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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 001-33071
_____________________________________________
EHEALTH, INC.
(Exact name of registrant as specified in its charter)
_____________________________________________

Delaware
56-2357876
(State or other jurisdiction of incorporation or organization)(I.R.S Employer Identification No)

2625 AUGUSTINE DRIVE, SECOND FLOOR
SANTA CLARA, CA 95054
 (Address of principal executive offices)

(650) 584-2700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.001 per shareEHTHThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding as of April 30, 2020 was 25,614,001 shares.




EHEALTH, INC.
FORM 10-Q
TABLE OF CONTENTS

PART I FINANCIAL INFORMATIONPAGE
Item 1.
Item 2.
Item 3.
Item 4.
PART II 
OTHER INFORMATION
Item 1.
Item 1A.
Item 6.

1




PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
EHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 March 31, 2020*December 31, 2019
Assets(Unaudited)
Current assets:
Cash and cash equivalents$184,167  $23,466  
Short-term marketable securities33,683    
Accounts receivable668  2,332  
Contract assets – commissions receivable – current125,252  174,526  
Prepaid expenses and other current assets9,202  7,822  
Total current assets352,972  208,146  
Contract assets – commissions receivable – non-current435,465  414,696  
Property and equipment, net12,875  10,518  
Long-term marketable securities24,409    
Operating lease right-of-use assets43,396  36,621  
Restricted cash3,353  3,354  
Other assets19,300  18,004  
Intangible assets, net9,516  10,062  
Goodwill40,233  40,233  
Total assets$941,519  $741,634  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$8,906  $24,554  
Accrued compensation and benefits18,473  29,578  
Accrued marketing expenses4,711  12,041  
Earnout liability — current  37,273  
Lease liabilities — current4,174  4,759  
Deferred revenue2,683  2,570  
Other current liabilities3,736  2,210  
Total current liabilities42,683  112,985  
Deferred income taxes — non-current61,623  64,130  
Lease liabilities — non-current41,992  34,305  
Other non-current liabilities3,535  3,050  
Stockholders’ equity:
Common stock37  35  
Additional paid-in capital717,380  455,159  
Treasury stock, at cost(199,998) (199,998) 
Retained earnings274,157  271,852  
Accumulated other comprehensive income110  116  
Total stockholders’ equity791,686  527,164  
Total liabilities and stockholders’ equity$941,519  $741,634  
_____________
* Reflects the impact from the adoption of ASC 326 on January 1, 2020. See Note 1Summary of Business and Significant Accounting Policies for details.

The accompanying notes are an integral part of these condensed consolidated financial statements.
2




EHEALTH, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share amounts, unaudited)
Three Months Ended March 31,
20202019
Revenue:  
Commission$99,669  $64,227  
Other6,739  4,546  
Total revenue106,408  68,773  
Operating costs and expenses:
Cost of revenue1,138  (77) 
Marketing and advertising37,764  23,941  
Customer care and enrollment30,535  19,944  
Technology and content15,740  9,017  
General and administrative19,653  11,278  
Amortization of intangible assets547  547  
Change in fair value of earnout liability  13,306  
Total operating costs and expenses105,377  77,956  
Income (loss) from operations1,031  (9,183) 
Other income, net373  557  
Income (loss) before benefit from income taxes1,404  (8,626) 
Benefit from income taxes(2,048) (3,467) 
Net income (loss)$3,452  $(5,159) 
 
Net income (loss) per share:   
Basic$0.14  $(0.24) 
Diluted$0.13  $(0.24) 
Weighted-average number of shares used in per share amounts:
Basic24,719  21,831  
Diluted26,179  21,831  
Comprehensive income:
Net income (loss)$3,452  $(5,159) 
Unrealized holding gain for available for sales debt securities, net of tax25    
Foreign currency translation adjustment, net of taxes(31) 29  
Comprehensive income (loss)$3,446  $(5,130) 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3




EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, unaudited)

Three Months Ended March 31, 2020
 Common StockAdditional Paid-in
Capital
Treasury StockRetained EarningsAccumulated Other Comprehensive IncomeTotal Stockholders’ Equity
 SharesAmountSharesAmount
Balance as of December 31, 201934,752  $35  $455,159  (11,616) $(199,998) $271,852  $116  $527,164  
Cumulative effect from the adoption of ASU 2016-13  —  —  —  —  —  (1,147) —  (1,147) 
Issuance of common stock in connection with exercise of common stock options  141  —  1,091  —  —  —  —  1,091  
Repurchase of shares to satisfy employee tax withholding obligations  —  —  (4,375) (33) —  —  —  (4,375) 
Shares issued in equity offering  2,070  2  228,022  —  —  —  —  228,024  
Settlement of earnout liability  295  —  28,521  —  —  —  —  28,521  
Stock-based compensation expense  —  —  8,962  —  —  —  —  8,962  
Other comprehensive income, net of tax  —  —  —  —  —  —  (6) (6) 
Net income  —  —  —  —  —  3,452  —  3,452  
Balance as of March 31, 202037,258  $37  $717,380  (11,649) $(199,998) $274,157  $110  $791,686  

Three Months Ended March 31, 2019
 Common StockAdditional Paid-in
Capital
Treasury StockRetained EarningsAccumulated Other Comprehensive IncomeTotal Stockholders’ Equity
 SharesAmountSharesAmount
Balance as of December 31, 201830,863  $31  $298,024  (11,426) $(199,998) $204,965  $127  $303,149  
Issuance of common stock in connection with exercise of common stock options  172  —  2,367  —  —  —  —  2,367  
Repurchase of shares to satisfy employee tax withholding obligations  —  —  (1,280) (24) —  —  —  (1,280) 
Shares issued in equity offering  2,760  3  126,048  —  —  —  —  126,051  
Settlement of earnout liability  295  —  17,264  —  —  —  —  17,264  
Stock-based compensation expense  —  —  3,229  —  —  —  —  3,229  
Foreign currency translation adjustment, net of taxes  —  —  —  —  —  —  29  29  
Net loss  —  —  —  —  —  (5,159) —  (5,159) 
Balance as of March 31, 201934,090  $34  $445,652  (11,450) $(199,998) $199,806  $156  $445,650  

The accompanying notes are an integral part of these condensed consolidated financial statements.



4




EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(in thousands, unaudited)
Three Months Ended March 31,
 20202019
Operating activities:
Net income (loss)$3,452  $(5,159) 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization823  655  
Amortization of internally developed software1,501  719  
Amortization of intangible assets547  547  
Stock-based compensation expense8,714  3,229  
Deferred income taxes(2,141) (3,543) 
Change in fair value of earnout liability  13,306  
Other non-cash items223  (1,194) 
Changes in operating assets and liabilities:
Accounts receivable1,664  221  
Contract assets – commissions receivable26,873  17,648  
Prepaid expenses and other assets(159) 1,111  
Accounts payable(16,279) (768) 
Accrued compensation and benefits(11,104) (9,390) 
Accrued marketing expenses(7,329) (7,147) 
Deferred revenue113  2,897  
Accrued expenses and other liabilities2,009  (383) 
Net cash provided by operating activities8,907  12,749  
Investing activities:
Capitalized internal-use software and website development costs(3,564) (1,487) 
Purchases of property and equipment and other assets(2,508) (1,509) 
Purchases of marketable securities(58,064)   
Cash used in investing activities(64,136) (2,996) 
Financing activities:
Proceeds from issuance of common stock, net of issuance costs228,024  126,051  
Net proceeds from exercise of common stock options1,091  2,367  
Repurchase of shares to satisfy employee tax withholding obligations(4,375) (1,280) 
Repayment of debt  (5,000) 
Acquisition-related contingent payments(8,751) (9,542) 
Principal payments in connection with leases(58) (25) 
Net cash provided by financing activities
215,931  112,571  
Effect of exchange rate changes on cash, cash equivalents and restricted cash(2) 62  
Net increase in cash, cash equivalents and restricted cash160,700  122,386  
Cash, cash equivalents and restricted cash at beginning of period26,820  13,089  
Cash, cash equivalents and restricted cash at end of period$187,520  $135,475  


 The accompanying notes are an integral part of these condensed consolidated financial statements.
5







EHEALTH, INC. 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1Summary of Business and Significant Accounting Policies

Description of Business – eHealth, Inc. (the “Company,” “eHealth,” “we” or “us”) is a leading health insurance marketplace with a technology and service platform that provides consumer engagement, education and health insurance enrollment solutions. Our mission is to connect every person with the highest quality, most affordable health insurance and Medicare plans for their life circumstances. 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 health insurance purchasing process, and to help them obtain the health insurance products that meet their individual health and economic needs. Our omni-channel consumer engagement platform is designed to meet the consumer wherever they prefer to engage with us, and 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 180 health insurance carriers across all fifty states and the District of Columbia.

Basis of Presentation – The accompanying condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019, and the condensed consolidated statements of comprehensive income (loss), stockholders' equity, and cash flows for the three months ended March 31, 2020 and 2019, respectively, are unaudited. The condensed consolidated balance sheet data as of December 31, 2019 was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission on March 2, 2020. The accompanying financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K.

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. The condensed consolidated financial statements include the accounts of eHealth, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in accordance with those rules and regulations. Certain reclassifications might be made to conform with the current presentation. However, the Company believes that the disclosures made are adequate to make the information not misleading.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019 and include all adjustments necessary for the fair presentation of our financial position as of March 31, 2020 and December 31, 2019, and our results of operations for the periods presented. Our financial position as of March 31, 2020 and results of operations and cash flows for the three months ended March 31, 2020 were not materially impacted by the COVID-19 pandemic but the Company is continuously assessing the evolving situation related to the pandemic. The results for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for any subsequent period or for the year ending December 31, 2020 and therefore should not be relied upon as an indicator of future results.

Significant Accounting Polices, Estimates and Judgements – The preparation of condensed consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to, but not limited to, the commissions we expect to collect for each approved member cohort, allowance for credit loss, the useful lives of intangible assets, fair value of investments, recoverability of intangible assets, valuation allowance for deferred income taxes, provision (benefit) for income taxes and the assumptions used in determining stock-based compensation. We base our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that we believe to be reasonable. Actual results may differ from these estimates.

6







EHEALTH, INC. 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
With the exception of the change for the accounting of credit losses as a result of the adoption of Accounting Standard Updates ("ASU") No. 2016-13, Financial InstrumentsCredit Losses discussed below, there have been no material changes to our significant accounting policies discussed in our Annual Report on Form 10-K for the year ended December 31, 2019.

Seasonality – A greater number of our Medicare-related health insurance plans are sold in our fourth quarter during the Medicare annual enrollment period when Medicare-eligible individuals are permitted to change their Medicare Advantage, Medicare Supplement, and Medicare Part D prescription drug coverage for the following year. As a result, our Medicare plan-related commission revenue is highest in our fourth quarter. Due to the recent reintroduction of the Medicare Advantage open enrollment period that takes place in the first quarter of the year, our commission revenue is typically second-highest in our first quarter.

The majority of our major medical individual and family health insurance plans are sold in the fourth quarter during the annual open enrollment period under the federal Patient Protection and Affordable Care Act and related amendments in the Health Care and Education Reconciliation Act. Individuals and families generally are not able to purchase major medical individual and family health insurance outside of the open enrollment period, 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.

Recently Adopted Accounting Pronouncement

Financial Instruments – Credit Losses (Topic 326) – In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial InstrumentsCredit Losses (Topic 326), that requires companies to present certain financial assets net of the amount expected to be collected. The guidance requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectability. Contract assets – commissions receivable are the Company's only financial assets that were materially impacted by this guidance.

We adopted ASU 2016-13 using a modified retrospective transition method on January 1, 2020 for all financial assets measured at amortized cost. Results for periods after January 1, 2020 are presented under ASU 2016-13 while prior period amounts continue to be reported under the previous accounting standards. We recorded a $1.1 million decrease, net of income taxes, to the retained earnings as of January 1, 2020 for the cumulative effect of adopting ASU 2016-13. See Note 3Supplemental Financial Statement Information for further discussion on credit losses.

The impacts from the adoption are summarized as follows (in thousands):

Balance Sheet Impact:December 31, 2019Transition AdjustmentsJanuary 1, 2020
Contract assets – commissions receivable – current$174,526  $(71) $174,455  
Contract assets – commissions receivable – non-current$414,696  $(1,442) $413,254  
Other assets*$18,004  $366  $18,370  
Total assets$741,634  $(1,147) $740,487  
Retained earnings$271,852  $(1,147) $270,705  
____________
*Adjustment to Other assets is related to the increase in deferred tax asset resulted from the adoption of the accounting guidance.


Financial Instruments (Topic 820) – In 2018, the FASB issued ASU No. 2018-13, to change the disclosure requirements for fair value measurement with the objective of improving the effectiveness of the notes to financial statements. This new guidance removed and modified certain disclosure requirements under Topic 820. We adopted this guidance in the first quarter of 2020 with no material impact on our condensed consolidated financial statements.


7







EHEALTH, INC. 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Intangible – Goodwill and Other (Topic 350) – In 2017, the FASB issued ASU 2017-04 to simplify the subsequent measurement of goodwill by removing the requirement to perform a hypothetical purchase price allocation to compute the implied fair value of goodwill to measure impairment. Instead, any goodwill impairment will equal the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. In addition, the guidance eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. This standard is effective for annual or any interim goodwill impairment test in fiscal years beginning after December 15, 2019. We adopted this guidance in the first quarter of 2020 with no material impact on our condensed consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

Income Taxes (Topic 740) – In December 2019, the FASB issued ASU No. 2019-12, Income Tax, Simplifying the Accounting for Income Taxes, which aims to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and improve consistent application of and simplify U.S. GAAP for other areas under this Topic by clarifying existing guidance. ASU 2019-12 will be effective for us beginning January 1, 2021. The amendments in this standard update have individually different adoption approaches. We do not anticipate a material impact on our consolidated financial statements and disclosure from the adoption of this standard update.



8







EHEALTH, INC. 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 2Revenue

Disaggregation of Revenue – The table below disaggregates our revenue by product (in thousands):
Three Months Ended March 31,
20202019
Medicare
Medicare Advantage$68,347  $39,843  
Medicare Supplement15,170  8,597  
Medicare Part D5,661  2,336  
Total Medicare89,178  50,776  
Individual and Family (1)
Non-Qualified Health Plans1,446  2,629  
Qualified Health Plans1,210  3,508  
Total Individual and Family2,656  6,137  
Ancillary
Short-term2,216  1,316  
Dental743  790  
Vision243  462  
Other1,049  951  
Total Ancillary4,251  3,519  
Small Business2,971  2,640  
Commission Bonus613  1,155  
Total Commission Revenue99,669  64,227  
Other Revenue6,739  4,546  
Total Revenue$106,408  $68,773  
_____________

(1)We define our individual and family plan offerings as major medical individual and family health insurance plans, which does not include Medicare-related, small business or ancillary plans. Individual and family health insurance plans include both qualified and non-qualified plans. Qualified health plans are individual and family health insurance plans that meet the requirements of the Affordable Care Act and are offered through the government-run health insurance exchange in the relevant jurisdiction. Non-qualified health plans are individual and family health insurance plans that meet the requirements of the Affordable Care Act and are not offered through the exchange in the relevant jurisdiction. Individuals that purchase non-qualified health plans cannot receive a subsidy in connection with the purchase of non-qualified plans.

Revenue Recognition Based on Estimated Constrained LTV

We recognize revenue for plans approved during the period by applying the latest estimated constrained life time value (“LTV”) for that product. We recognize adjustment revenue for plans approved in prior periods when there is a change in estimate to expected cash collections as a result of sufficient evidence that demonstrates a trend that is different from the estimated constrained LTV at the time of approval. We recognize adjustment revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. We assess the risk of significant revenue reversal based on statistical and qualitative analysis given historical information and current market conditions.

Our commission revenue for each product line is based on a number of assumptions, which include, but are not limited to, estimating conversion of an approved member to a paying member, forecasting average plan duration and forecasting the commission amounts likely to be received per member. These assumptions are based on our analysis of historical trends for different cohorts and incorporate management’s judgment in interpreting those trends to apply the constraints discussed below. For our Medicare commission revenue, which represented 89% and 79% of our total commission revenue for the three months ended March 31, 2020 and 2019, respectively, the estimated average plan duration, which is the average length of time paying
9







EHEALTH, INC. 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
members are active on their plans, used to calculate Medicare health insurance plan LTVs historically has been approximately 3 years for Medicare Advantage plans, approximately 5 years for Medicare Part D prescription drug plans, and approximately 5 years for Medicare Supplement plans. While the average plan duration has been approximately 3 years for Medicare Advantage plans, certain members may have a duration of up to 12 years. The estimated average plan duration used to calculate the LTV for major medical individual and family health insurance plans historically has been approximately 1.5 to 2 years. For short term health insurance plan LTVs, the estimated average plan duration historically has been less than six months. For all other ancillary health insurance plan LTVs, the estimated average plan duration has historically varied from 1 to 3 years. To the extent we make changes to the assumptions we use to calculate constrained LTVs, we recognize the impact of changes to commission revenue in the reporting period in which the change is made, including revisions of estimated lifetime commissions either below or in excess of previously estimated constrained LTV recognized as revenue.

Constraints are applied to LTV for revenue recognition purposes to help ensuring that the total estimated lifetime commissions expected to be collected for an approved member’s plan are recognized as revenue only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with future commissions receivable from the plan is subsequently resolved. Judgments that can be significant in estimating LTVs are related to the constraint. To determine the constraints to be applied to LTV, we compare prior calculations of LTV to actual cash received and review the reasons for any variations. We then apply judgment in assessing whether the difference between historical cash collections and LTV is representative of differences that can be expected in future periods. We also analyze whether circumstances have changed and consider any known or potential modifications to the inputs into LTV in light of the factors that can impact the amount of cash expected to be collected in future periods including but not limited to commission rates, carrier mix, plan duration, changes in laws and regulations, and cancellations of insurance plans offered by health insurance carriers with which we have a relationship. We evaluate the appropriateness of our constraints on a quarterly basis, and we update our assumptions when we observe a sufficient amount of evidence that would suggest that the long-term expectation underlying the assumptions has changed.

We recorded adjustment revenue of $12.7 million and $7.4 million, or $0.52 and $0.34 per basic share, or $0.49 and $0.34 per diluted share, respectively, for the three months ended March 31, 2020 and 2019, respectively.

Commission revenue by segment is presented in the table below (in thousands):

Three Months Ended March 31,
20202019
Medicare
Commission Revenue from Members Approved During the Period (1)
$81,125  $50,582  
Net Commission Revenue from Members Approved in Prior Periods (2)
8,979  1,067  
Total Medicare Segment Commission Revenue$90,104  $51,649  
Individual, Family and Small Business
Commission Revenue from Members Approved During the Period (1)
$5,796  $6,225  
Net Commission Revenue from Members Approved in Prior Periods (2)
3,769  6,353  
Total IFP/SMB Segment Commission Revenue$9,565  $12,578  
_____________

(1)These amounts include commission bonus revenue.
(2)These amounts reflect our revised estimates of cash collections for certain members approved prior to the relevant reporting period that are recognized as adjustment revenue within the relevant reporting period. These amounts include revenue associated with renewing small business health insurance members. Adjustment revenue also includes reductions to revenue for certain prior periods cohorts which were immaterial for the three months ended March 31, 2020 and 2019, respectively.


10







EHEALTH, INC. 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Since the adoption of ASC 606, we re-compute LTVs for all outstanding cohorts on a quarterly basis. We continually review and monitor changes in the data used to estimate LTV and compare the cash received for each cohort to our original estimates at the time of approval. The fluctuations of cash received for each cohort and LTV can be significant and may or may not be indicative of the need to adjust revenue for prior period cohorts. Changes in LTV may result in an increase or a decrease to revenue and a corresponding increase or decrease to contract assets – commissions receivable, accordingly. We analyze these fluctuations and, to the extent we see changes in our estimates of the cash commission collections that we believe are indicative of an increase or decrease to prior period LTVs, we adjust revenue for the affected cohorts at the time such determination is made and when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. As we accumulate more historical data, we continue to enhance our LTV estimation models using statistical tools to increase the accuracy of LTV estimates with an emphasis on improving member attrition forecasting. The enhancements to the LTV estimation model provide greater statistical certainty on expected cash collections, particularly for earlier period cohorts where there is more historical data available. Our LTV estimation models for the three months ended March 31, 2020 indicate increases in LTVs and estimates of future cash collections for earlier period cohorts of certain products within our Individual, Family and Small Business segment. However, after considering various market factors and recent changes due to the impact of COVID-19 to the U.S. economy, such as increases in unemployment rate, potential delays in customer premium payments and/or health insurance carrier commission payments, potential changes to enrollment periods, and potential changes to qualified health plan subsidies, we limited the adjustment revenue recognized during the three months ended March 31, 2020 to actual cash collected in excess of previously recognized revenue for certain cohorts related to individual and family as well as ancillary plans. These prevailing market conditions did not have an impact on the amount of adjustment revenue recognized for any other products we sell.


Note 3Supplemental Financial Statement Information

Cash, Cash Equivalents and Restricted Cash

We consider all investments with an original maturity of 90 days or less from the date of purchase to be cash equivalents. Cash and cash equivalents are stated at fair value. We also invested in marketable securities that are measured and recorded at fair value. See Note 4Fair Value Measurements for further discussion about our marketable securities. As of March 31, 2020 and December 31, 2019, our cash, cash equivalent and restricted cash balances were invested as follows (in thousands):
March 31, 2020December 31, 2019
Cash$16,364  $16,205  
Cash equivalents167,803  7,261  
Restricted cash3,353  3,354  
Total cash, cash equivalents and restricted cash$187,520  $26,820  

As of March 31, 2020 and December 31, 2019, we had $3.4 million of restricted cash which was classified as a non-current asset on our Condensed Consolidated Balance Sheets. This amount collateralizes letters of credit related to certain lease commitments.

Contract Assets and Accounts Receivable

We do not require collateral or other security for our contract assets and accounts receivable. We believe the potential for collection issues with any of our customers was minimal as of March 31, 2020.

11







EHEALTH, INC. 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Our contract assets and accounts receivable consisted of the following for the periods presented (in thousands):
 March 31, 2020December 31, 2019
Contract assets – commissions receivable – current$125,252  $174,526  
Contract assets – commissions receivable – non-current435,465  414,696  
Accounts receivable668  2,332  
Total contract assets and accounts receivable$561,385  $591,554  

We estimate the allowance for credit loss balance using relevant available information from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts. Specifically, for the purpose of measuring the probability of default parameters, we utilize Capital IQ, Standard & Poors and Moody's analytics. Our estimates of loss given default are determined by using our historical collections data as well as historical information obtained through our research and review of other insurance related companies. Our estimated exposure at default is determined by applying these internal and external data sources to our commission receivable balances. As such, we apply an immediate reversion method and revert to historical loss information when computing our credit loss exposure.

Subsequent to the adoption of ASC 326, we considered the impact of recent events and global economic condition when evaluating the appropriate adjustments to our allowance as of March 31, 2020. Determining the extent of these adjustments in the three months ended March 31, 2020 was especially challenging because we do not have any historical loss information for a period of similar economic decline. We considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and determined that the estimated of credit losses was not materially impacted as of March 31, 2020. After our management's evaluation, we recorded credit loss expenses of $0.1 million during the three months ended March 31, 2020 which is included in general and administrative expense on our Condensed Consolidated Statement of Comprehensive Income. Our contract assets – commission receivable activities, net of credit losses are summarized as follows (in thousands):
Three Months Ended March 31, 2020
Medicare SegmentIFP/SMB SegmentTotal
Beginning balance$550,922  $38,300  $589,222  
Commission revenue from members approved during the period81,125  5,796  86,921  
Net commission revenue adjustments from members approved in prior period8,979  3,769  12,748  
Cash receipts(112,731) (13,811) (126,542) 
Change in credit loss allowance*(1,574) (58) (1,632) 
Ending balance$526,721  $33,996  $560,717  

Three Months Ended March 31, 2019
Medicare SegmentIFP/SMB SegmentTotal
Beginning balance$311,977  $33,881  $345,858  
Commission revenue from members approved during the period50,582  6,225  56,807  
Net commission revenue adjustments from members approved in prior period1,067  6,353  7,420  
Cash receipts(67,873) (14,001) (