It’s been a rather quiet quarter for eHealth, Inc. (NASDAQ: EHTH), the nation’s leading online source of health insurance for individuals, families and small businesses.

With their upcoming earnings for Q4/2008 and full year 2008 set to be released after the market closes on February 12th, it will be interesting to hear on the conference call, and see in the results, how the nation’s economic turmoil is affecting eHealth and how they view their prospects going forward with the new administration in place.

In this post I’ll go over the important aspects that we need to be aware of before eHealth announces earnings and then break them down into the following parameters:

• What went right in the quarter: What were some of the positive developments that occurred within the company in the last 3 months.
• What went wrong in the quarter: What were some of the negative developments that occurred within the company in the last 3 months.
• What I want to see: All things considered, what I realistically want to see from the company as it relates to their business.
• What we need to see: At the minimum, what we need to see for our investing thesis to still hold and an investment in this company to be prudent.
• What we’ll probably see: After weighing what’s been going on for the last 3 months, what we can realistically expect when they do announce their earnings.
• Bottom Line: What it all means, and what you should do.

New to the eHealth story? 

eHealth, Inc. (NASDAQ: EHTH) offers Internet-based insurance agency services to individuals, families, and small businesses primarily in the United States. The company’s e-commerce platform, which is accessed directly via ehealth.com and ehealthinsurance.com, enable individuals and families to research, analyze, compare, and purchase health insurance products online.

For anyone that is self-employed, runs a small business, or as more and more companies stop paying for employee health insurance, needs to purchase their own health insurance, it is becoming increasingly crucial that individuals find affordable health insurance and eHealth gives them the power of choice.

eHealth offers various health insurance products, including medical health insurance coverage, such as preferred provider organization; health maintenance organization and indemnity plans; short-term medical insurance; student health insurance; health savings account eligible health insurance plans; and ancillary products, such as dental, vision, and life insurance.

Because of the fixed-cost nature of health insurance (there is no discounting online or otherwise in this highly regulated industry), eHealth is probably one of the only ways that most individuals will ever see what different health insurance offerings they could purchase from up to 180 different companies.

Want More?

• Start: with my initial company write-up here.
• OR: read my latest company analysis and quarterly earnings breakdown here.

Customer Acquisition Costs Might Increase

Focus will be on outlook, current quarter

eHealth had a very good quarter in Q3/2008 all things considered.

Their customer acquisition costs were higher, but that is not entirely unexpected seeing as we are in a much tougher environment and one in which people probably don’t realize how affordable health insurance really is.

Even with all of that, eHealth still reported solid earnings, and generated great cash flow.

Let’s take a look at what has transpired since that earnings call.

What Went Right In the Quarter

eHealth announces share repurchase program, new deal

eHealth announced on Wednesday November 12, 2008, that the company plans to repurchase up to 10%, or about $30 million worth of its stock, whichever is less.

This was shortly after the company said on its conference call that they were considering such a move if the stock continued to flounder.

There was all the usual caveats about the timing of purchases, how the exact number of shares to be purchased will depend upon market conditions, and that the repurchase program does not require the company to acquire a specific number of shares, etc.

In addition, the cost of the shares that are repurchased will be funded from available working capital.

Real quick, there was an interview with Gary Lauer, eHealth’s CEO on Tech Ticker that was a good overview of where eHealth sits now and what they are trying to accomplish.

I highly recommend you watch these three interview segments.

The first part of the interview can be seen by clicking here.

The second by clicking here.

The third by clicking here.

The wide ranging interview discusses how eHealth is cheaper than even what employers can get for their employees, and how those with COBRA coverage can get even cheaper coverage than what they can with this government sponsored program.

Finally, last week, eHealth announced that it and Hays Insurance Services announced an agreement that will enable Hays to sell individual health insurance products over the Internet using the eHealthInsurance.com platform. Individuals, families and small businesses seeking to purchase health insurance policies will be able to go to the Hays web site and search for plans while utilizing the same features and functionality available to consumers at eHealthInsurance.com.

Deals like this increase eHealth’s bottom line with low costs, as it leverages their infrastructure and platform that is already in place to other health insurance providers while charging them a fee for that service.

Yep, it was a slow quarter for eHealth on the good news and bad news front as we’ll go over below.

What Went Wrong in the Quarter

Umm…nothing…oh yea, that economy thing…

There was no inherent “bad” news in the quarter or anything of particular note that was a negative, other than of course, this whole economic slowdown that got progressively worse.

While eHealth didn’t preannounce earnings, or guide lower, it will be interesting to see if eHealth’s customer acquisition costs rose significantly to keep some growth intact.

Remember that eHealth grew at about a 20% clip in the first 3 quarters of last year and this year’s growth (2009) is expected to be similar.

This was all in the face of a rapidly declining jobs market and economic outlook.

It will be interesting to see if those that lost their jobs also stopped their health insurance altogether, or if they went out looking for a cheaper alternative, which is where eHealth comes into play.

There is also concern now with the new administration in place how exactly this will affect eHealth going forward.

Now let’s take a look at what I expect out of eHealth on this earnings call…

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