eHealth, Inc. Announces Fourth Quarter and Fiscal 2008 Results

Fourth Quarter 2008 Overview

MOUNTAIN VIEW, CA -- (Marketwire) -- 02/12/09 -- eHealth, Inc. (NASDAQ: EHTH), the leadingonline source of health insurance for individuals, families and smallbusinesses, today announced its financial results for the fourth quarterand fiscal year ended December 31, 2008.

Gary Lauer, chief executive officer of eHealth, stated, "Our financialresults illustrate that we continue to execute on our operating plans andgrow our business in the midst of an extraordinary macroeconomicenvironment. Fourth quarter performance is reflective of our disciplinedapproach to managing our company and growing our membership baseprofitably. In this economy we are focused on continued operatingefficiency and aggressive marketing, and most importantly helping peoplefind quality health insurance options online."

Fourth Quarter Results

Revenue - Revenue totaled $29.5 million for the fourth quarter of 2008, a22% increase compared to revenue of $24.2 million for the fourth quarter of2007.

Submitted Applications - Submitted applications for individual and familyproducts increased 18% in the fourth quarter of 2008 to 115,600applications, compared to 97,900 applications in the fourth quarter of2007.

Membership - Estimated membership at December 31, 2008 totaled 621,100members, a 20% increase over estimated membership of 518,400 at December31, 2007.

Operating Income - Operating income increased 31% to $5.7 million for thefourth quarter of 2008, compared to operating income of $4.3 million forthe fourth quarter of 2007. Operating margins were 19% in the fourthquarter of 2008, compared to 18% in the fourth quarter of 2007. Non-GAAPoperating income increased 35% to $6.5 million for the fourth quarter of2008, compared to non-GAAP operating income of $4.9 million for the fourthquarter of 2007. Non-GAAP operating margins were 22% in the fourth quarterof 2008, compared to 20% in the fourth quarter of 2007. Non-GAAP operatingincome and margins in the fourth quarters of 2008 and 2007 exclude $885,000and $544,000 of stock-based compensation expense, respectively.

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

Net Income - Net income for the fourth quarter of 2008 was $3.6 million, or$0.14 per diluted share. Net income for the fourth quarter of 2007, whichincluded a benefit for income taxes of $18.9 million due to the reductionof the valuation allowance against deferred tax assets, was $22.4 million,or $0.86 per diluted share. Non-GAAP net income for the fourth quarter of2008 was $4.2 million, or $0.16 per diluted share compared to non-GAAP netincome for the fourth quarter of 2007 of $3.7 million, or $0.14 per dilutedshare. Non-GAAP net income and non-GAAP net income per diluted share in thefourth quarter of 2008 exclude $885,000 of stock-based compensationexpense, adjusted by $355,000 for estimated income tax benefit related tostock-based compensation expense. Non-GAAP net income and non-GAAP netincome per diluted share in the fourth quarter of 2007 exclude $544,000 ofstock-based compensation expense, adjusted by $262,000 for estimated incometax benefit related to stock-based compensation expense, and an $18.9million income tax benefit from the reduction of the valuation allowanceagainst deferred tax assets.

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

Fiscal 2008 Results

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

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

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

Net Income - Net income for the year ended December 31, 2008 was $14.2million, or $0.55 per diluted share. Net income for the year ended December31, 2007, which included $18.9 million of income tax benefit recorded inthe fourth quarter of 2007, was $31.6 million, or $1.22 per diluted share.

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

2009 Guidance

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

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

"I would like to provide some additional comments on our 2009 guidance,"said Stuart Huizinga, chief financial officer of eHealth. "We expectour 2009 non-GAAP operating margin percentage, which excludes stock-basedcompensation, to be at least equal to what we reported for 2008, and our2009 operating income to increase as compared to the 2008 operating income.At the same time, we expect our 2009 net income to be impacted by a declinein interest income, a non-operating item. Our 2009 interest income isexpected to decline from the run-rate we observed in the fourth quarter of2008 as a result of current interest rates and our plan to continue tomanage our cash conservatively."

Webcast and Conference Call Information

A Webcast and conference call will be held today, Thursday, February 12,2009 at 5:00 p.m. EST / 2:00 p.m. PST. The Webcast will be available liveon the Investor Relations section on eHealth's website athttp://ir.ehealthinsurance.com. Individuals interested in listening to theconference call may do so by dialing 800-597-1967 for domestic callers and617-597-5526 for international callers. The participant passcode is#95786385. A telephone replay will be available two hours following theconclusion of the call for a period of 30 days and can be accessed bydialing 888-286-8010 for domestic callers and 617-801-6888 forinternational callers. The call ID for the replay is #20135984. The liveand archived webcast of the call will also be available on eHealth'swebsite at www.ehealthinsurance.com under the Investor Relations section.

About eHealth, Inc.

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

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

Forward-Looking Statements

This press release contains statements that are forward-looking statementsas defined within the Private Securities Litigation Reform Act of 1995.These include statements regarding eHealth's cash management and eHealth'sguidance for total revenue, stock-based compensation expense, GAAP incometax rate, GAAP net income per diluted share, non-GAAP operating margins,interest income, operating income and net income for the year endingDecember 31, 2009. These forward-looking statements are inherently subjectto various risks and uncertainties that could cause actual results todiffer materially from the statements made, including risks associated witheHealth's rate of growth, continued acceptance of the Internet as a mediumfor the purchase of health insurance, consumer awareness of theavailability and accessibility of affordable health insurance, eHealth'sability to continue to increase its membership base and retain its members,and maintain or expand its relationships with health insurance carriers andmarketing partners, negative publicity experienced by eHealth's carrierpartners, changes in products offered on eHealth's ecommerce platform,changes in commission payments or carrier underwriting practices,maintaining and enhancing eHealth's brand identity, changes in memberconversion rates and factors affecting conversion, system failures,capacity constraints or data loss, the performance, reliability andavailability of eHealth's ecommerce platform and underlying networkinfrastructure, exposure to online commerce security risks, dependence uponInternet search engines to attract consumers who visit eHealth's website,the effectiveness of eHealth's marketing and public relations efforts,reliance on marketing partners for the sale of health insurance, changes inthe economy and weak economic conditions, pursuing new strategies andopportunities in new segments of the health insurance market, timing ofreceipt of commission reports and related impact on estimating membership,payment practices of health insurance carriers, competition, eHealth'soperations in China and any foreign expansion, success in the sale ofsponsorship advertising and the licensing of the use of eHealth's ecommerceplatform, success of the health savings account (HSA) platform, protectionof intellectual property and intellectual property rights claims,regulatory penalties and negative publicity, costs of obtaining insuranceand the health of companies providing such insurance, ability to attractand retain qualified personnel, management of future growth, seasonality,impact of future acquisitions, implementation of internal enterprisesystems and maintenance of proper and effective internal controls, impactof employee stock-based compensation expense and provisions for incometaxes, compliance with insurance and other laws and regulations, changes inlaws and regulations, and changes in the structure of the health insurancesystem in the United States. Other factors that could cause operating,financial and other results to differ are described in eHealth's mostrecent Quarterly Report on Form 10-Q or Annual Report on Form 10-K filedwith the Securities and Exchange Commission and available on the investorrelations page of eHealth's website at www.ehealthinsurance.com and on theSecurities and Exchange Commission's website at www.sec.gov. eHealth doesnot undertake any obligation to update any forward-looking statement toconform the statement to actual results or changes in expectations.

Non-GAAP Financial Information

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

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

eHealth believes that the presentation of these non-GAAP financial measuresprovide important supplemental information to management and investorsregarding financial and business trends relating to the company's financialcondition and results of operations. Management believes that the use ofthese non-GAAP financial measures provides consistency and comparabilitywith the company's past financial reports. Management also believes thatthe exclusion of the items described above provides an additional measureof the company's operating results and facilitates comparisons of thecompany's core operating performance against prior periods and businessmodel objectives. This information is provided to investors in order tofacilitate additional analyses of past, present and future operatingperformance and as a supplemental means to evaluate the company's ongoingoperations. Externally, the company believes that these non-GAAP financialmeasures continue to be useful to investors in their assessment of thecompany's operating performance.

Non-GAAP operating income, non-GAAP operating margins, non-GAAP pre-taxincome, non-GAAP net income and non-GAAP net income per diluted share arenot calculated in accordance with GAAP, and should be consideredsupplemental to, and not as a substitute for, or superior to, financialmeasures calculated in accordance with GAAP. Non-GAAP financial measuresused in this press release have limitations in that they do not reflect allof the costs associated with the operations of the company's business anddo not reflect all of the income tax as determined in accordance with GAAP.As a result, you should not consider these measures in isolation or as asubstitute for analysis of eHealth's results as reported under GAAP. Thecompany expects to continue to incur stock-based compensation costsdescribed above, and exclusion of these costs, and their related income taximpact, from non-GAAP financial measures should not be construed as aninference that these costs are unusual or infrequent. The companycompensates for these limitations by prominently disclosing GAAP operatingincome, GAAP pre-tax income, GAAP net income and GAAP net income perdiluted share and providing investors with reconciliations from thecompany's GAAP operating results to the non-GAAP financial measures for therelevant periods.

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

                              EHEALTH, INC.                  CONDENSED CONSOLIDATED BALANCE SHEETS                              (In thousands)                                               December 31,  December 31,                                                  2007          2008                                             -------------- --------------                     Assets                        (1)        (unaudited)Current assets:   Cash and cash equivalents                 $       81,395 $       94,136   Marketable securities                             40,119         56,499   Accounts receivable                                1,300          2,005   Deferred income taxes                             13,240          7,580   Prepaid expenses and other current assets          2,098          1,874                                             -------------- --------------Total current assets                                138,152        162,094Property and equipment, net                           3,791          4,567Deferred income taxes                                 4,535          1,314Other assets                                            975            780                                             -------------- --------------Total assets                                 $      147,453 $      168,755                                             ============== ==============      Liabilities and stockholders' equityCurrent liabilities:   Accounts payable                          $        1,495 $        2,190   Accrued compensation and benefits                  4,849          4,662   Accrued marketing expenses                         2,454          3,162   Deferred revenue                                     436            427   Other current liabilities                          2,073          2,707                                             -------------- --------------Total current liabilities                            11,307         13,148Other non-current liabilities                           252            628Stockholders' equity:   Common stock                                          25             25   Additional paid-in capital                       167,847        172,456   Deferred stock-based compensation                   (104)           (22)   Accumulated deficit                              (32,060)       (17,892)   Accumulated other comprehensive income               186            412                                             -------------- --------------Total stockholders' equity                          135,894        154,979                                             -------------- --------------Total liabilities and stockholders' equity   $      147,453 $      168,755                                             ============== ==============(1) The condensed consolidated balance sheet at December 31, 2007 has been    derived from the audited consolidated financial statements at that    date.                              EHEALTH, INC.                CONDENSED CONSOLIDATED STATEMENTS OF INCOME                 (In thousands, except per share amounts)                               Three Months Ended         Year Ended                                  December 31,            December 31,                            ----------------------- -----------------------                               2007        2008        2007        2008                            ----------- ----------- ----------- -----------                            (unaudited) (unaudited)     (2)     (unaudited)Revenue:   Commission               $    22,016 $    26,176 $    81,502 $   100,839   Sponsorship, licensing    and other                     2,217       3,279       6,289      10,872                            ----------- ----------- ----------- -----------Total revenue                    24,233      29,455      87,791     111,711Operating costs and expenses:   Cost of revenue-sharing          457         408       1,702       1,746   Marketing and    advertising (1)               8,476      11,528      29,497      42,161   Customer care and    enrollment (1)                3,278       3,724      12,137      14,379   Technology and content (1)     3,368       3,634      12,393      14,182   General and    administrative (1)            4,348       4,508      16,046      17,983                            ----------- ----------- ----------- -----------Total operating costs and expenses                        19,927      23,802      71,775      90,451                            ----------- ----------- ----------- -----------Income from operations            4,306       5,653      16,016      21,260Interest and other income, net                              1,438         629       5,287       3,714                            ----------- ----------- ----------- -----------Income before income taxes        5,744       6,282      21,303      24,974Provision (benefit) for income taxes                   (16,616)      2,633     (10,292)     10,806                            ----------- ----------- ----------- -----------Net income                  $    22,360 $     3,649 $    31,595 $    14,168                            =========== =========== =========== ===========Net income per share:   Basic                    $      0.92 $      0.15 $      1.37 $      0.57   Diluted                  $      0.86 $      0.14 $      1.22 $      0.55Weighted-average number of shares used in per share amounts:   Basic                         24,424      25,076      23,092      24,963   Diluted                       25,929      25,826      25,797      25,954__________(1) Includes stock-based     compensation expense     as follows:      Marketing and       advertising          $       105 $       160 $       218 $       644      Customer care and       enrollment                    52          66         138         266      Technology and       content                      195         245         611         898      General and       administrative               192         414         539       1,686                            ----------- ----------- ----------- -----------         Total              $       544 $       885 $     1,506 $     3,494                            =========== =========== =========== ===========       (2)  The condensed consolidated statement of operations for the            year ended December 31, 2007 has been derived from the audited            consolidated financial statements for that year.                              EHEALTH, INC.              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                              (In thousands)                              Three Months Ended          Year Ended                                  December 31,            December 31,                            ----------------------  ----------------------                               2007        2008        2007        2008                            ----------  ----------  ----------  ----------                            (unaudited) (unaudited)     (1)     (unaudited)Operating activitiesNet income                  $   22,360  $    3,649  $   31,595  $   14,168Adjustments to reconcile net income to net cash provided by operating activities:  Deferred income taxes        (16,412)      2,305     (10,303)      9,451  Depreciation and   amortization                    434         591       1,709       1,863  Stock-based compensation   expense                         544         885       1,506       3,494  Excess tax benefits from   stock-based compensation        (50)        (82)        (50)       (298)  Deferred rent                    (18)         (8)        (40)        (51)  Loss on disposal of   property and equipment           12           7          30          45  Changes in operating   assets and liabilities:    Accounts receivable           (252)       (445)       (583)       (705)    Prepaid expenses and     other current assets         (195)       (392)        (11)         64    Other assets                    (1)        175        (524)        196    Accounts payable               610         336         308         693    Accrued compensation     and benefits                1,025         659         958         (41)    Accrued marketing     expenses                       31        (780)        807         708    Deferred revenue               159          76         374          (9)    Other current     liabilities                  (337)        378         416         526    Other long-term     liabilities                    --          90          --          90                            ----------  ----------  ----------  ----------Net cash provided by operating activities            7,910       7,444      26,192      30,194                            ----------  ----------  ----------  ----------Investing activitiesPurchases of property and equipment                        (724)       (240)     (1,777)     (2,482)Proceeds from the sale of property and equipment             --          --          14          --Purchases of marketable securities                    (17,823)    (24,088)    (54,343)    (85,653)Sales of marketable securities                      6,796          --       8,952      10,120Maturities of marketable securities                      4,895      20,930       5,483      59,309                            ----------  ----------  ----------  ----------Net cash used in investing activities                     (6,856)     (3,398)    (41,671)    (18,706)                            ----------  ----------  ----------  ----------Financing activitiesNet proceeds from exercise of common stock options         1,525         121       6,868       1,547Excess tax benefits from stock-based compensation           50          82          50         298Repurchase of common stock          --        (639)         --        (639)Principal payments in connection with capital leases                             (2)         --        (214)        --Costs incurred in connection with initial public offering                    --          --        (252)        --                            ----------  ----------  ----------  ----------Net cash provided by (used in) financing activities        1,573        (436)      6,452       1,206                            ----------  ----------  ----------  ----------Effect of exchange rate changes on cash and cash equivalents                        42           1         106          47                            ----------  ----------  ----------  ----------Net (decrease) increase in cash and cash equivalents       2,669       3,611      (8,921)     12,741Cash and cash equivalents at beginning of period         78,726      90,525      90,316      81,395                            ----------  ----------  ----------  ----------Cash and cash equivalents at end of period           $   81,395  $   94,136  $   81,395  $   94,136                            ==========  ==========  ==========  ==========    (1) The condensed consolidated statement of cash flows for the year        ended December 31, 2007 has been derived from the audited        consolidated financial statements for that year.                              EHEALTH, INC.                        SUMMARY OF SELECTED METRICS                                (Unaudited)                                      Three Months Ended Three Months Ended                                      December 31, 2007  December 31, 2008Key Metrics:                          -----------------  -----------------Operating cash flows (1)              $       7,910,000  $       7,444,000IFP submitted applications (2)                   97,900            115,600IFP approved members (3)                         83,800             97,700Total approved members (4)                      118,800            131,200Total revenue (5)                     $      24,233,000  $      29,455,000Total revenue per estimated member for the period (6)                   $           48.00  $           48.16                                             As of             As of                                      December 31, 2007  December 31, 2008                                      -----------------  -----------------IFP estimated membership (7)                    432,700            528,500Total estimated membership (8)                  518,400            621,100                                      Three Months Ended Three Months Ended                                      December 31, 2007  December 31, 2008                                      -----------------  -----------------Marketing and advertising expenses (9)                                  $       8,476,000  $      11,528,000Marketing and advertising expenses as a percentage of total revenue (10)                  35%                39%Marketing and advertising expenses excluding stock-based compensation (11)                                 $       8,371,000  $      11,368,000Marketing and advertising expenses excluding stock-based compensation as a percentage of total revenue (12)                                                35%                39%Other Metrics:Source of IFP submitted applications (as a percentage of total IFP applications for the period):   Direct (13)                                       38%                40%   Marketing partners (14)                           34%                32%   Online advertising (15)                           28%                28%                                      -----------------  -----------------      Total                                         100%               100%                                      =================  =================Acquisition cost per individual on IFP submitted applications (16)      $           56.73  $           65.35Acquisition cost (excluding stock-based compensation) per individual on IFP submitted applications (17)                    $           56.03  $           64.44Notes:(1)   Net cash provided by operating activities for the period from the      condensed consolidated statements of cash flows.(2)   IFP applications submitted on eHealth's website during the period.      Applications are counted as submitted when the applicant completes      the application, provides a method for payment and clicks the submit      button on our website and submits the application to us. The      applicant generally has additional actions to take before the      application will be reviewed by the insurance carrier, such as      providing additional information and providing an electronic      signature. In addition, an applicant may submit more than one      application. We include applications for IFP products for which we      receive commissions as well as other forms of payment. We define      our "IFP" offerings as major medical individual and family health      insurance plans, which does not include small business, short-term      major medical, stand-alone dental, life or student health insurance      product offerings.(3)   New IFP members reported to eHealth as approved during the period.      Some members that are approved by a carrier do not accept the      approval and therefore do not become paying members.(4)   New members for all products reported to eHealth as approved during      the period. Some members that are approved by a carrier do not accept      the approval and therefore do not become paying members.(5)   Total revenue (from all sources) recognized during the period from      the condensed consolidated statements of income.(6)   Calculated as total revenue recognized during the period (see note      (5) above) divided by average estimated membership for the period      (calculated as beginning and ending estimated membership for all      products for the period, divided by two).(7)   Estimated number of members active on IFP insurance policies as of      the date indicated. See our 2007 Annual Report on Form 10-K -      Item 7 - Management's Discussion and Analysis of Financial Condition      and Results of Operations - Summary of Selected Metrics for      additional information regarding our calculation of estimated      membership.(8)   Estimated number of members active on all insurance policies as of      the date indicated. See our 2007 Annual Report on Form 10-K - Item      7 - Management's Discussion and Analysis of Financial Condition and      Results of Operations - Summary of Selected Metrics for additional      information regarding our calculation of estimated membership.(9)   Marketing and advertising expenses for the period from the condensed      consolidated statements of income.(10)  Calculated as marketing and advertising expenses for the period (see      note (9) above) divided by total revenue for the period (see note (5)      above).(11)  Non-GAAP marketing and advertising expenses excluding stock-based      compensation for the period. See Non-GAAP Financial Information above      and the reconciliation of GAAP to Non-GAAP marketing and advertising      expenses below.(12)  Calculated as non-GAAP marketing and advertising expenses for the      period (see note (11) above) divided by total revenue for the period      (see note (5) above). See Non-GAAP Financial Information above and      the reconciliation of GAAP to Non-GAAP marketing and advertising      expenses below.(13)  Percentage of IFP submitted applications from applicants who came      directly to the eHealth website through algorithmic search engine      results or otherwise. See note (2) above for further information as      to what constitutes a submitted application.(14)  Percentage of IFP submitted applications from applicants sourced      through eHealth's network of marketing partners. See note (2) above      for further information as to what constitutes a submitted      application.(15)  Percentage of IFP submitted applications from applicants sourced      through paid search and other online advertising activities. See      note (2) above for further information as to what constitutes a      submitted application.(16)  Calculated as marketing and advertising expenses for the period      (see note (9) above) divided by the number of individuals on IFP      applications submitted on eHealth's website during the period.      This metric may not reflect the true acquisition cost.(17)  Calculated as non-GAAP marketing and advertising expenses for      the period (see note (11) above) divided by the number of      individuals on IFP applications submitted on eHealth's website      during the period. This metric may not reflect the true acquisition      cost exclusive of the impact of stock-based compensation allocated      to marketing and advertising expenses.                              EHEALTH, INC.                      GAAP TO NON-GAAP RECONCILIATION               FOR THE THREE MONTHS ENDED DECEMBER 31, 2008            (In thousands, except per share amounts, unaudited) Statement of Income Reconciliation                             Three Months Ended December 31, 2008                     ------------------------------------------------------                                  GAAP                            Non-GAAP                                 Percent                          Percent                       GAAP      of Total              Non-GAAP   of Total                     Reported    Revenue  Adjustments  Results    Revenue                     ---------- ---------  ---------- ---------- ---------Revenue:  Commission         $   26,176        89% $       -- $   26,176        89%  Sponsorship,   licensing and   other                  3,279        11          --      3,279        11                     ---------- ---------  ---------- ---------- ---------Total revenue            29,455       100          --     29,455       100Operating costs and expenses:  Cost of   revenue-sharing          408         1          --        408         1  Marketing and   advertising (1)       11,528        39        (160)    11,368        39  Customer care and   enrollment (1)         3,724        13         (66)     3,658        12  Technology and   content (1)            3,634        13        (245)     3,389        12  General and   administrative (1)     4,508        15        (414)     4,094        14                     ---------- ---------  ---------- ---------- ---------Total operating costs and expenses      23,802        81        (885)    22,917        78                     ---------- ---------  ---------- ---------- ---------Income from operations               5,653        19         885      6,538        22Interest and other income, net                629         2          --        629         2                     ---------- ---------  ---------- ---------- ---------Income before income taxes                    6,282        21         885      7,167        24Provision for income taxes (2)                2,633         9         355      2,988        10                     ---------- ---------  ---------- ---------- ---------Net income           $    3,649        12% $      530 $    4,179        14%                     ========== =========  ========== ========== =========Net income per share:    Basic            $     0.15            $     0.02 $     0.17    Diluted          $     0.14            $     0.02 $     0.16Weighted-average number of shares used in per share amounts:     Basic               25,076                25,076     25,076     Diluted             25,826                25,826     25,826Explanation of adjustments(1)  Non-GAAP results exclude the effect of expensing stock-based     compensation related to stock options, restricted stock and restricted     stock units in accordance with SFAS 123R beginning in 2006, in     addition to the amortization of deferred stock-based compensation     expense in accordance with APB 25 for grants made prior to 2006.(2)  Non-GAAP net income and non-GAAP net income per share exclude stock-     based compensation expense listed in note (1) above, adjusted for     estimated income tax benefit related to stock-based compensation     expense.                              EHEALTH, INC.                      GAAP TO NON-GAAP RECONCILIATION               FOR THE THREE MONTHS ENDED DECEMBER 31, 2007            (In thousands, except per share amounts, unaudited)Statement of Income Reconciliation                           Three Months Ended December 31, 2007                -----------------------------------------------------------                              GAAP                               Non-GAAP                             Percent                             Percent                   GAAP      of Total                 Non-GAAP   of Total                 Reported    Revenue    Adjustments   Results    Revenue                ----------- ----------  ----------- ----------- ----------Revenue:  Commission    $    22,016         91% $        -- $    22,016         91%  Sponsorship,   licensing and   other              2,217          9           --       2,217          9                ----------- ----------  ----------- ----------- ----------Total revenue        24,233        100           --      24,233        100Operating costs and expenses:  Cost of   revenue-sharing      457          2           --         457          2  Marketing and   advertising   (1)                8,476         35         (105)      8,371         35  Customer care   and enrollment   (1)                3,278         13          (52)      3,226         13  Technology and   content (1)        3,368         14         (195)      3,173         13  General and   administrative   (1)                4,348         18         (192)      4,156         17                ----------- ----------  ----------- ----------- ----------Total operating costs and expenses            19,927         82         (544)     19,383         80                ----------- ----------  ----------- ----------- ----------Income from operations           4,306         18          544       4,850         20Interest and other income, net                  1,438          6           --       1,438          6                ----------- ----------  ----------- ----------- ----------Income before income taxes         5,744         24          544       6,288         26Provision for income taxes (2)                (16,616)       (68)      19,194       2,578         11                ----------- ----------  ----------- ----------- ----------Net income      $    22,360         92% $   (18,650)$     3,710         15%                =========== ==========  =========== =========== ==========Net income per share:    Basic       $      0.92             $     (0.77)$      0.15    Diluted     $      0.86             $     (0.72)$      0.14Weighted-average number of shares used in per share amounts:    Basic            24,424                  24,424      24,424    Diluted          25,929                  25,929      25,929Explanation of adjustments(1)  Non-GAAP results exclude the effect of expensing stock-based     compensation related to stock options, restricted stock and restricted     stock units in accordance with SFAS 123R beginning in 2006, in     addition to the amortization of deferred stock-based compensation     expense in accordance with APB 25 for grants made prior to 2006.(2)  In the fourth quarter of 2007, management concluded that it was more     likely than not that eHealth would realize sufficient future earnings     to utilize its remaining deferred tax assets. Accordingly, eHealth     reduced the valuation allowance by $18.9 million against deferred tax     assets resulting in a tax benefit in the fourth quarter of 2007.     Additionally, non-GAAP net income and non-GAAP net income per share     exclude the income tax impact of $262,000 from the stock-based     compensation expense listed in item (1) above.                              EHEALTH, INC.                      GAAP TO NON-GAAP RECONCILIATION                   FOR THE YEAR ENDED DECEMBER 31, 2008            (In thousands, except per share amounts, unaudited) Statement of Income Reconciliation                               Year Ended December 31, 2008                -----------------------------------------------------------                              GAAP                               Non-GAAP                             Percent                             Percent                   GAAP      of Total                 Non-GAAP   of Total                 Reported    Revenue    Adjustments   Results    Revenue                ----------- ----------  ----------- ----------- ----------Revenue:  Commission    $   100,839         90% $        -- $   100,839         90%  Sponsorship,   licensing and   other             10,872         10           --      10,872         10                ----------- ----------  ----------- ----------- ----------Total revenue       111,711        100           --     111,711        100Operating costs and expenses:  Cost of   revenue-   sharing            1,746          2           --       1,746          2  Marketing and   advertising (1)   42,161         38         (644)     41,517         37  Customer care   and enrollment   (1)               14,379         12         (266)     14,113         13  Technology and   content (1)       14,182         13         (898)     13,284         12  General and   administrative   (1)               17,983         16       (1,686)     16,297         14                ----------- ----------  ----------- ----------- ----------Total operating costs and expenses            90,451         81       (3,494)     86,957         78                ----------- ----------  ----------- ----------- ----------Income from operations          21,260         19        3,494      24,754         22Interest and other income, net                  3,714          3           --       3,714          3                ----------- ----------  ----------- ----------- ----------Income before income taxes        24,974         22        3,494      28,468         25Provision for income taxes (2)                 10,806          9        1,142      11,948         10                ----------- ----------  ----------- ----------- ----------Net income      $    14,168         13% $     2,352 $    16,520         15%                =========== ==========  =========== =========== ==========Net income per share:    Basic       $      0.57             $      0.09 $      0.66    Diluted     $      0.55             $      0.09 $      0.64Weighted-average number of shares used in per share amounts:    Basic            24,963                  24,963      24,963    Diluted          25,954                  25,954      25,954Explanation of adjustments(1)  Non-GAAP results exclude the effect of expensing stock-based     compensation related to stock options, restricted stock and restricted     stock units in accordance with SFAS 123R beginning in 2006, in     addition to the amortization of deferred stock-based compensation     expense in accordance with APB 25 for grants made prior to 2006.(2)  Non-GAAP net income and non-GAAP net income per share exclude stock-     based compensation expense listed in note (1) above, adjusted for     estimated income tax benefit related to stock-based compensation     expense.                              EHEALTH, INC.                      GAAP TO NON-GAAP RECONCILIATION                   FOR THE YEAR ENDED DECEMBER 31, 2007            (In thousands, except per share amounts, unaudited) Statement of Income Reconciliation                               Year Ended December 31, 2007                -----------------------------------------------------------                              GAAP                               Non-GAAP                             Percent                             Percent                   GAAP      of Total                 Non-GAAP   of Total                 Reported    Revenue    Adjustments   Results    Revenue                ----------- ----------  ----------- ----------- ----------Revenue:  Commission    $    81,502         93% $        -- $    81,502         93%  Sponsorship,   licensing and   other              6,289          7           --       6,289          7                ----------- ----------  ----------- ----------- ----------Total revenue        87,791        100           --      87,791        100Operating costs and expenses:  Cost of   revenue-sharing    1,702          2           --       1,702          2  Marketing and   advertising   (1)               29,497         34         (218)     29,279         33  Customer care   and enrollment   (1)               12,137         14         (138)     11,999         14  Technology and   content (1)       12,393         14         (611)     11,782         13  General and   administrative   (1)               16,046         18         (539)     15,507         18                ----------- ----------  ----------- ----------- ----------Total operating costs and expenses            71,775         82       (1,506)     70,269         80                ----------- ----------  ----------- ----------- ----------Income from operations          16,016         18        1,506      17,522         20Interest and other income, net                  5,287          6           --       5,287          6                ----------- ----------  ----------- ----------- ----------Income before income taxes        21,303         24        1,506      22,809         26Provision for income taxes (2)                (10,292)       (12)      19,256       8,964         10                ----------- ----------  ----------- ----------- ----------Net income      $    31,595         36% $   (17,750)$    13,845         16%                =========== ==========  =========== =========== ==========Net income per share:    Basic       $      1.37             $     (0.77)$      0.60    Diluted     $      1.22             $     (0.68)$      0.54Weighted-average number of shares used in per share amounts:    Basic            23,092                  23,092      23,092    Diluted          25,797                  25,797      25,797Explanation of adjustments(1)  Non-GAAP results exclude the effect of expensing stock-based     compensation related to stock options, restricted stock and restricted     stock units in accordance with SFAS 123R beginning in 2006, in     addition to the amortization of deferred stock-based compensation     expense in accordance with APB 25 for grants made prior to 2006.(2)  In the fourth quarter of 2007, management concluded that it was more     likely than not that eHealth would realize sufficient future earnings     to utilize its remaining deferred tax assets. Accordingly, eHealth     reduced the valuation allowance by $18.9 million against deferred tax     assets resulting in a tax benefit for 2007. Additionally, non-GAAP     net income and non-GAAP net income per share exclude the income tax     impact of $324,000 from the stock-based compensation expense listed     in item (1) above.