What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-03-01 · 452 added, 483 removed, 814 unchanged (53% of the section changed)

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Notes to Consolidated Financial Statements

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Report of Independent Registered Public Accounting Firm

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Revenue recognition:

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Description of the Matter The Company recognized commission revenue of approximately $361.2 million in 2022 and related commissions receivable were approximately $884.3 million at December 31, 2022.

As described in Notes 1 and 2 to its consolidated financial statements, the Company’s commission revenue is recognized as the amount of the total estimated lifetime value of the commissions expected to be received when a member obtains a plan through the Company and is approved by the carrier (“LTV”).

As described in Notes 1 and 2 to its consolidated financial statements, the Company’s commission revenue is recognized as the amount of the total estimated lifetime value (“LTV”) of the commissions expected to be received when a member obtains a plan through the Company and is approved by a carrier.

Auditing management’s determination of the LTV of commission revenue was especially complex and highly judgmental due to the complexity of the models used and the subjectivity required by the Company to estimate the amount and timing of future cash flows, calculate the amount of commission revenue that is probable of not being reversed, and determine the timing and amount of any adjustment revenue that results from changes in the estimates of previously recorded LTV.

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We have served as the Company's auditor since 2000.

Redwood City, California

San Mateo, California

March 1, 2023

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EHEALTH, INC.

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Other assets 34,716 35,547

Intangible assets, net 1,923 8,569

Goodwill — 40,233

Total assets $ 1,112,611 $ 1,149,292

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Total current liabilities 60,565 75,465

Long-term debt 66,129 —

Deferred income taxes – non-current 32,359 50,796

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Total liabilities 198,372 167,181

Commitments and contingencies

Commitments and contingencies (Note 8)

Convertible preferred stock, par value $ 0.001 per share;

2,250 issued and outstanding as of December 31, 2021;

none issued and outstanding as of December 31, 2020

2,250 issued and outstanding as of December 31,2022 and 2021

263,284 232,592

Stockholders’ equity:

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7,750 authorized;

none issued and outstanding

none issued and outstanding as of December 31, 2022 and 2021

Common stock, par value $ 0.001 per share;

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Retained earnings 73,799 193,213

Accumulated other comprehensive income 390 350

Accumulated other comprehensive income (loss) ( 73 ) 390

Total stockholders’ equity 650,955 749,519

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The accompanying notes are an integral part of these consolidated financial statements.

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EHEALTH, INC.

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Amortization of intangible assets — 536 1,493

Change in fair value of earnout liability — — 24,079

Restructuring and reorganization charges 4,878 — —

Impairment charges 46,344 — —

Impairment, restructuring and other charges 19,616 51,222 —

Total operating costs and expenses 508,069 663,844 529,451

Income (loss) from operations ( 102,713 ) ( 125,645 ) 53,323

Other income, net 755 666 2,090

Other income (expense), net ( 3,676 ) 755 666

Income (loss) before income taxes ( 106,389 ) ( 124,890 ) 53,989

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Change in preferred stock redemption value ( 11,335 ) ( 6,361 ) —

Net income (loss) per share attributable to common stockholders:

$ ( 122,942 ) $ 45,450 $ 66,887

Net income (loss) attributable to common stockholders $ ( 119,414 ) $ ( 122,942 ) $ 45,450

Net income (loss) per share attributable to common stockholders:

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Net income (loss) $ ( 88,722 ) $ ( 104,375 ) $ 45,450

Unrealized holding gain for available for sale debt securities, net of tax ( 49 ) 28 —

Foreign currency translation adjustment 89 206 ( 11 )

Unrealized holding gain (loss) on available for sale debt securities, net of tax ( 29 ) ( 49 ) 28

Foreign currency translation adjustments ( 434 ) 89 206

Comprehensive income (loss) $ ( 89,185 ) $ ( 104,335 ) $ 45,684

The accompanying notes are an integral part of these consolidated financial statements.

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EHEALTH, INC.

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Common Stock Additional Paid-in

Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income Total Stockholders’ Equity

Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity

Shares Amount Shares Amount

Balance as of December 31, 2019 34,752 $ 35 $ 455,159 11,616 $ ( 199,998 ) $ 271,852 $ 116 $ 527,164

Cumulative effect from the adoption of ASU 2016-13 — — — — — ( 1,147 ) — ( 1,147 )

Issuance of common stock in connection with equity incentive plans 638 1 1,940 — — — — 1,941

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Settlement of earnout liability 295 — 28,521 — — — — 28,521

Stock-based compensation expense — — 22,570 — — — — 22,570

Other comprehensive loss, net of tax — — — — — — ( 11 ) ( 11 )

Stock-based compensation — — 27,179 — — — — 27,179

Other comprehensive income, net of tax — — — — — — 234 234

Net Income — — — — — 45,450 — 45,450

Balance as of December 31, 2020 37,755 38 721,013 11,831 ( 199,998 ) 316,155 350 837,558

Cumulative effect from the adoption of ASU 2016-13 — — — — — ( 1,147 ) — ( 1,147 )

Issuance of common stock in connection with equity incentive plans 849 1 4,904 — — — — 4,905

Repurchase of shares to satisfy employee tax withholding obligations — — ( 9,333 ) 185 — — — ( 9,333 )

Shares issued in equity offering 2,070 2 228,022 — — — — 228,024

Settlement of earnout liability 295 — 28,521 — — — — 28,521

Paid-in-kind dividend and accretion related to convertible preferred stock — — — — — ( 18,567 ) — ( 18,567 )

Issuance of common stock for employee stock purchase program 100 — 3,813 — — — — 3,813

Stock-based compensation — — 35,478 — — — — 35,478

Other comprehensive income, net of tax — — — — — — 40 40

Net Income — — — — — 45,450 — 45,450

Net loss — — — — — ( 104,375 ) — ( 104,375 )

Balance as of December 31, 2021 38,704 39 755,875 12,016 ( 199,998 ) 193,213 390 749,519

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Stock-based compensation — — 22,201 — — — — 22,201

Other comprehensive income, net of tax — — — — — — 40 40

Other comprehensive loss, net of tax — — — — — — ( 463 ) ( 463 )

Net loss — — — — — ( 88,722 ) — ( 88,722 )

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The accompanying notes are an integral part of these consolidated financial statements.

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EHEALTH, INC.

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Deferred income taxes ( 18,436 ) ( 21,522 ) 8,817

Change in fair value of earnout liability — — 24,079

Impairment charges 12,102 46,344 —

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Proceeds from redemption and maturities of marketable securities 49,769 111,284 130,978

Payments for security deposits — — ( 72 )

Net cash used in investing activities ( 12,631 ) ( 73,283 ) ( 16,944 )

Net cash provided by (used in) investing activities 25,861 ( 12,631 ) ( 73,283 )

Financing activities:

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Proceeds from issuance of common stock, net of issuance costs — — 228,024

Net proceeds from debt financing 64,862 — —

Net proceeds from exercise of common stock options and employee stock purchases 2,214 8,699 1,941

Repurchase of shares to satisfy employee tax withholding obligations ( 3,102 ) ( 9,333 ) ( 19,808 )

Debt issuance costs — — ( 517 )

Repayment of debt — — ( 5,000 )

Acquisition-related contingent payments — — ( 8,751 )

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Cash paid for interest $ 5,031 $ — $ —

Cash refunds from income taxes, net

Cash refunds from (payments for) income taxes, net

$ ( 529 ) $ 103 $ 882

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Description of Business – eHealth, Inc.

(the “Company,” “eHealth,” “we” or “us”) is a leading health insurance marketplace with a technology and service platform that provides consumer engagement, education and health insurance enrollment solutions.

Our mission is to connect every person with the highest quality, most affordable health insurance and Medicare plans for their life circumstances.

Our platform integrates proprietary and third-party developed educational content regarding health insurance plans with decision support tools to aid consumers in what has traditionally been a confusing and opaque health insurance purchasing process, and to help them obtain the health insurance products that meet their individual health and economic needs.

Our omnichannel consumer engagement platform enables consumers to use our services online, through interactive chat, or by telephone with a licensed insurance agent.

We have created a marketplace that offers consumers a broad choice of insurance products that includes thousands of Medicare Advantage, Medicare Supplement, Medicare Part D prescription drug, individual and family, small business and other ancillary health insurance products from over 200 health insurance carriers across all fifty states and the District of Columbia.

(the “Company,” “eHealth,” “we” or “us”) is a leading private online health insurance marketplace with a technology and service platform that provides consumer engagement, education and health insurance enrollment solutions.

Our mission is to expertly guide consumers through their health insurance enrollment and related options, when, where and how they prefer.

Our platform leverages technology to solve a critical problem in a large and growing market by aiding consumers in what has traditionally been a complex, confusing, and opaque health insurance purchasing process.

Our omnichannel consumer engagement platform differentiates our offering from other brokers and enables consumers to use our services online, by telephone with a licensed insurance agent, or through a hybrid online assisted interaction that includes live agent chat and co-browsing capabilities.

We have created a consumer-centric marketplace that offers consumers a broad choice of insurance products that includes thousands of Medicare Advantage, Medicare Supplement, Medicare Part D prescription drug, individual and family, small business and other ancillary health insurance products from approximately 200 health insurance carriers across all fifty states and the District of Columbia.

Our plan recommendation tool curates this broad plan selection by analyzing customer health-related information against plan data for insurance coverage fit.

This tool is supported by a unified data platform and is available to our ecommerce customers and our licensed agents.

We strive to be the most trusted partner to the consumer in their life's journey through the health insurance market.

Basis of Presentation – Our consolidated financial statements include the accounts of eHealth, Inc.

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generally accepted accounting principles (“U.S.

GAAP.”) Certain prior period amounts have been reclassified to conform with our current period presentation.

Certain prior period amounts have been reclassified to conform with our current period presentation.

Subsequent to the issuance of our consolidated financial statements for the year ended December 31, 2020, we identified certain errors, including a $ 3.0 million under-recognition of stock-based compensation expense and a $ 1.5 million over-recognition of licensing costs for the year ended December 31, 2020.

We adjusted for these items in the first quarter of 2021 and the adjustments reduced our net loss by approximately $ 1.5 million, or $ 0.06 per basic and diluted share in our Condensed Consolidated Statement of Comprehensive Loss for the three months ended March 31, 2021.

These items also reduced our net loss by approximately $ 1.5 million, or $ 0.05 per basic and diluted share, on our Consolidated Statement of Comprehensive Loss for the year ended December 31, 2021.

We adjusted for these items in the first quarter of 2021 and the adjustments increased our net loss by approximately $ 1.5 million, or $ 0.06 per basic and diluted share, in our Condensed Consolidated Statement of Comprehensive Loss for the three months ended March 31, 2021.

These items also increased our net loss by approximately $ 1.5 million, or $ 0.05 per basic and diluted share, on our Consolidated Statement of Comprehensive Loss for the year ended December 31, 2021.

We evaluated the effects of these out-of-period adjustments, both qualitatively and quantitatively, and concluded that the errors and the correction thereof were immaterial both individually and in the aggregate to the current reporting period and the periods in which they originated, including quarterly reporting.

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• Individual, Family and Small Business

The Medicare segment consists primarily of commissions earned from our sale of Medicare-related health insurance plans, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans, and to a lesser extent, ancillary products sold to our Medicare-eligible customers, including but not limited to, dental and vision insurance, as well as our advertising program that allows Medicare-related carriers to purchase advertising on a separate website developed, hosted and maintained by us or pursuant to which we perform other services as marketing and our delivery and

The Individual, Family and Small Business segment consists primarily of commissions earned from our sale of individual and family and small business health insurance plans and ancillary products sold to our non-Medicare-eligible customers, including but not limited to, dental, vision, short term disability and long term disability insurance.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

sale to third parties of Medicare-related health insurance leads generated by our ecommerce platforms and our marketing activities.

To a lesser extent, the Individual, Family and Small Business segment includes amounts earned from our online sponsorship program that allows carriers to purchase advertising space in specific markets in a sponsorship area on our website, our licensing to third parties the use of our health insurance ecommerce technology and our delivery and sale to third parties of individual and family health insurance leads generated by our ecommerce platforms and our marketing activities.

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Other indirect general and administrative operating expenses are managed in a corporate shared services environment and, since they are not the responsibility of segment operating management, are not allocated to the two operating segments and are presented as a reconciling item to our consolidated financial results.

Segment profit is calculated as total revenue for the applicable segment less direct and allocated marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses, excluding stock-based compensation, depreciation and amortization expense and amortization of intangible assets.

Segment profit is calculated as total revenue for the applicable segment less direct and allocated marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses, excluding stock-based compensation expense, depreciation and amortization expense, amortization of intangible assets and impairment, restructuring and other charges.

Use of Estimates – The preparation of consolidated financial statements and related disclosures in conformity with U.S.

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Actual results may differ from these estimates.

Cash Equivalents – We consider all investments with an original maturity of 90 days or less from the date of purchase to be cash equivalents.

Cash and Cash Equivalents – Our cash and cash equivalents were held in cash depository accounts with major financial institutions or invested in high quality, short-term liquid investments having original maturities of 90 days or less from the date of purchase.

Cash and cash equivalents are stated at fair value.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company's restricted cash balances are not material and are primarily used to collateralize letters of credit related to certain lease commitments.

Property and Equipment – Property and equipment are stated at cost, less accumulated depreciation and amortization.

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See Note 3 – Supplemental Financial Statement Information of the Notes to Consolidated Financial Statements for additional information regarding our property and equipment.

Business Combinations – We allocate the fair value of the acquisition consideration transferred in exchange for our acquired businesses to the tangible assets, liabilities and intangible assets acquired based on their estimated fair values at the acquisition date.

The excess of the fair value of acquisition consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

Acquisition-related costs are recognized separately from the business combination and are expensed as incurred.

Goodwill and Intangible Assets – Goodwill represents the excess of the consideration paid over the estimated fair value of assets acquired and liabilities assumed in a business combination.

We test our goodwill for impairment on an annual basis in the fourth quarter of each year or whenever events or changes in circumstances indicate that the asset may be impaired.

We test our goodwill for impairment on an annual basis in the fourth quarter of each year or whenever events or changes in circumstances

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

indicate that the asset may be impaired.

Factors that we consider in deciding when to perform an impairment test include significant negative industry or economic trends or significant changes or planned changes in our use of the intangible assets.

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Goodwill and intangible assets are considered non-financial assets and therefore, subsequent to their initial recognition are not revalued at fair value each reporting period unless an impairment charge is recognized.

For the years ended December 31, 2020 and 2019, there was no goodwill impairment identified, and therefore, there were no changes in carrying value of goodwill in the accompanying Consolidated Statements of Comprehensive Income.

We performed a goodwill impairment assessment as of December 31, 2021, which included both qualitative and quantitative assessments.

As of December 31, 2021, we performed a goodwill impairment assessment, which included both qualitative and quantitative assessments.

Our assessment included a comparison of carrying value to an estimated fair value using a market approach based on our market capitalization.

Based on this assessment, we concluded the fair value of our Medicare segment was below the carrying value primarily due to the recent change in our market valuation and financial performance and recorded a $ 40.2 million

EHEALTH, INC.

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impairment of our goodwill.

The change in the carrying amount of goodwill is summarized as follows (in thousands):

Balance as of December 31, 2020 $ 40,233

Impairment charges ( 40,233 )

Balance as of December 31, 2021 $ —

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate a potential reduction in their fair values below their respective carrying amounts.

Intangible assets with finite useful lives, which include purchased technology, pharmacy and customer relationships, trade names, and certain trademarks, are amortized over their estimated useful lives.

Based on this assessment, we concluded the fair value of our Medicare segment was below the carrying value primarily due to the change in our market valuation at the time and financial performance and recorded a $ 40.2 million impairment of our goodwill, which was recognized in the "Impairment, restructuring and other charges" line in the Consolidated Statements of Comprehensive Income (Loss).

As a result of this impairment, we had no goodwill balance on our Consolidated Balance Sheets at either December 31, 2021 and 2022.

There was no goodwill impairment identified for the year ended December 31, 2020.

We must make subjective judgments in determining the independent cash flows that can be related to specific asset groupings.

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When we determine that the useful life of an asset is shorter than we had originally estimated, we accelerate the rate of amortization over the assets’ new, remaining useful life.

We evaluated the remaining useful lives of our intangible assets with finite lives and determined no material adjustments to the remaining lives were required.

See Note 3 – Supplemental Financial Statement Information of the Notes to Consolidated Financial Statements for additional information regarding our intangible assets.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate a potential reduction in their fair values below their respective carrying amounts.

See Note 3 – Supplemental Financial Statement Information of the Notes to Consolidated Financial Statements for additional information regarding our intangible assets and related impairment.

Other Long-Lived Assets – We evaluate other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value.

Revenue Recognition – Our commission revenue consists of commission payments from health insurance carriers whose health insurance policies are purchased through our ecommerce platforms or telephonically via our customer care center, regular payments with respect to administrative services, and bonus payments, which are generally based on our attaining predetermined target sales levels or other objectives, as determined by the health insurance carriers.

In addition, we also generate revenue from non-commission sources, which include, among other things, online sponsorship, advertising, lead referrals, and technology licensing.

We account for revenue under ASC 606 – Revenue from Contracts with Customers.

The core principle of ASC 606 is to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled in exchange for those goods or services.

Revenue Recognition – We account for revenue under ASC 606 – Revenue from Contracts with Customers .

Our revenue consists of commission revenue and other revenue.

Accordingly, we recognize revenue for our services through the application of the following steps:

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• Recognition of revenue when, or as, we satisfy a performance obligation.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commission Revenue — Our commission revenue results from approval of an application from health insurance carriers, which we define as our customers under ASC 606.

Commission Revenue.

Our commission revenue results from approval of an application from health insurance carriers, which we define as our customers under ASC 606.

Our commission revenue is primarily comprised of commissions from health insurance carriers which is computed using the estimated constrained lifetime value of commission payments that we expect to receive.

Included in commissions are regular administrative payments we receive with respect to administrative services.

We estimate commission revenue for each insurance product by using a portfolio approach to a group of approved members by plan type and the effective month of the relevant plan, which we refer to as “cohorts”.

We estimate commission revenue for each insurance product by using a portfolio approach to a group of approved members by plan type and the

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

effective month of the relevant plan, which we refer to as “cohorts”.

We recognize revenue for plans approved during the period by applying the latest estimated constrained lifetime value (“LTV”) for that product.

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The estimated average plan duration used to calculate the LTV for major medical individual and family health insurance plans historically has been approximately 1.5 to 2 years.

For short term health insurance plan LTVs, the estimated average plan duration historically has been less than six months .

For short term health insurance plan LTVs, the estimated average plan duration has been approximately six months .

For all other ancillary health insurance plan LTVs, the estimated average plan duration has historically varied from 1 to 6 years.

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We also analyze whether circumstances have changed and consider any known or potential modifications to the inputs into LTV in light of the factors that can impact the amount of cash expected to be collected in future periods, including but not limited to commission rates, carrier mix, plan duration, cancellations of insurance plans offered by health insurance carriers with which we have a relationship, changes in laws and regulations, and changes in the economic environment.

We evaluate the appropriateness of our constraints on an ongoing basis, and we update our assumptions

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

when we observe a sufficient amount of evidence that would suggest that the long-term expectation underlying the assumptions has changed.

We evaluate the appropriateness of our constraints on an annual basis, at least, and update our assumptions when we observe a sufficient amount of evidence that would suggest that the long-term expectation underlying the assumptions has changed.

We re-compute LTVs for all outstanding cohorts on a quarterly basis.

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As we accumulate more historical data, we continue to enhance our LTV estimation models using statistical tools to increase the accuracy of LTV estimates with an emphasis on improving member attrition forecasting.

The enhancements to the LTV estimation model provide greater statistical certainty on expected cash collections, particularly for earlier period cohorts where there is more historical data available.

For both Medicare Advantage and Medicare Part D prescription drug plans, we receive a fixed, annual commission payment from insurance carriers once the plan is approved by the carrier and either a fixed, monthly, or annual commission payment beginning with and subsequent to the second plan year.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

enhancements to the LTV estimation model provide greater statistical certainty on expected cash collections, particularly for earlier period cohorts where there is more historical data available.

For both Medicare Advantage and Medicare Part D prescription drug plans, we receive a fixed, annual commission payment from insurance carriers generally once the plan is approved by the carrier and either a fixed, monthly, or annual commission payment beginning with and subsequent to the second plan year.

In the first plan year of a Medicare Advantage and Medicare Part D prescription drug plan, after the health insurance carrier approves the application but during the effective year of the plan, we are paid a fixed commission that is prorated for the number of months remaining in the calendar year.

Additionally, if the plan is the first Medicare Advantage or Medicare Part D prescription drug plan issued to the member, we may receive a higher commission rate that covers a full 12-month period, regardless of the month the plan was effective.

We earn commission revenue for Medicare Advantage and Medicare Part D prescription drug plans for which we are the broker of record, typically until either the policy is cancelled or we otherwise do not remain the agent on the policy.

We receive commissions for Medicare Advantage and Medicare Part D prescription drug plans for which we are the broker of record, typically until either the policy is cancelled or we otherwise do not remain the agent on the policy.

For individual and family, Medicare Supplement, small business and ancillary plans, our commissions generally represent a flat amount per member per month or a percentage of the premium amount collected by the carrier during the period that a member maintains coverage under a plan.

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See Note 2 – Revenue of the Notes to Consolidated Financial Statements for additional information regarding our commission revenue.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Revenue – Our non-Medicare plan related sponsorship and advertising program allows carriers to purchase advertising space in specific markets in a sponsorship area on our website.

Other Revenue.

Our non-Medicare plan related sponsorship and advertising program allows carriers to purchase advertising space in specific markets in a sponsorship area on our website.

In return, we are typically paid a fee, which is recognized over the period that advertising is displayed, and often a performance fee based on metrics such as submitted health insurance applications, which is recognized when the service has been performed.

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In instances where the performance criteria data is tracked by the third party, we recognize revenue when reversal of such amounts is not likely to occur.

Incremental Costs to Obtain a Contract.

Our sales compensation plans, which are directed at converting leads into approved members, represent fulfillment costs and not costs to obtain a contract with a customer.

Additionally, we reviewed compensation plans related to personnel responsible for identifying new health insurance

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

carriers and entering into contracts with new health insurance carriers and concluded that no incremental costs are incurred to obtain such contracts.

Therefore, costs related these compensation plans are expensed as incurred.

Deferred Revenue – Deferred revenue includes deferred fees and amounts billed to or collected from advertising, sponsorship or technology licensing customers in advance of our performing our service for such customers.

It also includes the amount by which both unbilled and billed services provided under our technology licensing arrangements exceed the revenue recognized to date.

Incremental Costs to Obtain a Contract — Our sales compensation plans, which are directed at converting leads into approved members, represent fulfillment costs and not costs to obtain a contract with a customer.

Additionally, we reviewed compensation plans related to personnel responsible for identifying new health insurance carriers and entering into contracts with new health insurance carriers and concluded that no incremental costs are incurred to obtain such contracts.

Therefore, costs related these compensation plans are expensed as incurred.

Cost of Revenue – Included in cost of revenue are payments related to health insurance policies sold to members who were referred to our website by marketing partners with whom we have revenue-sharing arrangements.

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Advertising costs incurred in the years ended December 31, 2022, 2021 and 2020 totaled $ 169.1 million, $ 240.4 million, and $ 178.9 million, respectively.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our direct channel expenses primarily consist of costs for direct mail, email marketing and television and radio advertising.

Our direct channel expenses primarily consist of costs for direct mail, email marketing, online marketing and television and radio advertising.

Advertising costs for our direct channel are expensed the first time the related advertising takes place.

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Research and development costs, which totaled $ 12.1 million, $ 10.4 million and $ 9.1 million for the years ended December 31, 2022, 2021 and 2020, respectively, are included in technology and content expense in the accompanying Consolidated Statements of Comprehensive Income (Loss).

Internal-Use Software and Website Development Costs – We capitalize costs of materials, consultants and compensation and benefits costs of employees who devote time to the development of internal-use software during the application development stage.

The amortization of these assets are recorded in technology and content.

The amortization expenses of these assets are recorded in technology and content.

Our judgment is required in determining the point at which various projects enter the phases at which costs may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized, which is generally 3 years.

For the years ended December 31, 2022, 2021 and 2020, we capitalized internal-use software and website development costs of $ 17.2 million, $ 19.6 million and $ 18.0 million respectively, and recorded amortization expense of $ 17.3 million, $ 12.9 million, and $ 7.8 million, respectively.

Capitalized internal-use software and website development costs are included in Other Assets on our Consolidated Balance Sheets and were $ 31.3 million and $ 24.6 million as of December 31, 2021 and 2020, respectively.

Capitalized internal-use software and website development costs are included in Other Assets on our Consolidated Balance Sheets and were $ 31.3 million as of December 31, 2022 and 2021.

See Note 5 - Equity of the Notes to Consolidated Financial Statements for the amount of stock-based compensation capitalized for internal-use software.

Stock-Based Compensation – We recognize stock-based compensation expense in the accompanying Consolidated Statements of Comprehensive Income (Loss) based on the fair value of our stock-based awards over their respective vesting periods, which is generally 4 years.

The estimated attainment of performance-based awards and related expense is based on the expectations of revenue and earnings target achievement.

The estimated fair value of performance awards with market conditions is determined using the Monte-Carlo simulation model.

The assumptions used in calculating the fair value of stock-based payment awards and expected attainment of performance-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment.

We will continue to use judgment in evaluating the expected term and volatility related to our own stock-based awards on a prospective basis, and incorporating these factors into the model.

Changes in key assumptions could significantly impact the valuation of such instruments.

The estimated grant date fair value of our stock options is determined using the Black-Scholes pricing model and a single option award approach.

Stock-Based Compensation – We grant stock-based awards to officers and certain other employees of the Company and non-employee directors of the Company.

The stock-based awards have consisted of stock options and restricted stock units.

We recognize stock-based compensation expense in the accompanying Consolidated Statements of Comprehensive Income (Loss) based on the fair value of our stock-based awards over their respective requisite service periods, typically the vesting period, which is generally four years for service-based awards or the one-year anniversary of achieving performance criteria for performance and market-based awards.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options .

Our stock options have consisted of service, performance and market-based awards and have exercise prices equal to the market price of the underlying common shares on the date of grant and a term of seven years .

The estimated grant date fair value of our stock options is estimated using the Black-Scholes option-pricing model and a single option award approach.

The weighted-average expected term for stock options granted is calculated using historical option exercise behavior.

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Expected volatility is determined using a combination of the implied volatility of publicly traded options in our stock and historical volatility of our stock price.

Restricted Stock Units.

Our restricted stock units have consisted of service, performance and market-based awards and each represents a contingent right to receive a share of our common stock upon predetermined criteria.

The fair value for service and performance based restricted stock units is estimated on the date of grant based on the current market price of our common shares.

Our market-based restricted stock units are contingent upon the attainment of certain stock prices generally over a four-year performance period.

These awards generally vest on the one-year anniversary of the date of achievement, subject to the employee’s continued service through the vesting date.

The grant date fair value of market-based restricted stock awards is determined using the Monte-Carlo simulation model and requires the input of subjective assumptions.

The weighted-average expected term is based on the likelihood of achievement using historical behavior.

The dividend yield is based on our dividend payment history and expectation of future dividend payments.

Through December 31, 2022, we had not declared or paid any cash dividends to common stockholders.

We base the risk-free interest rate on the implied yield currently available on U.S.

Treasury zero-coupon issues with a remaining term equal to the length of the remaining performance period.

Expected volatility is determined using a combination of the implied volatility of publicly traded options in our stock and historical volatility of our stock price.

The estimated attainment of performance-based awards and related expense is based on the achievement of certain financial targets over a predetermined performance period, subject to continued service through the vesting date and ultimately are subject to the discretion of the Company’s compensation committee.

We will continue to use judgment in evaluating the expected term and volatility related to our own stock-based awards on a prospective basis and incorporating these factors into the model.

Changes in key assumptions could significantly impact the valuation of such instruments.

Forfeiture Rate .

We estimate a forfeiture rate to calculate the stock-based compensation for all of our awards.

We evaluate the appropriateness of the forfeiture rate based on historical forfeiture, analysis of employee turnover, and other factors.

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Earnings (Loss) Per Share – Our Series A preferred stock is considered a participating security which requires the use of the two-class method for the computation of basic and diluted per share amounts.

Under the two-class method, earnings available to common stockholders for the period are allocated between common stockholders and participating securities according to dividends accumulated and participation rights in undistributed earnings.

Net loss attributable to common stockholders is not allocated to the convertible preferred stock as the holder of the Series A preferred stock does not have a contractual obligation to share in losses.

Basic net income (loss) attributable to common stockholders per share is computed by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

Diluted net income (loss) attributable to common stockholders per share is computed by dividing the net income (loss) available to common stockholders for the period by the weighted average number of common and common equivalent shares outstanding during the period.

Diluted net income (loss) attributable to common stockholders per share reflects all potential dilutive common stock equivalent shares, including conversion of preferred stock, stock options, restricted stock units and shares to be issued under our employee stock purchase program.

EHEALTH, INC.

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Participation in the 401(k) Plan is available to substantially all employees in the United States.

Employees can contribute up to 25 % of their salary, up to the federal maximum allowable limit, on a before-tax basis to the 401(k) Plan.

Employees may contribute up to 85 % of their salary, subject to applicable annual Internal Revenue Code limits and are permitted to make both pre-tax and after-tax contributions.

Employee contributions are fully vested when contributed.

Our contributions to the 401(k) Plan are discretionary and are expensed when incurred.

We also match employee contributions to our 401(k) Plan at 100 % of an employee’s contribution each pay period, up to a maximum of 3 % of the employee’s salary during such pay period for the years ended December 31, 2021 and 2020, compared to 25 % contribution match, with maximum of 3 % for the year ended December 31, 2019, respectively.

Our matching contributions are expensed as incurred and vest one-third for each of the first three years of the recipient’s service.

The recipient is fully vested in all 401(k) Plan matching contributions after three years of service.

We contribute a maximum of 100 % of the first 3 % of compensation a participant contributes to the 401(k) Plan, which vests immediately.

Our matching contributions to the 401(k) Plan are discretionary and are expensed as incurred.

We recognized expense of $ 3.8 million, $ 4.2 million and $ 3.5 million for the years ended December 31, 2022, 2021 and 2020, respectively, related to 401(k) matching contributions.

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We record interest and penalties related to uncertain tax positions as income tax expense in the consolidated financial statements.

Seasonality – Open enrollment periods drive the seasonality of our business.

A greater number of our Medicare-related health insurance plans are sold in our fourth quarter during the Medicare annual enrollment period when Medicare-eligible individuals are permitted to change their Medicare Advantage and Medicare Part D prescription drug coverage for the following year.

As a result, our Medicare plan-related commission revenue is highest in our fourth quarter.

Our Medicare plan-related commission revenue is also elevated in the first quarter compared to the second and third quarters as a result of the reintroduction of the Medicare Advantage open enrollment period in the first quarter of 2019.

Any changes or additional enrollment periods may change the seasonality of our business.

The majority of our individual and family health insurance plans are sold in the fourth quarter during the annual open enrollment period as defined under the federal Patient Protection and Affordable Care Act and related amendments in the Health Care and Education Reconciliation Act.

In states where the Federally Facilitated market place operates as the state health insurance exchanges, individuals and families generally are not able to purchase individual and family health insurance outside of the annual enrollment period, unless they qualify for a special enrollment period as a result of certain qualifying events, such as losing employer-sponsored health insurance or moving to another state.

Extended open enrollment or special enrollment periods may change the seasonality of our individual and family health insurance business.

For example, the COVID-related special enrollment period which ended on August 15, 2021 has caused increased commission revenue from the sale of individual and family health insurance plans outside of the open enrollment period.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recently Adopted Accounting Pronouncements

Codification Improvements – In October 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2020-10, Codification Improvements .

ASU 2020-10 is intended to facilitate codification updates for technical corrections, such as conforming amendments, clarifications to guidance, simplifications to wording or structure of guidance, and other minor improvements.

It contains amendments that improve the consistency of the codification by including all disclosure guidance in the appropriate disclosure section and other updates that vary in nature.

We adopted this guidance in the first quarter of 2021 with no material impact on our condensed consolidated financial statements and disclosures.

Debt with Conversion and Other Options (Topic 470) and Contracts in Entity's Own Equity (Topic 815) – In June 2020, the FASB issued ASU No.

2020-06 to simplify the accounting for convertible instruments and improve the usefulness and relevance of information regarding convertible instruments.

This ASU reduces the number of accounting models for converting debt instruments and convertible preferred stock.

2020-06 is effective for us in 2022, with early adoption permitted.

We early adopted this guidance in the first quarter of 2021, and it did not have a material impact on our condensed consolidated financial statements.

Income Taxes (Topic 740) – In December 2019, the Financial Accounting Standard Board (“FASB”) issued ASU No.

2019-12, Income Tax, Simplifying the Accounting for Income Taxe s, which aims to simplify the accounting for income taxes.

We adopted this guidance in the first quarter of 2021, and it did not have a material impact on our condensed consolidated financial statements.

Financial Instruments – Credit Losses (Topic 326) – In June 2016, the FASB issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments – Credit Losses (Topic 326), that requires companies to present certain financial assets net of the amount expected to be collected.

The guidance requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectability.

Contract assets – commissions receivable were our only financial assets that were materially impacted by this guidance.

We adopted ASU 2016-13, including applicable amendments in other ASUs issued subsequent to ASU 2016-13, using a modified retrospective transition method on January 1, 2020 for all financial assets measured at amortized cost.

Results for periods after January 1, 2020 are presented under ASU 2016-13 while prior period amounts continue to be reported under the previous accounting standards.

We recorded a $ 1.1 million decrease, net of income taxes, to retained earnings as of January 1, 2020 for the cumulative effect of adopting ASU 2016-13.

See Note 3 – Supplemental Financial Statement Information for further discussion on credit losses.

T he impact from the adoption of ASU 2016-13 is summarized as follows (in thousands):

Balance Sheet Impact:

December 31, 2019 Transition Adjustments January 1, 2020

Contract assets – commissions receivable – current $ 174,526 $ ( 71 ) $ 174,455

Contract assets – commissions receivable – non-current 414,696 ( 1,442 ) 413,254

Other assets* 18,004 366 18,370

Total assets 741,634 ( 1,147 ) 740,487

Retained earnings 271,852 ( 1,147 ) 270,705

* Adjustment to Other assets is due to the increase in deferred tax assets resulting from the adoption of ASU 2016-13 .

Reference Rate Reform (Topic 848) — In March 2020, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S.

GAAP to contract modifications and other transactions affected by reference rate reform if certain criteria are met in order to ease the financial reporting burden as the market transitions from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates expected to be discontinued to alternative reference rates.

The FASB further issued ASU 2021-01 in January 2021 to refine and clarify the scope of Topic 848.

The election allows relief from remeasuring the contracts at modification or from reassessing a previous accounting determination.

The guidance was effective upon issuance and may be applied through December 31, 2022.

We elected the optional expedient under ASU 2020-04 and 2021-01 in the third quarter of 2022 upon the amendment to our term loan credit agreement, which transitions the use of LIBOR to the Secured Overnight Financing Rate ("SOFR").

The adoption of the standard allows entities to account for such modification as if the modification was not substantial and as a result, the implementation of this standard did not have a material impact on our consolidated financial statements.

See Note 12 - Debt for additional information regarding the amendment to our term loan credit agreement.

EHEALTH, INC.

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Individuals that purchase non-qualified health plans cannot receive a subsidy in connection with the purchase of non-qualified plans.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commission Revenue

Since the adoption of ASC 606, we have evaluated changes in estimated cash collections and compare these to the initial estimates of LTV at the time of approval.

We record adjustment revenue in the period when the risk of significant reversal in not probable and continue to enhance our LTV estimation models to improve the accuracy and to reduce the fluctuations of our LTV estimates.

We record adjustment revenue in the period when the risk of significant reversal is not probable and continue to enhance our LTV estimation models to improve the accuracy and to reduce the fluctuations of our LTV estimates.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commission revenue by segment is presented in the table below (in thousands):

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Total Commission Revenue from Members Approved During the Period $ 344,864 $ 462,816 $ 462,693

$ 462,816 $ 462,693 $ 378,530

Commission Revenue from Renewals of Small Business Members During the Period (2)

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However, beginning in the first quarter of 2021, we enhanced our reporting by separately disclosing commission revenue from renewals of small business members during the period in a separate line item.

(3) The impact of total net commission revenue from members approved in prior periods was $ 0.81 , $ 1.49 and $ 3.52 per basic share, respectively, or $ 0.81 , $ 1.44 and $ 3.31 per diluted share, respectively, for the years ended December 31, 2021, 2020 and 2019, respectively.

(3) The impact of total net commission revenue from members approved in prior periods for the years ended December 31, 2022, 2021 and 2020 was $ 0.23 , $ 0.81 and $ 1.49 per basic share, respectively, or $ 0.23 , $ 0.81 and $ 1.44 per diluted share, respectively.

The total reductions to revenue from members approved in prior periods were $ 16.5 million, $ 28.8 million and $ 17.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

These reductions to revenue primarily related to the Medicare segment.

Enhancement to LTV Estimation Model and Impacts Related to COVID-19

During 2022, we continued to observe stronger member retention rates in our LTV assessments for the majority of the earlier period cohorts of certain products in our Individual, Family and Small Business segment.

Based on our evaluation of the updated LTV models and retention trends, we recognized $ 8.7 million of net adjustment revenue for the Individual, Family and Small Business segment for the year ended December 31, 2022.

In addition, we evaluated various market factors related to our Medicare segment and recorded a net adjustment of $( 2.3 ) million for the year ended December 31, 2022, primarily due to declines in LTV in all Medicare products.

We will continue to monitor our member retention rates as compared to our forecasts and other market factors and evaluate whether any addition or reduction of adjustment revenue shall be recorded as we continue to assess our LTV models in future periods

During 2021, despite the extension of the COVID-related special enrollment period through August 15, 2021 and an increase in subsidies to certain individuals who purchase qualified health plans, we continued to observe stronger member retention rates in our LTV assessments for the majority of the earlier period cohorts of certain products in our Individual, Family and Small Business segment.

We recognized $ 30.2 million of net adjustment revenue for the Individual, Family and Small Business segment for the year ended December 31, 2021.

In addition, we evaluated various market factors related to our Medicare segment and recorded a net adjustment of $( 8.4 ) million for the year ended December 31, 2021, primarily due to decline in LTV of Medicare Supplement and Medicare Part D prescription drug plans.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Enhancement to LTV Estimation Model and Impacts Related to COVID-19

During the fourth quarter of 2019, we enhanced our Medicare Advantage LTV estimation model to increase the accuracy of LTV estimates with an emphasis on improving member attrition forecasting by utilizing statistical tools.

For the Medicare segment, we recognized adjustment revenue of $ 55.3 million for the year ended December 31, 2019, of which $ 50.8 million was recognized for Medicare Advantage plans during the fourth quarter of 2019 due to enhancements made to the Medicare Advantage LTV estimation model.

For the Individual, Family and Small Business segment, we recognized net adjustment revenue of $ 26.0 million for the year ended December 31, 2019, in response to observing longer plan duration than initially anticipated at the time of enrollment for these plans.

During 2020, we expanded the enhanced statistical models to our remaining insurance products.

Despite the impact of COVID-19 in 2020 and uncertainties regarding the Presidential election and the U.S.

During 2020, despite the impact of COVID-19 in 2020 and uncertainties regarding the Presidential election and the U.S.

economy, we continued to observe stronger member retention rates in our LTV assessments for the majority of the earlier period cohorts of certain products in our Individual, Family and Small Business segment.

Based on our evaluation of the updated LTV models and retention trends, we recognized a $ 33.1 million net adjustment for the Individual, Family and Small Business segment and a net adjustment of $ 5.7 million related to our Medicare segment for the year ended December 31, 2020.

We recognized $ 30.2 million of net adjustment revenue for the Individual, Family and Small Business segment for the year ended December 31, 2021.

In addition, we evaluated various market factors related to our Medicare segment and recorded a negative net adjustment of $ 8.4 million for the year ended December 31, 2021, primarily due to decline in LTV of Medicare Supplement and Medicare Part D prescription drug plans.

Note 3 – Supplemental Financial Statement Information

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Total cash, cash equivalents and restricted cash $ 147,640 $ 85,165

As of December 31, 2021 and 2020, we had $ 3.2 million and $ 3.4 million, respectively, of restricted cash which was classified as a non-current asset on our Consolidated Balance Sheets.

As of December 31, 2022 and 2021, we had $ 3.2 million of restricted cash which was classified as a non-current asset on our Consolidated Balance Sheets.

This amount collateralizes letters of credit related to certain lease commitments.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contract Assets and Accounts Receivable

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We believe the potential for collection issues with any of our customers was minimal as of December 31, 2022.

Our contract assets and accounts receivable consisted of the following for the periods presented below (in thousands):

December 31, 2021 December 31, 2020

Contract assets – commissions receivable – current $ 254,821 $ 219,153

Contract assets – commissions receivable – non-current 653,441 573,252

Accounts receivable 5,750 1,799

Total contract assets and accounts receivable $ 914,012 $ 794,204

We estimate the allowance for credit loss balance using relevant available information from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts.

We estimate an allowance for credit losses using relevant available information from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts.

Specifically, for the purpose of measuring the probability of default parameters, we utilize Capital IQ’s, Standard & Poor’s and Moody’s analytics.

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As such, we apply an immediate reversion method and revert to historical loss information when computing our credit loss exposure.

Credit loss expenses are assessed quarterly and included in general and administrative expense on our Consolidated Statement of Comprehensive Loss.

Subsequent to the adoption of ASC 326, we considered the impact of recent events and global economic conditions when evaluating the appropriate adjustments to our allowance for credit losses as of December 31, 2021.

Determining the extent of these adjustments in the year ended December 31, 2020 was especially challenging because we do not have any historical loss information for a period of similar economic decline.

We considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic.

There were no allowance for doubtful accounts or credit losses for the year ended December 31, 2019.

The changes in the allowance for credit losses for the year ended December 31, 2021 are summarized as follows (in thousands):

December 31, 2021

Credit loss expenses are assessed quarterly and included in the "General and administrative" line in our Consolidated Statements of Comprehensive Income (Loss).

There were no write-offs during the years ended December 31, 2022, 2021 and 2020.

The change in the allowance for credit losses is summarized as follows (in thousands):

December 31, 2022 December 31, 2021

Beginning balance $ 2,198 $ 2,026

Net current period provision for expected credit losses 172

Change in allowance 200 172

Ending balance $ 2,398 $ 2,198

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Commission revenue from renewals of small business members during the period — 9,981 9,981

— 8,564 8,564

Net commission revenue from members approved in prior periods ( 2,326 ) 8,727 6,401

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Year Ended December 31, 2021

Medicare Segment IFP Segment Total

Medicare Segment IFP/SMB Segment Total

Beginning balance $ 739,637 $ 52,768 $ 792,405

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Commission revenue from renewals of small business members during the period — 8,564 8,564

— 6,727 6,727

Net commission revenue from members approved in prior periods ( 8,414 ) 30,153 21,739

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Net change in credit loss allowance ( 159 ) ( 13 ) ( 172 )

( 1,891 ) ( 135 ) ( 2,026 )

Ending balance $ 837,474 $ 70,788 $ 908,262

(1) Commission revenue from renewals of small business members during the period was previously included in net commission revenue from members approved in prior periods.

However, starting in the first quarter of 2021, we enhanced our reporting by separately disclosing commission revenue from renewals of small business members during the period in a separate line item.

(2) Amount consists of transition adjustment of $ 1.5 million related to the adoption of ASC 326 as of January 1, 2020 and the subsequent credit loss adjustment of $ 0.5 million during the year ended December 31, 2020.

See Note 1 – Summary of Business and Significant Accounting Policies for details regarding the adoption impact.

Our financial instruments that are exposed to concentrations of credit risk principally consist of cash, cash equivalents, contract assets – commissions receivable, and accounts receivable.

Our financial instruments that are exposed to concentrations of credit risk principally consist of cash, cash equivalents, marketable securities, contract assets – commissions receivable and accounts receivable.

We invest our cash and cash equivalents with major banks and financial institutions and, at times, such investments are in excess of federally insured limits.

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The deposits in China were $ 4.9 million as of December 31, 2022.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

See Note 4 – Fair Value Measurements for more information regarding our marketable securities.

We do not require collateral or other security for either our contract assets or accounts receivable.

Carriers that represented 10% or more of our total contract assets and accounts receivable balance are summarized as of the dates presented below:

Carriers that represented 10% or more of our total contract assets – commission receivable and accounts receivable balances are summarized as of the dates presented below:

December 31, 2022 December 31, 2021

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UnitedHealthCare (1)

Centene (1)(2)

(1) Percentages include the carriers' subsidiaries.

(2) Centene Corporation acquired WellCare Health Plans, Inc.

in 2020, and the contract assets and accounts receivable of WellCare are included in the percentage calculation for December 31, 2021 and 2020.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Prepaid Expenses and Other Current Assets – Our prepaid expenses and other current assets are summarized as of the periods presented below (in thousands):

December 31, 2022 December 31, 2021

Prepaid expenses $ 11,379 $ 6,628

Prepaid maintenance contracts $ 5,211 $ 6,246

Prepaid licenses 3,076 —

Prepaid expenses 2,858 11,379

Prepaid insurance 1,893 2,161

Others 922 646

Prepaid licenses 1,116 3,076

Other current assets 223 922

Prepaid expenses and other current assets $ 11,301 $ 23,784

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Property and equipment, net $ 5,501 $ 12,105

Depreciation and amortization expense related to property and equipment totaled $ 5.4 million, $ 3.7 million, and $ 3.0 million in the years ended December 31, 2021, 2020 and 2019, respectively.

Depreciation and amortization expense related to property and equipment for the years ended December 31, 2022, 2021 and 2020 was $ 3.8 million, $ 5.4 million and $ 3.7 million, respectively.

Additionally, during 2022, we recognized impairment charges of $ 2.2 million related to computer equipment, office equipment and furniture and leasehold improvements as a result of our sublease and vacating of certain leased office spaces in the "Impairment, restructuring and other charges" line in our Consolidated Statements of Comprehensive Income (Loss).

Intangible Assets – As of December 31, 2022 and 2021, our intangible assets subject to amortization had a gross carrying value of $ 17.2 million and life-to-date accumulated amortization and impairment charges of $ 17.2 million.

As of December 31, 2022 and 2021, our indefinite-lived intangible assets had a gross carrying value of $ 5.1 million and life-to-date impairment charges of $ 3.2 million.

We had no amortization expense related to intangible assets for the year ended December 31, 2022 and amortization expense related to intangible assets for the years ended December 31, 2021 and 2020 was $ 0.5 million and $ 1.5 million, respectively.

We recorded $ 6.1 million of impairment charges related to our intangible assets in the "Impairment, restructuring and other charges" line in our Consolidated Statements of Comprehensive Income (Loss) for the year ended December 31, 2021.

See Note 11 - Impairment, Restructuring and Other Charges for further discussion on our impairment charge in 2021.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Intangible Assets – The carrying amounts, accumulated amortization, net carrying value and weighted average remaining life of our definite-lived amortizable intangible assets, as well as our indefinite-lived intangible trademarks, are presented in the tables below (dollars in thousands, useful life in years):

December 31, 2021 December 31, 2020

Gross Carrying Amount Accumulated Amortization Impairment Charges Net Carrying Amount Weighted-average remaining useful life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted-average remaining useful life

Technology $ 2,000 $ ( 2,000 ) $ — $ — 0.0 $ 2,000 $ ( 1,945 ) $ 55 0.1

Pharmacy and customer relationships 9,500 ( 9,500 ) — — 0.0 9,500 ( 9,500 ) — 0.0

Trade names, trademarks and website addresses 5,700 ( 2,780 ) ( 2,920 ) — 6.1 5,700 ( 2,300 ) 3,400 7.1

Total intangible assets subject to amortization $ 17,200 $ ( 14,280 ) $ ( 2,920 ) — $ 17,200 $ ( 13,745 ) $ 3,455

Indefinite-lived trademarks and domain names 5,114 n/a ( 3,191 ) 1,923 Indefinite 5,114 n/a 5,114 Indefinite

Intangible assets $ 1,923 $ 8,569

During the years ended December 31, 2021, 2020, and 2019, amortization expense related to intangible assets totaled $ 0.5 million, $ 1.5 million, and $ 2.2 million, respectively.

We performed an annual assessment of impairment over our intangible assets, both definite-lived and indefinite-lived.

Prior to our annual impairment assessment as of December 31, 2021, the carrying amount of our intangible assets was $ 8.0 million, primarily consisted of trade names, trade marks, and website address.

Our assessment included a recoverability test for definite-lived intangible assets and a comparison of carrying value to the estimated fair value.

The fair value of our intangible assets as of December 31, 2021 was estimated using a market approach for certain indefinite-lived intangible assets as well as using the expected future cash flow approach for our definite-lived intangible assets.

Based our assessment, we determined that the fair value of our Medicare segment was below the carrying value as of December 31, 2021 primarily due to the recent change in our market valuation and financial performance.

Therefore, we recorded a $ 6.1 million impairment charges on our Consolidated Statements of Comprehensive Income (Loss) related to our intangible assets.

No intangible asset impairment was identified during the years ended either December 31, 2020 or 2019.

Note 4 – Fair Value Measurements

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Level 3 Unobservable inputs for the asset or liability.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table is a summary of financial assets measured at fair value on a recurring basis and their classification within the fair value hierarchy (in thousands):

Our financial assets measured at fair value on a recurring basis are summarized below by their classification within the fair value hierarchy as of the dates presented (in thousands):

December 31, 2022

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Commercial paper 112,268 — 112,268 — 112,268

Short-term marketable securities

Commercial paper 38,801 — 38,801 — 38,801

Corporate bond 2,505 — 2,505 — 2,505

Agency bonds 1,342 — 1,342 — 1,342

Total assets measured at fair value $ 126,625 $ 13,015 $ 113,610 $ — $ 126,625

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Money market funds $ 9,217 $ 9,217 $ — $ — $ 9,217

Commercial paper 39,456 — 39,456 — 39,456

Short-term marketable securities

Commercial paper 38,801 — 38,801 — 38,801

Agency bonds 35,423 — 35,423 — 35,423

Corporate bond 2,505 — 2,505 — 2,505

Total assets measured at fair value $ 89,979 $ 9,217 $ 80,762 $ — $ 89,979

Our cash equivalents were invested in money market funds and commercial paper with original maturity of 90 days or less were classified as Level 1 and Level 2, respectively.

We endeavor to utilize the best available information in measuring fair value.

We used observable prices in active markets in determining the classification of our money market funds as Level 1.

Our Level 2 assets included our available for sale marketable securities, which consisted of commercial paper and corporate bonds with maturity less than one year.

We classify our marketable debt securities within Level 2 in the fair value hierarchy, because we use quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value.

Our portfolio primarily consisted of financial instruments with credit rating of AA or equivalent by S&P Rating and Moody's Investor Services.

There were no transfers between the hierarchy levels in either of the years ended December 31, 2021 or 2020.

Our money market funds are measured at fair value based on quoted prices in active markets and are classified as Level 1 within the fair value hierarchy.

Our available for sale marketable securities, which include commercial paper, agency bonds and a corporate bond with maturities of less than one year, are measured at fair value using quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs and are classified as Level 2 within the fair value hierarchy.

Our portfolio primarily consisted of financial instruments with a credit rating of A or equivalent by S&P Rating and Moody's Investor Services.

There were no transfers between the hierarchy levels during either of the years ended December 31, 2022 or 2021.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes our cash equivalents and available-for-sale debt securities by contractual maturity (in thousands):

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Due in 1 year $ 126,664 $ 126,625 $ 89,988 $ 89,979

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unrealized gains and losses on available-for-sale debt securities that are not credit related are included in accumulated other comprehensive income (loss) and summarized as follows as of December 31, 2021:

Amortized Cost Unrealized Gain Unrealized Loss Fair Value

Unrealized gains and losses on available-for-sale debt securities that are not credit related are included in accumulated other comprehensive income (loss) and summarized as follows:

December 31, 2022

Amortized Cost Unrealized Gains Unrealized Losses Fair Value

Cash equivalents

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Commercial paper 112,307 — ( 39 ) 112,268

Agency bonds 1,342 — — 1,342

Total $ 126,664 $ — $ ( 39 ) $ 126,625

December 31, 2021

Amortized Cost Unrealized Gains Unrealized Losses Fair Value

Cash equivalents

Money market funds $ 9,217 $ — $ — $ 9,217

Commercial paper 39,458 — ( 2 ) 39,456

Short-term marketable securities

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Total $ 89,988 $ — $ ( 9 ) $ 89,979

As of December 31, 2021, there were thirty-six securities in net loss positions and their unrealized losses were immaterial.

We did not record any credit losses regarding our available-for-sales debt securities during the year ended December 31, 2021.

As of December 31, 2022 and 2021, we had 26 and 36 securities in net loss positions, respectively, and their unrealized losses were immaterial individually and in aggregate.

We did not record any credit losses regarding our available-for-sale debt securities during the year ended December 31, 2022 or 2021.

We do not intend to sell these securities and it is more likely than not that we will not be required to sell these securities before the recovery of their amortized cost basis.

Earnout Liabilities

Earnout liabilities in connection with our GoMedigap acquisition in 2018 were recognized at fair value.

We measure the earnout liability using internally developed assumptions;

therefore, it is classified as Level 3.

The fair value of the earnout liability was measured using probability-weighted analysis and is discounted using a rate that appropriately captures the risk associated with the obligation.

The fair value of the earnout liability as of December 31, 2019 was adjusted to the amount that we settled in January 2020.

Key assumptions included new enrollments and volatility for the years ended December 31, 2019 and 2018 and our stock price at the time of payment.

Our earnout liability activities are summarized as follows (in thousands):

Balance as of December 31, 2019 $ 37,273

Settlements ( 37,273 )

Balance as of December 31, 2020 $ —

In February 2019, we made the first earnout payment to GoMedigap consisting of $ 9.5 million in cash and 294,608 shares of our common stock with a value of $ 17.3 million.

In January 2020, we made the second payment, which consisted of $ 8.8 million in cash and 294,608 shares of our common stock with a value of $ 28.5 million.

The $ 28.5 million and $ 17.3 million of the earnout payments in 2020 and 2019, respectively, were non-cash financing activities since common stock was used to settle these liabilities.

There was no activity related to earnout liabilities in 2021.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 – Equity

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We intend to use the net proceeds of the offering for general corporate purposes, including working capital.

Pursuant to the effective registration statement which was filed on December 17, 2018, and amended on January 22, 2019, we entered into an underwriting agreement to issue 2.4 million shares of common stock, which included the exercise in full of the underwriters’ option to purchase 0.4 million additional shares of common stock, at a price to the public of $ 48.50 per share in January 2019, for a total of 2.8 million shares issued in connection with the offering.

Net proceeds from the offering were approximately $ 126.1 million after deducting underwriting discounts, commissions and estimated expenses of the offering.

We used the net proceeds of the offering for general corporate purposes, including working capital.

Common Stock – On all matters submitted to our stockholders for vote, our common stockholders are entitled to one vote per share, voting together as a single class, and do not have cumulative voting rights.

Accordingly, the holders of a majority of the shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they so choose.

Subject to preferences that may apply to any shares of preferred stock outstanding, the holders of common stock are entitled to share equally in any dividends, when and if declared by our board of directors.

Subject to preferences that may apply to any shares

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of preferred stock outstanding, the holders of common stock are entitled to share equally in any dividends, when and if declared by our board of directors.

Upon the occurrence of a liquidation, dissolution or winding-up, the holders of common stock are entitled to share equally in all assets remaining after the payment of any liabilities and the liquidation preferences on any outstanding preferred stock.

Holders of common stock have no preemptive or conversion rights or other subscription rights and there are no redemption or sinking funds provisions applicable to the common stock.

Stock Repurchase Programs – We had no stock repurchase activity during the years ending December 31, 2022, 2021 or 2020.

As of December 31, 2022 and 2021, we had a total of 12.4 million and 12.0 million shares, respectively, held in treasury.

As of December 31, 2022 and 2021, we had 1.7 million and 1.3 million shares, respectively, in treasury that were previously surrendered by employees to satisfy tax withholding due in connection with the vesting of certain restricted stock units as well as 10.7 million shares previously repurchased under our past repurchase programs.

For accounting purposes, common stock repurchased under our stock repurchase programs is recorded based upon the settlement date of the applicable trade.

Such repurchased shares are held in treasury and are presented using the cost method.

2020 Employee Share Purchase Plan – Our board of directors adopted in March 2020 and our stockholders approved in June 2020 the 2020 Employee Stock Purchase Plan ("ESPP").

A total of 0.5 million shares of our common stock are available for sale under the ESPP.

Eligible employees can purchase shares of our common stock based on a percentage of their compensation subject to certain limits.

The purchase price per share is equal to the lower of 85 % of the fair market value of our common stock on the offering date or the purchase date.

Employees purchased 0.2 million and 0.1 million shares of common stock under our ESPP during the years ended December 31, 2022 and 2021, respectively.

No shares of common stock were purchased under our ESPP in 2020.

There were 0.2 million shares remaining for purchase under our ESPP as of December 31, 2022.

Equity Plans – On June 12, 2014, upon approval at the Annual Meeting of Stockholders, we adopted the 2014 Equity Incentive Plan (the “2014 Plan”) with 4.5 million shares authorized for issuance.

The 2014 Plan does not include an evergreen provision to automatically increase the number of shares available under it, and any increase in the number of shares authorized for issuance under the 2014 Plan requires stockholder approval.

Also, under the 2014 Plan the following shares are not recycled for future grant under the 2014 Plan:

(i) shares used in connection with the exercise of an option and/or stock appreciation right to pay the exercise price or purchase price of such award or satisfy applicable tax withholding obligations;

and (ii) the gross number of shares subject to stock appreciation rights that are exercised.

Furthermore, the 2014 Plan included a provision that prohibits repricing of outstanding stock options or stock appreciation rights and formalized and updated procedures to qualify awards as “performance-based” compensation under Section 162(m) of the Internal Revenue Code in order to preserve full tax deductibility of such awards.

Our stockholders approved an amendment to the 2014 Plan to increase the maximum number of shares that may be issued by 2.5 million shares in 2019 and by 3.0 million in 2022.

The 2014 Plan was further amended on September 29, 2022 to remove certain provisions permitting the Company to provide a reload option (as amended and restated, the "A&R 2014 Plan").

On September 22, 2021, the Company adopted an inducement plan (the “2021 Inducement Plan”), pursuant to which the Company reserved 0.4 million shares of its common stock (subject to customary adjustments in the event of a change in capital structure of the Company) to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, other than following a bona fide period of non-employment, as an inducement material to the individual's entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules (“Nasdaq Rules”).

In March 2022 and September 2022, the Company amended and restated its 2021 Inducement Plan to reserve an additional 0.5 million and 1.5 million shares of its common stock, respectively (as amended and restated, the "A&R 2021 Inducement Plan").

The 2021 Inducement Plan and its amendments were approved by our board of directors (the "Board") without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Rules, and the terms and conditions of the A&R 2021 Inducement Plan and awards to be granted thereunder are substantially similar to our stockholder-approved A&R 2014 Plan.

As of December 31, 2022, 1.1 million shares were issued under the A&R 2021 Inducement Plan.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Shares Reserved – We generally issue previously unissued common stock upon the exercise of stock options, the vesting of restricted stock units and upon granting of restricted common stock awards;

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Total shares reserved 7,871 3,967

Stock Plans – On June 12, 2014, upon approval at the Annual Meeting of Stockholders, we adopted the 2014 Equity Incentive Plan (the “2014 Plan”) with 4.5 million shares authorized for issuance.

The 2014 Plan does not include an evergreen provision to automatically increase the number of shares available under it and increases in the number of shares authorized for issuance under the 2014 Plan require stockholder approval.

Also, under the 2014 Plan the following shares are not recycled for future grant under the 2014 Plan:

(i) shares used in connection with the exercise of an option and/or stock appreciation right to pay the exercise price or purchase price of such award or satisfy applicable tax

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

withholding obligations;

and (ii) the gross number of shares subject to stock appreciation rights that are exercised.

In 2019, our stockholders approved an amendment to the 2014 Equity Incentive Plan to increase the maximum number of shares that may be issued by 2.5 million shares.

Our stock options granted under the 2014 Plan generally vest over four years at a rate of 25 % after one year and 1/48th per month thereafter.

Stock options granted under the 2014 Plan generally expire after seven years from the date of grant.

We have granted market-based and performance-based restricted stock units to our executive officers and certain members of our senior management team.

For market-based restricted stock units, each represents a contingent right to receive a share of our common stock upon the attainment of certain stock prices generally over a four-year performance period.

These awards generally vest on the one-year anniversary of the date of achievement, subject to the employee's continued service through the vesting date.

Compensation expense related to these awards is recognized over the requisite service period.

For performance-based restricted stock units, each represents a contingent right to receive a share of our common stock upon the attainment of certain financial targets over a trailing 12 month performance period.

These awards would vest in the middle of 2022, subject to achievement of performance targets and continued service through the vesting date.

Compensation expense related to these awards is recognized over the requisite service period if the performance criteria is probable of being achieved.

Achievement of these performance conditions was not probable as of December 31, 2021 and no expense has been recognized for these awards.

However, such determination is subject to the discretion of the Company's compensation committee and these awards remain outstanding as of December 31, 2021.

2021 Inducement Plan - On September 22, 2021, the Company adopted an inducement plan (the “2021 Inducement Plan”), pursuant to which the Company reserved 410,000 shares of its common stock (subject to customary adjustments in the event of a change in capital structure of the Company) to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, other than following a bona fide period of non-employment, as an inducement material to the individual's entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules (“Nasdaq Rules”).

The Inducement Plan was approved by our board of directors without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Rules, and the terms and conditions of the Inducement Plan and awards to be granted thereunder are substantially similar to our stockholder-approved Amended and Restated 2014 Equity Incentive Plan.

As of December 31, 2021, 390,584 shares were issued under the 2021 Inducement Plan.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes activity under our 2014 Plan and 2021 Inducement Plans for the year ended December 31, 2021 (in thousands):

Beginning balance (1)

The following table summarizes activity under our A&R 2014 Plan and A&R 2021 Inducement Plan for the year ended December 31, 2022 (in thousands):

Balance at December 31, 2021 (1)

Additional shares authorized 5,000

Restricted stock units granted (2)

Options granted ( 200 )

Restricted stock units cancelled (3)

Options cancelled 121

Ending balance 1,159

Balance at December 31, 2022 5,165

(1) Shares available for grant do not include treasury stock shares that could be granted if we determined to do so.

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(3) Includes cancelled restricted stock units with service, performance-based or market-based vesting criteria .

The following table summarizes stock option activity (in thousands, except weighted-average exercise price and weighted-average remaining contractual life data):

Stock-Based Compensation Expense – The following table summarizes stock-based compensation expense recognized for the years presented below (in thousands):

Year Ended December 31,

2022 2021 2020

Restricted stock units* $ 18,713 $ 30,512 $ 23,729

Common stock options 1,154 707 1,097

Employee stock purchase program 449 1,638 346

Total stock-based compensation expense $ 20,316 $ 32,857 $ 25,172

Related tax benefit recognized 4,747 7,746 5,984

* Amounts include market-based and performance-based RSUs .

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes stock-based compensation expense by operating function for the years presented below (in thousands):

Year Ended December 31,

2022 2021 2020

Marketing and advertising $ 1,901 $ 8,660 $ 5,102

Customer care and enrollment 2,096 2,836 2,723

Technology and content 6,015 10,013 5,460

General and administrative 10,304 11,348 11,887

Total stock-based compensation expense 20,316 32,857 25,172

Amount capitalized for internal-use software 1,885 2,621 2,007

Total stock-based compensation $ 22,201 $ 35,478 $ 27,179

For the years ended December 31, 2022, 2021 or 2020, there was a total of $ 1.9 million, $ 2.6 million and $ 2.0 million, respectively, of stock-based compensation expense capitalized in the internal-use software and website development costs classified under Other assets, which represents a noncash investing activity.

As of December 31, 2022, there was $ 2.0 million of total unamortized compensation cost, net of estimated forfeitures, related to stock options, expected to be recognized over a weighted average period of 2.2 years.

As of December 31, 2022, there was $ 28.4 million of total unamortized compensation cost, net of estimated forfeitures, related to restricted stock units, expected to be recognized over a weighted average period of 2.5 years.

As of December 31, 2022, there was $ 0.1 million of unrecognized compensation cost related to our employee stock purchase program, expected to be recognized over a weighted average period of 0.4 years.

During the three months ended December 31, 2020, we made an adjustment to reduce stock-based compensation expense by $ 5.9 million related to our performance-based restricted stock awards due to attainment of certain performance goals deemed not probable based on our latest estimates.

The impact of this adjustment was $ 0.23 and $ 0.22 per basic and diluted share, respectively, for the year ended December 31, 2020.

Stock Options – The following table summarizes stock option activity (in thousands, except weighted-average exercise price and weighted-average remaining contractual life data):

Number of Stock Options (1)

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Exercised ( 77 ) $ 13.60

Cancelled ( 31 ) $ 29.70

Forfeited ( 121 ) $ 20.28

Outstanding balance as of December 31, 2022 226 $ 39.07 5.3 $ —

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(2) The aggregate intrinsic value is calculated as the product between eHealth’s closing stock price as of December 31, 2022 and 2021 and the exercise price of in-the-money options as of those dates.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides information pertaining to our stock options for the years presented below (in thousands, except weighted-average fair values):

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2022 2021 2020

Weighted average fair value of options granted $ 41.03 n/a $ 33.19

Weighted average fair value of options granted n/a $ 41.03 n/a

Total fair value of options vested $ 835 $ 797 $ 1,367

Intrinsic value of options exercised $ 694 $ 5,182 $ 8,127

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes restricted stock unit activity (in thousands, except weighted-average grant date fair value and weighted-average remaining contractual life data):

There were no options granted during the years ended December 31, 2022 and 2020.

For the options granted during the year ended December 31, 2021, the fair value of stock options granted to employees was estimated using the Black-Scholes option-pricing model and with the following weighted average assumptions for the year presented below:

Year Ended December 31,

Expected term (years) 7.0

Expected volatility 69.1 %

Expected dividend yield —%

Risk-free interest rate 1.3 %

Restricted Stock Units – The following table summarizes restricted stock unit activity (in thousands, except weighted-average grant date fair value and weighted-average remaining contractual life data):

Number of Restricted Stock Units (1)

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Vested ( 1,019 ) $ 30.23

Cancelled ( 815 ) $ 74.54

Forfeited ( 1,308 ) $ 48.63

Outstanding as of December 31, 2022 2,480 $ 19.27 1.4 $ 12,004

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(2) The aggregate intrinsic value is calculated as the difference of our closing stock price as of December 31, 2022 and 2021 multiplied by the number of restricted stock units outstanding as of December 31, 2022 and 2021, respectively.

Stock Repurchase Programs – We had no stock repurchase activity during the year ended December 31, 2021.

In addition to 10.7 million shares repurchased under our previous repurchase programs, we have in treasury 1.3 million shares as of December 31, 2021 that were previously surrendered by employees to satisfy tax withholding due in connection with the vesting of certain restricted stock units.

As of December 31, 2021 and 2020, we had a total of 12.0 million shares and 11.8 million shares, respectively, held in treasury.

For accounting purposes, common stock repurchased under our stock repurchase programs is recorded based upon the settlement date of the applicable trade.

Such repurchased shares are held in treasury and are presented using the cost method.

Stock-Based Compensation Expense – The fair value of stock options granted to employees was estimated using the Black-Scholes option-pricing model and with the following weighted average assumptions for the years presented below, except for 2020 in which we did not have any options granted:

Year Ended December 31,

2021 2020 2019

Expected term (years) 7.0 n/a 4.3

Expected volatility 69.1 % n/a 65.3 %

Expected dividend yield — % n/a — %

Risk-free interest rate 1.3 % n/a 2.1 %

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The weighted-average fair value of the market-based restricted stock units was determined using the Monte Carlo simulation model using the following weighted average assumptions:

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Weighted-average grant date fair value $ 9.66 $ 46.36 $ 93.85

We estimate a forfeiture rate to calculate the stock-based compensation for our awards.

We evaluate the appropriateness of the forfeiture rate based on historical forfeiture, analysis of employee turnover, and other factors.

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

2020 Employee Share Purchase Plan – Our board of directors adopted in March 2020 and our stockholders approved in June 2020 the 2020 Employee Stock Purchase Plan (“ESPP”).

A total of 500,000 shares of our common stock are available for sale under the ESPP.

Eligible employees can purchase shares of our common stock based on a percentage of their compensation subject to certain limits.

The purchase price per share is equal to the lower of 85 % of the fair market value of our common stock on the offering date or the purchase date.

Employees purchased 99,801 shares of common stock under our ESPP in 2021.

No shares of common stock were purchased under our ESPP in 2020.

There were 400,199 shares remaining for purchase under our ESPP as of December 31, 2021.

During the year ended December 31, 2021, we recognized $ 1.6 million in compensation cost related to our ESPP in our consolidated statement of operations.

As of December 31, 2021, the unrecognized compensation cost related to our ESPP is $ 0.6 million, which is expected to be recognized over a weighted average period of 0.4 years.

The following table summarizes stock-based compensation expense recognized for the years presented below (in thousands):

Year Ended December 31,

2021 2020 2019

Common stock options $ 707 $ 1,097 $ 2,215

Restricted stock units* 30,512 23,729 20,355

Employee stock purchase plan 1,638 346 —

Total stock-based compensation expense $ 32,857 $ 25,172 $ 22,570

* Amounts include market-based and performance-based RSUs .

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes stock-based compensation expense by operating function for the years presented below (in thousands):

Year Ended December 31,

2021 2020 2019

Marketing and advertising $ 8,660 $ 5,102 $ 4,230

Customer care and enrollment 2,836 2,723 1,451

Technology and content 10,013 5,460 3,611

General and administrative 11,348 11,887 13,278

Total stock-based compensation expense 32,857 25,172 22,570

Amount capitalized for internal-use software 2,621 2,007 —

Total stock-based compensation $ 35,478 $ 27,179 $ 22,570

The impact of this adjustment was $ 0.23 and $ 0.22 per basic and diluted share, respectively, for the year ended December 31, 2020.

For the year ended December 31, 2021, there was a total of $ 2.6 million stock-based compensation expense capitalized in the internal-use software and website development costs classified under Other assets, which represents a noncash investing activity.

As of December 31, 2021, there was $ 1.0 million of total unamortized compensation cost, net of estimated forfeitures, related to stock options, expected to be recognized over a weighted average period of 3.2 years.

As of December 31, 2021, there was $ 51.7 million of total unamortized compensation cost, net of estimated forfeitures, related to restricted stock units, expected to be recognized over a weighted average period of 2.7 years.

Achievement of performance-based awards granted not achieved prior to 2022 was not probable as of December 31, 2022, and no expense has been recognized for these awards.

During 2022, a performance-based award was granted and was contingent upon the attainment of certain financial targets through December 31, 2022, subject to continued service through December 31, 2023.

As of December 31, 2022, the achievement of is award is considered probable at 100 % of target and as a result, we have begun recognizing expense for this award.

Note 6 – Convertible Preferred Stock

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PIK dividends are cumulative and are added to the Accrued Value (as defined below).

“Accrued Value” means, as of any date, with respect to any share of Series A preferred stock, the sum of the Stated Value per share plus, on each Dividend Payment Date, on a cumulative basis, all accrued PIK dividends on such shares that have

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

not previously compounded and been added to the Accrued Value.

The Series A preferred stock participates, on an as-converted basis in all dividends paid to the holders of our common stock.

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also has the right to nominate an additional individual to our board of directors if we fail to maintain certain levels of commissions receivable and liquidity as further discussed below.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Voting Rights – The Series A preferred stock will vote together with the common stock as a single class on all matters submitted to a vote of the holders of the common stock (subject to certain voting limitations set forth in, and the terms and conditions of, the Certificate of Designations).

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Holders of Series A preferred stock will have one vote per share on any matter on which the holders of the Series A preferred stock are entitled to vote separately as a class (subject to certain voting limitations set forth in, and the terms and conditions of, the certificate of designations).

Mandatory Conversion of the Series A Preferred Stock – At any time on or after the third anniversary of the Closing Date, if the volume-weighted average price per share of our common stock is greater than 167.5 % of the then-current Conversion Price for 20 consecutive trading days in a 30 -day trading day period, the Company will have the right to convert all, but not less than all, of the Series A preferred stock into common stock at a conversion rate with respect to each share of Series A Preferred

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock of (i) the Accrued Value plus accrued PIK dividends that have not yet been added to the Accrued Value, (ii) divided by the then applicable Conversion Price.

Covenants and Liquidity Requirements – As long as H.I.G.

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will no longer have these additional board nomination and consent rights if the Company is able to satisfy the minimum liquidity amount requirements in the Investment Agreement for any subsequent 12 consecutive months.

As of December 31, 2022, we were in compliance with the asset coverage ratio and minimum liquidity amounts as required in the Investment Agreement.

Our Series A preferred stock is considered temporary equity in our consolidated financial statements.

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No shares of Series A preferred stock have been converted and the Series A preferred stock was convertible into 3.2 million shares of common stock as of December 31, 2022.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the proceeds and changes to our Series A preferred stock (in thousands):

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Balance as of December 31, 2021 232,592

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accrued paid-in-kind dividends 19,357

Change in preferred stock redemption value 11,335

Balance as of December 31, 2022

Note 7 – Net Income (Loss) Per Share Attributable to Common Stockholders

Our Series A preferred stock is considered a participating security which requires the use of two-class method for the computation of basic and diluted per share amounts.

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share amounts):

The following table sets forth the computation of basic and diluted net income (loss) attributable to common stockholders per share (in thousands, except per share amounts):

Year Ended December 31,

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Dilutive effect of common stock — — 989

Shares used in diluted share calculation 26,781 27,014 24,539

Shares used in per share calculation — diluted 27,359 26,781 27,014

Net income (loss) attributable to common stockholders per share – diluted $ ( 4.36 ) $ ( 4.59 ) $ 1.68

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For each of the years ended December 31, 2021, 2020 and 2019, we had securities outstanding that could potentially dilute net income per share, but the shares from the assumed conversion or exercise of these securities were excluded in the computation of diluted net income per share as their effect would have been anti-dilutive.

The number of weighted-average outstanding anti-dilutive shares that were excluded from the computation of diluted net income per share consisted of the following (in thousands):

For each of the years ended December 31, 2022, 2021 and 2020, we had securities outstanding that could potentially dilute net income (loss) per share, but the shares from the assumed conversion or exercise of these securities were excluded in the computation of diluted net income (loss) per share as their effect would have been anti-dilutive.

The number of weighted-average outstanding anti-dilutive shares that were excluded from the computation of diluted net income (loss) per share consisted of the following (in thousands):

Year Ended December 31,

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Common stock options 271 333 —

Employee stock purchase program 65 29 —

Total 4,989 3,345 151

* Amounts include market-based and performance-based RSUs .

Note 8 – Commitments and Contingencies

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As the benefits of these agreements are experienced uniformly over the applicable contractual periods, we record the related service and licensing expenses on a straight-line basis, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements.

Our future minimum payments under non-cancellable contractual service and licensing obligations as of December 31, 2021 (in thousands):

Our future minimum payments under non-cancellable contractual service and licensing obligations as of December 31, 2022 were as follows (in thousands):

For the Years Ending December 31,

2022 $ 10,493

Total $ 10,530

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An estimated loss contingency is accrued in the consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

Legal proceedings or other contingencies could result in material costs, even if we ultimately prevail, and we may from time to time enter into settlements to resolve such litigation.

Legal costs incurred in connection with the resolution of claims, lawsuits and other contingencies generally are expensed as incurred.

We accrued approximately $ 1.2 million as of December 31, 2020 for amounts we believed to be payable for certain legal proceedings.

The accrued amount was settled and paid in January 2021.

There was no material additional litigation-related accrual recorded during the year ended or as of December 31, 2021.

Legal proceedings or other contingencies could result in material costs, even if we ultimately prevail.

Legal Proceedings

Securities Class Action – On April 8, 2020 and April 30, 2020, two purported class action lawsuits were filed against us, our chief executive officer, Scott N.

Flanders, our then-chief financial officer, Derek N.

Yung, and our then-chief operating officer, David K.

Francis (collectively, the “Defendants”), in the United States District Court for the Northern District of California.

There were no material additional litigation-related accruals recorded during the years ended or as of December 31, 2022 and 2021.

The following discussion is limited to the Company's material on-going legal proceedings:

Securities Class Action – On April 8, 2020 and April 30, 2020, two purported class action lawsuits were filed against the Company, its then-chief executive officer, Scott N.

Flanders, its then-chief financial officer, Derek N.

Yu ng, and its then-chief operating officer, David K.

Francis in the United States District Court for the Northern District of California.

The cases are captioned Patel v.

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eHealth, Inc.

et al., Case No.

4:20-cv-02967 (N.D.

The complaints allege, among other things, that we and Messrs.

Flanders, Yung and Francis made materially false and misleading statements and/or failed to disclose material information regarding our accounting and modeling assumptions, rate of member churn and our profitability during the alleged class period of March 19, 2018 to April 7, 2020.

The complaints allege that we and Messrs.

Flanders, Yung and Francis violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

The complaints allege, among other things, that the Company and Messrs.

Flanders, Yung and Francis made materially false and misleading statements and/or failed to disclose material information regarding the Company’s accounting and modeling assumptions, rate of member churn and the Company’s profitability during the alleged class period of March 19, 2018 to April 7, 2020.

The complaints allege that the specified defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

The complaints seek compensatory and (in the Patel lawsuit) punitive damages, attorneys’ fees and costs, and such other relief as the court deems proper.

On June 24, 2020, the court consolidated the above-referenced matters under the caption In re eHealth Securities Litig.

, Master File No.

On June 24, 2020, the Court consolidated the above-referenced matters under the caption In re eHealth Securities Litig., Master File No.

4:20-cv-02395-JST (N.D.

The Court also appointed a lead plaintiff and lead counsel for the consolidated matter.

The lead plaintiff filed an amended complaint on August 25, 2020, which the Defendants moved to dismiss on October 23, 2020.

The Defendants’ motion, which the plaintiff opposed, was granted in part and denied in part on August 12, 2021.

The court dismissed the plaintiff's claims to the extent premised upon alleged misrepresentations or omissions relating to churn, but denied the Defendants motion with respect to alleged misstatements regarding purported operating costs.

An Amended Complaint was filed on August 25, 2020, which Defendants moved to dismiss on October 23, 2020.

Defendants’ motion, which Plaintiff opposed, was granted in part and denied in part on August 12, 2021.

The Court dismissed Plaintiff’s claims to the extent premised upon alleged misrepresentations or omissions relating to churn, but denied Defendant’s motion with respect to alleged misstatements regarding purported operating costs.

On October 1, 2021, the Company filed an Answer denying in part and admitting in part the remaining allegations, and denying any wrongdoing.

On November 11, 2021, Plaintiff’s counsel filed a suggestion of death with respect to lead plaintiff Billy White.

The parties stipulated to a schedule for the lead plaintiff process to be re-opened, which was so-ordered by the Court on January 10, 2022.

Plaintiff’s counsel published notice regarding the appointment of a new lead plaintiff on January 17, 2022, and motions for appointment of lead plaintiff are due no later than 60 days after such publication.

Derivative Actions – On July 7, 2020 and October 13, 2020, two derivative lawsuits were filed against our chief executive officer, Mr.

Flanders, our then-chief financial officer, Mr.

Yung, our then-chief operating officer, Mr.

Francis, and the members of our board of directors at the time of filing of the complaints (collectively, the “Individual Defendants”), in the United States District Court for the Northern District of California and the Superior Court of California, County of Santa Clara.

The cases are captioned Chernet v.

On November 11, 2021, Plaintiff’s counsel filed a suggestion of death with respect to the lead plaintiff Billy White.

Plaintiff’s counsel published notice regarding the appointment of a new lead plaintiff on January 17, 2022.

On November 9, 2022, the Court appointed Chicago & Vicinity Laborers’ District Council Pension Fund as the new lead plaintiff and approved plaintiff’s selection of counsel.

On November 29, 2022, the new lead plaintiff and lead plaintiff’s counsel filed a supplement to the amended complaint, replacing the names of the prior lead plaintiff and counsel and incorporating new lead plaintiff’s previously filed certification.

On December 22, 2022, the Company, Mr.

Flanders, and Mr.

Yung moved for judgment on the pleadings as to the remaining claims.

Francis also moved for judgment on the pleadings the same day, and joined the motion by the Company, Mr.

Flanders, and Mr.

The motions for judgment on the pleadings were fully briefed by February 9, 2023, and are scheduled for a hearing on April 13, 2023.

Derivative Actions – On July 7, 2020, a derivative lawsuit captioned Chernet v.

Flanders et al., Case No.

3:20-cv-04477-SK (N.D.

Cal.), and Lincolnshire Police Pension Fund v.

Flanders et al.

Cal.) (the “Chernet” matter) was filed in the United States District Court for the Northern District of California.

On October 13, 2020, a derivative lawsuit captioned Lincolnshire Police Pension Fund v.

Flanders et al., Case No.

20CV371555 (Cal.

Ct.), and also name the Company as a nominal defendant.

A third derivative lawsuit was filed against the same defendants on October 5, 2021 in the

Ct.) (the “Lincolnshire” matter) was filed in the Superior Court of California, County of Santa Clara.

The complaints were brought against the Company's then-chief executive officer, Mr.

Flanders, its then-chief financial officer, Mr.

Yung, its then-chief operating officer, Mr.

Francis, and the then-current members of the Board (collectively, the “Individual Defendants”), and name the Company as a nominal

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

United States District Court for the Northern District of California, captioned Badwal v.

The complaints allege, among other things, that the Individual Defendants made or caused the Company to make materially false and misleading statements and/or failed to disclose material information regarding the Company’s accounting and modeling assumptions, rate of member churn, profitability and internal controls for the period of March 2018 through the present.

The Chernet and Lincolnshire complaints purport to assert claims for breach of fiduciary duty, unjust enrichment and waste of corporate assets.

The Chernet lawsuit also alleges that the Individual Defendants violated Sections 14(a), 10(b), and 20(a) of the Exchange Act and asserts claims for abuse of control and gross mismanagement.

The Chernet and Lincolnshire complaints seek damages, restitution, attorneys’ fees and costs, and certain measures with respect to the Company's corporate governance and internal procedures, and (in the Lincolnshire lawsuit) equitable and/or injunctive relief.

On August 12, 2020, the court stayed the Chernet matter pending the resolution of the then-anticipated motion to dismiss the consolidated securities class action.

On December 11, 2020, the court stayed the Lincolnshire matter, also pending the resolution of the motion to dismiss in the consolidated securities class action.

On October 5, 2021, a third derivative lawsuit, captioned Badwal v.

Flanders et al., Case No.

4:21-cv-07795 (N.D.

The complaints allege, among other things, that beginning on March 19, 2018, the Individual Defendants made or caused the Company to make materially false and misleading statements and/or failed to disclose material information regarding our accounting and modeling assumptions, rate of member churn, profitability, and internal controls.

The Chernet and Lincolnshire complaints purport to assert claims for breach of fiduciary duty, unjust enrichment and waste of corporate assets.

The Chernet lawsuit also alleges that the Individual Defendants violated Sections 14(a), 10(b), and 20(a) of the Securities Exchange Act of 1934, and asserts claims for abuse of control and gross mismanagement.

The Badwal complaint purports to assert a claim for breach of fiduciary duty, an insider trading claim, and violations of Section 14(a), 10(b) and 20D of the Securities Exchange Act of 1934.

The Chernet and Lincolnshire complaints seek damages, restitution, attorneys’ fees and costs, and certain measures with respect to our corporate governance and internal procedures, and (in the Lincolnshire lawsuit) equitable and/or injunctive relief.

Cal.) (the “Badwal” matter) was filed in the United States District Court for the Northern District of California.

The Badwal complaint purports to assert a claim for breach of fiduciary duty, an insider trading claim, and violations of Section 14(a), 10(b), and 21D of the Exchange Act.

The Badwal complaint seeks damages, declaratory relief, corporate governance measures, equitable and injunctive relief, restitution and disgorgement, and attorneys' fees and costs.

On August 10, 2020, the parties filed a Stipulation and Proposed Order in the Chernet matter to stay the action until and through the resolution of the Defendants' anticipated motion to dismiss the consolidated securities class action, and filed a similar stipulation in the Lincolnshire matter on December 11, 2020.

The Chernet stipulation was granted by the court on August 12, 2020 and the Lincolnshire stipulation on December 11, 2020.

In December 2021, the parties entered into a stipulation to further stay the Badwal and Chernet actions pending the appointment of a lead plaintiff in the consolidated action, which was so ordered by the Court on December 14, 2021.

On November 29, 2021, the federal court consolidated the Chernet and Badwal matters under the caption In re eHealth, Inc.

Stockholder Derivative Litigation (the “Federal Derivative Action”).

On August 12, 2021, the court granted-in-part and denied-in-part defendants’ motion to dismiss the securities class action.

In December 2021, the parties entered into a stipulation to further stay the Federal Derivative Action pending the appointment of a new lead plaintiff in the securities class action, which was so ordered by the court on December 14, 2021.

As discussed above, November 9, 2022, the court appointed a new lead plaintiff in the securities class action.

On December 9, 2022, plaintiffs in the Federal Derivative Action filed a verified consolidated stockholder derivative complaint on behalf of the Company against certain current and former members of its Board of Directors and certain of its officers.

The complaint alleges breaches of fiduciary duties, insider trading, and violations of Sections 14(a), 10(b), 21D of the Exchange Act.

The complaint seeks damages, declaratory relief, corporate governance measures, equitable and injunctive relief, restitution and disgorgement, and attorneys’ fees and costs.

On January 3, 2023, pursuant to a joint stipulation, the court ordered all proceedings in the Federal Derivative Action stayed pending the resolution of the securities class action.

EHEALTH, INC.

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Segment profit (loss)

Medicare segment profit (loss) (1)

$ ( 9,873 ) $ ( 12,079 ) $ 108,787

Individual, Family and Small Business segment profit (1)

Individual, Family and Small Business (1)

21,438 45,705 40,315

Total segment profit (loss) 33,626 149,102 182,422

Segment profit 11,565 33,626 149,102

Corporate ( 53,238 ) ( 56,325 ) ( 57,664 )

2 unchanged sentences

( 21,108 ) ( 18,331 ) ( 11,450 )

Change in fair value of earnout liability — — ( 24,079 )

Impairment charges ( 46,344 ) — —

Restructuring and reorganization charges ( 4,878 ) — —

Impairment, restructuring and other charges ( 19,616 ) ( 51,222 ) —

Amortization of intangible assets — ( 536 ) ( 1,493 )

Other income, net 755 666 $ 2,090

Other income (expense), net ( 3,676 ) 755 666

Income (loss) before income taxes $ ( 106,389 ) $ ( 124,890 ) $ 53,989

(1) During the first quarter of 2021, we revised the calculation of segment profit by excluding amortization of capitalized software development costs to enhance comparability of our financial metrics with peer companies.

The amortization of capitalized software were $ 12.9 million, $ 7.8 million and $ 3.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The amortization of capitalized software was $ 17.3 million, $ 12.9 million, and $ 7.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.

(2) Depreciation and amortization has been adjusted to include amortization of software development costs.

1 unchanged sentence

With the exception of contract assets – commissions receivable, which is presented by segment in Note 3 – Supplemental Financial Statement Information, our CODM does not separately evaluate assets by segment, and therefore assets by segment are not presented.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Geographic Information

Our long-lived assets consist primarily of property and equipment and internally-developed software.

Our long-lived assets primarily consist of property and equipment and internally-developed software.

Our long-lived assets are attributed to the geographic location in which they are located.

4 unchanged sentences

Total $ 38,296 $ 45,729

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Significant Customers

3 unchanged sentences

2022 2021 2020

Humana 23 % 19 % 22 %

UnitedHealthcare (1)

22 % 20 % 21 %

Humana 19 % 22 % 26 %

12 % 18 % 15 %

Centene (1)(2)

8 % 12 % 10 %

(1) Percentages include the carriers' subsidiaries.

(2) Centene Corporation acquired WellCare Health Plans, Inc.

in 2020, and the revenue of WellCare is included in the percentage calculation for years ended December 31, 2021 and 2020.

Note 10 – Leases

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We determine if an arrangement is a lease at inception.

Our lease portfolio is primarily composed of operating leases for corporate offices and as of January 1, 2019 with the adoption of the new guidance for leasing arrangements, are included in operating lease right-of-use (“ROU”) assets and lease liabilities on our consolidated balance sheets.

Our lease portfolio is primarily composed of operating leases for corporate offices and are included in operating lease right-of-use (“ROU”) assets and lease liabilities on our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

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Certain of these leases have free or escalating rent payment provisions.

We recognize lease expense on a straight-line basis over the terms

We recognize lease expense on a straight-line basis over the terms of the leases, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements.

Most leases include options to renew, and the exercise of these options is at our discretion.

In August 2022, we executed and commenced the sublease of our office space located in Santa Clara, California, which will run through the remaining term of the primary lease, March 19, 2029.

This sublease is expected to generate approximately $ 13.5 million in sublease income over the sublease term.

Sublease income is recorded on a straight-line basis as a reduction of lease expense in our Consolidated Statements of Comprehensive Income (Loss).

Additionally, we have a sublease agreement for our office space in Mountain View, California to sublease to a third party, which commenced in December 2018 and will expire in July 2023.

We recorded $ 1.0 million, $ 1.2 million and $ 1.2 million of sublease income during the years ended December 31, 2022, 2021 and 2020, respectively.

We test right-of-use assets when impairment indicators are present in accordance with the asset impairment provisions of Accounting Standards Codification 360, Property, Plant and Equipment ("ASC 360").

The sublease of our Santa Clara, California office space triggered impairment testing for the underlying right-of-use asset as the expected sublease income is less than the remaining head lease obligation.

Furthermore, we became a virtual-first workplace in the third quarter of 2022 and as a result, we vacated a number of our leased office spaces during the fourth quarter of 2022.

We evaluated these right-of-use assets, including leasehold improvements, furniture and fixtures and computer equipment for impairment under ASC 360.

For our impairment tests, we utilized an income approach to value the asset group by performing a discounted cash flow analysis and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of the leases, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements.

Most leases include options to renew, and the exercise of these options is at our discretion.

determined that the net carrying value exceeded the estimated discounted future cash flows based on current market conditions.

As a result, we recorded an $ 11.8 million impairment charge related to operating lease right-of-use assets and property, plant and equipment, which was reflected in the "Impairment, restructuring and other charges" line in our Consolidated Statements of Comprehensive Income (Loss) for the year ended December 31, 2022.

See Note 11 — Impairment, Restructuring and Other Charges for further discussion about our asset impairment charges.

Total operating lease expenses were $ 7.8 million, $ 7.7 million, and $ 7.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.

We have a sublease agreement for our office space in Mountain View, California to sublease to a third party, which commenced in December 2018 and will expire in July 2023.

We recorded $ 1.2 million and $ 1.2 million of sublease income during the years ended December 31, 2021 and 2020, respectively.

The following table summarizes the lease-related assets and liabilities recorded on the Consolidated Balance Sheet for the periods presented below (in thousands):

December 31, 2021 December 31, 2020

Operating lease right-of-use assets $ 37,373 $ 42,558

Lease liabilities – current $ 5,543 $ 5,192

Lease liabilities – non-current 35,826 41,369

Total operating lease liabilities $ 41,369 $ 46,561

Supplemental information related to leases are as follows (in thousands):

December 31, 2021 December 31, 2020

Operating cash outflows from operating leases $ 7,640 $ 7,090

Year Ended December 31,

Cash paid for amounts included in the measurement of operating lease liabilities $ 7,697 $ 7,640

Non-cash investing activities relating to operating lease right-of-use assets $ 3,493 $ —

December 31, 2022 December 31, 2021

Weighted-average remaining lease term of operating leases 5.7 years 6.3 years

6 unchanged sentences

Total $ 40,673

(1) Noncancellable sublease income for the years ending December 31, 2022 and 2023 of $ 0.4 million and $ 0.4 million, respectively, is not included in the table above.

(1) Noncancellable sublease rent payments for the years ending December 31, 2023, 2024, 2025, 2026, 2027, and thereafter of $ 1.6 million, $ 2.1 million, $ 2.2 million, $ 2.2 million, $ 2.3 million, and $ 2.8 million, respectively, are not included in the table above.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11 – Restructuring and Reorganization

Our restructuring and reorganization costs and liabilities consist primarily of severance, transition and other related costs.

Note 11 – Impairment, Restructuring and Other Charges

The following table details impairment, restructuring and other charges for each of the periods presented:

Year Ended December 31,

2022 2021 2020

Asset impairment charges $ 12,102 $ — $ —

Restructuring and reorganization charges 7,514 4,878 —

Goodwill and intangible assets impairment — 46,344 —

Impairment, restructuring and other charges $ 19,616 $ 51,222 $ —

Our restructuring and reorganization charges and liabilities consist primarily of severance, transition and other related costs.

The following table summarizes the cash-based restructuring and reorganization related liabilities (in thousands):

3 unchanged sentences

Payments ( 7,294 )

Adjustment ( 28 )

Ending balance $ 366

In February 2021, we eliminated 89 full-time positions, primarily in the United States, representing approximately 5 % of our workforce, primarily within our customer care and enrollment group, and to a lesser extent, in our marketing and advertising, technology and content, and general and administrative groups.

Total pre-tax restructuring charges were $ 2.4 million for the year ended December 31, 2021, which primarily related to employee termination benefits.

Substantially all of the restructuring charges resulted in cash expenditures.

The restructuring activities were completed by March 31, 2021.

Asset Impairments

For the year ended December 31, 2022, we recognized a non-cash, pre-tax asset impairment charge of $ 12.1 million related to the subleasing and vacating of several of our office spaces in the "Impairment, restructuring and other charges" line in our Consolidated Statements of Comprehensive Income (Loss).

In the third quarter of 2022, we recorded a $ 3.4 million of pre-tax asset impairment charge related to our office space in Santa Clara, California.

The charge consisted of $ 2.5 million of operating lease right-of-use assets impairment and $ 0.9 million of property, plant and equipment impairment.

In the fourth quarter of 2022, we recorded an additional $ 8.4 million of impairment charges due to vacating a number of our leased office spaces as a result of becoming a remote first workplace.

The fourth quarter impairment charge consisted of $ 7.1 million of operating lease right-of-use assets impairment and $ 1.3 million of property, plant and equipment impairment.

Restructuring

In the first half of 2022, we eliminated 339 full-time positions, which represented approximately 14 % of our workforce, primarily within our customer care and enrollment group, and to a lesser extent, in our marketing and advertising, technology and content, and general and administrative groups, and, as a result, recorded pre-tax restructuring charges of $ 6.2 million in the "Impairment, restructuring and other charges" line in our Consolidated Statements of Comprehensive Income (Loss).

In the second half of 2022, we incurred pre-tax restructuring charges of $ 1.3 million for additional eliminated positions.

Substantially all of the restructuring charges have been settled in cash and no equity awards were modified.

As of December 31, 2022, the restructuring accrual of $ 0.4 million is recorded in other current liabilities on our Consolidated Balance Sheets.

In September 2021, we announced the transition of our chief executive officer.

2 unchanged sentences

Stock-based compensation expense for the year ended December 31, 2021 was impacted by a $ 4.1 million credit related to forfeited equity awards due to Mr.

Flanders' separation, which was included in general and administrative expenses on our Consolidated Statement of Comprehensive Income (Loss).

Note 12 – Debt

On September 17, 2018, we entered into a Credit Agreement with Royal Bank of Canada (“RBC”), as administrative agent and collateral agent (the “Credit Agreement”).

The Credit Agreement provides for a $ 40.0 million secured asset-backed revolving credit facility with a $ 5.0 million letter of credit sub-facility.

On December 20, 2019, we amended our revolving credit facility agreement with RBC (the “Amendment”) and increased the borrowing amount from $ 40.0 to $ 75.0 million.

The maturity date has been extended to December 20, 2022.

The borrowing base under the Credit Agreement is comprised of an amount equal to (a) the lesser of (i) eighty percent ( 80 %) of Eligible Commissions Receivables (as defined in the Credit Agreement) we actually collected during the immediately preceding period of three months or (ii) eighty percent 80 %) of our Eligible Commission Receivables for the immediately succeeding period of three months, plus (b) fifty percent ( 50 %) of our Eligible Commission Receivables for the immediately succeeding period of six months (excluding the immediately succeeding period of three months), in each case subject to reserves established by RBC (the “Borrowing Base”).

The proceeds of the loans under the Credit Agreement may be used for working capital and general corporate purposes.

The Borrowers have the right to prepay the loans under the Credit Agreement in whole or in part at any time without penalty.

Subject to availability under the Borrowing Base, amounts repaid may be reborrowed.

Flanders' separation, which was included in the "General and administrative" line in our Consolidated Statement of Comprehensive Income (Loss).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts not borrowed under the Credit Agreement will be subject to a commitment fee of 0.5 % per annum on the daily unused portion of the credit facility, to be paid in arrears on the first business day of each calendar quarter.

At the closing of the Credit Agreement, we paid a one-time facility fee of 1.75 % of the total commitments of $ 40.0 million.

We also paid a one-time closing fee of 0.5 % of the new commitment of $ 75.0 million in connection with the Amendment.

The Company is also obligated to pay other customary administration fees for a credit facility of this size and type.

The availability under the credit facility was up to the lesser of $ 40.0 million or the Borrowing Base in the original credit agreement.

The Amendment increased the availability up to the lesser of $ 75.0 million or the Borrowing Base, which may be reduced from time to time pursuant to the Credit Agreement.

Financial covenants in the original Credit Agreement required that we maintain Excess Availability (as defined in the Credit Agreement) at or above $ 6.0 million at any time.

The Amendment also changed the financial covenants to require us to maintain at least $ 6.0 million of Excess Availability at all times or, if greater, up to $ 11.3 million depending on our borrowing base as determined by eligible past and future commission receivables.

In addition, the Amendment also included changes in the payment conditions to, among other things, require us to have at least $ 10.0 million of liquidity or, if greater, up to $ 18.8 million depending on our borrowing base as determined by eligible past and future commission receivables, in order for us to make certain permitted acquisitions, investments, distributions and payments of indebtedness.

The Amendment also stated the seasonal amount thresholds used in connection with the cash dominion and field examination covenants in the Credit Agreement.

We incurred $ 1.2 million of issuance costs in connection with the Credit Agreement, which were capitalized as part of Other assets on our Consolidated Balance Sheet in the period we entered into the Credit Agreement.

The Amendment did not change the interest rate.

In connection with this Amendment, we incurred closing costs totaling $ 0.5 million, which were capitalized and recorded as Other assets on our Consolidated Balance Sheet as of December 31, 2019.

The remaining balance of unamortized issuance costs was $ 0.4 million and $ 0.7 million as of December 31, 2021 and 2020, respectively.

As of December 31, 2021, we had no outstanding borrowings under our revolving credit facility.

On February 28, 2022, we terminated our Credit Agreement with RBC and entered into a term loan credit agreement with Blue Torch Finance LLC, as administrative agent and collateral agent, and the other lenders party thereto (the “Term Loan Credit Agreement”).

This loan agreement provides for a $ 70.0 million secured term loan, which term loans were made available to us on February 28, 2022.

The proceeds of the loans under the Term Loan Credit Agreement may be used for working capital and general corporate purposes, refinance our Credit Agreement with RBC and to pay fees and expenses in connection with the entry into the Term Loan Credit Agreement.

We expect to incur closing costs totaling approximately $ 5.0 million, which will be amortized over the term of this agreement.

Total pre-tax restructuring charges were $ 2.4 million for the year ended December 31, 2021, which primarily related to employee termination benefits.

Substantially all of the restructuring charges resulted in cash expenditures.

The restructuring activities were completed by March 31, 2021.

Goodwill and Intangible Asset Impairments

For the year ended December 31, 2021, we performed an impairment analysis over our goodwill, which included both qualitative and quantitative assessments.

Our goodwill assessment included a comparison of carrying value to an estimated fair value using a market approach based on our market capitalization.

No goodwill impairment was recorded in 2020.

For the year ended December 31, 2021, we performed an impairment analysis over our intangible assets.

Our impairment of intangible assets assessment included a recoverability test for definite-lived intangible assets and a comparison of carrying value to the estimated fair value.

Therefore, we recorded a $ 6.1 million impairment charge on our Consolidated Statements of Comprehensive Income (Loss) related to our intangible assets.

No intangible asset impairment was identified during the years ended December 31, 2022 or 2020.

Note 12 – Debt

On February 28, 2022, we entered into a term loan credit agreement with Blue Torch Finance LLC, as administrative agent and collateral agent, and other lenders party thereto (the "Original Credit Agreement").

On August 16, 2022, we entered into an Amendment (the "Amendment") to the Original Credit Agreement (as amended by the Amendment, the "Credit Agreement").

The Amendment replaced the LIBOR-based Adjusted Euro currency Rate (as defined in the Original Credit Agreement) with Adjusted Term SOFR (as defined in the Amendment) as a reference rate for loans under the Credit Agreement.

The Credit Agreement provides for a $ 70.0 million secured term loan credit facility.

The proceeds of the loans under the Credit Agreement may be used for working capital and general corporate purposes, to refinance our credit agreement with Royal Bank of Canada ("RBC") and to pay fees and expenses in connection with the entry into the Credit Agreement.

The Original Credit Agreement bore interest, at our option, at either a rate based on the LIBOR for the applicable interest period or a base rate, in each case plus a margin.

The base rate was the highest of the prime rate, the federal funds rates plus 0.50 % and one month adjusted LIBOR plus 1.00 %.

The margin was 7.50 % for LIBOR loans and 6.50 % for base rate loans.

After the Amendment, the loans under the Credit Agreement bear interest, at our option, at either a rate based on the Adjusted Term SOFR or a base rate, in each case plus a margin.

The base rate is the highest of the prime rate, the federal funds rate plus 0.50 % and three-month Adjusted Term SOFR plus 1.00 %.

The margin is 7.50 % for Adjusted Term SOFR loans and 6.50 % for base rate loans.

As of December 31, 2022, the interest rate was 12.16 %.

For the year ended December 31, 2022, we incurred interest expense of $ 5.9 million.

We incurred no interest expense for the years ended December 31, 2021 or 2020.

Furthermore, as part of the agreement, we incur a $ 0.3 million fee per annum, payable annually.

The outstanding obligations under the Credit Agreement are payable in full on the maturity date.

The Credit Agreement matures in February 2025.

We have the right to prepay the loans under the Credit Agreement in whole or in part at any time, subject, in the case of certain mandatory prepayments or any voluntary prepayment of the loans under the Credit Agreement after February 28, 2023, to an exit fee.

Our obligations under the Credit Agreement are guaranteed by certain of our material domestic subsidiaries and substantially all of our assets and the assets of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

such guarantors, in each case, subject to customary exclusion.

We are obligated to pay administration fees under the Credit Agreement.

Financial covenants in the Credit Agreement require that we maintain Liquidity (as defined in the Credit Agreement) at or above $ 25.0 million as of the last calendar day of any month.

The Credit Agreement also requires that the outstanding amount as of the last calendar day of any month be less than 50 % of our total contract assets - commissions receivables (i.e., both current and non-current commissions receivables).

As of December 31, 2022, we were in compliance with our loan covenants.

In the first quarter of 2022, we obtained a $ 70.0 million secured term loan under our Credit Agreement.

We incurred closing costs totaling $ 5.1 million, which were recorded as a direct deduction from the face of the loan on our Consolidated Balance Sheet.

There was $ 3.9 million of unamortized issuance costs as of December 31, 2022.

The carrying value of the term loan approximates the fair value, based on Level 2 inputs (observable market prices in less than active markets), as the interest rate is variable over the selected interest period and is similar to current rates at which we can borrow funds.

The carrying value of the loan was $ 66.1 million as of December 31, 2022.

On September 17, 2018, we entered into a $ 40.0 million credit agreement with RBC as administrative agent and collateral agent and incurred $ 1.2 million of issuance costs which were capitalized as part of other assets on our Consolidated Balance Sheets.

On December 20, 2019, we amended our revolving credit facility agreement with RBC which increased the borrowing amount from $ 40.0 million to $ 75.0 million and incurred $ 0.5 million of issuance costs which were capitalized as part of other assets on our Consolidated Balance Sheets.

The maturity date was extended to December 20, 2022.

As of December 31, 2021, the remaining balance of unamortized issuance costs was $ 0.4 million and we had no outstanding borrowings under our agreement with RBC.

During the first quarter of 2022, we terminated our credit agreement with RBC and wrote off our remaining related debt issuance cost of $ 0.4 million.

We had no outstanding borrowings under our agreement with RBC at the time of termination.

Note 13 – Income Taxes

The components of our income (loss) before provision (benefit) for income taxes were as follows (in thousands):

The components of our income (loss) before provision for (benefit from) income taxes were as follows (in thousands):

Year Ended December 31,

15 unchanged sentences

Provision for (benefit from) income taxes $ ( 17,667 ) $ ( 20,515 ) $ 8,539

In 2021, we had a worldwide consolidated loss before tax of $ 124.9 million, and a tax benefit of $ 20.5 million, with an annual effective tax rate of 16.4 %.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The effective tax rate of our provision for income taxes differs from the federal statutory rate as follows:

The effective tax rate of our provision for (benefit from) income taxes differs from the federal statutory rate as follows:

Year Ended December 31,

2 unchanged sentences

State income taxes, net of federal benefit 2.1 0.4 2.2

Stock-based compensation shortfalls (windfalls), net ( 1.5 ) ( 7.9 ) ( 7.0 )

Stock-based compensation windfalls, net ( 4.5 ) ( 1.5 ) ( 7.9 )

Non-deductible stock-based compensation ( 0.7 ) ( 0.8 ) 2.2

3 unchanged sentences

Foreign income tax and income inclusion ( 0.2 ) ( 0.1 ) ( 0.7 )

Non-deductible parking expense — — 0.2

Goodwill impairment — ( 2.4 ) —

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Net operating losses $ 154,832 $ 149,689

Accruals and reserves 1,628 2,557

Operating lease liabilities 10,146 11,368

Intangible assets 13,618 7,480

Research and development credits carryovers 11,384 9,954

Operating lease liabilities 10,015 10,146

Accruals and reserves 3,411 1,628

Stock-based compensation 1,387 4,642

9 unchanged sentences

Net deferred tax liabilities $ ( 32,359 ) $ ( 50,796 )

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Assessing the realizability of our deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible.

1 unchanged sentence

These assumptions require significant judgment about future taxable income.

As a result, the amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

result, the amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.

During the year ended December 31, 2022, a valuation allowance of $ 4.3 million was recorded against California net deferred tax assets.

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These ownership change limitations may limit the amount of net operating loss carryforwards and other tax attributes that can be utilized annually to offset future taxable income and tax, respectively.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the beginning and ending amount of our unrecognized tax benefits is as follows (in thousands):

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As of December 31, 2021, the total amount of gross unrecognized tax benefits was $ 8.6 million, of which $ 7.6 million, if recognized, would affect our effective tax rate.

We record interest and penalties related to unrecognized tax benefits in income tax expense.

As of December 31, 2021, the amount accrued for estimated interest related to uncertain tax positions was $ 0.1 million and the amount accrued for estimated penalties related to uncertain tax positions was $ 0.1 million.

Included in the balance of income tax liabilities and accrued interest as of December 31, 2021 is an immaterial amount related to tax positions for which it is reasonably possible that the statute of limitations will expire in various jurisdictions and income tax exams will close within the next 12 months.

We record interest and penalties related to unrecognized tax benefits in provision for (benefit from) income taxes.

As of December 31, 2022, the amount accrued for estimated interest related to uncertain tax positions was immaterial.

We did not record an accrual for penalties.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022, we had an immaterial amount related to tax positions for which it is reasonably possible that the statute of limitations will expire in various jurisdictions and income tax exams will close within the next 12 months.

We are subject to taxation in various jurisdictions, including federal, state and foreign.

Our federal and state income tax returns are generally not subject to examination by taxing authorities for fiscal years before 2003 due to our credit carryforwards.

The Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law on March 27, 2020.

The business tax provisions of the CARES Act include temporary changes to income based tax laws, including the ability to utilize net operating losses, interest expense deductions, alternative minimum tax credit refunds, charitable contributions, and depreciation of qualified improvement property.

The income tax provisions of the CARES Act did not have a material impact on our Consolidated Financial Statements for the year ended December 31, 2020.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data