Good day, ladies and gentlemen, and welcome to the eHealth, Incorporated Q3 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference is being recorded. I’d now like to introduce your host for today’s conference, Mr. Kate Sidorovich, VP of Investor Relations. You may begin Ma’am.

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 2015 financial results. On the call this afternoon, we’ll 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 includes statements regarding future events, beliefs and expectations, including our expectations about the Medicare market opportunities, our strategies of skilled membership and the recurring revenue base for the Medicare business, our belief that we're well positioned for the medical enrollment period, strong growth in Medicare applications in this AEP, our ability to offer an extensive selection of Medicare products, deceptiveness of our marketing programs, our expectations for the upcoming open enrollment period in individual markets, our ability to careful monitor market environment and marketing costs, our member acquisition strategy, our strategy going into the fourth quarter, our expectations regarding our government advertizing spend in the individual market, managing our individual and family plan business for profitability, our expectations that submitted applications in that business will decline open enrollment period. The expected timing of open enrollment period, sequential trends for the year and their potential impact on fourth quarter, expected increase in operating expenses including marketing and customer care expenses in the fourth quarter, high application volumes during the fourth quarter, expected increase in the fourth quarter revenue driven by the expected increase in Medicare revenue and expectations to the portion of the Medicare revenue from the annual enrollment…

Thanks Kate and thanks everyone for joining us today. We're pleased with our third quarter 2015 results, which demonstrate continued execution just two quarters after implementing a cost rebalancing program. Third quarter revenues and earnings exceeded our expectations. We generated good cash flow and remain debt free. In Medicare an important investment area for us we grew Medicare advantage applications by 140% compared to the third quarter a year ago and grew our estimated Medicare advantage membership by 64% compared to the estimated membership we reported for the third quarter of 2014. During the third quarter in preparation for the Medicare Annual enrollment period, which started on October 15, we invested in the customer care operations required to handle the application volumes we anticipate and we were still able to deliver solid EBITDA and net income. In our individual and family planned business the number of submitted applications and the estimated member base declined as expected outside of the open enrollment period. Our current strategy in individual business is to focus on profitability and cash flow generation. Third quarter revenue was $38.2 million, EBITDA was $5.8 million and GAAP earnings per share were $0.20. During the quarter we generated approximately $10.9 million in operating cash flow bringing our cash balance as of September 30 to $62 million. What I'd like to do now is review several highlights of the quarter starting with Medicare, growth in submitted Medicare applications continue to accelerate throughout the year. Third quarter 2015, submitted Medicare Applications as I stated earlier grew 140% compared to the third quarter a year ago. In the first and second quarters of 2015 this year our submitted Medicare applications for Medicare advantage applications that is grew 79% and 88% respectively compared to the same quarters a year ago. The unit economics…

Thanks Gary and good afternoon, everyone. I would like review our third quarter financial results in greater detail and provide some directional comments for the fourth quarter of 2015. Our third quarter 2015 revenue was $38.2 million compared to $41.2 million in the third quarter of 2014. Commission revenue for the third quarter was $34.9 million compared to $36.2 million in the third quarter a year ago. Third quarter Medicare commission revenue grew by 10% compared to the third quarter a year ago, driven primarily by new member addition. Our escalated Medicare membership at the end of the quarter was 182,700 an increase of 51% compared to the third quarter of last year. I would like to remind you again that 2015 is the first year when we booked the vast majority of renewal revenues on a Medicare advantage and Medicare perception drug plan members during the first quarter as a result of the new CMS regulation. In 2014 we recognized these renewal revenues throughout the year. So the year-over-year comparisons of our third quarter Medicare commissions are impacted by this change in the timing of revenue recognition. If you look on a year to date basis our Medicare Commission revenues for the first three quarters of 2015 grew 76% compared to the first three quarters of 2014. Commissions from individual and family plan and ancillary products combined declined by 6% compared to the third quarter of 2014 due to a decline in the estimated number of revenue generating individual and family plan members over the same time period partially offset by an increase in average commission revenue per estimated individual and family plan member. Our estimated individual and family plan membership at the end of the quarter was 518,000 members down 21% from the third quarter a year ago.…

[Operator Instructions].Our first question comes from George Sutton with Craig Hallum.

That was close to George. Guys Relative to Medicare, obviously price increases are going to be fairly significant for this new period. Can you talk about how that affects your demand how that might affect the commission dollars you see and potential customer turnover.

George this is Gary and in Medicare as you may know the commissions are actually fixed through CMS, clearance go to CMS, they get the commission rates approved and those commission rates this year actually are up a bit interestingly. And there have been some price increases on Mediacre advantage although not to significant. So we haven’t seen anything that indicates that there is any dampening effect on the marketplace demand, affordability and so on.

Now relative to your ISP business, you talked last quarter about how many of the states might be forced to transition away from the aggressive marketing that and last year could you give us an update on what you're seeing from a state exchange perspective?

Well, we haven’t seen anything yet of course because we have a few days away from the beginning of this. We only know what we read in media which is that some of the states are finding it difficult to be able to fund the marketing, the advertising some of these other activities because most of the federal government funding is now gone for the legislation. But we still expect there is going to be quite a bit of government spending on advertising and marketing and what’s interesting about that as you probably seen from health and human services the projections for enrollment in this coming open enrollment period are certainly less than they have been expected a few years ago with the stuff that came from congressional budget offer. So how that goes into the mix, none of us know and that’s why we had made the comment that we’re just going to be monitoring and watching this very, very carefully and where we find opportunities that make sense in terms of what we'll spend will pursue those but we’re certainly not going to after this part of the market where it does -- where the economic don’t work for us.

And lastly Stuart the tax benefit you saw in the quarter it sounds like that was a one-time benefit correct?

Yeah, that’s a onetime benefit yeah, that your limitation ended on certain items that we were previously reserving against basically and we were able to take that reserve off and recognize that.

Got it, okay. Thanks guys.

Thank you.

Our next question comes from Tobey Sommer with SunTrust.

Good afternoon this is Kwan Kim in for Tobey. What proportion of Medicare enrollment has you usually occurred in the convince of open enrollment and how might that shift in coming years, thank you.

Well, typically during the annual enrollment period at least historically for us over 60% of the application volume, the annual application volume is occurred then. So it's obviously a big season and of course as everyone knows it's the season that once -- it's the time of year that once you are on Medicare you can switch products. You can't during the rest of the year hence that high volume. However with the very strong application volume we've been experiencing, the very strong demand we've been generating outside of the annual enrollment period and you've seen those in the growth rates over the past three quarters now for a second, third quarter of this year, I think you’re going to see that in the next few years this is going to skew up that it's going to less that 60% of the annual total volume happening in the annual enrollment period and more of that’s going to be moving out, outside of the annual enrollment period which we like a lot because I think I commented this is looking more and more like a year around business and not a business that runs for just several weeks nearly into the calendar year.

Got it. And are you able to sell more seamlessly in healthcare in last year.

Well, in the first year because of all of the technology challenges that the federal government had that really didn’t have any connectivity to be able to enroll such eligible individuals, last year we had some better connectivity and we've had good connectivity throughout this year. We would hope that that continues in and through this open enrollment period.

Thank you. And one more question how has traffic on your side changes since the revamp?

Kwan, could you repeat that question?

How has traffic on your Medicare website changed since the revamp?

We were always saying that revamp is Medicare.com, which is property that we purchased a year and a half, two years ago. But our traffic our volumes everything continue to increase. And if you look at Medicare Advantage application growth of 140% there is evidence of it right there. So we're seeing it increase because of our own efforts both internally as well as through partners and probably most importantly we've used that organic growth happening in the marketplace more and more Americans are turning 65 years of age for the demographics are very favorable there as well.

Okay. Thank you very much.

Thank you.

Our next question comes from Steve Rubis with Stifel.

Hi. Thanks for taking my questions. I'll ask you first, right now the governor exchanged the rising premiums and we think in the markets that United helped and secured reach the Native to sort of subsidy alter business. So I think it's positives for E- Health or negative?

Well its mix. Certainly having United back into the business in the first open enrollment period, United essentially didn't participate. Then it came into more states last year and more this year that’s good. United has got good products. We've always been a very big seller of the United products so that’s good for us. Right across the market premiums continue to increase. We see that the survey work that we do with our own member base in the applications that we get we see it in independent study work has done outside and that’s published and its good and it’s not good. The economics may be a good for us because we are paid as a percentage of premium as those premiums go up the absolute dollar we earn are more, but that’s very much offset by the fact that if these premiums continue to go up these products become less and less affordable to people and we don’t like that. We want these products to be affordable and obtainable for people to be able get to them and to want to enroll them and there has been a lot written about this recently that even with subsidies this is getting to be very expensive for people. So I for one hope that the pricing inflation stabilizes.

Great and then my last question I would give time to everyone else. can you talk a little bit about the risk exposure to the higher -- businesses. We hadn't open enrollment, especially around the sort of consumers who received the subsidy last year or this year I guess, but didn't file tax returns. I know that there is a decent is number of people, and I am just wondering on which end of the spectrum we serve the very on course end of the subsidy eligible or are we talking about more of the high-end or across Board or any color you could give would be great.

Well it’s an interesting question. In fact there was an article about this in the Wall Street Journal yesterday actually just in the inside of the cover of the second page. I can’t say we've had a lot of experience with that at this point. We're certainly very focused on retention with all of the individuals and members that we have on our base. That’s one of the things that we're looking at. Because we didn’t have a lot of good connectivity early on, we still don’t have a large portion of our member base being subsidy eligible although that portion is certainly growing. But we’re going to have to see what it looks like in this open enrollment period with retention and different reasons why people may be switching plans or reaffirming their subsidy eligibility and so on and these are all questions that remain to be addressed and answered and we think we have got a pretty good handle on all of this, but we’ll see once we get into this. So yes I think you do raise an interesting point there, which is many people who may have these subsidy eligible, but for various reasons can’t keep the subsidy.

Great, thanks for the color on this question.

Thank you.

Our next question comes from Stephen Lynch with Wells Fargo.

Guys thanks for taking my questions. You provided the Medicare Advantage application growth numbers for Q1 and Q2 that are comparable to the 140% growth in Q3. Could you also give sense what the growth rates were in Q1 and Q2 for Medicare Advantage membership?

Stuart do you have that handy?

Let's see I don’t have it right at my fingertips. Give me just one sec.

You may have stumped on this one.

That's not the problem, and…

I think it was close to 50% growth in Q2. Remember correctly. Yes.

Yes. So is it safe to say that you're seeing a similar like acceleration trend there that's reflective of what you're seeing with the acceleration in growth and application.

Q1 was about 35% and then it stepped up to about 50% last quarter. Yes we have seen some acceleration there.

Okay that’s great. The Medicare business seems to be performing very well. Can you help us frame the size of the addressable market for the Medicare advantage business may be in particular and then give us a sense for where you stand today in terms of penetration? I guess what I am wondering is how long can we expect to see you guys experience really high growth rate like this. Thanks.

Well. We think that we're just a blip in the market right now in terms of what’s available. You got about 47 million medical beneficiaries across the country today estimate that’s going to grow to 65 million to 70 million over the next several years as people age in and life expectancies are longer. You've got some place around 20% of these beneficiaries of Medicare advantage, but that number is growing. So we feel really optimistic about what we can do here we think that the market opportunities is very, very large. We are small piece of it right now very small, but growing very fast into it. It would just 4% or 5% of these market which we have been in the individual business this Medicare business is of very, very significant business for us multi hundreds and millions dollars in revenue and really good EBITDA some point to follow that continues. That’s what we are focused on. So for some of the reasons why we are investing in this the way do we have them over the last several years. Seeing with the market demographic look like we have seen what the retention is on this products what the union economic are and it’s just very, very compiling to us.

Great thank you. Yes just going to say may be my last question and then I will happen to queue. You mentioned that qualified health plans accounted for about of third of the members in the third quarter. Can you give us sense for that was what the mix look like a year ago third quarter 2014.

Yes actually. I will be clarifying that. About third of our applications in the third quarter were QHPs and they don’t all necessarily matriculate into being members of third of the applications and. Certainly a year ago it was vast. I don’t have that in hand.

Yes let me go back to Q3 a year ago with just a trade. I think it was just a very small percentage we really didn’t step up to the higher percentages until about OEP.

Yes. We really didn’t have connectivity that worked effectively until the end of this last open enrollment. So when you look back a year two years ago there wasn’t much opportunity to enroll subsidy eligible individuals unfortunately. We are very vocal about that, but here we are today and at least this moment we are able to.

Thank you guys. Nice quarter.

Thank you.

Thank you.

Our next question comes from Dave Styblo with Jefferies.

Hey, good afternoon. Thanks for taking the question. Let me just start on the IFP and obviously the challenges that you guys are still facing there. I think you had thought the attrition was in line what you're expecting but I guess it was quite a bit more than what I was thinking. And as we kind of rolled forward through the Managed Care earnings and heard what they have had to stay about the individual markets, the challenges there that its more risk of reverse market than I thought. You heard the Obama comments about only expecting about a million new lives. Has that influenced what you're thinking about the strategy here and I know you're sort of it sounds like you're taking a little bit of a wait and see and being opportunistic, but over the long run this sounds like it's just becoming a more challenging market and should we start to think of this almost more among the lines of runoff business where you're really just trying to maximize the retention as long as you can the profit. Or is there something that you would see where things get better and you're able to become more engaged in the market?

Well you've really asked the $64,000 question, which none of us have the answer to. We like others were surprised to see the projections from the federal government being as low as they are for environment in this upcoming open environment period. They're projecting as having a year from now about a million and more lives that exist today for the government exchanges. We've viewed that just a year ago we've been thinking a lot more than that. So sure that influences us. No this is not a run down or a run up business at all. What we've decided to do because of the competitive nature of all the government spending at least what we have seen that the economics didn’t make a whole lot of sense for us to chase that market the way that we have. It's a very profitable business for which. We want to do everything we can to maintain that profitability you've just seen in this quarter right here. And finer point which this is a really good stable business, but I think it's probably very clear at this point the growth drive of our company is we’re moving right now is Medicare and it’s a very exciting place for us to be. The individual business is a great business for us. It’s just a much different dynamic in this market today than it was a few years ago, before the Affordable Care Act really kicked into gear. What it looks like a year or two from now, your guess is probably as good as ours. So we're just trying to be very, very careful and thoughtful about, how we go about business in that part of the market.

Okay. That's helpful.

We're all there on the Medicare. We are pushing Medicare as fast and as hard as we can.

Yes

I think I would just add a little color on that, you mentioned churn of the outset these are always estimates because we're always looking back on a lag on these numbers, but they have been so far this year in line with what we're expecting and we’ve been expecting basically what we saw a year ago. So we're not seeing an acceleration of churn. We’re seeing things kind of in line with what we saw year ago.

Okay, and can you perhaps make a little bit more precision. I think you had mentioned that the RPF app you expect those to be down in the fourth quarter year-over-year Are we talking something -- can you order of magnitude whether you're thinking about half of it or even more than down more than 50% directionally can you help us out there.

No I think it’s hard to project. As we're talking about here on this call there is a lot of uncertainty about, how many shoppers are going to be out in the market place in the upcoming season. So I think it would be tough for me to tell you exactly what we were thinking, we certainly scale back it in their customer care center year over year versus a year ago where we were, and so far we have been sending some left budget stand point. Sort of commenting based on sort of our initial view coming into in terms of marketing budgets and customer care resources. But as you know in that business we can scale up very rapidly if the cost of acquisition is favorable. We can more than 80% of the customers come to the web site without a system and so that’s something we can rapidly shift if we need to

Okay

Let me give you the more inside on how we are looking at this part of the business. We are looking at the company holistically and we are thinking about revenue in total and EBITDA and cash flow generation and so on. And today the Medicare business is not a profitable business because we’re investing so heavily and so aggressively in it. And we’re really good with that because we still got a lot of really good profit coming out of the individual business and that allows us to do that and we think still deliver some pretty good financial results as we saw in this quarter. One of the things that’s happening in this individual business and we noted this, is that our estimates of the commissions that we’re earning are up and they are up fairly significantly. And so what we look at here is not so much even application in the member base, but the revenue and the profit that falls out of that. So you got the commissions up fairly significantly, you can afford to have the applications in the membership down and you can absorb a lot of that. And that frankly that’s what we’ve been doing. That’s what we have had in this open and roaming period in the next year as well and that’s allowing us to just really go in the way we’re at Medicare. And also just a for the comment on the current is still fair those churn numbers are the retraction of pretty much in line with what we expected. Remember because we’re outside of the open and roaming period. You are going to have natural retraction. It’s happening on the government exchanges, its happens with us and there is really no means to replace them because you can’t go out and get the application flow that we used to be able to do historically before you had these open environments periods.

Sure, that makes sense. I do want to shift over to Medicare and the string of growth that you guys have done sequence has been very stable, very impressive and you help us out with some color last quarter. I guess if you could maybe just elaborate a little bit more on -- it sounds like you're stepping up a little bit of spending to reach out to these folks and drive applications. Can you give us may be some more concrete examples of what you're doing, what channels you are in. If channel partners are helping you, what it is that has really been helping out in terms of generating additional interesting growth in the business.

Yes absolutely, we’re finding that search engine marketing which we pay for is working for us and when I say working the economics are favorable, we have a cost of acquisition that’s acceptable. We've got a number of partnerships CBS the retail pharmacy chain for example and others that generate demand for us and those are a bit more mature than they were previously. We've got a full slate of products now from all the major brand name carriers, So that makes it a more attractive place for our consumer to come and it helps to improve conversions. We’re doing some work in broadcast media that's been very interesting for us and we’re really enthused about what we’re seeing there. There is word of mouth we know that because we hear about it anecdotally. Our propertymedicare.com is a place that people just -- the individuals naturally just key in and come to us. So it’s a combination of all those things and this is not unlike how we grew our individual business several years ago except the gulf rates we’re seeing here are frankly bigger than we had during that individual business. We know a lot about online marketing to do this and we've got some really good technology assets that help with conversion. I think the other thing we should point out is one of the reasons that our cost of acquisition continues to be so favorable is that we are converting it over a good rate. So we’ve done a lot of work there as well. So it’s all of those things.

Yes, helpful and agree on the economics. These guys stick around. Churn is a lot lower on this on the RFP base. Last one here we just on cash that's starting to build backup, it sounds like it might be a drag in the fourth quarter from spending but has that kind of normalized that every time. What are your thoughts for how much you would like to keep on the balance sheet and what you're going to -- what are you planning to do with that?

I'll take a crack at it and Stuart maybe have some comments as well. Historically we have been I think fairly aggressive about returning some of this to shareholders through share repurchase. In fact we've repurchased $250 million worth of our stock over the last several years. We don’t have a stock repurchase program in place today but that’s one thing that we could do. As we look at the Medicare business, frankly we would like to be acquisitive in places where it would really make sense of where we could generate even more demand and have more conversion and fulfillment. So we think about all of those things. We would like the cash position we’re in. Frankly it's a better cash position that we thought we would be in at this point. And we will be reviewing and thinking about all those things.

Thanks.

Our next question comes from Ned Davis of William Smith and Company

Yes. Thank you. Gary, how much you -- I want to ask you maybe to elaborate a little bit on questions that asked before. You spoke about I think you said you just a bullet in the market place in the Medicare world. As I understand that there are very few independent companies that can market this product, mostly just carriers, marketing in. And I'm wondering what the gates for you to pick up a lot of this market share even as rapidly as you have been over the next few years. What are the limitations that further initiatives by other independent companies that are getting licensed to sell those, is that going to be a factor and our other carriers changing their strategy as they realize how profitable this business can be further a growth business it is.

Hey Ned, let me -- so thank you for the question, let me qualify my blip comment. What I -- I should have been more specific, we’re a blip in terms of market share right now. I don’t think we’re a blip bullet in terms of our presence in the market. And I think that our growth rates are telling us that especially what we’re seeing coming to us organically word of mouth and I like the fact that we’re a blip from a market share standpoint because that indicates we have so much run way that we think in front of us right now that there so attractive to us. And you’re right, there aren’t a whole lot out there doing what we do. It’s highly regulated by CMS. You’ve got a game and trust in the confidence of the carriers. There is a lot of compliance all should be because it’s a very important market and a lot of money is spend on by government. So we understand all of that. We’re very attentive to it, but we think that the limitations for us are probably more execution oriented than anything else. How much can we spend, continued to spend effectively, how can we ensure that we've got right resources in place to convert the demand as we bring it in and so far so good on that. But you can probably sense we’re really excited about this marketplace and what we seen here is. One of the better look in market opportunities I’ve ever seen.

All right, the carriers seem to still be doing a lot of paper-based marketing, just mailing volumes of information out to people, are you sensing any change don't they recognize there is, this is obviously a growth market, but it's also a market where there is a high return on marketing expand, if you do it right. Don't they realize that or they doing something about it in response, or they just sort of basically a hearing to the same old strategies of the past among marketing?

Yeah, it's hard for me to comment on their marketing strategy and so on. They've sold directly into the markets in both the individual markets and the Medicare markets. I’m sure they will continue to do that. It's not an usual to see some of the brand names carriers with television commercials and so. And that’s all fun, that they work for them. We’ve got activities and strategies and we think some really knowledge inside the company that works really well for us in terms of very efficient marketing that can scale in this business at this point for us is all about scale it's about volume and getting as much leverage on that as we possibly can and we think we’ve got some pretty efficient ways to go about that.

One last questions you gave up giving guidance because of all the confusion and uncertainty and strangeness of the IFP marketplace, I’m wondering if you think there will be enough stability next year after get through this enrolment period to start giving guidance again particularly guidance about the possible growth in the IFP business.

Well , we would hope so I think we have made a comment in the last earnings call if my memory is right and again we want to get through this annual enrollment period and open enrollment period. We need to have some stability when we want provide guidance we've been always historically we've done it the way that we understood the market the projections and we like to think our guidance was pretty accurate. And we need to have kind of bases from which we can do that and that’s what we're -- we'll see if we have that these enrollment period that we're in.

Okay, thank you very much. Appreciate it.

Thank you.

Ladies and gentlemen, this does conclude the question and answer portion of today’s call. I’d like to turn the conference back over to Gary Lauer for closing remarks.

I just like to thank everybody for your time and look forward to talking with many of you as well. Thanks again.

Ladies and gentlemen this does conclude today’s presentation. You may now disconnect and have a wonderful day.