Good day, ladies and gentlemen, and welcome to the third quarter 2008 eHealth earnings conference call. My name is Fab, and I'll be your coordinator for today. (Operator instructions) I would now like to turn the presentation over to Kate Sidorovich, Director of Investor Relations. Please proceed.

Good afternoon, and thank you all for joining us today either by phone or by webcast for a discussion about eHealth Inc.’s third quarter 2008 financial results. On the call this afternoon we will have Gary Lauer, eHealth’s President and Chief Executive Officer, and Stuart Huizinga, eHealth’s Chief Financial Officer. After management completes its remarks we will open the line for questions. As a reminder, today’s conference call is being recorded and webcast from the Investor Relations section of our website. A replay of the call will be available from the Investor Relations section of our website following the call. We will make forward-looking statements on this call. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements made on this call will include statements regarding Citigroup’s plans to promote eHealth Insurance, our intention to expand marketing of the HSA platform, CareFirst’s plan to make our e-commerce solution to available to consumers and brokers, IHC's plan to use eApproval to gain competitive advantage and get faster traction, eApproval serving as a competitive advantage, increased carrier recognition over the benefits of eApproval, our intention to work closely with the government on healthcare policy, the likelihood and limitations on the scope of healthcare platform reform, the impact of any healthcare and tax reform, our ability to maximize opportunities in connection with healthcare reform, the duration of the current economic conditions and impact of our investment approach, our plan with respect to marketing messaging, our investment approach positioning us well to weather the market environment, fourth quarter interest income, our effective tax rate for 2008, our projected rate for payment of cash taxes, a data center expansion project and its impact on capital expenditures, guidance for the full year 2008, and guidance relating to stock-based compensation expense. Forward-looking statements are…

Good afternoon and thanks everyone for joining us today. I’d like to begin by highlighting our financial results for the third quarter. Our total revenue of $28.5 million grew 24% over the third quarter a year ago. Earnings per share was $0.12. Non-GAAP operating margin, excluding the effects of stock-based compensation, was 19%. And we generated $8.3 million of operating cash flow during the quarter bringing our overall cash and marketable securities balance to $143 million. We believe that our financial performance posted during a very challenging and uncertain economic environment further illustrates eHealth’s sound business model and company-wide commitment to execution of our plans. Of particular note during the past quarter is our submitted application and growth of 20% year-over-year. We experienced healthy submitted application growth across all of our member acquisition channels. In addition to our application growth, we also made important progress in a number of key strategic areas, including additional eApproval projects, signing of a large e-commerce on-demand transaction with a significant carrier, and further expansion of our growing marketing partner network. I’d like to make some more comments about our application growth. Throughout the third quarter, I tried to be very clear both inside the company and out that we were not going to wait passively for the economy to get better. While the economy and consumer spending environment deteriorated during the third calendar quarter, we were developing and implementing a wide range of aggressive marketing initiatives that are specifically tailored to today’s economic realities. In the traditional media area and through our PR efforts, we are heavily stressing an affordability message and educating consumers that health insurance isn’t a discretionary item, but rather something they need and can afford through eHealth. For example, our marketing campaign, which emphasizes that health insurance can be bought…

Thanks, Gary. Good afternoon, everyone. I’ll now review our financial results for the third quarter of 2008. As Gary mentioned, we are pleased with our application growth during the quarter. We again generated solid year-over-year growth in revenue and operating cash flow, and posted operating margins reflective of our record application volume. Starting at the top line, our revenue for the third quarter was $28.5 million, an increase of 24% over the third quarter a year ago. Commission revenue was $25.8 million, an increase of 21% over Q3 2007. Our year-over-year commission revenue growth was mainly due to growth in our membership base. Sponsorship, licensing, and other revenue was $2.7 million in the third quarter of 2008, a 60% increase over $1.7 million in the third quarter of 2007. In the third quarter, we had 144,400 new approved members. Our total estimated membership at the end of Q3 2008 was over 602,000 members, which represents 23% growth over estimated membership we reported at the end of the third quarter of 2007. Our individual and family major medical plan estimated membership, which generates the majority of our commission revenue, grew 24% compared to the estimated membership we reported for the third quarter of 2007. In the third quarter, we achieve 20% year-over-year growth in individual and family major medical plan submitted applications, up from 18% reported in the second quarter of 2008. I would like to comment on number retention, but before I do, I would like to remind you that when we estimate churn, we use trailing historical data. And so our third quarter view of retention is based on data from the first quarter of 2008. Based on this information, our estimated member retention rate remained within our historical range, but declined slightly as compared to the estimated retention…

(Operator instructions) And your first question will come from the line of Steve Halper from Thomas Weisel. Please proceed. Steve Halper – Thomas Weisel: Hi, good afternoon. So if you are looking at the third quarter submitted application growth, and clearly I'll draw the assumption, say, the marketing spend worked. Outside of that, did you look at the second quarter performance and say, what did we learn from that?

Steve, hey, it’s Gary. Yes. And I think what we learned in the second quarter was that we are in an economic environment that was much different than any of us anticipated coming into the year. And as a result of that, we looked at a number of things from a marketing standpoint. One is simply the message that we are communicating to consumers, eAccess is one, but affordability really has become key. Secondly that these products shouldn’t be viewed as something that is discretionary rather something that people really need; in fact, probably need even more in an environment like this. Third, we’ve been trying to take advantage of the growing unemployment numbers that we see and doing a lot of work in the COBRA area. We’ll be doing a lot more work in that area, as the next several months unfold for us. Fourthly, we’ve been doing more offline work than we’ve ever done before. And here, we think of offline as TV, radio and print media, but specifically TV and media. We’ve been doing remnant cable TV advertising. We’ve also been doing some very interesting experimentation in the direct response radio area as well. We have stepped up our PR outreach very significantly once again to get this messaging out and about. In fact, last night at midnight I was looking at the New York Times online and saw an article about what women versus men pay for individual health insurances. And we were prominently featured in that. So those are just some examples. But I think in total what we learned is that it’s a different environment than any of us, maybe all of us anticipated. And we’ve really been sharpening the pencil and really getting much more aggressive about the message and so on. And it’s working. Steve Halper – Thomas Weisel: So when – I was watching CNN this past week, on Sunday in the morning. And that health show gave – mentioned to eHealth where consumers can go to get affordable health insurance. So, is that something that you go to CNN and you lobby for to build awareness, or did that just happen?

I wasn’t aware of that CNN reference. I’m pleased to hear that. That one may have just happened. To my knowledge, we have not gone to CNN specifically and we didn’t anticipate that program. But rather, we are out and about and talking to a lot of different media and so on, and being referenced in a number of different places. And I’d like to think through a lot of work, we're becoming kind of the de facto standard in this individual market, and that's very important for us. In addition to that, Steve, from a public policy standpoint, we published something called a cost and benefit survey every year, which ascertains what are people really paying for health insurance and really what they are getting for benefit. We will actually be releasing our latest version of that report in the next few weeks. That would get CNN’s attention, for example, as well. Steve Halper – Thomas Weisel: And finally – yes, so CNN did give you a nice plug there. So that was good. And finally, I know that there is a lag on retention rates. Do you have any – let’s say – so you reaffirmed your guidance, but what does that assume in terms of retention?

Yes. In terms of retention, it basically takes what we thought what we estimated for Q3. And we took that as kind of the midpoint of what we are looking at. And then we’ve built an upside and a downside case for either less churn or more churn than that around that third quarter number. Steve Halper – Thomas Weisel: Okay. And there is no way for really shorten that lag?

There is really no way for us to shorten the lag because of the lag in information. We don’t do the billing and collecting and so forth. So there is really nothing we can do there. But we do monitor the cash receipts that we get each month from the carriers. And those are up to date customers that are coming to us from our carriers. And we didn’t see anything significant that would lead us to believe that anything major was happening there, insurance currently. Steve Halper – Thomas Weisel: Okay. And then as you role out your ’09 year guidance at some point, you’re going to base your assumption based on the lag metric plus these cash receipts, the reports of the cash receipts of the carriers?

Yes, absolutely. Yes. Steve Halper – Thomas Weisel: And when would you provide ’09 guidance?

We expect to do that on our next call. Steve Halper – Thomas Weisel: In like January?

Sometime in February, most likely. Steve Halper – Thomas Weisel: Okay. Great. Thank you.

Yes.

Thanks, Steve.

Your next question will come from the line of William Morrison from ThinkEquity Company. Please proceed. Robert Coolbrith – ThinkEquity Company: Hi, good afternoon, gentlemen. This is actually Robert Coolbrith on the line for Bill. It looked – despite the growth, which I congratulate you on, in the applications, it looked as though the conversion of applications into members may have come down a bit quarter-over-quarter, looking at maybe 60% last quarter and now it’s something to 57%. Could you maybe speak a little bit about some of the dynamics there and maybe what – is it just a blip or do you have any commentary on that?

Yes, actually – this is Stuart. We actually don’t see much change from the prior quarter in terms of our, what we call, our close ratio. I think where you're probably getting those numbers that you are getting is by lining up the approved numbers and deriving the approved applications for this quarter and comparing that to the submitted applications for this quarter. Robert Coolbrith – ThinkEquity Company: Yes, that’s right.

That ignores the time lag that happened here. A lot of our – some of the applications this quarter are going to get approved next quarter. And this is a seasonally high submitted application quarter as well. So a lot of those are going into next quarter, whereas last quarter was a seasonally submitted application quarter and that’s where a lot of the fruits come from this quarter. Robert Coolbrith – ThinkEquity Company: That’s helpful. Thank you. I just also wanted to ask on the new Anthem numbers that you put out for the eApproval in California. Is there any way for you to sort of seeing if that’s having a broader impact up on the marketplace, whether it's sort of creating rising tide not just for Anthem but for the California market in general, or is it possible that they are just sort of stealing share based upon being an eApproval carrier?

Yes. That’s a good question. Clearly they have taken – I think they’ve taken some share because 89% is a very significant growth number for outpacing obviously our total growth to leverage growth. But we also think that it’s attracting some new incremental business as well, because people come to the Internet and come online, expecting to be able to do things quickly. And that’s exactly what eApproval delivers for them. As I commented, we’ve got two new carriers we’ve just launched with and we’ve got several others in the backlog as well. So we’re starting now to see the traction in the adoption that frankly we hope for, but also expect it. Robert Coolbrith – ThinkEquity Company: And then just finally quick question on public policy. Reviewing some of the proposals, it seems as though there may be a component of guaranteed issue in the Obama plan, but it seems a little bit vague to me from reading the materials. So I was wondering if you have a better perspective on guaranteed issue and whether or not it’s accompanied by a mandate in that plan were it to come to pass?

You’ve asked a really good question. John Desser and I were in Washington last week, maybe with several very prominent democrats, several of whom may be very much involved in the new administration if it is Obama. And we had some discussions about guaranteed issue and mandates and so on. There is a lot of different opinions and viewpoints. There is certainly not any plan today that that’s hard set. I think if you talk to the health insurance carriers, what you’d hear from them is that guaranteed issue for them is acceptable and quite workable so long as there is a mandate, because they have got to have a pool that’s representative of the entire population. They can't have one that's imbalanced. And I think what we learned last week is that people in Washington in the Democratic Party recognize that something like that would have to be. If there is guaranteed issue, we would certainly be pushing hard for some kind of a mandate there as well. And by the way, I would also add that I think whether it’s a Republican or a Democratic President, we think this individual market is going to get a lot of attention, a lot of support. And it should be, we think, good for the marketplace, good for lot of consumers, and very good for us. Robert Coolbrith – ThinkEquity Company: All right. Great. Thank you very much.

Your next question will come from the line of Jim Friedland from Cowen & Company. Jim Friedland – Cowen & Company: Thanks. First, a question on marketing. Assuming that we stay in a tough economic environment for a while, is it safe to assume that you will stay at the upper boundary of that marketing expense range that you’ve given us? And then the second question relates to the average commissions that you are generating from your members. Assuming that the growth rate slows, shouldn’t – just given the mix, shouldn’t we see a – and I think we saw this quarter a very slight year-over-year decrease in the average commissions that you are generating. And again, I just wanted to confirm if you still expect 5% year-over-year increase in price points for IFPs. Thanks.

Yes. On the commissions per member question – Jim Friedland – Cowen & Company: Yes.

That’s correct. The more the mix if it were to shift more towards individuals that are in their second year or beyond. We do earn a lower commission in those years. And were it to shift in that direction, that would result in lower commissions per member. On the flipside of that, we generally see lower churn rates on people that move into that second year and beyond as well on the flipside of that equation. Jim Friedland – Cowen & Company: And you still see about 5% year-over-year increases in IFP plans from the carriers on average?

Yes, somewhere in that range. I’d say low to mid-single digits on premium inflation is what you'll see. Jim Friedland – Cowen & Company: Great. And sort of your marketing thoughts?

Yes. Our marketing thoughts, obviously our marketing expenses are very closely tied to application volumes. So that’s the biggest driver of where those costs go. And I think, as you saw in this quarter, our tendency is towards growth and we are not going to limit that growth to keep it in a percentage range, the 35% to 39% range that we talked about earlier. We would necessarily keep it strictly within that range if we saw growth opportunities that we saw this quarter. I would expect that at least in the short-term here next quarter to be towards the higher end of the range there.

Hey, Jim, this is Gary. I’d like to add to that. That 20% to 25%, if you look back over the history of our company, is kind of what we feel is a really good application growth range. We’ve gotten ourselves back into the low end of that range, but we’re really happy to be there. We spent a little bit more, certainly than we typically do, in this past quarter. But we saw some good opportunities and we pursued them. And I think the other point I would make that Stuart had mentioned is that, if you put just the growth percentage aside, the sheer volume of applications was really big this past quarter, the biggest ever in the history of our company. Jim Friedland – Cowen & Company: Okay. Great. Thank you.

Thank you.

Your next question will come from the line of Carl McDonald from Oppenheimer. Carl McDonald – Oppenheimer: Thank you. The applications number looked pretty good this quarter. The new membership number wasn’t as good, sort of consistent with the last quarter. I should point out the approval rate is fairly consistent. So it doesn’t appear as though like the underwriting standards have changed all that much. So do you have any color in terms of – is it approved members that just are choosing not to take the product, or is it a great amount of attrition? Any insight there?

Yes. It really goes back to my earlier comments on the time lags that come into play here. We don’t have all the results yet from the submitted applications that came in in Q3. We are still getting notified of members even today that come from those applications. And so when you look at approveds for Q3, you’re really looking at a mix of submitted applications that came in Q2 and came in the earlier part of Q3. And now that we’ve got higher submitted application volumes in Q3, you’re going to see a lot of that lag over into Q4. Carl McDonald – Oppenheimer: Okay. But even if I look for, I mean, more than just the third quarter, if I look at year-to-date or your projection for this year versus what you’ve done in prior years, it looks like that trend still holds.

It looks like that – the trend meaning –? I’m sorry. Carl McDonald – Oppenheimer: The trend towards less new members approved for application received. Or actually – I’m sorry, let me rephrase. The less new members added to the eHealth plan relative to the applications received.

Well, I guess all I can say is that our conversion rates that we expect to – when we’re finally done with the numbers for this quarter, we expect those to be basically equivalent to what we saw a quarter ago. Carl McDonald – Oppenheimer: Okay. On the second question, you had mentioned at the Investor Day, at least beginning the thought process around a share repurchase program. Any updated thoughts there?

Only that we’re looking at it presently, evaluating it. It’s been such a tenuous market. And we’ve seen so much turbulence in the market that it – that’s part of the mix of different factors we’re evaluating right now. This may be a little bit different than it was 90 days ago, but we’re looking at it actively right now. Carl McDonald – Oppenheimer: Thank you.

(Operator instructions) And your next question will come from the line of George Sutton from Craig-Hallum. Please proceed. Ryan Bergan – Craig-Hallum: Good afternoon. This is Ryan Bergan in for George. Aetna mentioned a clear move by small employers to reduce healthcare cost by shifting it to the employees, which rather fits you well. Anything new that you are working on with Aetna or others to specifically take advantage of this?

Nothing specific with Aetna, but with all the carriers. We continue to add more products. We’ve got more carriers coming to market. I noted yesterday that Cigna in their earnings release talked about the importance of the individual market that it’s new to them and how they are very aggressively pursuing it. You saw the comments from Aetna. We are hearing it and seeing it from others as well. And it seems to reinforce the things that we’ve been seeing and saying for the last year or year-and-a-half, which is that this is the growth part of the business for these carriers. And for a lot of reasons, good, bad, whatever, employers exiting the market in terms of providing it to employees; employees opting out; there are more people coming to this individual market. So I think you’ll continue to see more products from carriers that’s all good for us because we’re with the marketplace essentially. And I think it’s also getting more attention of policy makers in DC. And one of the things that we’re getting very vocal about is the tax treatment of these products. As you know, you’ve heard me say this many times, employers can deduct 100% of the cost of health insurance from their taxes. Individuals can’t deduct a penny. And that’s an inequity that both Democrats and Republicans that we have talked to agree needs to be addressed. If it is – and how it is, I don’t know, but if it is, that’s really important for this marketplace and for us as well. So I think you’re going to see a lot of really interesting positive activity for us in this marketplace over the next couple of years from the carriers and from legislators. Ryan Bergan – Craig-Hallum: Okay. And then on your last call you mentioned the dual forces of higher gas prices and higher food costs being negative to your customer base. Is it logical to suggest you should see the opposite impact now?

Well, perhaps – I just put gas in my car today for $3 a gallon. So it’s been a month ago when it was $4. And I think that may help. On the other hand, you’ve got more people who are losing their jobs. So we’ve got to convince them that they have got to extend their health benefit, either through COBRA or through an alternative, which can be more affordable. There is so much media attention right now on how bad the economy is and how people are spending and so on. You would guess as good as I, but I read a lot of people saying that that’s affecting consumer behavior as well. So I think you’ve got a lot of pressures kind of coming and going that are changing almost on a daily basis. It's a very uncertain time. But again, I just want to emphasize that we think the message that we have is very important, it's resonating. People react to it. Many people understand how important it is to have health coverage for themselves and their family members and their children. We’re able to get many people covered very affordably. Ryan Bergan – Craig-Hallum: Okay. Thank you.

(Operator instructions)

Okay. It sounds like – there’s no more questions. I’d like to thank everybody for participating today and look forward to talking with you over the next several weeks as well. So, thank you.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a wonderful day.