6 March 2000: The healthcare industry's been coming online with a vengeance -- and it's not just Healtheon/WebMD with its stable of acquisitions. eHealthInsurance.com CEO Gary Lauer discusses his company and how much less intimidating and more efficient the dreaded health insurance process can be online.

The following interview was conducted on 23 February 2000:

eMarketer: Tell us a little about your company.

Gary Lauer:  The company is almost two years old. It's been the business for the last year of selling health insurance online. We've aggregated all of the major health insurance carriers in the U.S. into one place; we're licensed in 45 states and we're appointed by 30 carriers. We believe that we're the number one place online where people go to buy health insurance.

We're very focused on the customer experience and customer support, with a significant investment in a customer-care center. This includes a large group of health insurance professionals -- licensed agents -- who are available through the business day for online chats, for e-mail, for those who want to pick up the phone as well. They're there to provide counseling and answer questions, because this whole health insurance area can be very daunting and confusing to people.

We're the place that people go to learn that health insurance is affordable and accessible: a tremendous source of information and rates for people about health insurance. And we help people and businesses find what is most appropriate in terms of health insurance for themselves, for their families, or for their businesses.

We're also growing at a very good rate, processing thousands of people on a monthly basis.

eMarketer: What about your market?

Gary Lauer: The health insurance market is about $330 billion. Individuals and families are about 10 percent of that, so that's a market in excess of $30 billion dollars. These are people who don't get their health insurance through their employer or in association with an organization -- plumbers, electricians, architects, CPAs, attorneys. That really runs the gamut.

There are also businesses with less than 50 employees -- the ones that probably aren't big enough to have a full-time staff where people are dedicated to benefits. Yet employees want some kind of a health provision and health offering. And we allow a business, just like we allow an individual, to explore and get involved in different alternatives and options; we can also help them make the appropriate decision for all the employees in the business.

That's the biggest part of the market, the market we've been addressing: the small groups of 50 employees or less are about 25 percent of the market, or in excess of $75 billion. That's the newest initiative we have and one of the fastest growing business segments.

The third segment that we focus on is the Supplemental Health Programs through Medicare. People over 65 get Medicare, but it's not very robust. So many of them go out and buy insurance programs that compliment or augment the Medicare that they get. It's a big market as well.

The fourth sector, one we're very, very focused on is the uninsured. 45 million Americans today have no health insurance. There are some obvious economic reasons for that. But in California, where I live and where 10 % of the population is uninsured, the State conducted a study. And it found that 68% of those that didn't have health insurance didn't know that they could afford it.

And in the US, 20% of the uninsured had annual incomes in excess of $50,000. We're finding that a large portion of the people who are coming to us and buying health insurance from us were previously uninsured. So from a pure business standpoint, it's an important market opportunity. But from a social standpoint, you know, we think it's important to be able to help the uninsured get insurance.

Everything we do is online because the Internet is a natural means of distribution and delivery for us. It's fabulous. We're doing a little bit of work offline, but not much. We can aggregate the carriers, give you the options -- for example, we have over 2200 different health insurance products right now, online. So when you think about the choice and defining what's most appropriate, you see the power of the internet for people and for businesses.

eMarketer: How is revenue generated?

Gary Lauer:  We're paid a commission with every policy. What's unique about health insurance is that the premiums are billed and paid on a monthly basis. So we get a commission every month. We have a recurring revenue stream, which is highly unusual on the online world. We like that, especially since every month we're scaling up as we add more and more customers or members. We also have very little variable cost -- no inventory, no materials. And because it's fixed, once you exceed a certain point, the profit formula gets to be really attractive as well.

eMarketer:  Please describe the user experience.

Gary Lauer:  Okay. You log on and give us a zip code. We need to know what state you're in because health insurance is regulated state by state. And then you start working from there. If you need an educational preview, we'll educate you on the difference between a preferred provider -- which is a PPO, and HMO, different kinds of deductibles and so on -- to help you make your decisions about that.

And then there's comparative compliance. You can see pricing and details, then they'll give you the quotes and help you to make a decision about what's most appropriate for you, for your family or your business. You then apply online, all the same session. At this point, we're probably ten minutes into it something like that. You apply online. We've got a number of filters and things in our system and the software technology to help insure the acquisition is very accurate. We then take that application and process it, then ask you to send a check. We're not processing credit cards yet but we're looking at that right now. We then work with the carrier to get it in the underwriting process and it goes through this evaluation underwriting process. It's approved at some point -- and we're communicating it through the whole way. We get the policy back to you and you're insured.

We've invested heavily in our technology base. I think you'll find it's faster. I can tell you it's highly accurate. We're in close communication with the providers to expedite that process. The applications that we send to our carriers are highly accurate.

One of the interesting problems for health insurance carriers is that more than half of the applications they receive through traditional means have to be reworked. The information is incorrect, inaccurate, lacking something or whatever, so it's got to go back. Because of what we do online and the way we're able to filter and cleanse the process, the application reworking percentage is very, very small -- in the single digit percentage. That helps to expedite this.

We have just begun working with a carrier in California called Healthnet. After you've completed the application online, in 60 seconds they'll come back and tell you've already been accepted. So we ask you for payment and move you through the proccess very, very quickly.

Gary Lauer:  Health insurance is a complex issue. I would venture your insurance comes from you company?

eMarketer: Yes.

Gary Lauer:  Have you ever had to buy it for yourself?

eMarketer: No.

Gary Lauer:  Would you know how?

eMarketer:  No.

Gary Lauer:  Most people wouldn't. I wouldn't either. It's a very daunting task, especially if you have a family, because you want your family members to be insured as well. Most people would perhaps pick up the yellow pages or talk to somebody they know. And that could be fine. But, being able to come to us online, having all of the carriers aggregated there, learning and being able to interact with human beings who are experts in this area and then having us help you find the most appropriate product -- it's a very, very powerful formula. As a result, we got a business that's growing at a very, very fast rate.

Our vision is that the whole health insurance process from beginning to end becomes completely electronic. That's where we'd like to take it.

eMarketer:  What are some of your thoughts on the internet healthcare boom lately -- Healtheon/WebMD, etc.?

Gary Lauer:  Healtheon's got a big public currency that they're able to trade with right now. It seems obvious that they're trying to aggregate a lot of the new companies where they are. It's an interesting strategy. They're going to have a lot of work to do, integrating all those companies. I've got a lot of respect for how they're going about it. I really applaud this notion of taking the electronic world and capabilities for this area of healthcare to really, radically change the processes and improve them for everyone.

The healthcare industry is very process-laden, to say the least: a lot of systems and a lot of processes that are manual and conflict in a lot of ways with one another. The Internet is just such a tremendous, tremendous, productivity enhancer to so much of what goes on in healthcare.

We're an ideal example of that. I don't view us a dot-com in the traditional sense. I view us as a company that's radically changing, improving the way that people in businesses are able to obtain health insurance. And we're using the Internet as this fantastic distribution and delivery vehicle to do that. So yes, to answer your question, I think the healthcare industry is ripe for the kinds of productivity and efficiency that the electronic world can provide, and I'd like to think that we're a good example of that.

Our focus is solely on health insurance. Health insurance is the largest segment of expenditure. A trillion dollars was spent last year in healthcare and we think that having the expertise and the knowledge base in health insurance, is a really important thing. We want to be the place where people go and businesses go to get health insurance both online and offline, to be the number one place.

We've got a robust program for individuals and families and we're rolling out a small group program right now. We're soon to roll out a Medicare supplement program and we feel that we're doing some significant things here for the uninsured as well. And those four segments, the Medicare segment, the uninsured, the individual family part and the small group is well in excess of 50% of this $330 billion market. The market is huge, absolutely huge.

eMarketer:  It sounds like you've found your position. I can't call a $150 billion market a niche. (Laughs)

Gary Lauer:  It's not a niche but it's close. I mean we're not trying to create a new business here. People need and want health insurance. I think what we've proven is a much improved, much more efficient way for people to get the knowledge about health insurance and businesses to really obtain health insurance.

We're definitely making it streamlined, more efficient, more cost effective. But I think the biggest thing that we do is we provide knowledge to people and to businesses so they can make very informed decisions and make the right decisions for themselves, their families and for the employees in their companies. It is a big decision -- who do you want to entrust your health to. We want to empower people in businesses to be able to make the very best decision. And again, the Internet is just an incredible distribution and delivery vehicle for us. We couldn't do what we're doing any other way.