The following table shows approved members by product for the period presented:
2020 compared to 2019 - The constrained LTV of commissions per Medicare Supplement approved member increased by 15% in 2020 compared to 2019, primarily as a result of an increase in estimated average plan duration.
After we have estimated membership for a period, we may receive information from health insurance carriers that would have impacted the estimate if we had received the information prior to the date of estimation. We may receive commission payments or other information that indicates that a member who was not included in our estimates for a prior period was in fact an active member at that time, or that a member who was included in our estimates was in fact not an active member of ours. For instance, we reconcile information carriers provide to us and may determine that we were not historically paid commissions owed to us, which would cause us to have underestimated membership. Conversely, carriers may require us to return commission payments paid in a prior period due to policy cancellations for members we previously estimated as being active. We do not update our estimated membership numbers reported in previous periods. Instead, we reflect updated information regarding our historical membership in the membership estimate for the current period. As a result of the delay in our receipt of information from insurance carriers, actual trends in our membership are most discernible over periods longer than from one quarter to the next. As a result of the delay we experience in receiving information about our membership, it is difficult for us to determine with any certainty the impact of current conditions on our membership retention. Various circumstances could cause the assumptions and estimates that we make in connection with estimating our membership to be inaccurate, which would cause our membership estimates to be inaccurate. A member who purchases and is active on multiple standalone insurance plans will be counted as a member more than once. For example, a member who is active on both an individual and family health insurance plan and a standalone dental plan will be counted as two continuing members.
2020 compared to 2019 - Medicare estimated membership grew 23% as of December 31, 2020 compared to December 31, 2019 driven by a 32% increase in Medicare Advantage, as well as 12% and 11% increases in Medicare Part D prescription drug plan and Medicare Supplement plan estimated membership, respectively. The overall growth in Medicare estimated membership was due to our investment in our Medicare business. Individual and family plan estimated membership declined by 10% as of December 31, 2020 compared to December 31, 2019 due to market conditions in the individual and family plan market and our decision to shift our investment to our Medicare business. Ancillary plan estimated membership as of December 31, 2020 declined 6% compared to estimated membership as of December 31, 2019 primarily as a result of the decline of estimated membership of dental, short-term health plans, and vision plans.
(1)MA-equivalent approved members is a derived metric with a Medicare Part D approved member being weighted at 25% of a Medicare Advantage member and a Medicare Supplement member based on their relative LTVs at the time of our adoption of ASC 606. We calculate the number of approved MA-equivalent members by adding the total number of approved Medicare Advantage and Medicare Supplement members and 25% of the total number of approved Medicare Part D members during the years presented.
2020 compared to 2019 - Estimated CC&E costs per approved MA-equivalent member increased 4% in 2020 compared to 2019, due to underperformance of vendor agents which led to lower than expected approved members. Estimated variable marketing costs per approved MA-equivalent member increased by 16% in 2020 compared to 2019, due to a larger portion of applications originating from our online marketing channels which tend to have higher average marketing costs, and it was also impacted by underperformance of vendor agents which resulted in lower than expected approved members. Going forward, we expect a reduction in member acquisition costs per approved MA-equivalent member as a result of improved productivity of our agent force by
2020 compared to 2019 - Cost of revenue increased $1.3 million in 2020, compared to $2.7 million in 2019, primarily due to increased activity from our revenue sharing arrangements.
Segment profit is calculated as total revenue for the applicable segment less direct and allocated marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses, excluding stock-based compensation expense, change in fair value of earnout liability, depreciation and amortization expense, and amortization of intangible assets.
During the year ended December 31, 2020, there were no significant changes to our critical accounting policies and estimates.
(2) These amounts reflect our revised estimates of cash collections for certain members approved prior to the relevant reporting period that are recognized as adjustments to revenue within the relevant reporting period. The net adjustment revenue includes both increases in revenue for certain prior period cohorts as well as reductions in revenue for certain prior period cohorts.
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 December 31, 2020.
Pursuant to the effective registration statement which was filed on December 17, 2018, and amended on January 22, 2019, we entered into an underwriting agreement to issue 2.4 million shares of common stock, which included the exercise in full of the underwriters’ option to purchase 0.4 million additional shares of common stock, at a price to the public of $48.50 per share in January 2019, for a total of 2.8 million shares issued in connection with the offering. Net proceeds from the offering were approximately $126.1 million after deducting underwriting discounts, commissions and estimated expenses of the offering. We used the net proceeds of the offering for general corporate purposes, including working capital.
Our stock options granted under the 2014 Plan generally vest over four years at a rate of 25% after one year and 1/48th per month thereafter. Stock options granted under the 2014 Plan generally expire after seven years from the date of grant.
(2)The aggregate intrinsic value is calculated as the product between eHealth’s closing stock price as of December 31, 2020 and 2019 and the exercise price of in-the-money options as of those dates.
As of December 31, 2020, no shares of common stock have been purchased under our ESPP.
(1)Noncancellable sublease income for the years ending December 31, 2021, 2022 and 2023 of $1.2 million, $0.4 million and $0.4 million, respectively, are not included in the table above.
In 2020, we had worldwide consolidated income before tax of $54.0 million, and tax expense of $8.5 million, with an annual effective tax rate of 15.8%.