Welcome to the Q2 2009 eHealth Incorporated Earnings Call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s conference, Ms. Kate Sidorovich, Director of Investor Relations of eHealth. Please proceed.

Good afternoon and thank you all for joining us today either by phone or by webcast for a discussion about eHealth, Inc. second quarter 2009 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 be making forward-looking statements on this call. All statements other than statements of historical facts are forward-looking statements. Forward-looking statements made on this call will include statements regarding the implementation of and the relation of platform to Utah Health Insurance exchange. The consideration we expect to receive from members generated through the exchange, our pursuit of additional government opportunities, the passage of healthcare reform legistlation, its content and its impact on our business, marketing and advertising expense as a percentage of revenue in the third quarter of 2009, applications volume in the third quarter of 2009, our target for marketing and advertising expenses as a percent of revenue for 2009, our 2009 factored GAAP tax rate, our expectation regarding the repurchase of shares of our stock and our 2009 guidance for revenue, stock-based compensation expense, GAAP income tax rate and the GAAP net income per diluted share. Forward-looking statements are subject to risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by these statements. We describe these and other risks and uncertainties in our Annual Report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission, which you may access through the SEC website or from the Investor Relations section of our website. Forward-looking statements made on this call represent the company’s views as of today. You should not rely on these statements as representing our views in the future. We undertake no surety to update or revise any forward-looking statements made during this call whether the result of new information, future events or otherwise. We will be presenting certain financial measures on this call that will be considered non-GAAP under SEC Regulation G. For reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, please refer to the information included in our press release, and in our SEC filings, which can be found on our corporate website under the heading Investor Relations. At this point, I will turn the call over to Gary Lauer. Gary.

Thanks, Kate. Good afternoon and thank you all for joining us today. I’d like to begin by commenting on several of our financial highlights for the second quarter. Revenue of $33.4 million grew 22% over the second quarter a year ago. Earnings per share was $0.16 and non-GAAP operating margin, excluding the effect of stock-based compensation, was 24%. During the quarter, we generated $8.3 million in operating cash flow, bringing our overall cash and marketable securities balance to $160 million as of June 30th. These financial results and others illustrate the continued leverage and strength of our business model. Second quarter individual and family plans submitted application growth was 17%. By channel, direct continued to be the largest source of submitted applications at 43%, up from 41% in the first quarter of 2009, and 40% in the second quarter a year ago. I will provide more details on each of our marketing channels further on in my prepared remarks today. During the second quarter, significant progress was made in many important areas of our growing business. For example, we won and signed an agreement with the state of Utah to utilize our internet platform and technology in connection with the Utah Health Insurance Exchange, allowing us to launch our public eCommerce on-Demand or eOD business. We also added several new carriers and products to our offerings including an important addition to the State of Massachusetts. Additionally, we broadened the utilization of e approval, added important enhancements to our technology platform and continued to expand the presence of our commercial eOD platform and business. As a reminder, eOD is our technology licensing business that allows carriers and others to market and sell health insurance directly under their name on our internet platform, which we host and to power their broker and…

Thanks, Gary. Good afternoon, everyone. I will now review our financial results for the second quarter of 2009. As Gary mentioned, we saw continued positive momentum and leverage in our business as reflected by the revenue growth, strong cash flow and solid operating margins reported in the second quarter. Starting at the top line, our revenue for the second quarter was $33.4 million, an increase of 22% over the second quarter a year ago. Commission revenue was $29.9 million, an increase of 21% over Q2 2008. Our year-over-year commission revenue growth was mainly due to growth in our membership base. Sponsorship, eCommerce onDemand and other revenue was $3.5 million in the second quarter of 2009, or 28% annual growth. Excluding the $0.5 million in revenue related to a one-time eCommerce onDemand item that we recorded in Q2 of last year, the annual growth in sponsorship eCommerce onDemand and other revenue was 54%. During the second quarter, we achieved 17% year-over-year growth in individual and family major medical plans submitted applications, down from 23% reported in the first quarter of 2009. As Gary pointed out, our application growth reflected some under performance in our paid search channel, even as our direct and marketing partner channels continue to generate 20% plus annual growth, building upon solid first quarter performance. We were especially pleased in our direct channel, which generated 25% year-over-year individual and family application growth and contributed 43% of total individual and family plan submitted applications. In the second quarter, we had 103,400 approved members for individual and family products. During the quarter, we observed more stringent underwriting standards with our carrier partners and that created a headwind for our approved member growth. Our approved member growth was also impacted by a decline in the average number of individuals we had…

(Operator Instructions) Your first question comes from Youssef Squali - Jefferies & Co. Youssef Squali - Jefferies & Co.: Couple of questions, I guess going back to the online acquisition channel; I’m still not clear exactly what happened. Did you just suffer from poor performance based on, quick yield as you said earlier, because my issue with that is paid search is something that you get returns relatively quickly on. So, you probably would have stopped spending money and moving in to a different channel that was better performing or was it something that maybe Google and Yahoo did with the algorithm to change in midstream. So, any kind of clarification on that would be helpful. Then secondly, gross margins were down 140 bps and sequentially got 240 bps year-on-year, can you just clarify what’s behind that and what’s baked into your annual guidance? Thank you.

Hey, Youssef, it’s Gary. Let me take the search question and then I’ll let Stuart talk about the margin question. On search, we saw several things. First of all, we typically operate on Google and Natural Search, Organic Search in the number one position. We believe there were some algorithm changes in the last quarter. We were operating two and three. I think today we’re number two. We’re doing some things that we think will help influence us back into the number one position. That’s important because, when we’re bracketed number one in Natural or Organic as well as paid, which we buy, we do find that our conversions are much better on the paid side. So, there is one element that we think we know. Secondly, watch this carefully during the quarter and yes, frankly, we expected to see better conversion than we did, especially from the secondary search sources, Microsoft and Yahoo, for example, who got their own sets of challenges as we know. We had some of that, but not as much in Google. What we did find was that, we weren’t converting as much as we have historically and certainly we’ve heard commentary from some of these search engines publicly that they believe that there has been more comparison shopping and not as much transacting in most of the categories. There maybe some of that here as well. We’ve also taken some other steps in terms of looking to change some of the language that we advertise with. We’re landing visitors now and what we call more contextual space. So, for example, if you key in New York health insurance, Youssef, we want to land into an area that’s relevant to New York, not just kind of the vanilla eHealth experience, for example. So, we think,…

That is absolutely the case. I believe strongly that application growth for us starting with a two is what the opportunity that’s available in the market. I think if you take a look at our direct growth, which was 25%, if you look at our partnered growth, which was 21%, I think both of those very much support that. We were 23% overall application growth in the first quarter. There’s no reason why we shouldn’t see application growth in future quarters starting with a two as well. That is something as I think you know I’ve always felt very strongly about and something we’re pushing hard on. Let me also add once again, as I think as I did say in my commentary, that the application growth that we actually generated in the second quarter is within the range of application growth that was actually within the guidance, the parameters in which we established our guidance and forecasting for this year as well. I think we can do more.

On the margin question, it’s always most appropriate to look at the year-over-year comparisons, because of the seasonality and if you look at Q2 to Q2, it’s about 300 basis points lower this year than last year. About two thirds of that relates to the one-time revenue item that I mentioned in my comments. That dropped entirely to the bottom line. That was about $0.5 million that went all the way down to the bottom line in Q2 a year ago, and gave us about 200 basis points of margin last year. Then as I commented, our marketing costs as a percentage were higher this year. They are about 400 basis points higher than Q2 a year ago and we made up most of that through other line items on the P&L.

Your next question comes from Steven Halper - Thomas Weisel Partners.

Just to pinpoint the gross profit margin issue from the previous caller, so your cost of, what do we call it? Cost of revenue, the cost of revenue sharing was $1.3 million on the income statement. So what’s responsible for that increase from the first quarter, from $800,000 to $1.3 million?

Most of that increase comes from our revenue sharing on our Health Benefits Direct. Arrangement. So that’s the primary cause there.

So you talked about the weakness in paid search, so what are the things that you can do to get that channel moving again? What kind of fixes do you have to put in place to increase conversions from that segment?

They are already underway. The good news here again is this is something we know because this has always been a good channel for us in the past. We have got a number of things underway. We are making some language changes in terms of the actual advertising text. We are doing testing with that and finding some things that are more relevant today than what we may have been using. We are looking at what we call contextual landing environments, so again, Steve in New York, if you go to Google and key in New York health insurance and I’m not saying this will happen today if you key it in, but we would like to land you’re going to place where the context is New York with New York plans and so on. So it’s seems very relevant to your search. That’s awfully important. We’re looking at some of the things that we do actually inside of our site in terms of where we take people who come from paid search through the process and so on, and there are different conversion factors there. In facts, we’ve got a number of things under way. I think I commented as well that in natural or organic search which is part of this, we’ve been maintaining the number two or number three positions, in the past we’ve been number one. When we’re number one we know that that has positive impact on our position in paid search as well. We’ve got a number of initiatives under way to hopefully influence that. We believe that there may have been some algorithm changes at Google for example, which is where I’m referring to natural search as the number one position, which happens from time-to-time.

So if you implement one, two, and three, right, the first three things that you identified, then the goal is to get back to number one in natural search?

Well, one, two and three won’t get us back to number one. There are different things that have to happen there. The combination of all of those things will have and we believe is having positive impact on paid search and our conversions of paid search.

So what can you do to get back to that number one in the natural search?

Well, there’s some science and there’s some art to that. The science is that we know that there are a number of things that the Google algorithms for example go out and test and look for to determine or really to assess the relevancy of everything that’s out their in the world, then they rank them as such. So, right now we’re ranked number two. We know there are a number of things that we can do, that will impact that and that’s the work that’s underway. I can’t tell you what they are absolute because nobody knows what they are absolute, except some of the people, who control some of the algorithm work and so on in these different search engines. Believe me, when I tell you that we are, this is one that we’ve got a number of people on right now and we think some of the steps that we’re taking may very well influence that position for us. Having again that number one position in natural search just reinforces and frankly makes the number one position in paid search typically work and convert better for us.

Is that a three month project? Six month project or what kind of timeframe are you thinking about?

Well, it’s underway right now. We’ve got some people on it full-time and a half. I wish I could tell you, when we’re going to be back to number one. I wish I could tell you it was going to be this afternoon or this evening. It is something that we have a great sense of urgency on and I would certainly hope that it’s a lot less than months in terms of timing.

Next question comes from William Morrison - Thinkequity.

I have a few questions about the Utah win, Gary. I guess starting with; can you talk a little bit more about why they’re doing this exchange? I mean are they moving more towards a Massachusetts guarantee issue with individual mandate type of environment or are they doing this preemptively with the expectation that’s the way that the federal legislation is going to go? That’s question number one. Question number two is, I’m not sure I heard you right. I thought, I heard you said you’re going to get a commission on every individual that signed up through the exchange, as if you would through ehealthinsurance.com. Can you just confirm did I hear that correctly? If so, why is it being structured differently than your commercial eOD business, where it’s more of a technology licensing fee, do you think that’s going to be the trend going forward? Then last question is, are there any other states that you’re currently entering RFPs and competing for business like this?

First of all in Utah, I don’t believe Utah is trying to do anything to preempt what’s going on in D.C. This is work that’s been underway for sometime. We’ve been talking with them for a year before the presidential election. The RFP was actually let out last fall, before any of the healthcare reform start to take shape in D.C. They have just felt very strongly in Utah that they want to get everyone covered and the governor in Utah, Governor Huntsman, this has been something that’s been very high on his agenda. There’s a really nice article that I would refer everyone to that was in the Washington Post this past Sunday that I’m looking at it entitled Health Reform Utah’s Way, by Kathleen Parker. In fact, Kate can get you an online link to it as well. It does really nice job describing what’s going on in Utah and frankly the thesis here is that a lot of what’s going on in Utah should be a model for the rest of the US. Thus describe that. I don’t think there was anything there to preempt what’s happening in D.C. They just feel strongly about getting aggressive and doing some things to help the residents in Utah. Secondly, Bill, yes you heard me right, we’re actually in this exchange going to be paid a commission, same commission that we earned through the carriers. So, the state is not getting in the middle of any of the finances with any of this. Rather, they are just on their dime putting up the exchange, will be doing things to market it and get residents to it and to help them get health insurance. The state is looking at subsidies and things like that and what we found was that through…

A couple quick follow-ups on that. Is there a mandate in Utah that individuals have to buy their insurance through the exchange? Then broaden that to the government. I know, you don’t know which way it is going to go, but if you had to bet today, do you think the final legislation is going to include some sort of individual mandate to buy insurance within the exchange environments, whether a national or state exchanges?

Yeah. Bill, in Utah there’s not a mandate today. Rather, there is going to be some work done to help people fund it, but no mandate currently, not in the legislation that was recently passed. From a federal standpoint, as I commented, I believe with everything that we’re seeing and hearing and a lot of contact with people in DC, that if there’s legislation that’s passed this year, and I’m assuming there’s going to be, by the way, I think it’s going to be much more moderated than some of the things that have been reported recently. As you know in the Energy and Commerce Committee in the House, headed by Henry Waxman. They have got a number of center’s Democrats known as blue dog Democrats who simply won’t support where the bill is today and they’re stuck. There’s going to have to be some significant compromises made. I believe that what we’re going to end up with is, if we have legislation passed, it’s going to have a guaranteed issue. It’s going to have mandate provisions that require everyone to have coverage. I don’t believe there’s going to be a mandate or requirement that everyone has to go through a government exchange. I think, a government exchange whether it’s national, regional or state-by-state, is going to simply end up being an option or a place that people can go. A big part of my message has been that once legislation is passed, the real hard work begins, which is getting these 46 million to 50 million uninsured Americans covered. To do that you’ve got to use all of the viable means that exist today. Put exchanges in place, eHealth associations, and other things as well. Let us extend the technology which is already built to a lot of different places to do this, and this resonates very well with Democrats and Republicans and I think that’s probably where we’re going to end up and it’s one of the reasons why frankly we’re really getting more and more enthused about what we’re seeing from a legislative standpoint as things continue to unfold and change in D.C.

Your next question comes from [Mack Finler] - Bank of America/Merrill Lynch Mack Finler - Bank of America/Merrill Lynch: Not to beat a dead horse, but I’d like to go back to that cost of revenue sharing number. If I understand it correctly, that number is related to the 30,000 this quarter and 20,000 last quarter you got from Health Benefits Direct and the increase in both the last two quarters over a baseline of last year. Would I then expect those numbers to stay at those levels until those customers churned off at the normal pace?

Yeah. As I mentioned in my remarks, we’re virtually complete with bringing those on to our books. So, 30,000 is roughly in the ballpark of what we’re bringing over and then you would expect those to go through kind of the normal kind of retention cycle that you would see with our individual and family policies in our books. Most of those are individual and family policies. Mack Finler - Bank of America/Merrill Lynch: So, roughly two years.

Yeah, roughly two years, plus. Mack Finler - Bank of America/Merrill Lynch: Two year. Okay.

Well, I should say, many of those that we brought on were already in the life cycle. We bring them in a year into their life cycle. Some of them are three months in, some are close to two years in. So it’s a mix. It’s a mix of membership there. Mack Finler - Bank of America/Merrill Lynch: Okay. Your cost of submitted applications, trying to figure out, the increase seems -- considering that direct, your 22% increase in cost per submitted member seems even with an increase in the cost and the decrease in the efficiency of search, seems a little strong, considering that direct, which is largely free, I believe, went up considerably. Was there a change in the partner cost?

You know, the partner cost stayed relatively stable this quarter, relative to last quarter. We did spend a little bit in the direct channel. We’ve been spending more on email campaigns. We did do a little bit TV this quarter. You know, another impact here that I mentioned is, is that we have fewer members per policy and that’s the denominator of that calculation and so, that actually does have an impact as well in bringing that number up relative to other quarters.

It’s primarily, for the most part, its search related. Frankly, the cost per click is up as well, because we believe that others who are in paid search with health insurance terms are finding that they’re not converting as well also and we’re all spending more going after that right now. So, the key for us, which we’ve been really good at in the past and that we will be I believe again soon, is to find more efficient ways to convert those clicks. Mack Finler - Bank of America/Merrill Lynch: Interesting, cost per click went up even as ROI on a given click, the conversion rate on a given click went down?

Yes. Mack Finler - Bank of America/Merrill Lynch: That’s happening separately in other industries, the opposite direction.

Your next question comes from the line of Richard Fetyko with Merriman. Please proceed.

Just a couple of questions. First, on the writing criteria by carriers, you mentioned that it was a little more stringent than in the past. Are you talking sort of on the sequential basis or year-over-year basis and why do you think that change has taken place?

I was talking on a sequential and a year-over-year basis. It’s something that we have seen over the last many quarters, it has gotten tighter and I don’t really have a good answer for you as to why it is getting tighter. That’s something that’s in the carrier’s domain.

It is a cyclical thing. We noted in Aetna’s results yesterday, they had commented that they found that utilization of products is up and as a result you could expect to see their member base decline a bit, as I think they get more inspected as well. So we do see these things cycle. I should add by the way, it is probably obvious, but that if we get the kind of legislation passed that’s being discussed, and I still underscore if, in a guaranteed issue environment, we probably won’t be having many discussions about these kinds of conversion rates and so on, because every applicant by definition is approved.

Then on eApproval, did you mention – I missed the first 15 minutes of the call, whether you added new eApproval carriers and what’s in the pipeline for that?

Yes, Richard. In fact, that continues to broaden and we feel good about where it’s moving. We added Celtic in 37 states plus DC. We added CareFirst in Virginia and Maryland and also DC and then with WellPoint, we added two of their large plans, Texas Unicare and BlueCross BlueShield of Georgia, and yes we have others in the pipe that are coming on as well.

Your next question comes from Jim Friedland - Cowen & Co. Please proceed. Jim Friedland - Cowen & Co.: Thanks. First, a follow-up on the Utah connector. In Massachusetts, as the connector hasn’t really generated a lot of demand from what we’ve seen and granted, that’s a very different state, but do you think it’s possible that you’ll see the same thing in Utah and other states? Second question is on the subsidy. On the COBRA subsidy, now that we’re well into that going into effect, are you seeing that impact your conversion rates, et. cetera? Is that having any kind of impact on your business? Thanks.

This is Gary. I’ll take the second part of your question first on COBRA. No, we’re not – we haven’t seen any unusual impact from COBRA or the COBRA subsidies in the stimulus bill or whatever in the second quarter. We continue to see a number of people come to us who are recently unemployed looking for COBRA alternatives, and we’re marketing that very aggressively as well. No, nothing unusual as there. In terms of the connector in Massachusetts, it’s important to note, and this is publicly available information, that’s a large majority of people who have actually gone through the connector and gotten themselves enrolled in health insurance have gotten subsidized by the state or free health insurance for the state on the connector. A very small portion of those have actually bought private plans. In Massachusetts, we power Massachusetts Blue BlueCross BlueShield their eCommerce onDemand side. We believe that, we’re led to believe that the volume there is greater than the volume they see in the connector. With Fallon, we’ve just launched in Massachusetts, we expect that just us alone what will be marketing and selling for Fallon in Massachusetts will be more than they see in the connector. So, the connector just hasn’t had the kind of impact on the private sector or private insurance in this guaranteed issued, mandate regulated state that one might think or want to think. It’s one of the things I caution people, and policy makers in D.C a lot about, that you just can’t build the website and expect that most of the free world is going to come to it. It just doesn’t work that way as we all know. I think Utah will be interesting. I think the state will market the exchange or the connector in Utah. People will come to it. I think we’ll continue to have a really vibrant business in Utah and others will as well. I think, in an environment nationally again where you’ve got guaranteed issue and mandates and so on, and some kind of a government sponsored connector or exchange, if that connector or exchange, that’s the only place you can get subsidies, you can attract a lot of people who are looking for subsidized health insurance. One of the things I also feel strongly about, very vocal about with policy makers is that any subsidies that you make available in new legislation, put those in some kind of connector, be sure you put them at eHealth and a few other places as well because we’ll get more people covered that way. Jim Friedland - Cowen & Co.: Okay. A separate follow-up on eOD with all the sign-ups that you mentioned in the first part of the call, is there a potential to see any kind of acceleration in that growth line or is it sort of stair step a little bit each quarter? How do you think that plays out in the second half and into 2010?

This is Stuart. I think there is potential for acceleration there. I don’t know that I would expect acceleration but there is potential. It depends on the volumes, the transaction volumes of the carriers. As always, it’s going to be somewhat seasonal. It should pick up transaction-wise in Q3 because that’s a high season for applications, just like in our core business. Could have been slow a little bit, based on the seasonality there.

Your next question comes from George Askew - Stifel Nicolaus.

A couple of questions. Regarding the paid search weakness in the quarter, if I can address that once again, can you help us understand over the three months of the quarter, when did it impact you? When did you hopefully see it bottom? How are you seeing it? You kind of recover, or any kind of sense of that trajectory?

Well, yeah, it was certainly throughout the quarter it wasn’t where we have experienced it or where we wanted it. I think it bottomed out mid-quarter. Frankly, June was better. That was important because we are already taking steps at that point and the work we’re doing right now is to continue the improvement trajectory into this quarter and next as well.

Good. When does the Utah exchange actually go live?

Should go within the next several weeks. They’re just finishing up a few small things there right now. We have already released everything and we’re ready to go, which by the way that’s one of the things that I think was really appealing during the whole RFP process was that, we competed with systems integrators, software companies and so on. As you might imagine they all had to go build this from scratch, while we were ready to implement this within a few weeks. In fact, we’ve been waiting on the state. They have not been waiting on us. I think that makes it a very compelling, it makes it very attractive to other public agencies and entities as they consider doing things like this in the future as well.

Is the lower number of individuals per IFP submitted application related to the mix of application source or maybe related to the growth in eOD? I mean, in other words, are you seeing more people who come through eOD or direct, for example, are singles?

We’ve watched the eOD landscape very carefully. We do surveying and so on because, frankly, we’ve been interested to note if eOD would cannibalize our business in any of the markets that we are in. One in particular is with a very large carrier we looked at a couple of markets that they are in our business there as well, we have seen absolutely no cannibalization or affect. Our direct business with that carrier is growing at a very, very nice rate as is their eOD business. So, that hasn’t had any impact on our core business and I don’t believe it has any impact on the number of members that we have on an application. We are seeing interestingly more people coming to us rather than putting an entire family on an application, putting several members, just putting several family members on an application. We don’t know enough to tell you if people are just economizing and deciding that as a family the adults won’t be covered but the children will. We don’t know that. We do think we hear the senate told you that there are some people who get health insurance from their employers, their dependents aren’t covered or they take the dependents off the employer rolls but there’s nothing of substance beyond that.

Okay. Just one last question, any update on the China operations?

Thank you for asking. We continue to grow our business in China at a very nice pace. We have got several carriers nationwide. We’ve got several others in the pipeline that we hope to be adding in China. Although what we’re generating in China isn’t yet material enough or enough substance for us to give you the actual financial metrics, we’re seeing really, really nice growth there and I think probably the next quarter or two probably we may very well be making some comments on that. Things are going very nicely for us in China.

Your next question comes from George Sutton - Craig-Hallum.

Most of my questions have been asked and answered but one question on non-IFP. Can you just discuss the challenges there? We are seeing negative net additions. I just wanted to understand what’s behind that?

The primary reason behind that has to do with our short-term product and that’s always been sort of a byproduct of the traffic that comes to our site. It’s not a core area for us. It is kind of a side light and so I’d say the emphasis has not been as strong on that product line and that shows in terms of the performance of that. That’s a quick cycle product. People buy it for a month or two or three but it’s a very short-term product. The other one to a lesser extent is small business. In this tough economic environment, small businesses are struggling so that product line is not growing that significantly right now.

Yes George, this is Gary. On short-term, we used to promote short-term quite a bit, especially when we were in a not a good business environment like we are today. I n fact, we started this years ago when unemployment was high because we found that people were buying major medical individual and family plan products, holding them for a few months and dropping them, so it had an effect on retention we didn’t like. We’re watching that closely right now. We are not seeing that. In fact Stuart actually commented that our retention improving again. So, I think by choice we have not been pushing the short-term products because there hasn’t been a need to. We make them very visible, but we’re not marketing them aggressively.

One other question, looking at the state of Utah uninsured population it’s 387,000 people. Is that the target market that you and the state are going after with this new program?

Well, that’s part of it. The state is also going to put what’s called a defined contribution model in place to get businesses some small businesses kind of a cafeteria approach to products and so on. There maybe some subsidization for that as well. So, it’s going to be a number of things. I think as everybody knows, if Utah is not a big population state. I believe it’s about 2.7 million people today.

Your next question comes from Sameet Sinha - JMP Securities.

Couple of questions, in terms of Utah, can you talk about, who are the people, which companies, system integrators and software companies were you bidding against, how long was the RFP process and how much time did it take for them to make a decision and then I have another question.

The RFP process in Utah was late last year, was actually in the fall, into the early winter. Because of the nature of RFP processes and so on, we don’t know everyone that bid and so on. I don’t believe that it’s public information as well. We know that there were some known named systems integrators involved and some software companies in Utah as well. Again the RFP process, it was a typical government RFP process in previous company I had been through this many, many times, but there were several iterations and so on, best and final offer process and the such. We were obviously delighted with the outcome and also feel that it was a good exercise for us to go through that RFP process really for the first time in this company and to come out of the way that we did. We are feeling very optimistic about some other potential processes in states like this that we see in front of us as well.

Second question, just wanted to spend some time on Health Benefits Direct, can you talk about what the revenue contribution has been? I know 20,000 customers in Q1, 10,000 in the second quarter, so there has to be some, was it under 1% or about 1%, 2%? Can you talk about that?

We don’t break it out because it’s not material. We have provided the number of members and they’re all, almost all individual and families. So, you can get a general sense from that and you can also see the step-up in the cost of revenue and get a general idea of what that might be.

So, would you say that on an averaged 30,000 people look very similar to an average eHealth customer base?

Generally speaking in the ballpark.

I mean, in terms of longevity and ARPU and everything?

Well, in terms of ARPU, and yes, the way the retention so far. We don’t have a lot of experience, but so far similar.

We’re expecting that the life cycle’s about the same, but also note that these that we brought over all at various points in the life cycle.

Sure. You made a $1.3 million upfront payment in Q1. Was any incremental payments that were required in the second quarter or that’s it?

Well, there is ongoing payments of revenue share over and above that that we are paying to them. So, a portion of the $1.3 million is amortized as we go into that cost of revenue number along with an ongoing revenue share.

Would you say that, my understanding was that they have to hit certain revenue benchmarks and then that will trigger off any payments beyond the $1.3 million or that $1.3 million is upfront and you have to or you have already started paying some revenue share for these 30,000 new subscribers.

Well, really for all intents and purposes the $1.3 million with like a down payment against the rev share. A total bundle of revenue share that we were going to pay them over time, roughly an advance against the future stream of revenue.

Your last question comes from Carl McDonald - Oppenheimer.

Wanted to come back to the Fallon commission. Just to clarify, did you say the commission on Fallon is the same as other health insurers in Massachusetts get or I should say brokers in Massachusetts get or similar to the commission that you receive across the country?

Yes, Carl, here what I said is that it’s similar, in fact it’s equivalent to the average that we receive across our entire inventory of individual and family plan products in the US. So, not Massachusetts, but all 50 states.

Can you just give a little color on that? My understanding is that, if you get an individual policy through eHealth, or you go through the connector, you’re going to pay the same price for a commensurate policy. So, from the health plan perspective, if they’re paying 20% commission in the first year, how do they make any money on the policy relative to selling it through the exchange, where there’s a very, very limited commission?

Well, they’ve got their products in the exchange, but I can’t speak to how they make money. That’s their business to build those different mechanisms and so on. Rather, what Fallon has found and I think what we are going to see in a guaranteed issue environment is that, once you start to get the uninsured covered and the ranks of the uninsured decline, in Massachusetts less than 3% of the population now is uninsured. 97% is covered. Then what it becomes is really a challenge or a game of market share for these carriers. Fallon now has got to figure out ways to take market share from its competitors like Pilgrim and Blue Cross Blue Shield of Massachusetts. Sitting on a government run exchange probably isn’t the best way for them to market and take market share. So what’s happening is we’re finding these carriers waking up and starting to get very competitive and more assertive about how they market and sell their products. When Fallon goes on eHealth, they know that there’s going to be a lot more marketing than they’re going to get from the connector in Massachusetts or maybe through their own efforts as well. We’ve had them up for a little over a month and I can tell you that just the volume results so far are beyond their expectations and ours and it’s doing exactly what they wanted and it’s why other carriers may want to come on as well. They’re very willing to pay the commission that they’re paying us to do this and at least as they tell us, Carl, it’s a profitable, very positive business for us and they find a very efficient, frankly economical channel to do this with and through.

In your conversations in DC, have you gotten much pushback on the amount of commissions that brokers receive? I mean, 20% of the premium obviously, lower in the second year but a fairly significant amount of money and also when you thing about how much premiums have accelerated over the last five years, been some pretty significant improvements in the compensation that brokers make. So has that been a focusing in any of your conversations?

Interestingly, I have not had a discussion with a Democrat or a Republican about commissions or commission structures and so on or the margins or any of that. The concern that legislators and policy makers seem to have about kind of traditional agents and brokers is about adverse selection. In fact, Henry Waxman made a comment at a breakfast I was at that that he believes that there may be some brokers who position themselves in an office that require somebody to walk up three flights of stairs to fill out an application. You went there and if you’re not healthy enough to get three flights of stairs, then you’re not going to fill out the application and so that’s up you could get adversely selected. So some policy makers look at agents and brokers as a bit of an extension of the health insurance carrier world. We’re different and we’re getting recognition for that. Everything we do is presented in an objective and unbiased fashion. We are blind to commissions that no one in our Company knows what the different commissions are and for most part in different plans and so on. No, that has not been an issue. The issue in the discussion is, how do we get these 46 to 50 million people who are uninsured connected and how do we get them connected economically and efficiently. As the President and others have said, an exchange, applying technology to healthcare to reduce cost and increase efficiency is the way to impact a lot of delivery of healthcare. I think that we’re an example of how to do that but no discussion at all about commissions or commission rates.

Then the last question, sounds like a simple question which is have you guys done any work on the size of the individual market in the US? I mean, I’ve seen the figure, 17, 18 million on a national basis, but when you do more of a bottoms up analysis looking at some of the bigger publicly traded and not for profit plans, can’t really get anywhere close to 17 or 18 million. Just wondering if you guys have done any work to try to get a size of where the individual market is today.

Well we have in the past. We used data from the Census Bureau. Last Census report had the market at about 18 million policy holders. Let’s talk about two things, you’ve got the number of people to hold these policies and then the market opportunity. Bureau of Labor Statistics comes in at about $18 million as well. As we do work in share intelligence with the carriers and so on, we commend a similar numbers, actually between 18 and 20 million. Remember, you’ve got between 46 and 50 million people uninsured. 46 million people per census at a year ago, closer to 50 million or even more than that, if you look at some of the research that start initially with people who are unemployed. Between 8 and 12 million of those 46 to 50 million people are eligible for children’s health insurance program and Medicaid, but they’re not enrolled. That’s an issue. Secondly, you’ve got someplace between 15 and 20 million who have annual household incomes in excess of $50 to $75,000 a year. Many of those people can afford health insurance, don’t have it, don’t know how to access it, or they don’t know they can afford it. So you’ve got to put them into the market opportunity. Then you’ve got others on the cusp that if they had subsidies from the federal government, suddenly the market opportunity grows larger, still which is one of the reasons we’re so intrigued with this idea about healthcare reform. Then I’ll take it a step further. You’ve got over 50 million people today who are covered by small business health insurance, yet we know statistically from the national federation of independent businesses and in the chamber of commerce and others that over half of small businesses with less than 50 employees don’t provide any health coverage to their employees, although they would like to. One of the issues today is a law called ERISA, which essentially precludes or prevents a business from funding an employee to buy an individual product, because for the most part, this is the logic behind the law. Some people will be left behind, because they won’t be underwritten for health reasons. Group health insurance is guaranteed issue by federal law, so everybody is included but it’s very expensive. In the new environment, where you had guaranteed issue and a mandate, it’s acknowledged by many policy people that ERISA requirement or law may very well change or go away, because you have guaranteed issue then a small business could fund or co-fund an employee to go to a place like eHealth and look at this cafeteria of different kinds of products and make a selection. Then you add that to the market opportunity. Suddenly you’re looking at something that is much more significant than we face and have today.

There are no further questions. I would now like to turn the call over to Gary Lauer for closing remarks. Please proceed.

Well, I just want to thank everybody for the time. This call has gone a bit long than we typically do, but we had a lot to share with you today and be anxious to talk with you individually if it needed as well. So, thanks a lot.

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