Perform the annual journal entries for eHealth under the old and new revenue recognition standard for one Medicare Advantage policy using the information in Exhibit $7.$ Under the new standard, how would eHealth account for the following changes in year $2$:

The customer does not renew the policy,

eHealth assumes that the lifetime drops to two years per policy, and

eHealth increases its constraints by $$50$ per policyExhibit $7$ eHealth Revenue Recognition Steps $-$ Medicare Advantage Policy $[$FY$2019$ Example$]$

US$$,$ unless otherwise stated

Once the carrier approves a member's application, recognize future expected commission revenue $($i$.$e$.,$ the "constrained" LTV per approved member$)$

To estimate the "constrained" LTV per approved member:

A$.$ Forecast the commission rate for the initial policy placement $($per carrier agreement$)$

B$.$ Forecast the commission rates for future policy renewals $($per carrier agreement$)$

C$.$ Estimate expected policy duration or "lifetime" using statistical models based on historical experience

D$.$ Calculate estimated future renewal commissions, by multiplying B$)$ with, $[$ C$)$ minus $1]$

E$.$ Add D$)$ to A$)$ to forecast the "unconstrained" LTV of an approved member

F$.$ Estimate a "constraint" to the current "unconstrained" LTV estimate so as to ensure no probable significant reversal

G$.$ Discount the "unconstrained" LTV by the "constraint" to arrive at a "constrained" LTV

Debit the commission receivable account by the amount of constrained LTV per approved member and credit revenues

Source: eHealth Inc. FY$201910-$K$,$ eHealth earnings call transcripts.

Note: Assumes that renewal commission rates are $50\%$ of initial placement commission rate.

adopting ASC $606,$ eHealth applied that ratio only to the initial year's commission $($A$).$