July 31 (Bloomberg) -- Online health insurance broker EHealth Inc. won permission from the U.S. government to enroll customers for subsidized plans offered under the federal health-care law. The shares gained the most in almost seven years.
EHealth will be able to tap into a government computer system allowing the company to determine whether people shopping for plans at its website are eligible for tax subsidies for their health insurance, the Mountain View, California company said today in a statement. The information will enable EHealth to offer customers subsidized plans available in their state.
The company has been lobbying the federal government for the agreement, as well as urging similar permission from 14 states that are building their own marketplaces called exchanges to sell insurance to people who don’t get it at work. The exchanges open Oct. 1.
“When there are choices in the marketplace, more presence in the marketplace of various options, it’s likely you’re going to get more enrollment,” EHealth Chief Executive Officer Gary Lauer said in a telephone interview. “At the end of the day, the Affordable Care Act succeeds or fails solely based on enrollment.”
EHealth shares gained 28 percent to $30.74 at the close in New York, the biggest single-day increase since October 2006.
Lauer has publicly complained that the governments have dragged their feet in reaching an accord with his company. He hasn’t yet reached a similar agreement with any of the states, EHealth said in its statement.
“The states that have elected for various reasons not to erect their own exchanges, 36 of them, ironically may end up having more enrollment choices and more enrollment as a percent of population” because of the federal government’s agreement with EHealth and other brokers, Lauer said.
The Obama administration is seeking to enroll about 7 million people next year through the federal and state exchanges, and needs at least 2.6 million of them to be relatively healthy for the insurance system to be viable.
The federal government should sign more agreements like EHealth’s to boost enrollment in exchange plans, Les Funtleyder, health-care strategist at New York-based investment firm Poliwogg, said in an e-mail. “The EHealth deal is a breath of sanity that has come to Obamacare,” he said.
About 18 million people buy health insurance for themselves today and the health law should eventually add 25 million to 32 million Americans to that market, Lauer said.
“The market, my gosh, doubles to two-and-a-half times its size,” he said in a telephone interview. “Just based on that alone, and being able to help subsidized individuals, is an opportunity for us.”
It won’t cost the government or customers anything extra when people enroll through EHealth, Lauer said in a May 14 conference call with reporters. The company will instead collect a commission from insurance companies such as UnitedHealth Group Inc. when it enrolls people in their plans.
EHealth collects about 7 percent of monthly premiums as commission for the plans it sells now, Lauer said. Carriers will probably negotiate a lower commission for plans sold in government exchanges because “the risk is a little bit more unknown,” he said.
Under the agreement with the government, EHealth must offer customers any plan available on the federal exchanges, regardless of whether it has a commission agreement with the carrier.
“I’m happy to enroll someone if we don’t get a commission for it,” Lauer said.
The company has to sign an additional agreement “encompassing the federal requirements for agents and brokers” with the agency managing the Affordable Care Act, the U.S. Centers for Medicare & Medicaid Services, before it can begin enrolling people in subsidized plans. Lauer called that agreement “perfunctory.”
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