the Senior Vice President of Investor Relations. This will be a fireside chat, which I will moderate. If you have questions, please feel free to type them in the chat section. I will get to as many of your questions as possible. With that, everyone, thank you for joining us today. Appreciate it.
Thanks, [Michael]. It's great to be here.
Let's start with a kind of a broad question. First of all, why don't we just go back, and even though I gave an introduction, maybe you can give an update on the company and where you are today.
Yeah. Thanks, [Michael]. As you mentioned, eHealth is an omnichannel health insurance marketplace that combines advanced technology and licensed advisors, primarily to help consumers select coverage. Our main focus today is in the Medicare Advantage market, which I think as you know, is highly complex, both in rules and plan and benefit design, and we're expanding into additional products and services over the next two to three years. There's several core elements that define our business. The first one is that we're a broad carrier-agnostic platform with relationships across roughly 180 carriers, which translates into meaningful consumer choice for beneficiaries. We have a distinct and growing consumer brand in a market that is very fragmented and generic.
We think that's a competitive advantage for us, and we have advanced technology that really underpins every aspect of our operation, and we're in the early stage of pioneering the use of AI in the sector, which includes, I would remind folks, of the launch of our AI screening capabilities, during the last AEP, which significantly outperformed human screeners.
Great. Okay. I was just wondering if maybe let's kick it off and talk about what has changed over the last two years that gives you greater confidence in the durability of Medicare member lifetime value. How much of your future growth opportunity comes from acquiring new members versus increasing value from your existing member base?
It's a great question. [Michael], as you know, I joined eHealth as CEO last August, during the process of discussing with the board the opportunity to become the next CEO, we had significant conversations around the future strategy and in particular around diversification efforts. eHealth today, 90%+ of our revenue is generated in the Medicare space. The company, we're looking to execute on a strategy that helps us drive meaningful diversification, both in revenue, and just from a timing perspective around the seasonality of the business. Shortly after I joined, the board was gracious. We conducted a strategic review. By the way, this is on the heels of an incredible turnaround that was led by my predecessor, Fran Soistman, and the leadership team. The company had done an incredible job of growing revenue.
In fact, I've shared with some folks today, as a reminder, Q4 of 2025, the company set an all-time record in revenue on a quarterly basis. Executing around Medicare Advantage enrollments extremely well, and again, growing our brand, that's improving the lifetime value of our book of business. Again, we needed to make sure that we built on the accomplishments and that the business didn't become stale. By the way, as we thought about where we're heading strategically, it really aligns with the market trends of where Medicare Advantage is today. Most people know or understand, maybe some don't, but the Medicare Advantage market is really undergoing a reset. We're in a disruptive market as our carrier partners, which are very important, obviously, to the equation here, are focusing on improving their own margins, and that's come about for several reasons.
They're under margin pressure as a result of regulatory changes, and medical cost inflation that has been expanding over the last few years. That's made a meaningful change in plan benefits as they think about new bids during each year, along with cancellation of many plans that are no longer profitable for the carriers, and a more targeted enrollment strategy, both in plan design and geographic area. Millions of consumers have been disrupted, and it's caused an increase in shopping during AEP. That really creates an elevated demand for advisory support. As we thought about the direction we needed to move the business in our sales model, we want to move from the traditional transactional broker model and focus more on a model that encourages and creates lifetime customer relationships.
We believe that the lifetime customer relationship starts with the engagement, and that's why we think our brand is so important. The way, when, where, and how we engage with consumers on that initial touch point and the experience that they have working through the Medicare Advantage enrollment, we think is going to allow us to win the right to expand the relationship to offer additional products and services over a period of time. We think, and it's been proven in the field marketing organization model, that type of relationship building increases persistency of membership, which increases value over time. Again, it also allows us to have the right to win additional business with the members through additional products and services that we're going to offer over time. Oh, you're on mute. Sorry, [ Michael].
Sorry about that.
That's all right.
Yeah. From a consumer standpoint, what most clearly differentiates eHealth from going directly to a carrier, like using Medicare.gov or working with a local broker?
Yeah. There's different things in each of those buckets. I'll start with how we differentiate versus going directly to a carrier. I would say the primary differentiation there is choice. When a member chooses to go directly to a carrier, they're only seeing the options that the individual carrier offers in a particular market. When they engage and interact with eHealth, they're going to see a very broad market supply, if you will, and options for both carriers and plan designs. Again, the fundamental value proposition and the thing that we want to make sure beneficiaries understand is that we're here to make sure that the needs that they have as an individual is matched with the type of plan that best meets those needs. That may or may not be with an individual carrier.
It relates to Medicare.gov, clearly Medicare.gov has all of the choice, what Medicare.gov really doesn't do is offer advice. That's where our licensed advisors that are highly educated in the rules of Medicare as well as plan design and benefits can engage with consumers, again, to make sure that they're choosing the right plan. As it relates to other brokers, I would say two things, at least two things that distinguish. Number one is our brand. When consumers engage with us, they know who they're calling, and they know what our capabilities are. I would say our technology platform really sets us apart from most people that we compete against. We like to consider ourselves the Medicare matchmaker in the space, that our technology enables consumers to make an informed choice with less stress.
Yeah. I'm going to get to that, the technology part, in a couple of questions. Where are you gaining share today, why are those gains sustainable?
Yeah. I would say if we're looking back, I would say that we haven't gained share in the last few years. We've been holding share is what I would say. My perspective, [Michael], is that-
Okay.
-distribution organizations are probably losing a little bit of share to carriers directly as carriers make decisions, primarily because of choices they've made around not paying commission on certain types of plans, plan designs, geographic areas. That just quite frankly makes it very difficult for eHealth or anyone that we compete against to really engage to help the consumer. That's a hard economic value proposition to enter into. I would say that we've been doing well at holding our market share, but we've been focused on being able to do that at a lower cost. We've been driving down our demand generation costs, focused on our branded channels, which our data shows and supports increasing value over time because it's higher persisting business, the business that we're creating through our branded channel.
Yeah. I know in your Q1 2026 investor call, you highlighted a Medicare LTV CAC ratio of 1.4 up from 1.2, while your acquisition costs declined. How should investors think about normalized lifetime value versus customer acquisition cost economics across the cycle?
Yeah. It is different by quarter because it's focused with the seasonality of the business. We have the highest LTV to CAC ratios during the fourth quarter and during AEP, because that's where the majority of the business is generated. Each organization, I would say, first of all, there's probably not consistency in the way that those ratios are calculated in the industry. There's nuances between the way that we calculate it versus others. We think our branded channel focus and strategy is driving higher LTVs because it's driving higher persistency in our business. Our focus in 2026 is to focus on the highest profitable marketing channels, again, that are branded, so that we're focused on sort of the economic valuation in a disruptive market. We certainly made a conscious effort in 2026 to reduce our growth rate.
We're focused on investing and growing business in the profitable channels.
Yeah. I want to go back to your technology we're talking about. Your website emphasizes personalized recommendations through MatchFinder and PlanPrescriber technology. How much of your competitive advantage is technology-driven versus agent-driven?
I would say both are really important because it starts fundamentally with a belief at eHealth that we want to meet consumers where they want to be met. That's the first thing that we would say. As evidenced by the fact that we track something that we call online unassisted enrollment. When somebody comes into effectively our tech ecosystem, they start the search, they complete the enrollment all the way through without ever talking to someone, that's risen to roughly 20% of our annual enrollment. We're getting really good traction and penetration, and really it's a testament that the tech stack allows people to enroll that way if that's the way they choose to do so. Again, we know that it's a very complicated market and product, and so some people, they just need help.
What's great about our platform, [Michael], is when they come into the system, they start their process. If they get stuck or they get to a place where they have a question, they can click the chat, they can click to call. We have video call capabilities where our advisor comes up on the screen so that the Medicare beneficiary can see them, and our technology doesn't allow our advisor to see in the person's home to guard their privacy. Again, it's multiple ways where consumers can be comfortable to interact with us the way they choose to interact with us to get their questions answered.
I would say the technology's important because it gives choice, but that advisor is really important because they're highly educated, they're highly trained, and they can give the right answers to the questions, again, to make sure that the beneficiary is getting to the right plan based on what their needs are.
Yeah. We're getting some questions that are coming in as well. Could you talk about the competitive environment during the last annual enrollment period?
That's a broad question. I guess I'll start from on the carrier side, again, much disruption as carriers were making decisions about terminating certain types of plans, focusing on when, where, and how they wanted to grow. We think that's going to continue, unfortunately, into this next open enrollment period. We think disruption is going to continue in the near term. Now, [Michael], I've said publicly, and I believe this clearly, I view this as one event that's happening over multiple years because it's different carriers that are making decisions at different points in time. It's not as if it's every carrier doing it every open enrollment period. On the distribution side, I would say what we're seeing is really a shrinking of the competition. That's coming in a couple of different ways.
Unfortunately, some of the smaller organizations just didn't have the size and scale to survive the type of volatility that we're seeing that's being caused by the disruption. That's where it first started. Now what we're seeing is that there are, in particular, some carriers that are making a distinct choice to reduce the amount of distribution relationships they have. We've seen instances of where they're reducing the number of contracts that they're offering for distribution partners, and again, this is why I continue to say size and scale is going to matter in this type of market because you need to offer broad choice in order to navigate the plan terms and the decisions that carriers are making. By the way, I've said this publicly as well, we need strong carriers. We need partners that are strong.
We at eHealth, we don't fault them for making the choices that they're making. They're making hard, difficult decisions, but long term, we think it will be beneficial for the health of the industry.
Your company intentionally reduced marketing spends while focusing on higher return enrollments. What milestones would indicate that eHealth has become structurally stronger than it was prior to the Medicare Advantage disruption cycle?
Really our near-term focus is because of the increase in I refer to it as excess lapse rates, right? When you think about just the market in general, there's a normal persistency curve based on product design, membership, age of membership. What we've seen now for a couple of years, the old risk management side of me is coming out, right? This excess lapse that's being caused by an external event, that distribution partners and members, Medicare beneficiaries, they're not causing it, right? They can't control it, they're not causing it. That's really why we made the decision to focus in 2026, in particular, on reducing growth, reducing investment, focusing on getting to positive operating cash flow. I would say that's the primary metric for 2026 that we're monitoring and that we're focused on creating in our 2026 plan.
We're getting quite a few questions coming in. How are customer acquisition cost and lifetime values trending?
I'll start, and then John, you can feel free to offer as well. What we've seen is that the lifetime values for eHealth in particular, in our book of business, have been trending positively, and there's a lot that goes into the LTV calculation. It's not just one thing. It's the rate that's set at CMS around the annual rate that's allowed for distribution compensation. It's persistency of the book. It's the mix of business that we're selling from our carrier partners. It's the portfolio mix. It's a multitude of things that goes into the calculation. For eHealth, we've seen advancing LTVs, in particular in our Q4 cohort, in our AEP cohorts. On the customer acquisition side, again, we've seen costs declining because we've made a conscious choice to reduce our demand generation spend. That's certainly been helping the economics.
John, anything else you would add?
No, I think. You hit on it right. I think the different quarters drive different seasonality in our customer acquisition costs. Obviously, with the lower volume in Q2 and Q3 and our need to ramp up our advisor base for AEP, we tend to see an increase in the customer acquisition cost, but should be in line with historical increases.
Okay. Another question, when do you expect to return to growth, and what gives you confidence the improved economics will hold once you start scaling enrollment back up?
Yeah. As a part of our prior earnings call, we released an updated three-year long-range plan. We released that to the Street, we have nominal growth in 2027. A little bit more incremental growth in 2028. What's important to understand about that, [Michael], is that we've made no assumption in that timeframe that the market improves at the macro level. We're very comfortable that we will achieve the growth rates that are in our three-year plan if the macro environment stays exactly the way it is today. That's number one. Number two, we do have confidence in future growth opportunities because it's rooted in the demographics of our country. CMS themselves, they're projecting that Medicare beneficiaries will grow to close to 80 million by 2030. Medicare Advantage penetration rates, they're forecasting that they will grow to 60% by 2030.
You have an increasing beneficiary base and increasing penetration rate, that will all support growth in the future in the Medicare space. Really from a confidence around the economic value of the growth is that's part of why we believe in the sales model change that we're making to create the lifetime advisory model, to create lasting relationships, which again, we absolutely believe will improve the persistency of the Medicare Advantage business that we're selling, as well as give us opportunity to increase our cross-sell or attachment rate of ancillary products, without having to spend more marketing dollars to create that revenue. Those are the factors that give us confidence in our future growth rates.
Derrick, how are you using AI to improve your customer acquisition, enrollment, and service efficiency? I was just wondering in terms of whether or not AI can materially reduce acquisition cost or increase conversion rates.
Yeah. I'm going to answer that by starting with the AI technology that we released in 2025. In Q2, the company announced a pilot using what we call AI screeners. Somebody calls, historically in our business, and I think most others, when the phone would initially be answered to screen the beneficiary, it was a human answering the phone. Humans cost money, right? You got to hire people, you got to train people. As my predecessor would say, once we were able to launch an AI screener, AI screeners don't have bad days, they don't call in sick, they don't have bio breaks. It materially increased our capacity to answer the phone.
When you think about at the height of AEP, especially the last two weeks, that was a real governor on the ability to grow was did you have enough people that could just answer the phone based on how much the phone was ringing? What we discovered, through the process, is that when we did the test in the second quarter, we got great feedback from our customers that it was a pleasant experience. It was hard for them to tell that they weren't talking to a real person. As we got into AEP last year, initially, we started with about 15% of our phone calls being answered by AI screeners. By the end of AEP, that had ramped to 85%.
What we discovered in that, at least in that open enrollment, was that the phone calls that AI screeners answered, once the call got to a licensed advisor, the licensed advisor call time was lower, so it took them less time, and a higher conversion rate. We saw great results really from using AI screeners, and our plan for this year is that 100% of our calls will be answered by AI screeners. That's just one example of how we're using it early on. I would call it early days of using AI technology to engage with consumers. We're using it in other ways in the back office to reduce operating costs and increase our operating leverage. We're really bullish on our opportunity to continue to expand.
I've shared internally, [Michael], again, I'm a little biased clearly, I believe our tech stack is a competitive advantage. Somebody told me a long time ago that an unguarded strength will become a weakness in your life. We're focused on maintaining that strategic advantage. We have a great tech team. They love our business. They're bought into the consumer focus, and I'm very confident in our capability to continue to expand that.
Great. I'm taking some more questions here from the field. How is the company navigating CMS marketing and enrollment registrations? Has there been an impact to customer acquisition and conversion rates?
The answer is no on the last part of the question. I'm not aware of any material impacts there. Listen, well, I shouldn't say everyone. A lot of people understand that this is a highly regulated industry. There's lots of rules. I want to make sure a broader answer to this question, [Michael]. When I joined the company, I introduced four operating principles for the company. The very first one, the first operating principle that we live by today is that we honor our commitments. We are hyper-focused on making sure that when we engage with consumers, when we engage with CMS, that whatever the commitments that we've made or that we're required to live up to, that we're absolutely going to do that. We have a great relationship with our regulators, and there's nothing there that is of concern for me.
Yeah. I believe investors recognize, and everybody recognizes that we have an aging demographic. Aside from that, how has your view of the long-term Medicare opportunity changed over the last several years?
Well, I think, as most markets, most markets go through these phases. You get into a phase where it's hyper-growth and sometimes people view it as grow at all costs. I think, unfortunately, our industry went through that for several different reasons, and I think we're now into a place where the market's maturing more. As a distribution partner to carrier partners, the number one thing is no longer I can bring you X members or X growth. It has to be a quality business. It has to be highly compliant business. Those are the kinds of things that set eHealth apart and why I think we'll be able to compete very effectively in the coming years, because of our operating principles, our ethics, and the way that we do business.
Again, it starts with our relationship with carrier partners are really important, but it's not the most important relationship. Our most important relationship is with our member, with our consumer, making sure that we're meeting their needs, and our senior citizens in this country are an important part of our constituency, and they deserve this type of service. They deserve to have their needs met, and that's where we're focused.
Another question from the field. With roughly 1.3 million people having used eHealth to sign up for insurance plans, what scale advantage do you have that a smaller broker or newer digital platform would struggle to replicate?
I think the first thing is in answering that question, I would say it starts with the broad set of relationships we have with carrier partners. New brokers that are coming into this industry, they will come and start with limited carrier contracts. It's just hard for them to get access to the type of contracts that we have. That's the first thing. The second thing is, although I will admit this is likely getting easier with AI, it's not inexpensive to build the type of technology ecosystem that we've built and that we have. I would just, again, say that it's a high cost to enter into this space. The third thing is, I've heard over my 38 years in this space that distribution brands don't matter, that the only brand that matters is a carrier.
I respectfully disagree with that. I think in the coming years that our brand is going to matter, and that too will be hard for a startup to create.
Yeah. I know that we're running out of time here, but I want to slip this question in. What is the biggest misconception investors have about the company today?
Oh, the biggest. Wow. That's a great question. I think a large one, I don't know if it's going to be the biggest or not, but a large one is a misunderstanding of our cap structure. On our balance sheet today, we have roughly $125 million of bank debt. A great partner there. We have a preferred stock investment in our cap structure. I think most investors view that and think of that as debt. There is an April of 2027 event that could happen under the terms of the preferred equity, but it's not a maturity. I think people view April of 2027 as some doomsday clock is ticking to get to April of 2027, and it's just a misconception. That's not true. There's no forced repayment in April of 2027. My pref holder, they're a good partner of mine.
They can't force us to do anything that we're not able to do from a capital perspective. I would just say that's a large misconception, and I think people view it as debt, and it really is preferred equity.
Got you. Well, unfortunately, that is all the time that I have, and I am sorry that I did not get to everyone's questions. Hopefully, the company comes back and joins us again in the future for a virtual presentation or in person. I would like to thank Derrick, John, and Kate for introducing eHealth to our investors, and thank you for your time today. Thank you everyone.
Thanks, [Michael].