eHealth Will Take Several Years To Get Established In Medicare

Analysts at Citigroup initiate coverage of eHealth EHTH with a "sell" rating. The target price for EHTH is set to $10. According to Citigroup, “The introduction of minimum MLRs in 2011 will force health plans to significantly reduce broker commissions, putting a lot of pressure on eHealth’s margins. Moreover, the existing business is already struggling, because individual health insurance commissions generally are cut in half upon renewal, requiring significant new member growth each year to maintain revenue, which has been hard to accomplish in this difficult economy.” “However, this cash is only valuable if used in a shareholder friendly way. As commissions are cut, our fear is that management will panic, and use the cash to buy other businesses with less than stellar prospects, like its recent acquisition of PlanPrescriber… Medicare could be a nice niche business for the company, but it will take several years for eHealth to become established in Medicare, and the cost of member acquisition will be much higher than eHealth currently anticipates,” the analysts say. More Analyst Ratings here.