SOURCE: eHealth, Inc.

eHealth, Inc.

February 12, 2009 16:15 ET

eHealth, Inc. Announces Fourth Quarter and Fiscal 2008 Results

Fourth Quarter 2008 Overview

-- Revenue of $29.5 million, up 22% over the fourth quarter of 2007

-- Growth in IFP submitted applications of 18% over the fourth quarter of 2007

-- Operating income of $5.7 million, up 31% over the fourth quarter of 2007

-- GAAP operating margins of 19% and non-GAAP operating margins of 22% for the fourth quarter of 2008

-- GAAP net income of $3.6 million, or $0.14 per diluted share, and non-GAAP net income of $4.2 million, or $0.16 per diluted share, for the fourth quarter of 2008

-- Cash flow from operations of $7.4 million, down 6% from the fourth quarter of 2007

MOUNTAIN VIEW, CA--(Marketwire - February 12, 2009) - eHealth, Inc. (NASDAQ: EHTH), the leading online source of health insurance for individuals, families and small businesses, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2008.

Gary Lauer, chief executive officer of eHealth, stated, "Our financial results illustrate that we continue to execute on our operating plans and grow our business in the midst of an extraordinary macroeconomic environment. Fourth quarter performance is reflective of our disciplined approach to managing our company and growing our membership base profitably. In this economy we are focused on continued operating efficiency and aggressive marketing, and most importantly helping people find quality health insurance options online."

Fourth Quarter Results

Revenue - Revenue totaled $29.5 million for the fourth quarter of 2008, a 22% increase compared to revenue of $24.2 million for the fourth quarter of 2007.

Submitted Applications - Submitted applications for individual and family products increased 18% in the fourth quarter of 2008 to 115,600 applications, compared to 97,900 applications in the fourth quarter of 2007.

Membership - Estimated membership at December 31, 2008 totaled 621,100 members, a 20% increase over estimated membership of 518,400 at December 31, 2007.

Operating Income - Operating income increased 31% to $5.7 million for the fourth quarter of 2008, compared to operating income of $4.3 million for the fourth quarter of 2007. Operating margins were 19% in the fourth quarter of 2008, compared to 18% in the fourth quarter of 2007. Non-GAAP operating income increased 35% to $6.5 million for the fourth quarter of 2008, compared to non-GAAP operating income of $4.9 million for the fourth quarter of 2007. Non-GAAP operating margins were 22% in the fourth quarter of 2008, compared to 20% in the fourth quarter of 2007. Non-GAAP operating income and margins in the fourth quarters of 2008 and 2007 exclude $885,000 and $544,000 of stock-based compensation expense, respectively.

Pre-tax Income - Pre-tax income for the fourth quarter of 2008 was $6.3 million, a 9% increase compared to pre-tax income of $5.7 million for the fourth quarter of 2007. Non-GAAP pre-tax income was $7.2 million for the fourth quarter of 2008, a 14% increase compared to non-GAAP pre-tax income of $6.3 million for the fourth quarter of 2007. Non-GAAP pre-tax income in the fourth quarters of 2008 and 2007 exclude $885,000 and $544,000 of stock-based compensation expense, respectively.

Net Income - Net income for the fourth quarter of 2008 was $3.6 million, or $0.14 per diluted share. Net income for the fourth quarter of 2007, which included a benefit for income taxes of $18.9 million due to the reduction of the valuation allowance against deferred tax assets, was $22.4 million, or $0.86 per diluted share. Non-GAAP net income for the fourth quarter of 2008 was $4.2 million, or $0.16 per diluted share compared to non-GAAP net income for the fourth quarter of 2007 of $3.7 million, or $0.14 per diluted share. Non-GAAP net income and non-GAAP net income per diluted share in the fourth quarter of 2008 exclude $885,000 of stock-based compensation expense, adjusted by $355,000 for estimated income tax benefit related to stock-based compensation expense. Non-GAAP net income and non-GAAP net income per diluted share in the fourth quarter of 2007 exclude $544,000 of stock-based compensation expense, adjusted by $262,000 for estimated income tax benefit related to stock-based compensation expense, and an $18.9 million income tax benefit from the reduction of the valuation allowance against deferred tax assets.

Cash Flow and Cash Balance - Cash flow from operations for the fourth quarter of 2008 was $7.4 million, compared to $7.9 million for the fourth quarter of 2007, representing a decrease of 6%. Cash, cash equivalents and short-term marketable securities as of December 31, 2008 totaled $150.6 million, compared to $121.5 million as of December 31, 2007. During the fourth quarter of 2008, our Board of Directors authorized a stock repurchase program of up to $30 million, or ten percent of our outstanding common stock, whichever is less. We established a 10b5-1 trading plan and began repurchasing our outstanding common stock in late December 2008. As of December 31, 2008, we had repurchased approximately 51,000 shares at an average price of $12.59 per share for a total cost of $0.6 million.

Fiscal 2008 Results

Revenue - Revenue totaled $111.7 million for the year ended December 31, 2008, a 27% increase compared to revenue of $87.8 million for the year ended December 31, 2007.

Operating Income - Operating income increased 33% to $21.3 million for the year ended December 31, 2008, compared to operating income of $16.0 million for the year ended December 31, 2007. Operating margins were 19% in the year ended December 31, 2008, up from 18% in the year ended December 31, 2007.

Pre-tax Income - Pre-tax income for the year ended December 31, 2008 was $25.0 million, a 17% increase compared to pre-tax income of $21.3 million for the year ended December 31, 2007.

Net Income - Net income for the year ended December 31, 2008 was $14.2 million, or $0.55 per diluted share. Net income for the year ended December 31, 2007, which included $18.9 million of income tax benefit recorded in the fourth quarter of 2007, was $31.6 million, or $1.22 per diluted share.

Cash Flow and Cash Balance - Cash flow from operations for the year ended December 31, 2008 was $30.2 million, a 15% increase compared to $26.2 million for the year ended December 31, 2007.

2009 Guidance

eHealth is providing guidance for the full year ending December 31, 2009 based on information currently available:

--  Total revenue is expected to be in the range of $131 million to $136
    million
--  Stock-based compensation expense is expected to be in the range of $5
    million to $6 million
--  GAAP income tax rate expected to be in the range of 43% to 45%
--  GAAP net income per diluted share is expected to be in the range of
    $0.51 to $0.61 per share
    

"I would like to provide some additional comments on our 2009 guidance," said Stuart Huizinga, chief financial officer of eHealth. "We expect our 2009 non-GAAP operating margin percentage, which excludes stock-based compensation, to be at least equal to what we reported for 2008, and our 2009 operating income to increase as compared to the 2008 operating income. At the same time, we expect our 2009 net income to be impacted by a decline in interest income, a non-operating item. Our 2009 interest income is expected to decline from the run-rate we observed in the fourth quarter of 2008 as a result of current interest rates and our plan to continue to manage our cash conservatively."

Webcast and Conference Call Information

A Webcast and conference call will be held today, Thursday, February 12, 2009 at 5:00 p.m. EST / 2:00 p.m. PST. The Webcast will be available live on the Investor Relations section on eHealth's website at http://ir.ehealthinsurance.com. Individuals interested in listening to the conference call may do so by dialing 800-597-1967 for domestic callers and 617-597-5526 for international callers. The participant passcode is #95786385. A telephone replay will be available two hours following the conclusion of the call for a period of 30 days and can be accessed by dialing 888-286-8010 for domestic callers and 617-801-6888 for international callers. The call ID for the replay is #20135984. The live and archived webcast of the call will also be available on eHealth's website at www.ehealthinsurance.com under the Investor Relations section.

About eHealth, Inc.

eHealth, Inc. is the parent company of eHealthInsurance, the leading online source of health insurance for individuals, families and small businesses. eHealthInsurance presents complex health insurance information in an objective, user-friendly format, enabling the research, analysis, comparison and purchase of health insurance products that best meet consumers' needs. eHealth and eHealthInsurance are registered trademarks of eHealthInsurance Services, Inc.

eHealth, Inc. was founded in 1997 and its technology was responsible for the nation's first Internet-based sale of a health insurance policy. eHealth is headquartered in Mountain View, California. Additional information can be found on eHealth's website, www.ehealthinsurance.com.

Forward-Looking Statements

This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statements regarding eHealth's cash management and eHealth's guidance for total revenue, stock-based compensation expense, GAAP income tax rate, GAAP net income per diluted share, non-GAAP operating margins, interest income, operating income and net income for the year ending December 31, 2009. These forward-looking statements are inherently subject to various risks and uncertainties that could cause actual results to differ materially from the statements made, including risks associated with eHealth's rate of growth, continued acceptance of the Internet as a medium for the purchase of health insurance, consumer awareness of the availability and accessibility of affordable health insurance, eHealth's ability to continue to increase its membership base and retain its members, and maintain or expand its relationships with health insurance carriers and marketing partners, negative publicity experienced by eHealth's carrier partners, changes in products offered on eHealth's ecommerce platform, changes in commission payments or carrier underwriting practices, maintaining and enhancing eHealth's brand identity, changes in member conversion rates and factors affecting conversion, system failures, capacity constraints or data loss, the performance, reliability and availability of eHealth's ecommerce platform and underlying network infrastructure, exposure to online commerce security risks, dependence upon Internet search engines to attract consumers who visit eHealth's website, the effectiveness of eHealth's marketing and public relations efforts, reliance on marketing partners for the sale of health insurance, changes in the economy and weak economic conditions, pursuing new strategies and opportunities in new segments of the health insurance market, timing of receipt of commission reports and related impact on estimating membership, payment practices of health insurance carriers, competition, eHealth's operations in China and any foreign expansion, success in the sale of sponsorship advertising and the licensing of the use of eHealth's ecommerce platform, success of the health savings account (HSA) platform, protection of intellectual property and intellectual property rights claims, regulatory penalties and negative publicity, costs of obtaining insurance and the health of companies providing such insurance, ability to attract and retain qualified personnel, management of future growth, seasonality, impact of future acquisitions, implementation of internal enterprise systems and maintenance of proper and effective internal controls, impact of employee stock-based compensation expense and provisions for income taxes, compliance with insurance and other laws and regulations, changes in laws and regulations, and changes in the structure of the health insurance system in the United States. Other factors that could cause operating, financial and other results to differ are described in eHealth's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K filed with the Securities and Exchange Commission and available on the investor relations page of eHealth's website at www.ehealthinsurance.com and on the Securities and Exchange Commission's website at www.sec.gov. eHealth does not undertake any obligation to update any forward-looking statement to conform the statement to actual results or changes in expectations.

Non-GAAP Financial Information

This press release includes financial measures that are not in accordance with generally accepted accounting principles in the United States ("GAAP"). To supplement eHealth's condensed consolidated financial statements presented in accordance with GAAP, eHealth presents investors with certain non-GAAP financial measures, including non-GAAP operating income, non-GAAP operating margins, non-GAAP pre-tax income, non-GAAP net income and non-GAAP net income per diluted share.

--  Non-GAAP operating income consists of GAAP operating income excluding
    the effects of expensing stock-based compensation related to stock options,
    restricted stock and restricted stock units in accordance with SFAS 123R
    beginning in 2006 and amortization of deferred stock-based compensation
    expense in accordance with APB 25 for grants made prior to 2006.
    
--  Non-GAAP operating margins are calculated by dividing non-GAAP
    operating income by GAAP total revenue.
    
--  Non-GAAP pre-tax income consists of GAAP pre-tax income excluding the
    effects of expensing stock-based compensation.
    
--  Non-GAAP net income consists of GAAP net income excluding the effects
    of expensing stock-based compensation adjusted for estimated income tax
    benefit related to stock-based compensation expense. Additionally, non-GAAP
    net income for the three months and fiscal year ended December 31, 2007
    excludes $18.9 million of non-cash benefits for income taxes related to the
    reduction of the valuation allowance against deferred tax assets.
    
--  Non-GAAP net income per diluted share is calculated by dividing non-
    GAAP net income by GAAP weighted average diluted shares outstanding.
    

eHealth believes that the presentation of these non-GAAP financial measures provide important supplemental information to management and investors regarding financial and business trends relating to the company's financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with the company's past financial reports. Management also believes that the exclusion of the items described above provides an additional measure of the company's operating results and facilitates comparisons of the company's core operating performance against prior periods and business model objectives. This information is provided to investors in order to facilitate additional analyses of past, present and future operating performance and as a supplemental means to evaluate the company's ongoing operations. Externally, the company believes that these non-GAAP financial measures continue to be useful to investors in their assessment of the company's operating performance.

Non-GAAP operating income, non-GAAP operating margins, non-GAAP pre-tax income, non-GAAP net income and non-GAAP net income per diluted share are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures used in this press release have limitations in that they do not reflect all of the costs associated with the operations of the company's business and do not reflect all of the income tax as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of eHealth's results as reported under GAAP. The company expects to continue to incur stock-based compensation costs described above, and exclusion of these costs, and their related income tax impact, from non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. The company compensates for these limitations by prominently disclosing GAAP operating income, GAAP pre-tax income, GAAP net income and GAAP net income per diluted share and providing investors with reconciliations from the company's GAAP operating results to the non-GAAP financial measures for the relevant periods.

The accompanying tables provide more details on the GAAP financial measures that are most directly comparable to the non-GAAP financial measures and the related reconciliations between these financial measures.

                              EHEALTH, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (In thousands)


                                               December 31,  December 31,
                                                  2007          2008
                                             -------------- --------------
                     Assets                        (1)        (unaudited)
Current assets:
   Cash and cash equivalents                 $       81,395 $       94,136
   Marketable securities                             40,119         56,499
   Accounts receivable                                1,300          2,005
   Deferred income taxes                             13,240          7,580
   Prepaid expenses and other current assets          2,098          1,874
                                             -------------- --------------
Total current assets                                138,152        162,094
Property and equipment, net                           3,791          4,567
Deferred income taxes                                 4,535          1,314
Other assets                                            975            780
                                             -------------- --------------
Total assets                                 $      147,453 $      168,755
                                             ============== ==============


      Liabilities and stockholders' equity

Current liabilities:
   Accounts payable                          $        1,495 $        2,190
   Accrued compensation and benefits                  4,849          4,662
   Accrued marketing expenses                         2,454          3,162
   Deferred revenue                                     436            427
   Other current liabilities                          2,073          2,707
                                             -------------- --------------
Total current liabilities                            11,307         13,148
Other non-current liabilities                           252            628

Stockholders' equity:
   Common stock                                          25             25
   Additional paid-in capital                       167,847        172,456
   Deferred stock-based compensation                   (104)           (22)
   Accumulated deficit                              (32,060)       (17,892)
   Accumulated other comprehensive income               186            412
                                             -------------- --------------
Total stockholders' equity                          135,894        154,979
                                             -------------- --------------
Total liabilities and stockholders' equity   $      147,453 $      168,755
                                             ============== ==============

(1) The condensed consolidated balance sheet at December 31, 2007 has been
    derived from the audited consolidated financial statements at that
    date.




                              EHEALTH, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                 (In thousands, except per share amounts)


                               Three Months Ended         Year Ended
                                  December 31,            December 31,
                            ----------------------- -----------------------
                               2007        2008        2007        2008
                            ----------- ----------- ----------- -----------
                            (unaudited) (unaudited)     (2)     (unaudited)
Revenue:
   Commission               $    22,016 $    26,176 $    81,502 $   100,839
   Sponsorship, licensing
    and other                     2,217       3,279       6,289      10,872
                            ----------- ----------- ----------- -----------
Total revenue                    24,233      29,455      87,791     111,711
Operating costs and
 expenses:
   Cost of revenue-sharing          457         408       1,702       1,746
   Marketing and
    advertising (1)               8,476      11,528      29,497      42,161
   Customer care and
    enrollment (1)                3,278       3,724      12,137      14,379
   Technology and content (1)     3,368       3,634      12,393      14,182
   General and
    administrative (1)            4,348       4,508      16,046      17,983
                            ----------- ----------- ----------- -----------
Total operating costs and
 expenses                        19,927      23,802      71,775      90,451
                            ----------- ----------- ----------- -----------
Income from operations            4,306       5,653      16,016      21,260
Interest and other income,
 net                              1,438         629       5,287       3,714
                            ----------- ----------- ----------- -----------
Income before income taxes        5,744       6,282      21,303      24,974
Provision (benefit) for
 income taxes                   (16,616)      2,633     (10,292)     10,806
                            ----------- ----------- ----------- -----------
Net income                  $    22,360 $     3,649 $    31,595 $    14,168
                            =========== =========== =========== ===========

Net income per share:
   Basic                    $      0.92 $      0.15 $      1.37 $      0.57
   Diluted                  $      0.86 $      0.14 $      1.22 $      0.55

Weighted-average number of
 shares used in per share
 amounts:
   Basic                         24,424      25,076      23,092      24,963
   Diluted                       25,929      25,826      25,797      25,954
__________

(1) Includes stock-based
     compensation expense
     as follows:
      Marketing and
       advertising          $       105 $       160 $       218 $       644
      Customer care and
       enrollment                    52          66         138         266
      Technology and
       content                      195         245         611         898
      General and
       administrative               192         414         539       1,686
                            ----------- ----------- ----------- -----------
         Total              $       544 $       885 $     1,506 $     3,494
                            =========== =========== =========== ===========


       (2)  The condensed consolidated statement of operations for the
            year ended December 31, 2007 has been derived from the audited
            consolidated financial statements for that year.



                              EHEALTH, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)


                              Three Months Ended          Year Ended
                                  December 31,            December 31,
                            ----------------------  ----------------------
                               2007        2008        2007        2008
                            ----------  ----------  ----------  ----------
                            (unaudited) (unaudited)     (1)     (unaudited)
Operating activities
Net income                  $   22,360  $    3,649  $   31,595  $   14,168
Adjustments to reconcile
 net income to net cash
 provided by operating
 activities:
  Deferred income taxes        (16,412)      2,305     (10,303)      9,451
  Depreciation and
   amortization                    434         591       1,709       1,863
  Stock-based compensation
   expense                         544         885       1,506       3,494
  Excess tax benefits from
   stock-based compensation        (50)        (82)        (50)       (298)
  Deferred rent                    (18)         (8)        (40)        (51)
  Loss on disposal of
   property and equipment           12           7          30          45
  Changes in operating
   assets and liabilities:
    Accounts receivable           (252)       (445)       (583)       (705)
    Prepaid expenses and
     other current assets         (195)       (392)        (11)         64
    Other assets                    (1)        175        (524)        196
    Accounts payable               610         336         308         693
    Accrued compensation
     and benefits                1,025         659         958         (41)
    Accrued marketing
     expenses                       31        (780)        807         708
    Deferred revenue               159          76         374          (9)
    Other current
     liabilities                  (337)        378         416         526
    Other long-term
     liabilities                    --          90          --          90
                            ----------  ----------  ----------  ----------
Net cash provided by
 operating activities            7,910       7,444      26,192      30,194
                            ----------  ----------  ----------  ----------

Investing activities
Purchases of property and
 equipment                        (724)       (240)     (1,777)     (2,482)
Proceeds from the sale of
 property and equipment             --          --          14          --
Purchases of marketable
 securities                    (17,823)    (24,088)    (54,343)    (85,653)
Sales of marketable
 securities                      6,796          --       8,952      10,120
Maturities of marketable
 securities                      4,895      20,930       5,483      59,309
                            ----------  ----------  ----------  ----------
Net cash used in investing
 activities                     (6,856)     (3,398)    (41,671)    (18,706)
                            ----------  ----------  ----------  ----------

Financing activities
Net proceeds from exercise
 of common stock options         1,525         121       6,868       1,547
Excess tax benefits from
 stock-based compensation           50          82          50         298
Repurchase of common stock          --        (639)         --        (639)
Principal payments in
 connection with capital
 leases                             (2)         --        (214)        --
Costs incurred in
 connection with initial
 public offering                    --          --        (252)        --
                            ----------  ----------  ----------  ----------
Net cash provided by (used
 in) financing activities        1,573        (436)      6,452       1,206
                            ----------  ----------  ----------  ----------

Effect of exchange rate
 changes on cash and cash
 equivalents                        42           1         106          47
                            ----------  ----------  ----------  ----------

Net (decrease) increase in
 cash and cash equivalents       2,669       3,611      (8,921)     12,741
Cash and cash equivalents
 at beginning of period         78,726      90,525      90,316      81,395
                            ----------  ----------  ----------  ----------
Cash and cash equivalents
 at end of period           $   81,395  $   94,136  $   81,395  $   94,136
                            ==========  ==========  ==========  ==========


    (1) The condensed consolidated statement of cash flows for the year
        ended December 31, 2007 has been derived from the audited
        consolidated financial statements for that year.



                              EHEALTH, INC.
                        SUMMARY OF SELECTED METRICS
                                (Unaudited)



                                      Three Months Ended Three Months Ended
                                      December 31, 2007  December 31, 2008
Key Metrics:                          -----------------  -----------------

Operating cash flows (1)              $       7,910,000  $       7,444,000

IFP submitted applications (2)                   97,900            115,600

IFP approved members (3)                         83,800             97,700
Total approved members (4)                      118,800            131,200

Total revenue (5)                     $      24,233,000  $      29,455,000
Total revenue per estimated member
 for the period (6)                   $           48.00  $           48.16

                                             As of             As of
                                      December 31, 2007  December 31, 2008
                                      -----------------  -----------------

IFP estimated membership (7)                    432,700            528,500
Total estimated membership (8)                  518,400            621,100

                                      Three Months Ended Three Months Ended
                                      December 31, 2007  December 31, 2008
                                      -----------------  -----------------

Marketing and advertising expenses
 (9)                                  $       8,476,000  $      11,528,000
Marketing and advertising expenses as
 a percentage of total revenue (10)                  35%                39%

Marketing and advertising expenses
 excluding stock-based compensation
 (11)                                 $       8,371,000  $      11,368,000
Marketing and advertising expenses
 excluding stock-based compensation
 as a percentage of total revenue
 (12)                                                35%                39%

Other Metrics:

Source of IFP submitted applications
 (as a percentage of total IFP
 applications for the period):
   Direct (13)                                       38%                40%
   Marketing partners (14)                           34%                32%
   Online advertising (15)                           28%                28%
                                      -----------------  -----------------
      Total                                         100%               100%
                                      =================  =================

Acquisition cost per individual on
 IFP submitted applications (16)      $           56.73  $           65.35
Acquisition cost (excluding
 stock-based compensation) per
 individual on IFP submitted
 applications (17)                    $           56.03  $           64.44

Notes:
(1)   Net cash provided by operating activities for the period from the
      condensed consolidated statements of cash flows.
(2)   IFP applications submitted on eHealth's website during the period.
      Applications are counted as submitted when the applicant completes
      the application, provides a method for payment and clicks the submit
      button on our website and submits the application to us. The
      applicant generally has additional actions to take before the
      application will be reviewed by the insurance carrier, such as
      providing additional information and providing an electronic
      signature. In addition, an applicant may submit more than one
      application. We include applications for IFP products for which we
      receive commissions as well as other forms of payment. We define
      our "IFP" offerings as major medical individual and family health
      insurance plans, which does not include small business, short-term
      major medical, stand-alone dental, life or student health insurance
      product offerings.
(3)   New IFP members 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.
(4)   New members for all products 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.
(5)   Total revenue (from all sources) recognized during the period from
      the condensed consolidated statements of income.
(6)   Calculated as total revenue recognized during the period (see note
      (5) above) divided by average estimated membership for the period
      (calculated as beginning and ending estimated membership for all
      products for the period, divided by two).
(7)   Estimated number of members active on IFP insurance policies as of
      the date indicated. See our 2007 Annual Report on Form 10-K -
      Item 7 - Management's Discussion and Analysis of Financial Condition
      and Results of Operations - Summary of Selected Metrics for
      additional information regarding our calculation of estimated
      membership.
(8)   Estimated number of members active on all insurance policies as of
      the date indicated. See our 2007 Annual Report on Form 10-K - Item
      7 - Management's Discussion and Analysis of Financial Condition and
      Results of Operations - Summary of Selected Metrics for additional
      information regarding our calculation of estimated membership.
(9)   Marketing and advertising expenses for the period from the condensed
      consolidated statements of income.
(10)  Calculated as marketing and advertising expenses for the period (see
      note (9) above) divided by total revenue for the period (see note (5)
      above).
(11)  Non-GAAP marketing and advertising expenses excluding stock-based
      compensation for the period. See Non-GAAP Financial Information above
      and the reconciliation of GAAP to Non-GAAP marketing and advertising
      expenses below.
(12)  Calculated as non-GAAP marketing and advertising expenses for the
      period (see note (11) above) divided by total revenue for the period
      (see note (5) above). See Non-GAAP Financial Information above and
      the reconciliation of GAAP to Non-GAAP marketing and advertising
      expenses below.
(13)  Percentage of IFP submitted applications from applicants who came
      directly to the eHealth website through algorithmic search engine
      results or otherwise. See note (2) above for further information as
      to what constitutes a submitted application.
(14)  Percentage of IFP submitted applications from applicants sourced
      through eHealth's network of marketing partners. See note (2) above
      for further information as to what constitutes a submitted
      application.
(15)  Percentage of IFP submitted applications from applicants sourced
      through paid search and other online advertising activities. See
      note (2) above for further information as to what constitutes a
      submitted application.
(16)  Calculated as marketing and advertising expenses for the period
      (see note (9) above) divided by the number of individuals on IFP
      applications submitted on eHealth's website during the period.
      This metric may not reflect the true acquisition cost.
(17)  Calculated as non-GAAP marketing and advertising expenses for
      the period (see note (11) above) divided by the number of
      individuals on IFP applications submitted on eHealth's website
      during the period. This metric may not reflect the true acquisition
      cost exclusive of the impact of stock-based compensation allocated
      to marketing and advertising expenses.



                              EHEALTH, INC.
                      GAAP TO NON-GAAP RECONCILIATION
               FOR THE THREE MONTHS ENDED DECEMBER 31, 2008
            (In thousands, except per share amounts, unaudited)

 Statement of Income Reconciliation



                             Three Months Ended December 31, 2008
                     ------------------------------------------------------
                                  GAAP                            Non-GAAP
                                 Percent                          Percent
                       GAAP      of Total              Non-GAAP   of Total
                     Reported    Revenue  Adjustments  Results    Revenue
                     ---------- ---------  ---------- ---------- ---------

Revenue:
  Commission         $   26,176        89% $       -- $   26,176        89%
  Sponsorship,
   licensing and
   other                  3,279        11          --      3,279        11
                     ---------- ---------  ---------- ---------- ---------
Total revenue            29,455       100          --     29,455       100
Operating costs and
 expenses:
  Cost of
   revenue-sharing          408         1          --        408         1
  Marketing and
   advertising (1)       11,528        39        (160)    11,368        39
  Customer care and
   enrollment (1)         3,724        13         (66)     3,658        12
  Technology and
   content (1)            3,634        13        (245)     3,389        12
  General and
   administrative (1)     4,508        15        (414)     4,094        14
                     ---------- ---------  ---------- ---------- ---------
Total operating
 costs and expenses      23,802        81        (885)    22,917        78
                     ---------- ---------  ---------- ---------- ---------
Income from
 operations               5,653        19         885      6,538        22
Interest and other
 income, net                629         2          --        629         2
                     ---------- ---------  ---------- ---------- ---------
Income before income
 taxes                    6,282        21         885      7,167        24
Provision for income
 taxes (2)                2,633         9         355      2,988        10
                     ---------- ---------  ---------- ---------- ---------
Net income           $    3,649        12% $      530 $    4,179        14%
                     ========== =========  ========== ========== =========

Net income per
 share:
    Basic            $     0.15            $     0.02 $     0.17
    Diluted          $     0.14            $     0.02 $     0.16

Weighted-average
 number of shares
 used in per share
 amounts:
     Basic               25,076                25,076     25,076
     Diluted             25,826                25,826     25,826

Explanation of adjustments
(1)  Non-GAAP results exclude the effect of expensing stock-based
     compensation related to stock options, restricted stock and restricted
     stock units in accordance with SFAS 123R beginning in 2006, in
     addition to the amortization of deferred stock-based compensation
     expense in accordance with APB 25 for grants made prior to 2006.
(2)  Non-GAAP net income and non-GAAP net income per share exclude stock-
     based compensation expense listed in note (1) above, adjusted for
     estimated income tax benefit related to stock-based compensation
     expense.


                              EHEALTH, INC.
                      GAAP TO NON-GAAP RECONCILIATION
               FOR THE THREE MONTHS ENDED DECEMBER 31, 2007
            (In thousands, except per share amounts, unaudited)

Statement of Income Reconciliation



                           Three Months Ended December 31, 2007
                -----------------------------------------------------------
                              GAAP                               Non-GAAP
                             Percent                             Percent
                   GAAP      of Total                 Non-GAAP   of Total
                 Reported    Revenue    Adjustments   Results    Revenue
                ----------- ----------  ----------- ----------- ----------

Revenue:
  Commission    $    22,016         91% $        -- $    22,016         91%
  Sponsorship,
   licensing and
   other              2,217          9           --       2,217          9
                ----------- ----------  ----------- ----------- ----------
Total revenue        24,233        100           --      24,233        100
Operating costs
 and expenses:
  Cost of
   revenue-sharing      457          2           --         457          2
  Marketing and
   advertising
   (1)                8,476         35         (105)      8,371         35
  Customer care
   and enrollment
   (1)                3,278         13          (52)      3,226         13
  Technology and
   content (1)        3,368         14         (195)      3,173         13
  General and
   administrative
   (1)                4,348         18         (192)      4,156         17
                ----------- ----------  ----------- ----------- ----------
Total operating
 costs and
 expenses            19,927         82         (544)     19,383         80
                ----------- ----------  ----------- ----------- ----------
Income from
 operations           4,306         18          544       4,850         20
Interest and
 other income,
 net                  1,438          6           --       1,438          6
                ----------- ----------  ----------- ----------- ----------
Income before
 income taxes         5,744         24          544       6,288         26
Provision for
 income taxes
 (2)                (16,616)       (68)      19,194       2,578         11
                ----------- ----------  ----------- ----------- ----------
Net income      $    22,360         92% $   (18,650)$     3,710         15%
                =========== ==========  =========== =========== ==========

Net income per
 share:
    Basic       $      0.92             $     (0.77)$      0.15
    Diluted     $      0.86             $     (0.72)$      0.14

Weighted-average
 number of
 shares used in
 per share
 amounts:
    Basic            24,424                  24,424      24,424
    Diluted          25,929                  25,929      25,929

Explanation of adjustments
(1)  Non-GAAP results exclude the effect of expensing stock-based
     compensation related to stock options, restricted stock and restricted
     stock units in accordance with SFAS 123R beginning in 2006, in
     addition to the amortization of deferred stock-based compensation
     expense in accordance with APB 25 for grants made prior to 2006.
(2)  In the fourth quarter of 2007, management concluded that it was more
     likely than not that eHealth would realize sufficient future earnings
     to utilize its remaining deferred tax assets. Accordingly, eHealth
     reduced the valuation allowance by $18.9 million against deferred tax
     assets resulting in a tax benefit in the fourth quarter of 2007.
     Additionally, non-GAAP net income and non-GAAP net income per share
     exclude the income tax impact of $262,000 from the stock-based
     compensation expense listed in item (1) above.



                              EHEALTH, INC.
                      GAAP TO NON-GAAP RECONCILIATION
                   FOR THE YEAR ENDED DECEMBER 31, 2008
            (In thousands, except per share amounts, unaudited)

 Statement of Income Reconciliation



                               Year Ended December 31, 2008
                -----------------------------------------------------------
                              GAAP                               Non-GAAP
                             Percent                             Percent
                   GAAP      of Total                 Non-GAAP   of Total
                 Reported    Revenue    Adjustments   Results    Revenue
                ----------- ----------  ----------- ----------- ----------

Revenue:
  Commission    $   100,839         90% $        -- $   100,839         90%
  Sponsorship,
   licensing and
   other             10,872         10           --      10,872         10
                ----------- ----------  ----------- ----------- ----------
Total revenue       111,711        100           --     111,711        100
Operating costs
 and expenses:
  Cost of
   revenue-
   sharing            1,746          2           --       1,746          2
  Marketing and
   advertising (1)   42,161         38         (644)     41,517         37
  Customer care
   and enrollment
   (1)               14,379         12         (266)     14,113         13
  Technology and
   content (1)       14,182         13         (898)     13,284         12
  General and
   administrative
   (1)               17,983         16       (1,686)     16,297         14
                ----------- ----------  ----------- ----------- ----------
Total operating
 costs and
 expenses            90,451         81       (3,494)     86,957         78
                ----------- ----------  ----------- ----------- ----------
Income from
 operations          21,260         19        3,494      24,754         22
Interest and
 other income,
 net                  3,714          3           --       3,714          3
                ----------- ----------  ----------- ----------- ----------
Income before
 income taxes        24,974         22        3,494      28,468         25
Provision for
 income taxes
 (2)                 10,806          9        1,142      11,948         10
                ----------- ----------  ----------- ----------- ----------
Net income      $    14,168         13% $     2,352 $    16,520         15%
                =========== ==========  =========== =========== ==========

Net income per
 share:
    Basic       $      0.57             $      0.09 $      0.66
    Diluted     $      0.55             $      0.09 $      0.64

Weighted-average
 number of
 shares used in
 per share
 amounts:
    Basic            24,963                  24,963      24,963
    Diluted          25,954                  25,954      25,954

Explanation of adjustments
(1)  Non-GAAP results exclude the effect of expensing stock-based
     compensation related to stock options, restricted stock and restricted
     stock units in accordance with SFAS 123R beginning in 2006, in
     addition to the amortization of deferred stock-based compensation
     expense in accordance with APB 25 for grants made prior to 2006.
(2)  Non-GAAP net income and non-GAAP net income per share exclude stock-
     based compensation expense listed in note (1) above, adjusted for
     estimated income tax benefit related to stock-based compensation
     expense.


                              EHEALTH, INC.
                      GAAP TO NON-GAAP RECONCILIATION
                   FOR THE YEAR ENDED DECEMBER 31, 2007
            (In thousands, except per share amounts, unaudited)

 Statement of Income Reconciliation



                               Year Ended December 31, 2007
                -----------------------------------------------------------
                              GAAP                               Non-GAAP
                             Percent                             Percent
                   GAAP      of Total                 Non-GAAP   of Total
                 Reported    Revenue    Adjustments   Results    Revenue
                ----------- ----------  ----------- ----------- ----------

Revenue:
  Commission    $    81,502         93% $        -- $    81,502         93%
  Sponsorship,
   licensing and
   other              6,289          7           --       6,289          7
                ----------- ----------  ----------- ----------- ----------
Total revenue        87,791        100           --      87,791        100
Operating costs
 and expenses:
  Cost of
   revenue-sharing    1,702          2           --       1,702          2
  Marketing and
   advertising
   (1)               29,497         34         (218)     29,279         33
  Customer care
   and enrollment
   (1)               12,137         14         (138)     11,999         14
  Technology and
   content (1)       12,393         14         (611)     11,782         13
  General and
   administrative
   (1)               16,046         18         (539)     15,507         18
                ----------- ----------  ----------- ----------- ----------
Total operating
 costs and
 expenses            71,775         82       (1,506)     70,269         80
                ----------- ----------  ----------- ----------- ----------
Income from
 operations          16,016         18        1,506      17,522         20
Interest and
 other income,
 net                  5,287          6           --       5,287          6
                ----------- ----------  ----------- ----------- ----------
Income before
 income taxes        21,303         24        1,506      22,809         26
Provision for
 income taxes
 (2)                (10,292)       (12)      19,256       8,964         10
                ----------- ----------  ----------- ----------- ----------
Net income      $    31,595         36% $   (17,750)$    13,845         16%
                =========== ==========  =========== =========== ==========

Net income per
 share:
    Basic       $      1.37             $     (0.77)$      0.60
    Diluted     $      1.22             $     (0.68)$      0.54

Weighted-average
 number of
 shares used in
 per share
 amounts:
    Basic            23,092                  23,092      23,092
    Diluted          25,797                  25,797      25,797

Explanation of adjustments
(1)  Non-GAAP results exclude the effect of expensing stock-based
     compensation related to stock options, restricted stock and restricted
     stock units in accordance with SFAS 123R beginning in 2006, in
     addition to the amortization of deferred stock-based compensation
     expense in accordance with APB 25 for grants made prior to 2006.
(2)  In the fourth quarter of 2007, management concluded that it was more
     likely than not that eHealth would realize sufficient future earnings
     to utilize its remaining deferred tax assets. Accordingly, eHealth
     reduced the valuation allowance by $18.9 million against deferred tax
     assets resulting in a tax benefit for 2007. Additionally, non-GAAP
     net income and non-GAAP net income per share exclude the income tax
     impact of $324,000 from the stock-based compensation expense listed
     in item (1) above.

Contact Information