Why eHealth, Inc. Shares Surged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of eHealth, Inc. were rocketing higher today, gaining as much 31% after winning a contract to advise on insurance plans under the Patient Protection and Affordable Care Act, commonly known as Obamacare.

So what: The parent of eHealthInsurance.com and other online health sites said it had reached an agreement with the Center for Medicare and Medicaid Services to help citizens in 36 states enroll for tax subsidies under the new health care plan. Seeing as CEO Gary Lauer had made the effort a centerpiece of his strategy, investors cheered the results. The agreement could also lead to further breakthroughs to score similar agreements with the 14 states that are building their own exchanges. eHealth will not be paid by the government for providing the service, but rather on a commission basis by insurance companies.

Now what: With its strong online presence, eHealth figures to benefit further from the Affordable Care Act. Its websites are popular with the self-employed and others who do not receive insurance through conventional means, and the insurance mandate should drive further traffic to its sites. Shares are highly priced now, but I'd expect eHealth to grow into that valuation as it's poised to benefit from the health insurance transformation that's just beginning.

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The article Why eHealth, Inc. Shares Surged originally appeared on Fool.com.

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