Jul 26, 2013
Executives
Kate Sidorovich - Director of Investor Relations Gary L. Lauer - Chairman, Chief Executive Officer and Member of Equity Incentive Committee Stuart M.
Huizinga - Chief Financial Officer, Principal Accounting Officer and Senior Vice President
Analysts
Jason Kreyer - Craig-Hallum Capital Group LLC, Research Division Andrew Marok - Cowen and Company, LLC, Research Division Shawn Bevec - Deutsche Bank AG, Research Division Adam Klauber - William Blair & Company L.L.C., Research Division
Operator
Good day, ladies and gentlemen, and welcome to the Second Quarter 2013 eHealth, Inc. Earnings Conference Call.
My name is Sean, and I'll be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.
I would like to turn the call over to Kate Sidorovich, Vice President of Investor Relations. Please proceed.
Kate Sidorovich
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 Second Quarter 2013 Financial Results. On the call this afternoon, we will have Gary Lauer, eHealth's Chief Executive Officer; and Stuart Huizinga, eHealth's 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.
A replay of the call will be available on our website following the call. We will be making forward-looking statements on this call.
These statements will be regarding future events, beliefs and expectations, including those regarding eHealth's ability to expand its plan and product offerings; the availability of individual health insurance products meeting the ACA requirements and the timing of such availability; eHealth's ability to service an enrollment source for subsidized and non-subsidized individuals; the features and terms of our relationship with Aon Hewitt and their anticipated benefits; our ability to capture significant share of consumers who are expected to enter the individual market; our financial performance for the full year 2013; our financial performance for the third quarter of 2013 compared to Q3 2012 and the second quarter of this year; and the rate of our expected earnings growth during the full year 2013. These forward-looking statements are based on management's current expectations and assumptions that are subject to various risks and uncertainties, that could cause actual results to differ materially from those set forth in such forward-looking statements, including risks associated with the direct and indirect impact of healthcare reform in our business, our ability to maintain our relationships with and to extend our product selection from health insurance carriers, our preparation for and ability to manage operational demands from our Medicare business and our participation in selling individual health insurance products in government exchanges.
Other factors that could cause operating, financial and other results to differ, as described in eHealth's most recent quarterly report on Form 10-Q or annual report on Form 10-K with -- filed with the Securities and Exchange Commission and available on the Investor Relations page of eHealth's website and on the SEC website at sec.gov. Forward-looking statements on this call represent eHealth's views as of today.
You should not rely on these statements as representing our views in the future. We undertake no obligation or duty to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise.
We will be presenting certain financial measures on this call that will be considered non-GAAP under SEC Regulation G. For a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, 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 Gary Lauer.
Gary L. Lauer
Good afternoon, everyone, and thanks for joining us today as we review our second quarter 2013 results. Second quarter revenue was $39.8 million, a 12% increase as compared to the second quarter of 2012.
GAAP earnings per share was $0.06, reflecting our planned investment in eHealth's technology platform as we near a major implementation stage of the Affordable Care Act. EBITDA was $4.9 million and cash flow from operations was $6.6 million.
At the end of the quarter, we had $90 million in cash on the balance sheet and no debt. During the second quarter, we completed our fourth share repurchase program, which was initially authorized for $30 million in September of 2012 and later expanded to $60 million in March of this year.
As a reminder, we have now completed 4 share repurchase programs totaling $150 million and repurchased over 30% of the fully diluted shares that we had outstanding when the first program was implemented in late 2008. We are now a few months away from the expected October 1 launch of state and federal health insurance exchanges.
As we approach this important date, our Individual & Family Plan business or sometimes referred to as the IFP business, continues to be robust. Second quarter Individual & Family Plan submitted applications grew 7% compared to the second quarter of 2012.
Our Individual & Family Plan approved members grew 15% from the second quarter of last year, the strongest year-over-year growth rate we've observed since the first quarter of 2009, reflecting continued demand and improved conversion rates. Our Individual & Family Plan commission revenues grew by 8% or $1.8 million year-over-year.
We are very pleased with the strength across these pertinent metrics in our Individual & Family Plan business. We also generated strong second quarter growth in excess of 75% in our ancillary product membership.
Commission revenues from these products, which include dental, vision, short-term and accident, grew 77% year-over-year. Most of these ancillary products are not marketed independently but rather cross-sold into our Individual & Family Plan customer base and as such, are meaningful margin contributors.
In our Medicare business, we are in the process of preparing for this year's Annual Enrollment Period, which begins on October 15 of this year. We've kept a large, full-time Medicare staff on board throughout this year.
And in preparation for the Annual Enrollment Period, we started to hire and train more Medicare customer care representatives to address the demands we anticipate. We are also continuing to expand the inventory of plans and products available on our websites and recently added Cigna's HealthSpring Medicare Advantage products, as well as Cigna's Medicare Supplement Plans to our inventory.
We believe that during this upcoming Annual Enrollment Period, we will be able to offer a much broader selection of Medicare products through our websites and the call centers we operate compared to 2012. Second quarter 2013 Medicare revenue was $5.8 million, representing a 17% year-over-year growth rate, while Medicare commission revenues grew 31% year-over-year.
The number of estimated revenue-generating Medicare members that we had at the end of the second quarter grew 87% year-over-year. The number of Medicare Advantage products sold during the quarter grew 16% compared to the second quarter last year while the total number of Medicare products sold grew 12% on the same basis.
As a reminder, the second and third quarters are seasonally low in terms of Medicare enrollments and recognized revenues, with the majority of Medicare enrollments taking place during the fourth quarter, which is the Annual Enrollment Period. With the Affordable Care Act implementation under way, we continue to invest in our technology platform to maintain eHealth's position as the leading online destination of choice for health insurance and related products.
As you know, on October 1, individual health insurance products meeting the Affordable Care Act requirements, will be able available for purchase and enrollment with an effective date of January 1, 2014. Many Americans will qualify for federal subsidies to purchase these products.
The Congressional Budget Office now estimates that over the next 3 years, over 25 million of currently uninsured individuals will gain coverage. Many of these in the individual market.
We believe that eHealth can serve as an important enrollment source for both subsidized and non-subsidized individuals as they research and purchase health plans and help the states and the federal government achieve their aggressive enrollment targets. We are investing very heavily in our technology platform so that eHealth can be the online destination of choice for consumers who will be buying health insurance under the auspices of the Affordable Care Act.
As you know, we are currently working with many states and the federal government to develop processes through which eHealth will be able to enroll subsidy-eligible individuals into Qualified Health Plans. It's important to note that there are still a number of issues to be worked out with these government entities as they prepare to launch.
We also see interesting opportunities in the employer-based market, both from the growing private exchange space and in capturing the potential attrition of members from group plans into the individual market. As an example, in June of this year, we announced our partnership with Aon Hewitt, a leading employees benefit consultant, to provide enrollment platforms and services to employees of Aon's clients, who choose to enroll an individual health insurance coverage.
Through this partnership, Aon Hewitt's clients may elect to allow their employees and service providers who are not eligible for employer-provided benefits, such as part-time employees, contractors and early retirees, to access the eHealth platform to find, compare and buy the health insurance plans that best fit their needs. To summarize, this is a very important and exciting time for eHealth with significant changes under way across the health insurance landscape.
We believe that eHealth is well positioned to capture a significant share of consumers who are expected to enter the individual market over the next several years. At the same time, we will continue to invest in our Medicare business, which we believe is poised for another year of strong double-digit revenue growth in 2013.
We are pleased with the second quarter financial results and we're optimistic about our positioning for the remainder of this year. Now I'll turn the call to Stuart, who will provide a more detailed overview of our second quarter financial performance.
Stuart?
Stuart M. Huizinga
Thanks, Gary, and good afternoon, everyone. Our second quarter financial results reflect the strong performance of our Individual & Family Plan business, our continued execution in Medicare, as we prepare for this year's Annual Enrollment Period, and our ongoing investment in eHealth's technology platform.
Our second quarter 2013 revenue was $39.8 million, representing 12% annual growth. Commission revenue for the quarter was $34.9 million or 14% annual growth.
Our Individual & Family Plan commissions grew by 8% or $1.8 million compared to Q2 2012, driven by acceleration in individual and family membership growth and stabilization in commission revenues per member. We are very pleased to have continuing improvement in our individual business, which contributed over 40% of the total increase in commission revenues this quarter.
Medicare commissions grew by 31% year-over-year while commissions from ancillary products increased 77% on the same basis. Other revenue, which include sponsorship, eCommerce On-Demand, Government Systems and noncommissioned Medicare revenue was $4.9 million.
This represented a 1% decline compared to the second quarter a year ago. As Gary mentioned, we continued to see solid demand for our individual and family major medical products with individual and family submitted application volume up 7% year-over-year.
We also observed an improvement in our conversion rates from submitted applications to carrier approval. As a result, approved Individual & Family Plan members grew 15% compared to the second quarter of 2012, more than double the growth in submitted applications.
Total approved members for all products were up 28%. Our total estimated membership at the end of the quarter was approximately 1,091,000 members, which represents 24% growth over estimated membership reported at the end of the second quarter of 2012.
The number of revenue-generating Individual & Family Plan members was up 9% while the number of other members increased 78%, driven by the increase in our Medicare and ancillary product customer bases over the past 12 months. Now I'd like to review our operating expenses for the quarter.
Excluding stock-based compensation and the amortization of acquired intangibles, our non-GAAP operating expenses increased in absolute terms and as a percentage of revenues, relative to the comparable period a year ago. The increase in our second quarter operating expenses as a percentage of revenue compared to Q2 2012, was driven primarily by our planned investment in technology and content and a step-up in Medicare spending as we prepare for the Annual Enrollment Period.
Second quarter 2013 non-GAAP tech and content expense, which excludes stock-based compensation expense, was $7.3 million or 18% of revenue, up from $4.8 million or 14% of revenue in the second quarter of 2012. As Gary mentioned, our goal with this investment is to maintain eHealth's position as the leading exchange of choice for health insurance as we near a major implementation stage of the Affordable Care Act.
Non-GAAP customer care and enrollment expense, which excludes stock-based compensation expense, was $7.7 million or 19% of revenue, up from $6.3 million or 18% of revenue in the second quarter of 2012. This year-over-year increase reflects our decision to retain a larger number of Medicare agents on staff after the completion of the last Annual Enrollment Period in December of 2012.
We also started to hire and train additional customer care representatives earlier in the year compared to 2012 when our peak hiring quarter for Medicare was the third quarter. Second quarter 2013 non-GAAP marketing and advertising expense, which excludes stock-based compensation expense, was up -- was flat with Q2 2012 as a percentage of revenue at 33% while second quarter of 2013 non-GAAP general and administrative expense declined year-over-year as a percentage of revenue.
Second quarter non-GAAP operating income, excluding stock-based compensation and the amortization of acquired intangibles, was 10% of revenue or $4.2 million. This compares to 17% of revenue or $6 million in the second quarter a year ago.
For the full year 2013, we continue to expect that our non-GAAP earnings will grow approximately in line with revenue growth in terms of percentage, year-over-year growth. EBITDA for the second quarter of 2013 was $4.9 million as compared to EBITDA of $6.5 million for the second quarter of 2012.
Second quarter 2013 GAAP earnings per share were $0.06 compared to $0.11 in Q2 of 2012. Second quarter non-GAAP EPS, which excludes the impact of the amortization of acquired intangibles, stock-based compensation and related income tax benefit was $0.12.
Our cash flow from operations was $6.6 million compared to $7.6 million in the second quarter of 2012. Capital expenditures for the second quarter were approximately $2.3 million.
As of June 30, 2013, our cash and marketable securities balance was $90 million compared to $114 million at the end of the first quarter of 2013. Our cash balance reflects our share buyback activity.
As Gary mentioned earlier, during the quarter, we completed the $60 million share repurchase program, which was originally authorized in September of 2012 and later expanded in March of this year. Our average share price under this latest program was $20.29 per share.
With respect to guidance and based on information currently available, we are reaffirming the revenue, EBITDA, stock-based compensation expense and earnings per share guidance for the full year 2013 that we provided on our fourth quarter 2012 earnings call. I also wanted to comment on certain expected quarterly trends for the year.
In the third quarter of 2013, you should expect to see year-over-year growth in revenues and GAAP and non-GAAP earnings per share compared to the third quarter of 2012. At the same time, we anticipate a sequential decline in the third quarter GAAP and non-GAAP EPS compared to Q2 of this year, driven primarily by higher Medicare expenses as we continue our preparations for the Annual Enrollment Period.
Similar to last year, Q3 will be minimally profitable on a GAAP basis, driven by the seasonality of our Medicare business. The expected GAAP and non-GAAP earnings growth for the full year 2013 will be back-end loaded with a significant step-up in operating margin and EPS projected for the fourth quarter relative to Q2 and Q3 of this year.
As you know, Q4 is the strongest quarter of the year for us in terms of Medicare enrollments and Medicare revenues, which has a positive impact on the bottom line. I want to remind you that these comments, as well as our annual guidance, are based on current indications for our business, which are subject to change at anytime.
We undertake no obligation to further update our guidance. And now, we'd like to open up the call for questions.
Operator?
Operator
[Operator Instructions] Okay, your first question comes from the line of George Sutton of Craig-Hallum.
Jason Kreyer - Craig-Hallum Capital Group LLC, Research Division
This is Jason on for George. Gary, so HHS and the Obama administration announced a number of delays this quarter related to the Affordable Care Act.
And I was just kind of wondering if you could spend some time talking about that and how meaningful that would be for eHealth.
Gary L. Lauer
Sure. Well, first of all, we are planning working toward and investing in the October 1 launch dates when our products become available.
We fully expect that that's on track and going to occur. The administration made several announcements recently.
I think the most noteworthy was that the mandate for employers with more than 50 employees to have to offer health insurance starting January 1, 2014, was being relaxed or deferred to January 1 of 2015. That really has no impact on our business at all.
We do think there's opportunity with those larger employees who, at some point, some of whom may choose to migrate their employees away from employer coverage into the individual market. But we only view this as giving them a little more time to plan for that.
Our real focus is on these 25-plus million individuals who will be coming into the individual market over the next several years and our plan is to, as we said, be the online destination of choice to help them get Affordable Care Act mandate-meeting coverage. And I think specifically, and the question I get a lot is where are we on subsidy-eligible individuals, because we think it's so important that we're there to help enroll subsidy -- subsidized people as well.
And these are individuals who are at 400% of the federal poverty level or below. We're working with several of the states.
But as you probably know, there are 36 states that the federal government will be putting -- operating an exchange in because they're either not ready or in many cases, have elected not to develop their own exchange. And the discussions we're having with the federal government in this area are progressing well.
They're constructive and we're very optimistic about our ability to operate as a web-based or a web broker entity in these 36 states. In the other remaining 16 states, we're having conversation with each and every one of them.
Understandably, they've got an awful lot of work to do to be up and ready on October 1. But we're thinking many of them will be there with the ability to host subsidy-eligible individuals as well.
Jason Kreyer - Craig-Hallum Capital Group LLC, Research Division
Okay. And then just more specifically on the small business exchange or the SHOP.
That seems that, that could be a meaningful opportunity for you. Do you see that as an opportunity or am I misreading that?
Gary L. Lauer
No, we see it as a very significant opportunity because the small business exchange, which is really the SHOP, which is focused on employers with 50 employees or less. There's kind of been a fundamental issue there for a long time, which is that these group products for small businesses are in many cases, prohibitively expensive, and the reason is that you've got a very small employee base to spread risk across.
So as a result, it gets mitigated by very high premiums. We think that there's a really unique and could be significant opportunity in this area with the 50-employee size businesses and less to offer them individual products.
And in fact, we've got a pretty vibrant business today and have for several years, that have been built above people who are full-time employed in small businesses coming to us for individual products because the employer doesn't offer them anything. And we think this could be even more interesting going into 2014, especially with the guaranteed issue element of the Affordable Care Act, which will leave no one behind.
Jason Kreyer - Craig-Hallum Capital Group LLC, Research Division
Okay. And then just switching gears on the Medicare side.
You talked the last couple of quarters about some new initiatives that you're putting in place to improve on the conversion rates there. And I'm just wondering what kind of expectations do you have as we head into the enrollment period.
And what we should be thinking about as far as for the changes in the supply of Medicare policies or adding additional vendors on that side of the business.
Gary L. Lauer
Yes, Jason, we've actually been adding inventory. We'll continue to right up until the Annual Enrollment Period.
We -- in fact, I talked today about Cigna. We've got other product coming on as well.
We've got many more people in the call centers who are going to be much more experienced. We're going to have yet more online offerings.
We're going to have more partnerships. I mean, this business just continues to grow and broaden for us.
And work, it's -- we continue to be really excited about it. It's got the attention of all the large carriers in a meaningful way.
We think that because of some pricing that's going on, there could be quite a bit of transitional or product-switching activity in this Annual Enrollment Period, which we think we could capitalize on and do quite well with as well. So we're coming into this Annual Enrollment Period with a lot more experience, a lot more inventory, a lot more resource on hand and we're going to be very assertive about how we approach this business in this Annual Enrollment Period, as we have been this year.
Operator
And the next question we have comes from the line of Andrew Marok of Cowen and Company.
Andrew Marok - Cowen and Company, LLC, Research Division
I just have a couple of quick questions. I was just wondering what you're seeing in Q3 to date in the IFP market.
And on the Medicare side, Medicare came out to about 20% of total revenue in 2012, I was just wondering if you guys are targeting anything in 2013 along those lines?
Gary L. Lauer
Let me take the first part of the question, and Stuart can take the second. In the IFP market, we don't, as a matter of policy and practice, comment on any trends or metrics during a quarter.
I'll just say this. This is expected to be a big transition year because of the implementation of the Affordable Care Act.
There has been a lot of speculation that the market would freeze. In our first quarter, we saw a 10% application growth.
In the second quarter, we saw a 7% application growth. This business has turned profitable again for us, in fact, in a very nice fashion this past quarter.
And we're really optimistic about what we see in this business for the remainder of the year. So I'd say that we're -- we've been pleased with the volume that we've seen of both new applicants in the marketplace and I also want to note, new members as well.
We grew our Individual & Family Plan applicants by 7%, but the approved members grew by 15%. Better conversions on our websites, better acceptance by the carriers, I think it speaks to the way that we're able to help people find a product that best matches their needs and requirements.
We're very pleased about that, especially in light of the fact that we may soon be seeing some very significant volume as a result of the implementation of the Affordable Care Act. And that's one of the reasons that we've been investing so heavily in the technology side of this business, as Stuart commented and I did as well.
We're doing an awful lot right now on the site itself to make it a very, very consumer-centric, very consumer-friendly experience, where people can understand what these products are about, where they can interact with them, we give them decision-support tools to help them through this process and we're building what we think are going to be some really innovative tools to help people post enrollment as well. That is once they've got health insurance on their hands, how do they utilize it, what are the features, what are the benefits, and I think most importantly, how do they best spend their health care dollars.
Stuart M. Huizinga
And on the Medicare question, we haven't given specific guidance on Medicare. I can say that, last year, like you said, it was 20% of our total revenue.
I would expect it to be in the high 20s as a percentage of our total revenue for the year. And you'll see what our guidance range is, so you can back into those numbers there.
If you look at the midpoint of our range this year, it implies about $15.5 million, $16 million of revenue growth year-over-year and a significant portion of that is Medicare. So again, you can take that number and compare it to the $31 million of Medicare revenue that we had last year, a couple of ways to go back.
Operator
The next question we have comes from the line of Scott Fidel of Deutsche Bank.
Shawn Bevec - Deutsche Bank AG, Research Division
This is Shawn Bevec for Scott. A couple of questions.
Do you guys still expect a slowdown or decline in IFP enrollment in the back half as people get ready for the exchanges and enrollment in exchanges, I know WellPoint reported yesterday and they said that they are already seeing some individual and small group attrition. So I'm wondering if -- what you're seeing?
It certainly doesn't sound like that from the numbers you reported today. But I'm just curious as to what you're thinking for the back half.
Gary L. Lauer
Yes, Shawn, this Gary. I'll pretty much repeat what I said earlier and I'd let Stuart to, probably, make some comments as well.
But we're very pleased with what we've seen in the first half both in terms of applications, conversions, new members, retention, all of these metrics are very, very good for us in this business. You can probably tell by our commentary, we're feeling very optimistic about this, moving into the second half.
October 1, is when essentially we've got a much larger market to address because we're going to have people who are subsidy-eligible and very many others as well, who are going to be thinking about having to buy health insurance because of the federal mandate. And we -- as Stuart said, we're, today, feeling good about the guidance that we described at the beginning of the year.
So we're very optimistic about this Individual & Family Plan business. So the big question for us right now is when we get to this fourth quarter, how much pre-enrollment can we do for the January 1 effective dates, and we think that it's going to be really interesting, let me say that.
Shawn Bevec - Deutsche Bank AG, Research Division
Okay. I'm sorry if I missed this.
But you haven't yet formally contracted with any of the states or the federal government to work with the online exchanges for subsidy-eligible individuals, right?
Gary L. Lauer
Yes, that's right. We're in deep in process with the federal government right now, the same with many of the states.
And as soon as we have some news on that, we'll let you know it. We need some things to happen soon because the clock is ticking.
And all these government entities are -- they seem to be working 24/7 to try to get this exchange ready to be up and going and we think it's -- we believe that we've got a very compelling proposition because it cost government nothing, in fact, we save government money and it's the same products at the same prices, and all we're going to do is expand enrollment. So as soon as we have some news on some of these, you'll know right after us.
Shawn Bevec - Deutsche Bank AG, Research Division
And what portion of your IFP membership today is subsidy-eligible?
Gary L. Lauer
Well, we don't disclose that. But someplace around 40% of the U.S.
population is. We're -- our average income level is a little bit higher than the national average.
So you can construe from that, that it's going to be less the national average. But there's definitely a number in there and we're working right now with how to transition those people into subsidy-eligible products and bring in -- bring new members in as well, who are going to be subsidy-eligible.
Shawn Bevec - Deutsche Bank AG, Research Division
Okay. And then just a couple of more, last couple of ones on the commission rates.
Have you had any pushback from your Medicare partners on commissions for next year, given the headwinds that they're seeing? I know that you guys -- I think 2% to 3% range is what you get for a commission on the Medicare piece and I know that's relatively low compared to what it is on the IFP business.
But given the headwinds that the Medicare plans are seeing next year, just in talking to some of consultants and whatnot, they're thinking that sometimes, some of the broker commissions are going to come down in Medicare and I'm just wondering what you guys are hearing?
Stuart M. Huizinga
Yes, we haven't seen anything change in our commission rates on Medicare at this stage, nothing to report there. If anything, we've actually seen some of the carriers expand the number of years that they're paying out.
Some of our contracts, they pay a certain number of years, let's say 5 or 6 years of the member life, and we've seen some of those expand the number of years or even make it open-ended and perpetual.
Gary L. Lauer
Which increases the lifetime revenue value. The other point I would make is that, these 2014 products, which will be sold in the Annual Enrollment Period are either filed or being filed right now with CMS and commission everything else is part of that, no, we've seen no degradation there at all.
It's important to note, and you referenced this, but in the individual business, we earn, on average, about 7% of the premium value every month. With the Medicare Advantage product, it's typically a little bit less than 3%.
That is a very -- although the dollars are high, it's a very, very low distribution cost. And we think, in many cases, it is lower than the direct efforts of the carriers themselves.
So it's -- we believe that what we offer here, especially with the volume, is an efficient, economically favorable way for us to get these products into the hands of the consumers.
Operator
Okay. The next caller is from Adam Klauber of William Blair.
Adam Klauber - William Blair & Company L.L.C., Research Division
Do you expect the Aon partnership to produce some critical mass next year or is that more of a 2015 type event?
Gary L. Lauer
Adam, this is Gary. Aon is actively marketing this right now.
We think it's got the potential to contribute. Yes, maybe even a bit this year but certainly next year as well.
You're talking about some extremely large clients they have with very, very large part time and contractor employee basis. All of whom have got a need for health insurance and Aon view this as a unique and hopefully, powerful way to give them access.
So we think this is something that actually could be rather immediate in terms of its impact and contribution.
Adam Klauber - William Blair & Company L.L.C., Research Division
Okay. And is it -- are there other potential, I guess, markets that, that partnership could be used for, is it mainly that part-time market?
Gary L. Lauer
Well, it's also the early retiree market where you've got people who are presumably in their late 50s, early 60s, retiring before they're eligible for Medicare at 65. No longer going to have the employer health benefit and need a solution to bridge themselves to Medicare.
That's actually a good-sized population. And of course, then beyond that you've got the opportunity to transition people like that into Medicare products as well.
So we think with Aon that this has the potential to be a really interesting partnership. We've got the platform, the technology and the product inventory and they've really got the access or the pipe into some of these very large groups of individuals who are in need of these products.
Adam Klauber - William Blair & Company L.L.C., Research Division
Sure, sure, they've got a pretty big subset. As far as individual rates for 2014, what's the range that you're hearing?
And what do you think that will do to retention from the existing base and this is for IFP?
Stuart M. Huizinga
We -- At this stage, we haven't had anything of note that's changed with our individual and family commission rates. I think we'll comment on our next call.
It'll probably be the time to talk about that but at this stage, really nothing to report.
Gary L. Lauer
Yes. There's -- yes, and that's -- we really -- we have no news there.
So I wouldn't expect that our comments may be very well be the same in the next earnings call as well. I've said this before and I'll say it again.
I do think that these qualified health plans, the subsidy-eligible plans for lower-income people, may have a lower commission rate because it may be a higher risk profile for the carriers, but we see it mostly as incremental to us anyway.
Adam Klauber - William Blair & Company L.L.C., Research Division
Okay, okay. And also, I was wondering, what about premium rate increases for next year, do you have a sense on how high those are going to be?
Gary L. Lauer
Well, you see a lot of these reported in the media. There was a fair amount of attention in New York recently that the premium prices may come down.
In other states, they may go up, California made some announcements here about the California Exchange and so on. So -- and we've done some research into this as well and we're not seeing anything that looks alarming in terms of premium increases in aggregate, and we hope that's not the case.
What we don't want to have happen here is premiums rise so quickly or so high that they're prohibitively expensive for a lot of people. In fact, that's a big part of the proposition we have for government to allow us to host subsidy-eligible individuals that the more enrollment that you have, the more balance you have in these pools, the more likely it is that premiums are going to stabilize and stay in check.
And if there's one thing we can do is to help increase enrollment substantially. So we think we're a really important cog in all of this for government and frankly, for the President to achieve the goals that are -- that they set out with -- that he set out with the Affordable Care Act.
Adam Klauber - William Blair & Company L.L.C., Research Division
When will you or we get better visibility in what the rate outlook is going to look like for next year?
Gary L. Lauer
Well, we're seeing it now. I mean, we've seen some of the rates in California, we've seen some in New York, we've seen some in Oregon and in some other states as well.
And I can give you a few examples. They, purportedly, are coming down in New York but New York has been a guaranteed issue, non-mandated state.
So New York has been the most expensive state in the country for years and years. In fact, the cost of individual product in New York for several years has been about 3x the national average.
So in some ways, it's not surprising that prices would come down there, especially with the mandate. In California, like-for-like, they seem to be relatively stable and in some other states as well, we've got a few that are higher but we're seeing them right now.
They're rolling out and they're developing, and we haven't seen anything, again, to us that seems real anomalous in terms of radical change. But we're watching it very carefully.
Operator
[Operator Instructions]
Gary L. Lauer
Okay. Well, listen, thanks, everybody.
We really appreciate your interest and continued support and look forward to talking with many of you one-on-one as well. Have a good afternoon.
Thanks again.
Operator
Thank you for your participation in today's conference. This concludes the presentation.
You may now disconnect. Good day.