Ladies and gentlemen, thank you for standing by and welcome to the Q3 2020 eHealth, Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your speaker today, Ms. Kate Sidorovich, your Vice President of Investor Relations. Thank you. Please go ahead, ma’am.

Thank you. Good afternoon and thank you all for joining us today either by phone or by webcast for a discussion about eHealth, Inc's third quarter 2020 financial results. On the call this afternoon, we will have Scott Flanders, eHealth's Chief Executive Officer and Derek Yung, Chief Financial Officer. After management completes its remarks, we will open the lines for questions. As a reminder, today's conference call is being recorded and webcast from the IR section of our website, and a replay of the call will be available on our website following the call. We will be making forward-looking statements on this call that include statements regarding future events, beliefs and expectations, including statements relating to our expectations regarding our Medicare business including Medicare enrollment growth, consumer demand, our competitive advantage, our expectations regarding our online enrollments, and our retention and recapture rates. Our investment in telesales capacity, internal agent counts, agent productivity tools and incentives, customer engagement and retention initiatives and enhancements to our technology platform, as well as the expected positive financial and operational impact of our investments. Our expectation regarding the Medicare market opportunity, our direct to consumer broker channel, our online marketing and strategic partnership channels, the profitability of our business, seasonality, churn, lifetime values, claim persistency, member estimates, total acquisition cost per member and operating expenses. And finally, our outlook for the open enrollment period in our 2020 financial guidance. Forward-looking statements on this call represent eHealth views as of today. You should not rely on the statements as representing our views in the future. We undertake no obligation or duty to update information contained in this forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in our forward-looking statements. We describe these and other risks and uncertainties in our Annual Report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission, which you may access through the SEC website or from the IR section of our website. We will be presenting certain financial measures on this call that are considered non-GAAP under SEC Regulation G. For reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measures, please refer to the information included in our press release and in our SEC filings which can be found in the About Us section of our corporate website under the heading Investor Relations. And at this point, I will turn the call over to Scott Flanders.

Thank you, Kate, and welcome everyone. This has been a busy and successful quarter preparing for the most important Medicare selling season of the year and deploying our retention enhancement initiatives across the entire organization. We achieved substantial progress in both areas, which are closely interrelated given that our focus this annual enrollment period is on driving growth by targeting high lifetime value, high margin enrollments. Our customer engagement and retention initiatives are expected to have a long-lasting positive financial impact. But most importantly, they are aimed at further enhancing customer experience as they shop for, enroll in, and start utilizing their Medicare plans. I will update you on the key initiatives and achievements that were made during the quarter in just a moment. But first, let me provide a summary of our third quarter financial results. Total revenue for the third quarter was $94.3 million, a 35% year-over-year increase. Our adjusted EBITDA was negative $13.3 million and our GAAP net loss was $14.5 million. These results were in line with our expectations for the quarter and reflect an investment made in our Medicare telesales capacity, with an emphasis on expanding our in-house agent force, as well as marketing investments ahead of the annual enrollment period. The number of third quarter Medicare approved members grew 17% compared to a year ago. This includes 28% year-over-year growth in approved Medicare Advantage members. MA enrollment growth was dominated by our online marketing and strategic partner channels, which grew well above the overall enrollment growth for the quarter, reflecting our emphasis on these high ROI channels, but with a higher propensity to bring in consumers who are comfortable transacting online. Our third quarter Medicare major medical online enrollments, including fully unassisted and partially assisted online enrollments, grew 107% on a year-over-year basis in the third quarter; 36% of our applications for these products were submitted by our customers online. This was above our expectations and a meaningful increase compared to 21% in Q3 a year ago. Building on the momentum achieved in the third quarter and following a technology release conducted ahead of the annual enrollment period, which I'll cover in more detail in a moment, we currently expect 45% to 50% of our fourth quarter Medicare major medical applications to be submitted online. This is compared to 36% in Q4 of 2019. Our fulfillment mix has significant implications for the average policy persistency, given that online enrollments tend to retain the product longer, with first-year retention rates higher by approximately 25% to 30% compared to members who enroll telephonically. In addition to fulfilling more demand online, we've made significant changes to our telesales organization. We have broadened its mandate to focus on not only enrollment, but extending it to proactive post-enrollment engagement as customers start utilizing their Medicare policies. This strategy is deployed broadly through our training program, agent compensation structure, lead ranking and allocation, and our product and technology initiatives. As we announced last month, we have successfully completed staffing of our telesales organization ahead of the annual enrollment period and achieved a meaningful shift towards in-house sales capacity. This year, we will have 120% more internal agents compared to a year ago. In-house eHealth agents now represent roughly 45% of our total sales force compared to just 30% last annual enrollment period. Our internal agents have, on average, superior productivity rates and generate enrollments with higher average persistency compared to outsourced call center agents. As a result, we expect that this shift will have positive implications for our overall conversions and per member acquisition costs compared to a year ago, as well as for how well we retain members post enrollment. The compensation structure of our in-house agents was also adjusted to link a significant portion of it to the persistency of their enrollments. This aligns the compensation strategy with our goals and gives agents who are producing positive retention outcomes an opportunity to increase their overall compensation. Reporting to our sales agents, this annual enrollment period will be a team of over 200 Customer Care employees. This team will include enrollment specialists and a dedicated retention team comprised of agents who will handle inbound inquiries from our existing members and outbound agents who will target policies ranked at higher risk for churn based on our data analytics, as well as any plan structure changes we identify in the market. We deployed our first cohort of dedicated retention agents last month and have since observed encouraging early results. We have expanded this team above our initial expectations ahead of the annual enrollment period. Last month, we conducted a major technology release across the key areas of our customer engagement platform, further widening the competitive gap between eHealth and the more traditional in-person and telephonic-only brokers. This latest technology release takes customer experience to the next level through personalized data-driven plan recommendations and a unified experience that allows seniors to move seamlessly between our online platform and agent interaction, whether telephonically or through texts and emails. Underlying this 360 consumer experience is a customer-centered technology which we released last month and is unmatched in our industry. Using our customer center tool, consumers can create a secure personal profile containing their physician, preferred pharmacy, drug and other key medical and personal data that is accessible both through our online platform and by agents when they are interacting with the customer. This tool, which has already been adopted by thousands of our customers since last month's launch, not only provides for a better enrollment process, but also facilitates future interaction and post-transaction engagement including plan analysis should customer needs or plan structures change. We believe this capability will have a significant positive impact on our online enrollment volumes, customer retention, and, importantly, member recapture rates. Within our telephony systems, we changed the process for lead ranking and allocation to align it closer with our strategic and financial goals, including increased emphasis on retention. In the past, leads were ranked based on their estimated conversion rates, but the highest converting leads were allocated to our best agents. For this annual enrollment period, we are taking a more holistic view of demand generation, assigning lead scores based on estimated lifetime values, in addition to conversion rates. On the demand side of the equation, our market opportunity is continuing to expand with CMS projecting another year of strong 10% Medicare Advantage enrollment growth. This annual enrollment period, seniors have an even broader selection of high-quality affordable plans, with many major carriers expanding their geographic coverage. This will also be an annual enrollment period different from any other prior year given COVID-19 and its impact on consumer behavior. Many seniors are likely to feel more comfortable with telephonic or online interaction instead of face-to-face broker visits. And this can prove to be another meaningful tailwind for the direct-to-consumer broker channel. Finally, the shift to online is here, and it's real. We are seeing it in our enrollment numbers and in overall patterns of consumer behavior on our platform. This dynamic is expected to have a strong positive impact on our competitive positioning, consumer value proposition, and our member economics. And we feel confident in our ability to leverage these powerful industry trends by driving demand on our platform at attractive acquisition costs. Our approach to marketing is opportunistic. We are proactively shifting investments across channels to maximize the return on our marketing dollars and meet our internal targets for lifetime value to total acquisition cost per member ratio. We believe that momentum in our online marketing and strategic partnership channels, seen in Q3, will continue into the annual enrollment period and will result in these channels growing above our total fourth quarter Medicare enrollment growth. As I mentioned earlier, these channels are more likely to bring in consumers who are comfortable transacting online compared to more traditional marketing initiatives such as DirectTV and mail. In addition, members originating in our strategic partnered channel tend to have higher than average retention rates, regardless of whether they were enrolled telephonically or online. Our partners are increasingly recognizing our value proposition. They appreciate that we offer access to the largest plan selection among the DTC brokers and the ability to provide a seamless experience for their customers by safely and securely pre-populating customers' doctors, preferred pharmacy, and drug data through a proprietary personal code technology for either an end-to-end online or telephonic experience on the eHealth platform. More partners are digitally integrating with us for this annual enrollment period, which is expected to be another meaningful driver of online enrollments. For Q4, we expect the partner channel will grow in excess of 80%, driven by new relationships, as well as expanding relationships with existing partners, including large national retailers such as Walgreens and Costco. In addition to partnering with major national chains, we are going deeper into the pharmacy and provider channel. We have now extended our platform to serve thousands of independent and community pharmacies and providers nationwide. Before I turn the call over to Derek, I'd like to address churn dynamics on our platform. Churn levels for Medicare Advantage plans have stabilized in the third quarter, with the trailing 12 months churn flat sequentially at 42%. Importantly, the absolute levels of churn have declined significantly compared to the first and second quarters, with an estimated 30,000 Medicare Advantage members churning in the third quarter compared to 87,000 and 54,000 in Q1 and Q2, respectively. You should expect to see the initial impact of the comprehensive retention program that we put in place reflected in this metric in the first quarter of 2021. As these initiatives mature and impact an increasing number of customers on the eHealth platform, we expect to see continuing improvement in our member retention and recapture rates. In conclusion, I'm pleased with our accomplishments this quarter, as we enter the Annual Enrollment Period from a position of strength and expect to generate significant Medicare enrollment while reducing our per member acquisition costs— a powerful combination. We are also focused on enrollment quality and expect that members that we enroll this annual enrollment period will, on average, stay on their policies longer and generate higher lifetime commissions compared to the annual enrollment period a year ago, as a direct result of the retention and customer engagement initiatives that we have put in place. As always, our customers are at the center of everything we do at eHealth. We are acutely focused on enhancing and simplifying their experience by meeting them where they want to be, whether it's online, through interaction with our licensed agent, customer care specialist, or through a hybrid agent-assisted online enrollment. I believe the work we've done so far this year has positioned us uniquely well in this large and growing market to capitalize on the opportunity at hand. I will now turn the call over to Derek Yung, who will go over our financial results in greater detail.

Thanks, Scott, and good afternoon, everyone. Our third quarter results reflect strong momentum in our Medicare online enrollments, significant growth in carrier advertising revenue, and investment in our telesales capacity and technology initiatives ahead of the Medicare Annual Enrollment Period. In our Medicare business, third quarter revenue of $70.4 million grew 23% compared to a year ago, driven by a 17% growth in approved Medicare members and a 103% growth in carrier advertising revenue, reflecting carrier recognition of eHealth's value proposition and significant enrollment growth potential in online marketing and telesales channels this Annual Enrollment Period. Our Medicare segment loss was $16 million, reflecting investments as we prepare for what is expected to be another record fourth quarter selling season in terms of revenue, enrollment volume, and profitability. Year-to-date, our Medicare segment profit was $19.4 million, compared to $5.9 million for the same period last year, an increase of over 200%. Our estimated number of paying Medicare members was approximately 734,000 at the end of the third quarter, up from approximately 551,000 at the end of the third quarter of 2019, for an increase of 33%, well above the growth rates of the Medicare Advantage market and the overall Medicare markets. Third quarter 2020 revenue from our individual family and small business segment was $23.9 million, an 88% increase compared to a year ago. This was primarily driven by a 37% increase in approved individual plans for major medical plan products, accompanied by a continued trend of longer duration for these products and an $18 million in residual or tail revenue that we booked in the segment during the quarter. This compares to $7.7 million in segment tail revenue in Q3. The individual family and small business segment profit was $18.3 million compared to a profit of $3.8 million in the third quarter of 2019, driven largely by a positive impact of tail revenue generated by our individual plans and ancillary products during the quarter. Our estimated individual and family plan membership at the end of the third quarter was approximately 112,800, down 14% compared to estimated membership reported at the end of the third quarter a year ago. Our total revenue for the third quarter was $94.3 million, an increase of 35% compared to the third quarter of 2019. Our total estimated membership at the end of the quarter for all products combined was approximately 1.14 million members, including approximately 245,000 estimated members on ancillary products. Now before I move on to discuss operating expenses, I want to provide more detail on the dynamics that we're seeing with member retention and estimated lifetime values in our Medicare business. Please note that we report churn as any plan switching by paying members, even if the changes are made on our platform and eHealth remains the broker of record. This also includes plan changes within the same carrier. As a reminder, given that we observe churn on a lag, our core membership figures reflect the estimated number of effective policies paid by members, based primarily on cash collections and historical retention data. As Scott mentioned in his prepared remarks, our estimated third quarter paying member churn in our Medicare Advantage business declined substantially compared to the first and second quarters. This was primarily driven by seasonal factors and was within our expected range. The trailing 12-month churn of 42% continues to be dominated by the churn from Q1 2020, which will no longer be a factor into the trailing 12-month average as of Q1 next year. In our Medicare Advantage business, similar to carriers and other brokers, we experienced the highest churn in the first year following policy enrollment. In the second year, average churn rates have dropped and have continued to decline as policies mature. Within the first year, churn has been quite front-end loaded. Over 70% of our first-year churn in Medicare Advantage plans has occurred in the first 90 days of policy life. Our largest enrollment volume quarter is Q4; with members that we enrolled during that period and during the first 90 days of policy life in Q1 of the following year. As a result, the first quarter is the most meaningful period in terms of persistency data. We believe that this Annual Enrollment Period, our new enrollments will benefit greatly from the comprehensive retention program that Scott described earlier in the call, and we expect that the initial impact of that to be evident in our Q1 2021 estimated retention metrics. In terms of estimated lifetime values for 2020, we continue to guide to a roughly 60% decline in Medicare Advantage LTVs for the full year and a 10% decline for the fourth quarter compared to the same period a year ago. For next year, we currently maintain a conservative target of getting back to 2019 Medicare Advantage LTV levels. Our Medicare commission cash collections for the trailing 12-month period ended September 30 were $240 million, or approximately $420 per Medicare Advantage equivalent member. This represents a 47% increase in the total Medicare commission cash collections and a 12% increase in per Medicare Advantage equivalent member collections compared to the trailing 12-month period ended Q3 2019. As part of our earnings slides posted on our Investor Relations site, we have provided some further information on our cash collection cycle in the Medicare business. This analysis compares the upfront acquisition costs spent to acquire each of our annual Medicare Advantage cohorts against cash cohorts generated by these members to date. You will see that our 2018 Medicare Advantage cohorts are already generating positive cash flow in excess of our initial acquisition costs while the 2019 cohorts are nearing breakeven on that basis. In general, our commission cash collections in Medicare continue to be favorable when compared to initial estimates used for LTV at the time we recognize revenue. Now I would like to review our operating expenses and profitability metrics. Q3 has always been a big investment quarter for Medicare as we expand our telesales capacity and deploy technology upgrades in preparation for the Annual Enrollment Period. This Annual Enrollment Period, we made a shift in our agent mix toward more full-time in-house agents. Following a successful hiring season, we increased the number of internal agents 120% compared to last year's Annual Enrollment Period. At the same time, our total agent number, including outsourced call center agents, increased approximately 40%, which is well below the expected growth in the fourth-quarter Medicare enrollments. This is due to a higher expected percentage of Medicare major medical online enrollments, which include unassisted and partially agent-assisted enrollments, compared to 2019, as well as better agent productivity as a result of an enhanced league ranking and allocation system and a new call center technology deployed ahead of the Annual Enrollment Period, including an important tool that increases the speed and accuracy of capturing drug and provider data. Our third quarter cost per approved Medicare member declined 2% compared to a year ago, driven by a 7% decline in customer care enrollment costs, offset by an 11% increase in marketing cost per member. Agent costs per approval were favorable compared to last year due to a higher percentage of online enrollments. Some of this was due to timing of our agent onboarding expense, which we incurred later in the year compared to 2019. The increase in our marketing cost per approved Medicare member was driven primarily by our larger portion of applications originating from our online marketing channels, which tend to have a higher average marketing cost, but also higher propensity to convert online with no or reduced agent involvement. Given the favorable trend in acquisition cost per Medicare member in Q3, and the fact that we anticipate we will be able to drive more enrollments per agent this Annual Enrollment Period compared to a year ago, we expect our fiscal year 2020 acquisition costs per member, including agents and marketing costs, will decline approximately 10%. This decline would more than offset the forecasted reduction in our 2020 Medicare Advantage LTVs and will allow us to achieve a higher LTV to total acquisition cost per member ratio, as well as an increase in our overall EBITDA margin in our Medicare business compared to 2019. Turning to profitability metrics, GAAP net loss for the third quarter of 2020 was $14.5 million, compared to GAAP net loss of $11 million for the third quarter of 2019. Adjusted EBITDA for the third quarter of 2020 was negative $13.3 million compared to negative $18.8 million for the third quarter of 2019. We calculate adjusted EBITDA by adding stock-based compensation expense, change in fair value of earnout liability, depreciation, amortization, amortization of intangible assets, other income, and benefit from income taxes to our GAAP net loss. Our third quarter cash flow from operations was $1.4 million, compared to a negative $15.9 million for the third quarter of 2019. Cash flow from operations benefited from significant in-quarter carrier advertising revenue. As of September 30, we had $197.8 million in cash, cash equivalents, and marketable securities, and we had no debt outstanding under our line of credit. Our balance sheet also reflects a significant commissions receivable balance of $604 million. Based on information available as of October 22, eHealth is reaffirming its guidance for the full year ending December 31, 2020. Our guidance ranges are included in our third quarter earnings release for your reference. I want to remind you that these comments and our guidance are based on current indications for our business on our current estimates, assumptions, and judgments, which may change at any time. Our actual results may differ as a result of changes in our estimates, assumptions, and judgments. We undertake no obligation to update our comments or our guidance. And now we will open the call for questions.

Ladies and gentlemen, we will now open it up for a question-and-answer session. Your first question comes from the line of Jailendra Singh from Credit Suisse. Your line is now open.

Quick clarification on your comments around member turnover point. So I know it's declining from 54,000 in the second quarter to 30,000 in the third quarter but then the second quarter included like some 20,000 member turnover catch-up from the first quarter. So on an apples-to-apples basis, not that big declines. Can you flush out a little bit more or did we understand that wrong?

Hey, Jailendra, this is Derek. So if you remember correctly, in Q3, we did have a catch-up on what was reported coming out of Q2 where there should have been a shift in the turnover members that were reported in Q3 instead of Q2, so you're correct in remembering that. From a seasonal basis, that is still a significant decline, we look at absolute numbers even on the adjusted basis, going from Q2 to Q3, due to obviously what we typically see as the seasonal enrollment with the annual enrollment period.

Okay. I just want to also understand your trends in MA approved members in the third quarter, I understand the second quarter has some SEP benefits, but still a sequential decline from around 60,000 approved members in the second quarter to 45,000 in the third quarter. Can you provide a little bit more color there? Would you say approved members in MA in the third quarter were kind of flat to expectations? Or what do you say there was some variance as to any color there?

Yes. Our enrollment volumes through Q3 were in line with our expectations, as well as the overall top-line expectations. As you know, Q3 is seasonally a low quarter for our business. From an investment perspective, our goal is to prepare for the annual enrollment period, both for sales, marketing, and for technology investments. As you heard in the call, we feel very good about all those plans and everything that we've seen relative to how we have been executing. So we expect to deliver on our plan for the full year as we have provided in our guidance in Q2.

Can you provide any given the trends in Q3, can you share any like what's kind of year-over-year growth are you expecting, are you reflecting your guidance for Medicare Advantage approved members for the fourth quarter?

Yes. It was implied in our guidance based on year-to-date results. Our Medicare revenue in Q4 growth were close to 50%, I think it's around 47%. The enrollment growth will be higher than that because our Medicare Advantage LTV is expected to be declining year-over-year by 10%. So if you kind of back that number to enrollment growth, it will be close to 60% year-over-year for Medicare Advantage.

Okay. And then last one, I was wondering if you guys can comment on the recent developments in the competitive landscape with Walmart trying to enter the market. Just AEP, just curious on your thoughts there. And I'm assuming you guys use Walmart as one of your channel partners. And does this have any implication on that relationship?

Well, we don't know what Walmart's long-term strategy is, but they've been a partner of ours in years past and continue to be this year. We're expecting enhanced spillover calls from Walmart this year over last year of a fairly significant amount. And so we see them as a partner, not a competitor.

Your next question comes from the line of George Sutton from Craig-Hallum. Your line is now open.

Thank you. I wonder if you could go into a little more detail on what you referred to as encouraging results from the first month of your retention initiatives. Given that, obviously, the trailing 12-month indicator is not really representative of any of that impact.

Is Tim on the line?

Yes. I can take that one. So we obviously in the last call, we talked about the full review we were doing and initiatives that we were putting in place. And one of the largest, most impactful was our retention team. And that team started up in early September with the first wave of agents that we took from our existing sales floor as well as new recruits. Right out of the gate, we can see very encouraging signs on the impact they were having on our consumers. Most notably, when consumers were calling to cancel, 90% of the time, we were able to keep them as eHealth customers, and the overwhelming majority in their current plan. So there was a gap in how we were serving our customers that was very apparent very quickly. This is one of the main reasons why we expanded our retention team in the run-up to the annual enrollment period to add in agents to do outbound calling to our high-risk customers and to be able to handle a larger inflow with licensed agents for our existing customers.

Okay. Just I heard correctly, you would call 90% of the folks that you were talking to that were going to churn you were able to keep in; did I hear that correctly?

Yes, sorry. These are inbound calls. So customers would call with a concern of some kind, and previously would be routed to a sales agent who was attempting to sell them something new when that probably wasn't appropriate. When somebody would call in and express that they wanted to cancel or make a change, 90% of those calls resulted in them remaining an eHealth customer. Prior to the establishment of this team, we would not have had any ability to save them the way we do now.

You are getting 10%. I believe that the math was before. So that's an encouraging change. One more question, so you mentioned that you're going to have less focus on high conversion customer volume and more focus on higher lifetime value opportunities, meaning looks like folks that would churn at a slower pace. Can you just give us a picture of what those different kinds of customers look like and how predictable that is?

I'll take that one again, Scott. So there are—we have been able to leverage our data and analytics to better understand what drives persistency. At a high level, we talk about channel being a big driver of that. The main reason for that is the kind of customers that we attract through different channels. We have been able to change the targeting within all of our channels; some are just more likely to produce the right kinds of customers than others. I won't go into all the details about what makes somebody a good customer because it's competitively sensitive. But we used to look for high conversion rates exclusively, and we can now see there were unprofitable pockets of customers, customer types that we should avoid and certainly not prioritize the way we had been previously. So, conversion is still important as a significant driver of LTV, but the long-term expected value of the customer is now what we rank calls on and evaluate our agents on their ability to drive.

Perfect. Thank you, guys.

George, just one more thing to add to that, the other two leading indicators in terms of what we expect of improvement in persistency’s and lifetime values are based on fulfillment mix that we commented on in terms of increasing online, which is 25% to 30% more favorable historically with lifetime values. Also, the use of internal agents versus vendor agents. All that combined, in addition to what Tim is doing, has been positive relative to what we expect in terms of increased persistency.

Your next question comes from the line of Greg Peters from Raymond James. Your line is now open.

I have one question and one follow-up. The first question, and I know it's hard to adjust your scripts on the fly, but the stock is down in the aftermarket guys. And first flush, I think if we look at some of the metrics around your declining estimated customer care enrollment per approved member, we look at the declines in IFP, and we look at the guidance that's effectively flat, relative to the second quarter, it might suggest that there's a slowing growth rate of the organization. Perhaps you could give us an update on how you see that looking forward because, as I said, the stock is down in the aftermarket.

Yes. Let me kind of comment on your last comment there, which is slowdown in growth. The top line came in within our expectations, both in terms of revenue and volume, and our preparations for what is really the heavy selling season, which is right now in the annual enrollment period is good. That's what you heard. So our guidance has a revenue spread range of $40 million and an EBITDA spread of $15 million. We do expect that our results for the full year will fall in that range, which if you back into it is Q4 growth rate, total revenue basis of almost 40% on the Medicare side, almost 50%, which we think is good growth. At the same time, we are, as you have heard here, making progress in final implementation or retention initiatives, which won't show up on our reported metrics because we do need observations on how persistency has improved in order for LTVs to increase again. As a reminder, we had forecasted LTVs for 2021 to get back to 2019 levels. Given everything you heard on this call regarding what we see as the anticipated impact of our initiatives, we feel very, very good about that being a likely conservative estimate in terms of what LTVs could be next year.

Got it. I just like to ask the follow-up question that's just about commission receivable, both current and long-term because rates of growth of that slowed in the third quarter on a sequential basis. Really, I think most of your investors view that as the pipeline for future earnings. Given that you're making the adjustments to the churn levels, do you expect the growth of those commission receivables to accelerate next year based on their current projections or if of course, churn improves? Or do you anticipate that the growth rates of those receivable numbers will stagnate or again, the growth rate deteriorate a little bit?

Yes, Greg. So you're digging deep into our 606 account, which is great because we need more people like you who do that. Receivable growth is a bit tricky to look at, which I think is what you're pointing out because the receivable is large. So even when we are growing all right revenue significantly, as a percentage of the receivable is smaller. With that said, there are two drivers by which the receivable will grow faster. One is obviously if your revenue growth is growing and continues to grow at a healthy clip. The second one is obviously if our persistency improves. Given that we expect our persistency to improve, I would expect the commission revenue growth to be increasing as we see persistency improve.

Your next question comes from the line of George Hill from Deutsche Bank. Your line is now open.

I guess Derek, just a first housekeeping question before we go into my follow-up. Did you guys actually disclose what the retention figure was for the third quarter? And I recognize it's a seasonally slower and softer quarter. But I think the number is important given the discussion from the Q2 call?

Yes. So in our earnings slides, we updated our Medicare Advantage membership churn turnover chart, and that 12-month metric is 42%.

Great. Yes, not the turnover but the retention figure?

Oh, the retention figures. I'm sorry, I misunderstood. We did not talk about that. And the way we act, the way we look at that but the period by which that's most meaningful is after Q1 when we look at the retention that came out of what we saw in the annual enrollment period. So it's too early, obviously, to comment on that right now since we just started the annual enrollment period.

Okay. And then maybe a quick follow-up, I guess for you or for Scott is, I guess given Walmart's will call their entrance into the market and you guys have your relationships with some of the pharmacy organizations and a lot of large MCs are talking about both a slowdown in churn and an increase in their reliance on third-party brokers going into these annual enrollment periods. And so I guess, could you guys talk about kind of what you've done to either strengthen your partner channels either on the retailer side? And is there anything that you've done different on a year-over-year basis with your partnerships on the carrier side?

Well, we've signed up thousands of pharmacies, and our partner channel is one of the bright spots in Q3. We're expecting it to significantly outgrow our overall growth rate in Q4 for just the reasons that you've identified. Importantly, the enrollments from those channels have a propensity to grow online at a higher rate. Whether they enroll online or telephonically, they have higher persistency than the traditional DTC channels of direct mail and direct response TV.

Your next question comes from the line of Elizabeth Anderson from Evercore. Your line is now open.

I was wondering if you might be able to comment more broadly on your partnership strategy. I think you made some specific comments about Walmart but it's really that is a sort of underappreciated part of your story. So just to know in terms of where you're seeing it with specific partnerships in terms of the specific areas of the applications or how you think about those regarding your LTVs?

Yes. So I think just think about the partner channel in two broad buckets. One is the provider channel. These will be hospital systems that are partnering with eHealth to be their official and sole Medicare Advantage enrollment partner. This has been a rapidly growing area for us, and we expect it to double this year in aggregate. The other would be the pharmacy channel, where we assist pharmacy customers to enroll in Part D plans or MAPD plans, where the pharmacy client of ours is a preferred pharmacy. That has been a rapidly growing business as well. I do agree, Elizabeth, it is an underappreciated part of our story. It's outgrowing all other aspects of our business in terms of lead source and having higher persistency and stronger online enrollment.

Okay. Is there any reason you would point to this stronger persistency and online enrollment from that group? Or is it hard to characterize it in one bucket?

Well, I'd say the most important reason is, when we take a call from a provider, for example, we very often answer the call as the enrollment for, if it's Cedars-Sinai or another hospital system. And so we know that the client that's calling us is a patient of that hospital system. We are getting them into the plan that covers all of their physicians and all of their specialists. The most important factor in churn is getting a senior into the plan that covers all of their doctors and all of their drugs. While that's easy to say in one sentence, it's complicated to execute in part because the beneficiary does not always recall all the physicians that they see in the course of a year; they don't always recall every drug that they're on. So when we have information as we do in some cases with the pharmacies, where we get an electronic link with all of the drugs that are prescribed for that senior, we can get that senior into an optimal plan. Their propensity to churn is much less than, say, a direct response TV call, where someone's calling from their sofa, they don't have their drugs in front of them, they're responding to an offer spontaneously. They may or may not give us complete information, even though we try, and we exert maximal effort to extract all that information. This is why, very often, it's inaccurate or incomplete. The retention team that Tim mentioned is critical because what happens when a senior shows up to use their plan early in the new year? They'll often have a drug that's not included in the Part D plan or a specialist that they forgot to mention that they see once a year. They can call us. We can identify whether the specialist is in the plan for them or move them to a plan that does cover all of their specialists. As I said, it's more complicated getting seniors into the right plan than it seems because, very often, they don't deliver complete information to us. These partnerships give us access to a far more complete patient history so that's why it works so well.

That makes sense. And then just on an unrelated note, the IFP guidance. I totally appreciate you're not wanting to update guidance one weekend to the annual enrollment period, but on the IFP part, you guys have already done close to $43 million in revenue for the year. And this is the high end of your guidance, there's like $51 million. So if there's something we should think about in terms of the step down because usually we've seen like a seasonal step up, and you obviously saw a great deal of outperformance in the third quarter there. So I just want to make sure we're taking into account what you guys are thinking in terms of the fourth quarter there.

Yeah, that's a very good catch, though. You're right, the IFP business has performed well. We've seen in particular the policy durations continue to extend and hence the increase in total revenue being recognized because we're having people staying on longer. I think we've seen nine quarters in a row now where lifetime values for major medical IFP policies increase. So you're correct. In terms of kind of how that measures the guidance, I think you're right, you should expect that we would do closer to the top if not exceed the IFP, SMB segment guidance for the full year given the performance year-to-date through Q3.

Your next question comes from the line of Dave Styblo from Jefferies. Your line is now open.

First question is just coming back to the Medicare Advantage business. I know the management team characterized the quarter as being in line with your expectations. I guess the hard part I'm trying to wrap my arms around is the deceleration of the approved application growth down to 28%, which is less than half of the 60 to 65% growth we saw in the first half of the year. I guess that precipitous decline, I just still don't understand the disconnect when you've hired so many more reps this year. Is there any other explanation? Perhaps it's just a retooling of the agency slow down growth and leads just to retrain the agents and get them back on track to improve duration as some of the issues you've put forth? How do we get confidence that that is going to accelerate back up on the fourth quarter again?

Dave, so a few things. This is not related to anything operational execution; I think what you heard on this call was confidence that our plans for the annual enrollment period are positioned well to achieve our goals. From a more macro perspective, there has been a change beyond the seasonal pattern that we typically see with Q1 having the open enrollment period and then Q2 for that special enrollment period. We did have something different this year in terms of sequential change for enrollment growth. The last thing I would say, which I'll reiterate, is really, given the choice of investing for growth in Q3 versus Q4, we would push to Q4, given the much better economics of how we deploy the capital. We feel very good about how we have allocated our sales and marketing investments toward Q4 growth versus enrollment growth in Q3.

Okay. And is that different than last year? Because in the third quarter of last year, the approved application growth accelerated. Last year we had the annual enrollment period and the open enrollment period. My understanding was the special enrollment period this year wasn't that big of a factor based on maybe some conversations you've had before? So I'm just struggling a little bit to understand that step down.

Yes. Let me explain that. Last year in Q3, we did have very, very good growth in terms of the Medicare Advantage approved member enrollments. That was a benefit of a very easy comp from the year before. The year before in Q3 2018, we had zero percent growth for Medicare Advantage year-over-year. We had a very light comp in Q3 2019.

Yes. So we've had a sequence of actually more unusual macro factors that allowed enrollment growth to have more tailwinds. We did not see that in Q3. And, additionally, on your broader comment around what the kind of the sequential growth, obviously, in Q2 last quarter, we did have a different environment with the special enrollment period that created more opportunities.

Your next question comes from the line of Daniel Grosslight from Citi. Your line is now open.

Hey, guys, thanks for taking the question. I want to go back to that partner channel, which was looking very strong. I would have expected those channel partners to be most affected by COVID-19 given they're largely in person. I guess can you talk about what has offset some of the reduced traffic in hospitals and pharmacies recently? And how do you think about perhaps a surge in the winter during the annual enrollment period and how that might affect traffic at these channel partners?

Yes. I mean, we do watch the provider channel and follow the public systems, and clearly, they are struggling due to the lack of elective surgeries. But from an enrollment standpoint, most of our enrollments come from having the email and physical addresses of their patients; we promote directly to them. Even though we do have signage and brochures in each of the facilities, it really is our direct marketing to those patients that brings them to our site, our platform, either telephonically or online. We aren't seeing or expecting anything but fast continuing growth. I will tell you, they are, and we do hear from the partner channel business development team that there are a lot of hospital systems who are smaller that are in deep financial distress, but those that don't have a large charitable endowment are really struggling. There are no economic exchanges here. The partnership is done by them. Their objective is to capture 100% of the share of wallet of the beneficiary. They want seniors to sign up with a Medicare Advantage plan that will cover all of their specialists and all of their services.

Your next question comes from the line of Frank Morgan from RBC Capital Markets. Your line is now open.

Most of my questions have been answered. But I did want to go back to your assumptions around the growth in the online channel. I think you said 45% to 50% of your applications would be online. I'm just curious what gives you—that's a really big number and very differentiated from your competitors. What gives you confidence that you can really achieve that much enrollment growth? Are there any early indicators to suggest that that's achievable? And then, secondly, if would you care to share what the potential split would be between pure enrollment online versus assisted. I have that number question.

Yes, Frank. I'm going to introduce Phillip Morelock, who's our Chief Digital Officer and oversees all product data and technology for eHealth, who is responsible for architecting, executing, and launching the customer center because I really want him on the hook for these results. Philip, take it and run.

Thanks, Scott. We have made substantial investments in our platform over the last two years, but certainly this year, we've gone to market not just with the customer center, but with an entire redesign of our e-commerce funnel, taking into account customer research that we've done through first-party research as well as extensive A/B testing. So far in the AEP period, we're seeing our conversion rates up over 50% on the online platform, and so we're very confident that the design changes that we thought would yield results will indeed produce those results. Additionally, we're seeing rapid adoption of the customer center technology. We quickly reached over 10,000 enrollments in the customer center itself. We're seeing more time spent by those customer center users, better conversion from those customer center users. It’s still early, but we're optimistic that this will positively impact our retention figures as well. In addition, as Scott was mentioning, the partner channel is a material driver for online for us. We are seeing increased conversion rates in that partner channel as well from many of the partners that we have due to those data integrations that Scott was talking about.

And I think you also historically that pure unassisted enrollment number was fairly low. Based on the new studies you've done any changes there in the mix between assisted and unassisted normal enrollment?

Both are growing rapidly. We do see the unassisted growing a little bit faster. We're optimistic about that because of all the changes we've made to our conversion funnel.

In the economics.

And I guess one final one. In terms of the change, or as it relates to retention, some of the changes you've made are related to the compensation for your sales force—your internal sales force. How has that been received so far? Has there been any pushback from adopting this new structure that could alter retention?

This is Tim. I'll take that one. So far, there hasn't been any pushback within the agent workforce. Our best performing agents, this is a chance for them to earn more. It's certainly our hope and expectation that they will. We see great retention rates of our core agents; of our top 75% of agents, we keep 94% of them on an annual basis. They're engaged; they were consulted in the process of building this plan. For high performers, this is a chance to earn more money in the long run.

Your next question comes from the line of Tobey Sommer from Truist. Your line is now open.

Thank you. If we think of the multi-pronged approach you have to proving customer attention does, getting back to the prior LTV represents sort of the best outcome, or if these initiatives turn out well, could you in fact do better than them?

I'd like for Tim to answer that because he is singularly accountable to us for those results.

Thanks, Scott. Yes, that's a very astute observation; we believe that there are opportunities to do much better than where we were in 2019 because we had none of these initiatives in place at that time either. When we build that goal, we knew it had a degree of conservatism in it. We are learning every single day how to adjust these programs, make them more impactful, and tie them better together. One of the things that we're doing is getting feedback from our retention team back to our sales team on ways that they can improve on the front end. We believe that the 2019 LTV is a fine short-term goal, but is by no means the long-term success metric here.

Okay, thank you. My last question is, with respect to retention, do you have a look at the book in your MA membership based on average star rankings? Here managed care companies talk about that. If you have looked at it on that dimension, has the ebb and flow of retention over the last 24 months mirrored a change in the sort of blended star ranking of your membership profile?

Scott, I will take that one as well. We do look at our retention across as many different dimensions as we possibly can. What I would say is that the overwhelming drivers were factors within our control and less to do with exogenous changes happening around us. There is no doubt that plan expansion, plan changes, benefit changes, and star rankings introduce some change, but they were a small driver of the deterioration that we saw. It’s something we looked at, but again, it was not a big driver of our performance.

There are no questions from participants online. Let me hand the conference over to the CEO, Mr. Scott Flanders for the closing remarks. Please go ahead, sir.

Thank you, everyone for your informed questions. We're excited about how we're positioned for Q4 and looking forward to helping a record number of seniors get into the right Medicare Advantage plan, a growing individual family plan business, and look forward to getting back on the phone with you after we have a successful Q4. Thank you, everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.