What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-02-26 compared with 2020-03-02 · 110 added, 121 removed, 194 unchanged (54% of the section changed)

In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

The words “expect,” “anticipate,” “believe,” “estimate,” “target,” “goal,” “project,” “hope,” “intend,” “plan,” “seek,” “continue,” “may,” “could,” “should,” “might,” “forecast,” and variations of such words and similar expressions are intended to identify such forward-looking statements.

These statements include, among other things, statements regarding our expectations relating to submitted and approved health insurance applications and estimated membership;

our estimates regarding the constrained lifetime value of commissions;

our expectations relating to revenue, operating costs and profitability;

our expectations regarding our strategy and investments;

our expectations regarding our Medicare business, including market opportunity, consumer demand and our competitive advantage;

our expectations regarding our individual and family business, including anticipated trends and our ability to enroll individuals and families into qualified health plans;

the impact of future and existing healthcare laws and regulations on our business;

the expected impact of the COVID-19 on our financial targets and product development initiatives;

our expectations regarding commission rates, payment rates, conversion rates, plan duration, membership retention rates and membership acquisition costs;

our expectations relating to the seasonality of our business;

expected competition from government-run health insurance exchanges and other sources;

our expectations relating to marketing and advertising expense and expected contributions from our marketing channels;

the timing of our receipt of commission and other payments;

our critical accounting policies and related estimates;

our estimates relating to the fair value of earnout liability;

liquidity and capital needs;

political, legislative, regulatory and legal challenges;

the merits or potential impact of any lawsuits filed against us;

the potential approval and adoption of an employee stock purchase plan and the potential number of shares of common stock reserved for issuance thereunder;

as well as other statements regarding our future operations, financial condition, prospects and business strategies.

We have based these forward-looking statements on our current expectations about future events.

These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict.

Our actual results may differ materially from those suggested by these forward-looking statements for various reasons, including our ability to retain existing members and enroll new members during the annual healthcare open enrollment period and Medicare annual enrollment period;

changes in laws and regulations, including in connection with healthcare reform or with respect to the marketing and sale of Medicare plans;

competition, including competition from government-run health insurance exchanges;

the seasonality of our business and the fluctuation of our operating results;

our ability to accurately estimate membership and lifetime value of commissions;

changes in product offerings among carriers on our ecommerce platform and the resulting impact on our commission revenue;

our ability to execute on our growth strategy in the Medicare market;

exposure to security risks and our ability to safeguard the security and privacy of confidential data;

our relationships with health insurance carriers;

customer concentration and consolidation of the health insurance industry;

our success in marketing and selling health insurance plans and our unit cost of acquisition;

our ability to hire, train and retain licensed health insurance agents and other employees;

the need for health insurance carrier and regulatory approvals in connection with the marketing of Medicare-related insurance products;

changes in the market for private health insurance;

consumer satisfaction of our service;

changes in member conversion rates;

changes in commission rates;

our ability to sell qualified health insurance plans to subsidy-eligible individuals and to enroll subsidy-eligible individuals through government-run health insurance exchanges;

our ability to maintain and enhance our brand identity;

our ability to derive desired benefits from investments in our business, including membership growth initiatives;

reliance on marketing partners;

the impact of our direct-to-consumer email, telephone and television marketing efforts;

timing of receipt and accuracy of commission reports;

payment practices of health insurance carriers;

our ability to successfully make and integrate acquisitions;

dependence on our operations in China;

the impact on our operations of public health crises in China and the United States, including the current coronavirus outbreak;

the restrictions in our debt obligations;

compliance with insurance and other laws and regulations;

and the performance, reliability and availability of our ecommerce platform and underlying network infrastructure and those identified in Part I, Item 1A of this Annual Report on Form 10-K under the heading “Risk Factors.” Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements.

The forward-looking statements included in this report are made only as of the date hereof.

Except as required by applicable law, we do not undertake, and specifically decline, any obligation to update any of these statements or to publicly announce the results of any revisions to any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.

We are a leading health insurance marketplace with a technology and service platform that provides consumer engagement, education and health insurance enrollment solutions.

1 unchanged sentence

Our platform integrates proprietary and third-party developed educational content regarding health insurance plans with decision support tools to aid consumers in what has traditionally been a confusing and opaque purchasing process and to help them obtain the health insurance product that meets their individual health and economic needs.

Our omni-channel consumer engagement platform enables consumers to use our services online, through interactive chat, or by telephone with a licensed insurance agent.

Our omnichannel consumer engagement platform enables consumers to use our services online, through interactive chat, or by telephone with a licensed insurance agent.

We have created a marketplace that offers consumers a broad choice of insurance products that includes thousands of Medicare Advantage, Medicare Supplement, Medicare Part D prescription drug, individual and family, small business and other ancillary health insurance products from over 200 health insurance carriers across all fifty states and the District of Columbia.

1 unchanged sentence

We were incorporated in Delaware in November 1997.

Over the last four years, we have increasingly shifted our business focus to marketing of Medicare-related health insurance products.

This shift in focus has enabled our business to benefit from (1) strong demographic trends, with 10,000 people on average turning 65 every day over the next ten years, (2) the increasing proportion of the Medicare eligible population that is choosing commercial insurance solutions rather than obtaining healthcare through the original Medicare program, and (3) the growing consumer demand for online tools to compare and enroll in Medicare related health insurance plans.

Our shift toward the health insurance market for Medicare eligible individuals has enabled us to mitigate the impact of the Patient Protection and Affordable Care Act, or Affordable Care Act, on our business, which among other things, established competing government exchanges that offer non-Medicare, Affordable Care Act-compliant individual and family health insurance plans.

4 unchanged sentences

Our platform and services are free to the consumer, and we are not responsible for the payment of consumer health insurance claims.

On January 22, 2018, we completed our acquisition of Wealth, Health and Life Advisors, LLC, more commonly known as GoMedigap, a technology-enabled provider of Medicare Supplement enrollment services.

GoMedigap has built a leading consumer acquisition and engagement platform focused on meeting the Medicare Supplement insurance needs of its individual customers with a technology-enabled, consumer-centric approach that aligns with our mission and operations.

This strategic acquisition significantly enhanced our presence in the Medicare Supplement market, put us in a stronger position with health insurance carriers and strategic partners and helped us to accelerate our Medicare plan enrollment growth.

On January 23, 2019, we entered into an underwriting agreement with RBC Capital Markets, LLC and Credit Suisse Securities (USA) LLC as representatives of the several underwriters to issue and sell 2,400,000 shares of our common stock par value $0.001 per share in a public offering, and also granted the underwriters a 30-day option to purchase up to an additional 360,000 shares of common stock, which they exercised, for a total of 2,760,000 shares of common stock.

The offering closed on January 28, 2019, at a price of $48.50 per share, for total net proceeds of $126.2 million, after deducting underwriting discounts and commissions and estimated offering expenses.

We intend to use the net proceeds of the offering for general corporate purposes, including working capital.

Our focus on marketing of Medicare-related health insurance products has enabled our business to benefit from (1) strong demographic trends, with 10,000 people on average turning 65 every day over the next ten years, (2) the increasing proportion of the Medicare eligible population that is choosing commercial insurance solutions rather than obtaining healthcare through the original Medicare program, and (3) the growing consumer demand for online tools to compare and enroll in Medicare related health insurance plans.

In January 2018, we completed our acquisition of Wealth, Health and Life Advisors, LLC, more commonly known as GoMedigap, a technology-enabled provider of Medicare Supplement enrollment services.

GoMedigap has built a leading consumer acquisition and engagement platform focused on meeting the Medicare Supplement insurance needs of its individual consumer with a technology-enabled, consumer-centric approach that aligns with our mission and operations.

This strategic acquisition enhanced our presence in the Medicare Supplement market, put us in a stronger position with health insurance carriers and strategic partners and helped us to accelerate our Medicare plan enrollment growth.

In January 2019, we entered into an underwriting agreement with RBC Capital Markets, LLC and Credit Suisse Securities (USA) LLC as representatives of the several underwriters to issue and sell a total of 2,760,000 shares of our common stock in a public offering, which total included the exercise in full of the underwriters’ option to purchase 360,000 additional shares of common stock, at a price to the public of $48.50 per share, for total net proceeds of $126.2 million, after deducting underwriting discounts, commissions and offering expenses.

In March 2020, we entered into an underwriting agreement to issue and sell a total of 2,070,000 shares of our common stock, which total included the exercise in full of the underwriters’ option to purchase 270,000 additional shares of common stock, at a price to the public of $115.00 per share.

Net proceeds from the offering

were approximately $228.0 million after deducting underwriting discounts, commissions and expenses of the offering.

On February 17, 2021, we entered into an investment agreement with Echelon Health SPV, LP, an investment vehicle of H.I.G.

Capital (“H.I.G.”), pursuant to which we have agreed to sell to H.I.G.

at closing, 2,250,000 shares of our newly designated Series A preferred stock, par value $0.001 per share, at an aggregate purchase price of $225.0 million (the “Private Placement”).

The Private Placement is subject to closing conditions, including, among others:

(i) the expiration or early termination of the waiting period (and any extension thereof) applicable to the consummation of the Private Placement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;

(ii) the confirmation by Nasdaq that it has no objection to the terms and conditions of the Private Placement;

and (iii) the determination that consummation of the Private Placement would not cause our outside auditor to no longer be deemed independent under the rules and regulations of the Securities and Exchange Commission or the Public Company Accounting Oversight Board.

The parties have agreed to cooperate with each other and use reasonable best efforts to promptly take such actions to cause the closing conditions to be satisfied as promptly as reasonably practicable.

Available Information

6 unchanged sentences

Medicare Segment

Through a combination of demand generation strategies, we actively market, a large selection of Medicare-related health insurance plans, and to a lesser extent, ancillary products such as dental and vision insurance, to our Medicare-eligible customers.

Our Medicare ecommerce platform, which can be accessed through our websites ( www.eHealthMedicare.com, www.Medicare.com, www.PlanPrescriber.com and www.GoMedigap.com ), and telephonic enrollment capabilities enable consumers to research, compare and purchase Medicare-related health insurance plans, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans.

4 unchanged sentences

We are paid commissions for Medicare Advantage and Medicare Part D prescription drug plans for which we are the broker of record, typically until either the plan is cancelled or we otherwise do not remain the agent on the plan.

Commission payments we receive for Medicare Supplement plans sold by us typically are a percentage of the premium on the plan and are paid to us monthly until either the plan is cancelled or we otherwise do not remain the agent on the plan.

Commission payments we receive for Medicare Supplement plans sold by us typically are a percentage of the premium on the plan and are paid to us monthly until

either the plan is cancelled or we otherwise do not remain the agent on the plan.

Medicare Advantage and Medicare Part D prescription drug plan pricing is approved by the Centers for Medicare and Medicaid Services, or CMS, an agency of the United States Department of Health and Human Services, and is not subject to negotiation or discounting by health insurance carriers or our competitors.

3 unchanged sentences

In addition, we market a variety of ancillary products, including but not limited to, short-term limited duration, dental and vision plans.

These ancillary products are offered to our individual and family and small business customers and are also sold on a standalone basis.

The commission payments we receive for individual and family, small business and ancillary health insurance plans are either a percentage of the premium our customers pay for those plans or a flat amount per member per month, and vary depending on the carrier that is offering the plan, the state where the plan was sold and the size of the small business.

These ancillary products are offered to individual and family and small business consumers and are also sold on a standalone basis.

The commission payments we receive for individual and family, small business and ancillary health insurance plans are either a percentage of the premium consumers pay for those plans or a flat amount per member per month, and vary depending on the carrier that is offering the plan, the state where the plan was sold and the size of the small business.

Commission payments are typically made to us on a monthly basis until either the plan is cancelled or we otherwise do not remain the agent on the plan.

1 unchanged sentence

Non-Commission Revenue Sources

Within our two operating segments, we earn commission revenue, as well as non-commission revenue, or other revenue, which includes online sponsorship and advertising, technology licensing and lead referral revenue.

Within our two operating segments, we earn commission revenue, as well as non-commission revenue, or other revenue, which includes online sponsorship and advertising, lead referral, and technology licensing revenue.

Online Sponsorship and Advertising.

We generate revenue from our sponsorship and advertising program that allows carriers to purchase advertising space for non-Medicare products on our website and Medicare plan related advertising on separate websites that we develop, host and maintain.

In addition, in connection with our Medicare plan advertising program, we may use direct marketing channels including direct television and direct mail to generate leads for carriers participating in the program.

In return for our services, we typically are paid either a flat amount, a monthly amount, or, in our individual and

family health insurance sponsorship advertising program, a performance-based fee based on metrics such as submitted health insurance applications.

In addition, in connection with our Medicare plan advertising program, we may engage in other marketing activities.

In return for our services, we typically are paid either a flat amount, a monthly amount, or, in our individual and family health insurance sponsorship advertising program, a performance-based fee based on metrics such as submitted health insurance applications.

Lead Referrals.

We generate revenue from the sale of Medicare-related and individual and family health insurance leads generated by our ecommerce platforms and our marketing activities.

Technology Licensing.

2 unchanged sentences

Health insurance carriers that license our technology typically pay us implementation fees and performance-based fees that are based on metrics such as submitted health insurance applications.

Lead Referrals.

We generate revenue from the sale of Medicare-related and individual and family health insurance leads generated by our ecommerce platforms and our marketing activities.

Additional financial information about our company is included in Part II, Item 7, Management Discussion and Analysis of Financial Condition and Results of Operations and Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.

Additional financial information about our company is included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.

Industry Background

3 unchanged sentences

These incomplete and inaccurate paper applications often result in back-and-forth communications, delay and additional costs.

The Internet’s convenient, information-rich and interactive nature offers the opportunity to provide consumers with more organized information, a broader choice of plans and a more efficient process than have typically been available from traditional health insurance distribution channels.

The Internet’s convenient, information-rich and interactive nature offers the opportunity to provide consumers with more organized up-to-date information, a broader choice of plans and a more efficient and accurate process than have typically been available from traditional health insurance distribution channels.

We believe that over time the Internet will become an increasingly important channel for researching and enrolling into health insurance plans, similar to other consumer-focused industries such as travel, financial services and shopping.

5 unchanged sentences

CMS contracts with private health insurance carriers under the Medicare Advantage and Medicare Part D prescription drug programs.

Under these programs, the government pays health insurance carriers a fixed amount of money each year per enrollee to cover health care expenses rather than making payments directly to providers under Medicare Fee-For-Service.

Under these programs, the government pays health insurance carriers per enrollee to cover health care expenses rather than the government making payments directly to providers under Medicare Fee-For-Service.

Medicare Advantage plans are required to cover the same services as Medicare Fee-For-Service and usually cover a variety of other health care services and include a cap on out-of-pocket spending for the consumer.

12 unchanged sentences

Enhance Post-Enrollment Consumer Engagement and Increase Customer Retention

We continually invest in our consumer engagement platform to add products and services.

We are also enhancing our consumer experience, both online and telephonically, to simplify and encourage the use of our platform for future enrollments as consumer needs and plan selection evolves.

Our goal is to, over time, increase the contribution from repeat customers to our total enrollments.

In 2020, we implemented a comprehensive customer retention program in our Medicare business.

At the core of the program is a proactive post-enrollment engagement as customers start utilizing their Medicare policies.

This engagement is achieved through a combination of agent and technology-driven initiatives.

We are also enhancing our consumer experience, both online and telephonically, to simplify and encourage the use of our platform for future enrollments and further increase the accuracy of plan recommendations.

Our goal is to not only drive higher retention rates for our existing Medicare customers but also increase the contribution from repeat customers to our new enrollments.

We believe that increased consumer engagement and customer retention will have a positive impact on our revenue as well as lower our marketing, customer care and enrollment costs.

Increase Online Enrollment to Improve Margins and Enhance Operating Leverage

We view our consumer engagement platform as unique in the Medicare market and as attractive to the growing number of Medicare beneficiaries who prefer to research, compare and purchase health insurance online.

The percentage of members who submit applications for Medicare Advantage and Medicare Supplement products online through our platform has substantially increased from 10% in 2017 to 16% in 2018 to 27% in 2019.

Online submitted applications include applications submitted with and without assistance from call center agents prior to the final submission of an application.

We are able to scale growth more rapidly and at an incrementally lower cost basis though our online platform, which significantly reduces our reliance on and financial and managerial resources associated with our call center operations.

We view our consumer engagement platform as unique in the Medicare market and attractive to the growing number of Medicare beneficiaries who prefer to research, compare and purchase health insurance online through a hybrid process with partial agent assistance.

We believe that over time the Internet will become an increasingly important channel for researching and enrolling into health insurance plans allowing us to capture a growing share of the Medicare distribution market.

The percentage of members who submit applications for Medicare Advantage and Medicare Supplement products online, including fully unassisted and partially agent assisted online enrollments, has substantially increased from 16% in 2018 to 27% in 2019 to 37% in 2020.

We are able to scale growth more rapidly and at an incrementally lower cost basis though our online platform, which we expect will significantly reduce our investments in call center operations over time.

Expand Our Strategic Relationships

The value of our consumer engagement and enrollment solution platform allows us to work closely with strategic partners in the health care market to leverage their relationships with consumers.

We expect to increase the contribution to total Medicare enrollments from this effective demand generation channel which has shown a positive impact on customer engagement and increased customer retention.

In 2019, we had strategic relationships with each of the top five retail pharmacies in the United States, a growing networks of leading hospital systems in the United States and with select financial and affinity marketing organizations to expand the availability of our platform to more consumers.

Through greater data integration, co-branding and further investments to improve the customer experience with our platform, we believe that we can create significant value for each of our partners and further expand our partner relationships.

We expect to increase the contribution to total Medicare enrollments from this effective demand generation channel which has shown a positive impact on consumer engagement and increased member retention.

In 2020, we had strategic relationships with each of the top four retail pharmacies in the United States, a growing network of leading hospital systems in the United States and with select financial and affinity marketing organizations to expand the availability of our platform to more consumers.

Through greater data integration, co-branding and further investments to improve the consumer experience with our platform, we believe that we can create significant value for each of our partners and further expand our partner relationships.

Acquire Capabilities that Leverage our Consumer Engagement Platform

We intend to pursue strategic relationships or acquisitions that expand our platform, provide additional capabilities or enable us to access adjacent markets within the broader health insurance and related customer facing segments of the healthcare industry.

We intend to pursue strategic relationships or acquisitions that expand our platform, provide additional capabilities or enable us to access adjacent markets within the broader health insurance and related consumer facing segments of the healthcare industry.

We acquired GoMedigap in January 2018 to help us expand our presence and engagement capabilities in the Medicare Supplement market.

Our Platforms and Technology

Our ecommerce platforms and consumer engagement solutions are built to provide market leading information, decision support and transactional services to health insurance customers across the country.

Our ecommerce platforms and consumer engagement solutions are built to provide market leading information, decision support and transactional services to a broad group of health insurance consumers across the country while prioritizing accessibility to health insurance.

Our ecommerce platforms organize and present voluminous and complex health insurance information in an objective format that empowers individuals, families and small businesses to research, analyze, compare and purchase a wide variety of health insurance plans.

Elements of our platforms include:

New Customer Center.

We launched our Customer Center in September 2020.

The Customer Center enables members to create a secure personal profile that stores their prescription drug regimen, preferred doctors and pharmacies, current coverage, and other relevant data and make this data available to the member and our licensed agents that they contact.

Our members who enroll by phone can also access this new online experience.

After members create a Customer Center account, our technology will import details provided to an agent over telephone to the account.

The following are important benefits of our Customer Center:

• Empowers Medicare beneficiaries to take control of their personal information – Our Customer Center will put our members in the driver’s seat by helping them track and update the information they will need when it is time to reconsider their coverage options.

• Identification of Medicare plan options – With their personal information easily accessible online and to our agents, it is easier for shoppers to find the best plan options for their personal needs and budget and also incentivizes them to return to us when their needs change.

• Drives retention through communication – Our Customer Center allows beneficiaries to track the status of their applications over time and connects them with us if they have questions.

Plan Comparisons and Recommendations .

We offer online comparison and recommendation tools that process and simplify voluminous health insurance information according to each customer's specific insurance need.

We offer online comparison and recommendation tools that process and simplify voluminous health insurance information according to each consumer's specific insurance need.

Our ecommerce platform enables consumers to compare and personalize health insurance options based on plan characteristics such as price, plan type, coverage limits, deductible amount, co-payment amount, and in-network and out-of-network benefits.

2 unchanged sentences

Health insurance applications vary widely by carrier and state.

Our proprietary application tool allows us to capture each insurance application’s unique business rules and build a corresponding online application in a XML format.

Our proprietary application tool allows us to capture each insurance application’s unique business rules and build a corresponding online application.

Our online application process offers our consumers significant improvements over the traditional, paper-intensive application process.

1 unchanged sentence

This reduces delay resulting from application rework, a significant problem with traditional health insurance distribution, where incomplete applications are mailed back and forth between the consumer, the traditional agent and the carrier.

We further simplify the enrollment process by accepting electronic signature and electronic payment from our consumers.

We further simplify the enrollment process by accepting electronic signature.

Customer and Carrier Data Interchange.

Our digital data interface technology integrates our online application process with health insurance carriers’ technology systems, enabling us to electronically deliver our consumers’ applications to health insurance carriers.

This expedites the loading of insurance product inventory in to our various shopping experiences and accelerates the application process by eliminating manual delivery.

Our digital interface technology also expedites the loading of insurance product inventory in to our various shopping experiences and accelerates the application process by eliminating manual delivery.

We also receive alerts and data from carriers, such as notification of approval or a request from a carrier for a consumer’s medical records for underwriting purposes, which we then relay electronically to the consumer.

3 unchanged sentences

Call center agents have script-on-screen tools that align to health insurance needs and leverage a common back office platform that powers our direct-to-consumer shopping experience.

Data science driven algorithms are used to route and match call center agents with the right training and experience to certain customers.

Data science driven algorithms are used to route and match call center agents with the right training and experience to certain consumers.

These systems also have customer relationship management tools that can track each consumer throughout the application process, obtain real-time updates from the carrier, generate automated emails specific to each consumer and access a cross-sell engine and dashboard to identify and track cross-sell opportunities.

Our auto-email system is feature-rich with HTML capability, customizable merge tags, granular segmentation and tracking capability.

email system is feature-rich with HTML capability, customizable merge tags, granular segmentation and tracking capability.

Customer Data Platform.

4 unchanged sentences

Many of these major carriers have been selling their products through us for over ten years.

In many cases, we have back-office integration with major carriers allowing us to submit customer applications efficiently and cost-effectively, which is an area of competitive differentiation for our business.

In many cases, we have back-office integration with major carriers allowing us to submit applications efficiently and cost-effectively, which is an area of competitive differentiation for our business.

We typically enter into contractual agency relationships with health insurance carriers that are non-exclusive and terminable on short notice by either party for any reason.

Health insurance carriers often have the ability to terminate or amend our agreements unilaterally on short notice, including provisions in our agreements relating to our commission rates.

Revenue derived from Humana represented approximately 26% , 22% and 20% of our total revenue for the years ended December 31, 2019 , 2018 and 2017 , respectively.

Revenue derived from carriers owned by UnitedHealthcare represented approximately 19% , 19% and 23% of our total revenue in 2019 , 2018 , and 2017 , respectively.

Revenue derived from carriers

owned by Aetna represented approximately 17% , 14% and 10% of our total revenue in each of the years ended December 31, 2019 , 2018 and 2017 , respectively.

We focus on building brand awareness, increasing individual, family and small business customer visits to our websites, increasing Medicare customer visits to our websites and telephonic sales centers and converting these visitors into members.

We focus on building brand awareness, increasing Medicare, individual, family and small business customer visits to our websites and telephonic sales centers and converting these visitors into members.

Our marketing initiatives are varied and numerous.

8 unchanged sentences

Our marketing partner member acquisition channel consists of consumers who access our website and call centers through a network comprised of hundreds of partners that drive consumers to our ecommerce platform and call centers.

These partners include health care industry participants, such as pharmacies, hospital networks and insurance carriers;

financial and online services partners in industries such as banking, insurance and mortgage;

These partners include health care industry participants, such as insurance carriers;

affiliate organizations;

online advertisers and content providers that are specialists in paid and unpaid (algorithmic) search, as well as specialists in other types of Internet marketing;

pharmacies and hospital networks;

financial and online services partners in industries such as banking, insurance and mortgage;

and off-line lead generators who specialize in traditional direct marketing channels, such as direct mail and television advertising.

3 unchanged sentences

There are many risks associated with having an operation and doing business in China.

Information regarding risks involving our operations in China is included in Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.

regarding risks involving our operations in China is included in Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.

Government Regulation and Compliance

12 unchanged sentences

We are subject to similar requirements of state insurance departments with respect to our marketing and sale of Medicare Supplement plans.

Medicare plans are not generally able to be purchased outside of an annual enrollment period that occurs in the fourth quarter of the year, subject to exception for

individuals aging into Medicare eligibility and for individuals who qualify for a special enrollment period as a result of certain qualifying events.

Medicare plans are not generally able to be purchased outside of an annual enrollment period that occurs in the fourth quarter of the year, subject to exception for individuals aging into Medicare eligibility and for individuals who qualify for a special enrollment period as a result of certain qualifying events.

In addition, Medicare Advantage plan enrollees may enroll in another Medicare Advantage plan or disenroll from their Medicare Advantage plan and return to original Medicare during the Medicare Advantage open enrollment period that occurs in the first quarter of the year.

CMS and state insurance department regulations and guidelines include a number of prohibitions regarding the ability to contact Medicare-eligible individuals and place many restrictions on the marketing of Medicare-related plans.

14 unchanged sentences

Individuals and families generally are not able to purchase individual and family health insurance outside of the annual enrollment periods, unless they qualify for a special enrollment period as a result of certain qualifying events, such as losing employer-sponsored health insurance or moving to another state.

Moreover, in order to be eligible for a subsidy, qualified individuals must purchase subsidy-qualifying health plans, known as qualified health plans, through a government-run health insurance exchange during the open enrollment period or a special enrollment period.

special enrollment period.

While they are not required to do so, government-run exchanges are permitted to allow agents and brokers to enroll individuals and families into qualified health plans through them.

12 unchanged sentences

We expect to continue to do so in the future.

Violations of federal and state privacy and security laws and other contractual

requirements may result in significant liability and expense, damage to our reputation or termination of relationship with government-run health insurance exchanges and our members, marketing partners and health insurance carriers .

Violations of federal and state privacy and security laws and other contractual requirements may result in significant liability and expense, damage to our reputation or termination of relationship with government-run health insurance exchanges and our members, marketing partners and health insurance carriers .

Intellectual Property

2 unchanged sentences

The market for selling health insurance plans is highly competitive.

Our competitors include government entities, including government-run health insurance exchanges established as a result of health care reform;

Our competitors include government entities, including government-run health insurance exchanges;

health insurance carriers;

1 unchanged sentence

and companies that use the Internet and other means to attract individuals interested in purchasing health insurance and generate revenue by referring these individuals to us or one of our competitors.

Other agents and brokers.

We compete with agents and brokers who offer and sell health insurance plans utilizing traditional offline distribution channels as well as the Internet.

Our current competitors include the tens of thousands of local insurance agents across the United States who sell health insurance plans in their communities.

A number of these agents operate websites and provide an online shopping experience for consumers interested in purchasing health insurance.

In addition, there are a number of direct-to-consumer Medicare platforms that generate demand through a combination of online and traditional marketing channels and fulfill it through their call center operations.

In connection with our marketing of Medicare related health insurance plans, we compete with the federal government’s original Medicare program.

5 unchanged sentences

Health insurance carriers have become more experienced in marketing their products directly to consumers, both over the Internet and through more traditional channels, which has resulted in increased competition.

Other agents and brokers.

We compete with agents and brokers who offer and sell health insurance plans utilizing traditional offline distribution channels as well as the Internet.

Our current competitors include the tens of thousands of local insurance agents across the United States who sell health insurance plans in their communities.

A number of these agents operate websites and provide an online shopping experience for consumers interested in purchasing health insurance.

In addition, a number of online health insurance agents like us generate demand over the Internet and sell health insurance to individuals over the Internet and using call centers.

Internet marketers and other advertisers.

1 unchanged sentence

We compete with these companies for individuals who are looking to purchase health insurance.

The majority of our commission revenue is recognized in the fourth quarter of each calendar year under Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASC 606) , which we adopted using the full retrospective transition method on January 1, 2018.

The majority of our commission revenue is recognized in the fourth quarter of each calendar year under Accounting Standards Codification, Revenue from Contracts with Customers (ASC 606) , which we adopted using the full retrospective transition method on January 1, 2018.

We have historically sold a significant portion of Medicare plans for the year in the fourth quarter during the Medicare annual enrollment period, when Medicare-eligible individuals are permitted to change their Medicare Advantage and Medicare Part D prescription drug coverage for the following year.

9 unchanged sentences

We incur a significant portion of our marketing and advertising expenses in the fourth quarter as a result of the Medicare annual enrollment period and the open enrollment period under the Affordable Care Act.

Our marketing and advertising increases in the fourth quarter as a result of increased amounts owed to our marketing partners in connection with lead referral arrangements as well as an increase in the number of health insurance applications submitted on our ecommerce platforms referred to us by our marketing partners.

We also typically incur an increase in other marketing and advertising related expenses in the fourth quarter.

We expect this seasonal trend in marketing and advertising expenses to continue in 2021.

In preparation for the Medicare annual enrollment period during 2020, 2019, and 2018, and to a lesser extent the open enrollment period for individual and family health insurance plans during the same periods, we began increasing our customer care center staff during the third and fourth quarters to handle the anticipated increased volume of health insurance transactions, which resulted in higher customer care and enrollment expenses in the third and fourth quarters.

We expect this seasonal trend in customer care and enrollment expenses to continue in 2020 .

Historically, a significant portion of the seasonal increase in customer care center

staffing was through the utilization of vendors that employ their own health insurance agents.

Going forward, we plan to shift to a predominantly internal agent model and will employ and maintain the majority of our health insurance agent force year-round.

We expect to increase our internal agents' utilization outside of the enrollment periods by expanding our offerings of ancillary products and increasing our outbound calling efforts.

In addition, we are planning to enhance our new agent onboarding and training program and commence these processes earlier in the second quarter of the year.

As a result, we expect to incur increased employee costs beginning earlier in 2021 and reduced outsourced vendor agent costs during the fourth quarter AEP season.

We believe the earlier investments in expanding our internal team will enable stronger execution during the fourth quarter AEP season of 2021.

Human Capital Resources

As of December 31, 2020, we had approximately 1,960 full-time employees, of which 1,190 were in customer care and enrollment, 410 were in technology and content, 260 were in general and administrative, and 100 were in marketing and advertising.

Of the 1,960 full-time employees, 275 were non-US employees based in our China office.

None of our U.S.

1 unchanged sentence

As required under Chinese law, the employees in our Xiamen, China office established a labor union in January 2014.

We have not experienced any work stoppages and consider our employee relations to be good.

We have not experienced any work stoppages and consider our employee relations to be strong.

We value our employees for their critical role in the success of our business.

We focus on our culture and maintain a generous benefits package for our employees to attract, motivate, and retain them.

Health benefits we offer are extended to all full-time employees.

Our employee wellness benefits include mental health and financial well-being benefits, including fertility assistance, a tuition reimbursement program, a student loan repayment program, and financial counseling resources.

During 2020, we implemented an employee stock purchase plan for our U.S.

employees which enables them to purchase shares of our common stock at a discount from market prices and participate in equity ownership of us.

We focus on diversity, equality, and inclusion and they form a part of our culture and values.

We recently formed a diversity and inclusion committee to identify ways in which we can further support a culture of acceptance and inclusivity.

We have also introduced expanded offerings for virtual employee training to ensure our employees continue to develop their skills while working remotely.

Information Security

We are committed to maintaining information security through responsible management, appropriate use, and protection in accordance with legal and regulatory requirements and our contractual relationships.

Information security is an integral part of our business, and we emphasize to every employee that information security is “everyone’s responsibility.” We maintain an office of the chief information security officer, or CISO, focused on information and systems technology and corporate governance to drive a common security framework practice.

The office of the CISO concentrates on technology, behaviors and safeguarding information from unauthorized or inappropriate access, use, or disclosure.

We utilize various industry recognized information security frameworks, including Health Information Trust Alliance, National Institute of Standards and Technology, Payment Card Industry Data Security Standard, CIS Controls, and CIS Benchmarks.

Climate Change

Though our direct environmental impact is limited, we believe that we all have a role to play in effectively planning for, and mitigating the effects of, climate change.

Therefore, we consider climate-related risks when assessing our larger enterprise-level risks.

We also consider how we can build upon our business model to reduce environmental impacts, such as those associated with the use of paper for processing insurance applications.

Through the use of our online platforms, we have transformed a paper intensive health insurance application process into an easy to use digital experience.

As we continue to grow, we plan to select and design our offices in a manner that promotes the health, well-being, and productivity of our workforce and consider the environmental impacts of our facilities.

For example, our Santa Clara office is located in a high performance building and adheres to a number of sustainability requirements under local and California state guidance.

We have extended our data tracking

mechanisms to better understand our organizational footprint and to identify ways to further mitigate our impact on the environment, including increasing the automation of our procurement activities.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business