Good day, ladies and gentlemen, and welcome to the Q3 2013 eHealth, Inc. Earnings Conference Call. My name is Whitney, and I'll be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Kate Sidorovich, Vice President of Investor Relations. Please proceed.

Thank you. 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 2013 financial results. On the call this afternoon, we will have Gary Lauer, eHealth's Chief Executive Officer; and Stuart Huizinga, eHealth's Chief Financial Officer. After management completes its remarks, we'll open the lines for questions. As a reminder, today's conference call is being recorded and webcast from the IR section of our website. A replay of the call will be available on our website following the call. We will be making forward-looking statements on this call that include statements regarding future events, beliefs and expectations, including those related to future conversion rates, our belief that user activity on our side is a good validation of our daily proposition, our ability to provide access to subsidy-eligible plans and the timing thereof, the number of uninsured entrant individual markets and the timing of entry, future commissions and commission rates, Medicare product sales in the fourth quarter, our ability to help employers and benefit administrators to take advantage of trends we believe to be occurring in the marketplace, our provision of solutions to corporate retiree program beneficiaries, our planned integration with TurboTax and the availability of our platform to TurboTax users and the number of anticipated TurboTax users, CVS offering our platform to its customers, our expectations regarding our relationships with Intuit and CVS, trends in health insurance market moving towards a more consumer-centric digital model and the pace of those trends, projected expansion of the individual insurance market and the increase in online sales, our belief that Medicare will be a capable driver, expectations regarding RFP applications [ph] growth and the timing of such growth and the anticipated impact on the expenses, and finally, our guidance…

Thanks, Kate, and good afternoon, everyone. And thank you for joining us as we review our third quarter 2013 results. During the quarter, we made preparations for the historic launch of the Affordable Care Act, which began enrollment implementation on October 1 and is scheduled to run through the end of March 2014. In addition, we are prepping for this year Medicare annual enrollment period, which kicked off just last week on October 15 and ends on December 7. What I plan to do today is summarize our financial results for the third quarter; talk about our Individual & Family Plan business, including our initial observations from the open enrollment period; discuss our Medicare business and how we are positioned for this year's selling season; and finally, review some of our new strategic initiatives, including our private exchange activities and recent partnerships. Third quarter revenues were $42 million, a 12% increase as compared to the third quarter of 2012. GAAP earnings per share was $0.01. EBITDA was $3.6 million and cash flow from operations was $8.7 million. At the end of the quarter, we had $98 million in cash on the balance sheet and no debt. Third quarter Individual & Family Plan submitted applications grew 3% compared to the third quarter of 2012, reflecting a slowdown in consumer purchasing towards the end of the quarter in anticipation of the Affordable Care Act launch. At the same time, our conversion rates continue to improve, with new Individual & Family Plan members growing at a 13% year-over-year growth rate, well ahead of submitted application growth. We believe that this trend with conversion rates is likely to continue as the guaranteed issue provision of the Affordable Care Act comes into effect for policies effective January 1, 2014. As the open enrollment period began…

Thanks, Gary, and good afternoon everyone. Our third quarter results reflected continued number membership and revenue growth, combined with a seasonal increase in Medicare-related spent ahead of this year's Medicare Annual Enrollment Period and our ongoing technology investment in preparation for the first-ever Open Enrollment Period under the Affordable Care Act. As you know, both enrollment periods are taking place in the fourth quarter this year, which required significant preparatory work on our product in Q2 and Q3. Our third quarter 2013 revenue was $42 million, representing 12% annual growth. Commission revenue for the quarter was $36 million, or 15% annual growth. Our Individual & Family Plan commission revenue grew by 8%, or $1.9 million compared to Q3 2012, and our Medicare commission revenue grew by 33% year-over-year. Commission revenue from ancillary products increased over 70% on the same basis. Other revenue, which includes sponsorship, e-commerce on-demand and noncommission Medicare revenue was $6 million, or a 5% decline compared to the third quarter a year ago. The year-over-year decline is driven primarily by the timing of the advertising component of our Medicare revenues. Our total estimated membership at the end of the quarter was approximately 1,147,000, which represents 24% growth over estimated membership reported at the end of the third quarter 2012. The estimated number of revenue-generating Individual & Family Plan members was up 10%, another sequential step-up in this metric, while the estimated number of other members increased 67%, driven by the increase in our Medicare and ancillary product customer bases over this past 12 months. As Gary mentioned, we saw some softening in the purchasing of our Individual & Family major medical products towards the end of the third quarter. IFP-submitted application volume was up 3% for the quarter year-over-year. Similar to the prior 2 quarters, our IFP-approved…

[Operator Instructions] Your first question comes from the line of George Sutton of Craig-Hallum.

Gary, you had mentioned that you have received the CMS data, and that was good to hear. Can you be a little more specific as to when you might be able to handle that part of the volume?

Well, George, as soon as we can. We needed several weeks to integrate all of this, to test it and so on. We don't -- I'm not taking a shot at the federal government. We just don't launch things that don't work. We launch things that do work and have to work well, and that's part of the problem right now, is -- the major news story is the instability and lack of performance of the federal exchange, and we're somewhat dependent on that to be able to process subsidies. So we're hoping there's a little bit of stabilization there and that we can get this going soon. We are also having some discussions with CMS about some ways to expedite all of this as well because frankly, I think we're starting to realize that they need help offloading an awful lot of the volume that they're not able to satisfy and deal with right now. I guess, if there's any good news in this situation, it's not like we're losing these subsidy-eligible individuals to the federal exchange because there is, I think as we've seen, very little transacting there. So, look, we're optimistic and hopeful that we can have this up and available to consumers within the next several weeks, George.

Your point relative to the government site not working is obviously key. They're bringing in a number of new technologists to try to figure that site out. And anytime you bring in a new technologist, one of the things they look at is sort of a buy versus build decision. And I'm wondering, is it naïve for me to assume that you could private label much of what you do and make their site much more effective more quickly?

Well, I have to say, theoretically, yes. In fact, there's a theory that's been moving around outside of here as well that we could essentially take over the front end enrollment and let the government focus on the back end, i.e. the subsidy verification and validation. But I don't -- everything I know, and what I read -- and I was just reading earlier about the hearings today, and Capitol Hill indicated that they're going to stay the course and try to repair what they've got and get it working. So we shall see. Where we are right now is we're just -- we're obviously getting a lot of media interest as well and attention here, but we're just not interested at this point in talking about what's wrong with the federal exchange from a media standpoint or any other place. We're just looking forward and trying to do everything we possibly can to get as many people, individuals enrolled as we possibly can. I made the comment earlier that we're off to a good start. We're seeing strong growth. And as contrary to what's reported by a lot of these government agencies, this isn't about people who are talking to our call center or starting applications. We're talking about applications that are completed and already in the hands of carriers for people ready to be enrolled. That's a big difference.

Perfect. Last question from me, nice to hear about the CVS partnership. Can you give us a little bit more of a sense of what kind of impact that might have in this open enrollment season?

Well, we're hoping that it's going to have some very significant impacts. CVS is one of the largest pharmacies in the country. They're very focused on others on having prescriptions filled there. They get an extraordinary number of seniors that use them as a pharmacy. They seem to be very committed to this partnership. They're taking an active marketing role in this with outreach and so on, much more than us just being on the site or a pharmacist answering a question. They're doing outreach to consumers as well. So we think this could be a very good acquisition partner for us.

Our next question comes from the line of Adam Klauber with William Blair. Adam Klauber - William Blair & Company L.L.C., Research Division: A couple of different questions. On some of the partnerships, the TurboTax, the SOLO Health, will those be up and running for this enrollment period? Or is that more for next year?

We'll, TurboTax, we're in the process of implementing right now. And most of that would be starting in January. But we're enthused about that because that's when the tax season start, and the open enrollment period of course goes through March 31. With SOLO Health, we're in the process right now of implementing. And the great thing about SOLO Health is that they're present in a lot of retail locations. They're all over Walmart, for example, and others as well. And just so everyone knows, SOLO Health are these kiosks that you see when you go into a CVS or a Walmart, where you can sit down and take your blood pressure and do a number of different things as well. And it turns out, they become very informational for people as well. So we think it's kind of a unique way to get to people. Adam Klauber - William Blair & Company L.L.C., Research Division: Going back to the federal exchange, could you have some idea -- technically, I mean, what is the aspect that isn't working with you right now? Is it the eligibility? Or which -- what's the technical aspect that needs to change?

Well, we need some of their engineering assistance to do some of the testing that we want to do. And as you might imagine, they're very busy there right now. We've got to be able to at least move through the exchange into what's called the federal data hub to be able to do the verification for subsidies and so on. We're not even so sure the federal exchange is doing that yet. So those are some of the things that we're working with right now. We're working closely with them. I'll say this much, I really appreciate the fact that the feds recognized that we can really help when they regulated the ability for someone like us to be able to help subsidy-eligible individuals and they signed the agreement with us. Now we just got these technical issues that we've got to get through. And again, I'm hopeful that we can get this going in the next several weeks. I wish I could give you something more definitive than that, but much of this, as you know and read and hear on television, is out of our hands. Adam Klauber - William Blair & Company L.L.C., Research Division: Right. Right. Another question. I mean, I realize it's very early in this whole process, but do you have a sense that -- it sounds like you're having a lot of applicants. In general, are you seeing a much bigger share of the market shopping online than you have previously?

Oh, there's no question about that. We're seeing a lot more demand online. In fact, interestingly, really in September, we saw visits to eHealth and demand really starting to kick up in a pretty substantial way, and that has not abated. That has continued right into where we are right now. The other point I would make is that we're -- as you said, we're very early in this open enrollment period, and consumer behavior is such that typically, purchasing, transacting and so on happens through the ends of these periods. So it's certainly possible that we're just seeing the beginning here of something that could continue to grow in terms of the demand curve.

Your next question comes from the line of Nat Schindler of Bank of America Merrill Lynch.

We all know that the federal exchange is having challenges, but there are federal -- there are state exchanges up and running, which you're not connected into. Have you noticed any change in existing customers in those states who are looking -- who are subsidy-eligible and would not be able to get through your system? And have they changed their behavior or started looking to -- or started canceling at a higher rate than normal? Additionally, if we think about past October 1 and the implementation of the guaranteed coverage, how does that affect your conversion rate from application to member. I'm sure it doesn't make it 100%, but how much of the gap does it close?

Yes, Nat, this is Stuart. I'll take the first question. It's really too early to tell on your question of different shopping patterns or customers falling off of the books. We wouldn't get visibility on that until they get commission statements down the road. That would indicate that there's any change and that's -- we're probably a few months from having any visibility on any of that type of behavior.

But we've also got very active programs as you might imagine in campaigns of outreach to get to every single one of our current members who may be subsidy-eligible. In several of these states like California, we're able to get them subsidy-eligible plan. Believe it or not, we have to do it by hand with an agent because we haven't gotten California yet to embrace this idea of using us online, which I'll just say I'm very critical of and going to continue to be in the media because this -- us hosting subsidy-eligible individuals in the State cost the state nothing and actually expands the enrollment ranks. But we're very aggressively approaching each and every one of those members we have that we think are subsidy-eligible or maybe and helping them through with their choices and so on. But as Stuart said, that's all yet to be determined. But the other point I would make is even for the number of those that we have, we think that there's so much volume in terms of opportunity in front of us here, of new entrants into the market, and new enrollments and so on, that it could very well be a net plus gain. And you asked about a guaranteed issue in conversion rates. We think that's only going to help. As we noted, our conversion rates of new members have increased quite substantially, and we think that's the carriers anticipating the fact that they can't deny anyone any longer. So that's -- as we thought for some time, we're just beginning to see it. That should have a positive impact on our conversion rates at the end of the sales and purchasing process.

How much -- just a follow-up on that, what -- of the difference between the applications and members, how much of that gap is because they're being denied coverage? And how much of that gap is for any other reason? And can carriers deny coverage on certain types of plans that you will continue to issue and not deny overall coverage and so would still be allowed to say no to certain applications.

Well, Nat, historically across the industry, 15% to 20% of applicants have been denied for existing chronic medical conditions and so on. In fact, we theorize that a lot of the early enrolling that you're seeing, on the reports you're getting from government exchanges and so on, are likely people who have had pent-up demand or interest to enroll in products because they weren't able to previously, i.e., those that couldn't be for medical reasons. So there's a -- 15% to 20% of the market that wanted to buy was able to buy but wasn't allowed to and now can. So again, that's an uplift and positive from a conversion standpoint.

[Operator Instructions] Your next question comes from the line of Kevin Kopelman with Cowen and Company.

Can you talk a little bit more about what you're seeing in the Medicare enrollment period that just started? I know it's early, especially any comments you can give us on how conversion rates have been from the call centers and how that compares to your expectations in last year?

Yes, I don't want to get into our current yields and so forth, but we -- throughout this year, we've seen an improvement in our yields from lead to sold members as we've had our agents in their seats longer with more tenure and more experience than we did a year ago. Feel very good about how we are set up for this enrollment period on an agent -- on the number of agents and the experience of those agents. And just as importantly, and possibly more importantly, just the inventory, as we mentioned, the number of plans we've added and the brands that we've brought to bear, we feel very good about what's in front of us with those added to the platform and just -- I'd say a lot more visibility this time around than where we were a year ago based on those 2 factors.

And as I think I commented, we're off to a good start. It's been a week.

Yes, yes, absolutely. It's still early. And one other question. Could you just talk a little bit more about the corporate retiree initiative that you mentioned? And give -- how big an opportunity is that?

Well, we think it's very large. It's an area we've been looking at for some time. It's an area where we really didn't have -- how would I describe it, we really didn't have the right kind of access to these large employer-based retiree opportunities. But now, with the announcement we've made with Empyrean and frankly, with several other interested benefits administrators who have these large employer clients, we've gotten now with the product inventory with our online capabilities and certainly our call center capabilities, we think that this is a very interesting one, it's an area we've been looking at for some time. It's lucrative. It scales, and we're really pleased with this first step we've taken to it. It's an area we're going to be doing a fair amount of work to accelerate.

[Operator Instructions]

Well, look. Thanks, everyone. We appreciate the time and the interest and look forward to talking with many of you individually and seeing you over the next several months. Thanks, operator.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.