We also derive revenue from licensing the use of our health insurance ecommerce technology. Our technology platform enables health insurance carriers and agents to market and distribute health insurance plans online. Health insurance carriers or agents that license our technology typically pay us implementation fees and performance-based fees that are based on metrics such as submitted health insurance applications. We also recently began to license our ecommerce technology for use by government agencies and intend to market it to states implementing health insurance exchanges as a result of health care reform legislation. In our government technology licensing business, we may earn a combination of fixed license fees and time- and materials-based fees or we may be paid performance-based fees.
Using data from the third quarter of 2010, we estimate the amount by which our average individual and family plan base commission rate has changed to be a decline from just over 10% of premium to just below 7%. The estimate of the change in the average rate is calculated by applying the changes in the first and subsequent year commission rates to our membership as of the end of the third quarter of 2010, as if all changes were effective immediately for all individual and family health insurance plan members. Our estimate is revenue-weighted so that a rate reduction implemented by a health insurance carrier with a larger member base with us had a larger impact on the resulting average rate than a change by a carrier with a smaller member base. We also estimated changes for a minority of health insurance carriers which we believe had not completed a review of their commission rates. The commission rate changes apply prospectively to applicable commissions earned on or after January 1, 2011 and the majority of the changes apply only to commissions earned on new members approved in 2011 and thereafter. For the majority of members that were approved prior to the effective date of the commission rate changes, we will continue to be paid commissions at the rates in effect prior to the changes. As a result, the new estimated average base commission rate computed above will phase in over time. Since the calculation is an estimate of the magnitude of the commission changes using our membership composition as of the end of the third quarter of 2010, including the mix by health insurance carrier and plan for past sales, as well as the current mix of members between first year and renewal year, our actual future base commission rate will differ from the estimated rate. The actual commission rate will depend on the mix of future approved members by state, health insurance carrier and plan and the mix between members approved prior to the commission rate changes and those approved after the changes, among other factors. We also expect that in addition to the base commission rate changes, other programs that health insurance carriers have supported, such as commission overrides and sponsorship advertising programs, may be reduced as carriers work to comply with the new medical loss ratio requirements. Based on information currently available to us, we expect commission revenue to decrease in absolute dollars and as a percentage of total revenue in 2011 compared to 2010.
Cost of revenue consists of payments related to health insurance policies sold to members who were referred to our website by marketing partners with whom we have revenue-sharing arrangements. Cost of revenue also includes direct labor and other direct costs incurred in connection with our contract with the federal government, as well as the amortization of consideration we paid to certain brokers in connection with the transfer of their health insurance members to us as the new broker of record on the underlying policies. In order to enter into a revenue-sharing arrangement, marketing partners must be licensed to sell health insurance in the state where the policy is sold. Costs related to revenue-sharing arrangements are expensed as the related revenue is recognized. Initial direct labor and other direct costs incurred in connection with our contract with the federal government, but prior to the availability of our technology for use by the federal government, were deferred and included in prepaid expenses and other current assets in our consolidated balance sheet as of December 31, 2010 and are being amortized to cost of revenue from the date our technology was available for use by the federal government to the end of the initial one-year term of the contract.
(4) New members for all plans reported to eHealth as approved during the period. Some members that are approved by a carrier do not accept the approval and therefore do not become paying members. Does not include members transferred from Health Benefits Direct Corporation during 2009.
Commission Revenue. We recognize commission revenue when our commission is reported to us by a health insurance carrier, net of an allowance for future forfeiture amounts payable to carriers due to policy cancellations. Commissions are reported to us by a cash payment and commission statement. We generally receive these communications simultaneously. In instances when we receive the cash payment and commission statement separately and in different accounting periods, we recognize revenue in the period that we receive the earliest communication, provided we receive the second corroborating communication within ten business days following the end of the accounting period. If the second corroborating communication is not received within ten business days following the end of the accounting period, we recognize revenue in the period the second communication is received. We use the data in the commission statements to help identify the members for which we are receiving a commission payment and the amount received for each member, and to estimate our allowance for forfeitures payable to carriers. As a result, we recognize the net amount of compensation earned as the agent in the transaction.
2010 compared to 2009-Customer care and enrollment expenses increased $3.0 million, or 21%, in 2010 compared to 2009, primarily due to incremental compensation and benefits costs associated with the new customer care center we established in Salt Lake City, Utah and, to a lesser extent, with an increase in personnel servicing individual and family health insurance applications submitted through our website. As a result, compensation and benefits increased $2.5 million and facility and operating costs increased $0.3 million in 2010. As a percentage of total revenue, customer care and enrollment expenses were 11% in both 2010 and 2009.
The stock repurchase activity under our stock repurchase programs during the years ended December 31, 2009 and 2010 is summarized as follows (in thousands, except share and per share amounts):
In November 2010, we entered into an agreement with a partner, whereby the partner transferred certain of its existing Medicare insurance members to us as the broker of record on the underlying policies. Total consideration of $3.3 million is being amortized to cost of revenue in the consolidated statements of income and comprehensive income as we recognize commission revenue related to the transferred members over a period of up to five years. Of the $3.3 million total consideration, $2.5 million was paid to the partner in November 2010 and $0.8 million is payable in February 2011 and is recorded in accounts payable in the consolidated balance sheets as of December 31, 2010.
The net valuation allowance increased $0.1 million, $0.1 million and $0.4 million in each of the years ended December 31, 2008, 2009 and 2010, respectively, related to net operating carry forwards in China and, beginning in 2010, state net operating losses related to our PlanPrescriber subsidiary.
Our federal net operating losses and tax credit carry forwards were available without annual limitations as of December 31, 2010. For tax return purposes, we had net operating loss carry forwards at December 31, 2010 of approximately $18.2 million and $73.9 million for federal income tax and state income tax purposes, respectively. Included in these amounts are unrealized federal and state net operating loss deductions resulting from stock option exercises of approximately $7.9 million and $55.4 million, respectively. The benefit of these unrealized stock option-related deductions has not been included in the deferred tax assets table above and will be recognized as a credit to additional paid-in capital when realized. Federal and state net operating loss carry forwards begin expiring in 2021 and 2012, respectively.
For each of the years ended December 31, 2008, 2009 and 2010, we had securities outstanding that could potentially dilute earnings per share, but the shares from the assumed conversion or exercise of these securities were excluded in the computation of diluted net income per share as their effect would have been anti-dilutive.
Selected summarized quarterly financial information for 2010 and 2009 is as follows (in thousands, except per share amounts):