eHealthInsurance booms during nation's bust

Scott Hillis

SEATTLE: When Laurie Anne Plax got laid off from her marketing job in
November, she also lost her company health plan.

Moreover, the COBRA federal health insurance program for people who lose
their company coverage, was going to cost a bundle -- $700 a month for her and
her self-employed husband. Fortunately, the Chicago resident knew where to look
for alternatives.

"Thank God for the Internet," Plax said. And as it turns out, at
least when it comes to health insurance, the Internet is practically synonymous
with eHealthInsurance, a privately held firm that claims to handle 95 per cent
of all health policies purchased online.

"We just went on the Internet and literally typed in 'health insurance
in Illinois' and up popped eHealthInsurance (http://www.ehealthinsurance.com
), which sounded exactly like what to click on," Plax said.
eHealthInsurance is a go-between, not an insurance company. With links to 100
insurers offering 8,000 plans in all 50 states, eHealthInsurance is a
"super mall" for comparing, tailoring and buying a health plan.

Founded in 1997, the Sunnyvale, Calif.-based firm is backed to the tune of
$84 million by some of Silicon Valley's top venture capital firms, including
Kleiner, Perkins, Caufield & Byers, and The Sprout Group. It was started by
Vip Patel, a former executive with Internet health firm Healtheon, later bought
by WebMD. Chief executive Gary Lauer's credentials include a nine-year stint
with high-performance computing firm Silicon Graphics.

"The whole notion and vision was to take the Internet and see if it
couldn't be used to help facilitate access to health insurance for individuals,
families and small businesses," Lauer told Reuters in an interview.

Even when times were good, eHealthInsurance found enough business among
America's 40-million-strong ranks of uninsured to keep it growing at a breezy
clip. "It's a large market, ineffectively served," Lauer said.

Now the mounting stacks of pink slips nationwide are driving 10 per cent
month-to-month growth, dot-com-style numbers rising from the ashes of the
dot-com flame-out. "We're seeing it in several ways," Lauer says,
addressing the impact of a bad economy. "The short-term, transitional
products, for one, two or three months, we've seen a real surge in that
business."

Still, some 40 per cent of eHealthInsurance's customers were previously
uninsured, Lauer said. "There were many people uninsured, not because they
can't afford it but because they didn't know they could get it," Lauer
said.

An online application filled out at the company's Web site should take 15 to
30 minutes to complete, Lauer said. eHealthInsurance then forwards it on to the
appropriate insurer, which can process it in anywhere from a few hours to a
couple of days.

Often the entire transaction can be handled online, but sometimes the insurer
needs documents that must be sent via fax or mail. But eHealthInsurance
continues to act as a go-between, so customers don't have to deal directly with
the carrier.

"They make it seem seamless to you, which is great," Plax said.
Like a regular insurance agency, eHealthInsurance collects a fixed fee on every
transaction. While it has licensed its platform to some individual insurers,
most carriers would just as soon not run their own online store, Lauer said.

"The carriers really don't want to distribute, they have encouraged a
large broker force," Lauer said. But online insurance can be a tough
business. Shares in Sacramento, Calif.-based rival InsWeb Corp.
are trading at about 71 cents, and have fallen 50 per cent in the past year.

InsWeb (http://www.insweb.com ) sells
auto, homeowners, life and health insurance, though it isn't selling health in
every state yet. The company has been losing about $7 million a quarter, though
it expects revenues for the current quarter to be up to $5.9 million, as much as
23 per cent more than previously expected.

When asked about competitors like InsWeb, Lauer said it has been easier
focusing on health rather than trying to offer all kinds of policies. As a
private company, eHealthInsurance doesn't reveal any revenue, profit or loss
data, but Lauer said it is on track to pull out of the red in mid-2002.

"We are well-capitalized. We're moving in on profit and cash-flow
positive, so there is no need to go public for any kind of
capital-raising," Lauer said. "We're in no great rush. Certainly when
market conditions are better, I'd be shocked if we didn't become a public
company."

(C) Reuters Limited.