# United States
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

# FORM 10-Q

|x | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the
quarterly period ended ........................... March 31, 2006                                                              
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  | OR                                                                                                                                                                                                                            
|o | TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from .................... to .................... Commission file number ........................... 0-13591

HEALTHAXIS
INC.(Exact name of registrant as specified in its charter)

|**Pennsylvania**
    (State or other jurisdiction of incorporation or organization) | **23-2214195**
    (I.R.S. Employer Identification No.)
|----------------------------------------------------------------------------------- | -------------------------------------------------------

7301 N. State Highway 161, Suite 300,
Irving, Texas 75039(Address of principal executive offices)(Zip Code)

Registrant's
telephone number, including area code: (972) 443-5000

Former name,
former address and former fiscal year, if changed since last report: N/A

Indicate
by check mark  whether the  Registrant  (1) has filed all reports  required to be filed
by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 during the preceding 12
months (or for such shorter  period that the  registrant  was required to file  such
reports), and (2) has been subject to such filing requirements for the past 90 days.   
x Yes   
o No

Indicate
by check mark whether the  registrant is a large  accelerated  filer,  an  accelerated
filer,  or a  non-accelerated  filer.  See definition of accelerated filer and
large accelerated filer in Rule 12b-2 of the Exchange Act.  (Check one):

|Large accelerated
filer o | Accelerated filer
o | Non-accelerated filer
x
|------------------------- | ------------------- | -----------------------

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). o Yes    
x No

Indicate the
number of  shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date: 6,088,855 shares of common stock, par value $.10,
outstanding as of May 5, 2006.

Page 1

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Healthaxis
Inc.

Table of
Contents

|                                      |  |                                                                                           | Page
|------------------------------------- |  | ----------------------------------------------------------------------------------------- | ----
|PART
        I  Financial Information | 
|                                      |  |                                                                                           |     
|Item 1.                               |  | Financial Statements                                                                      | 3   
|                                      |  | Consolidated Balance Sheets                                                               | 3   
|                                      |  | Consolidated Statements of Operations                                                     | 4   
|                                      |  | Consolidated Statements of Cash Flows                                                     | 5   
|                                      |  | Notes to Consolidated Financial Statements                                                | 6   
|                                      |  |                                                                                           |     
|Item 2.                               |  | Managements
    Discussion and Analysis of Financial Condition and Results of Operations | 10  
|                                      |  |                                                                                           |     
|Item 3.                               |  | Quantitative and Qualitative Disclosures About Market Risk                                | 13  
|                                      |  |                                                                                           |     
|Item 4.                               |  | Controls and Procedures                                                                   | 13  
|                                      |  |                                                                                           |     
|PART
        II  Other Information    | 
|                                      |  |                                                                                           |     
|Items 1-5                             |  |                                                                                           | 15  
|                                      |  |                                                                                           |     
|Item 6.                               |  | Exhibits                                                                                  | 15  
|                                      |  |                                                                                           |     
|Signatures                            |  |                                                                                           | 16  
|                                      |  |                                                                                           |     
|Exhibit Index                         |  |                                                                                           | 17  

Page 2

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## PART I.  FINANCIAL INFORMATION

Item 1.
Consolidated Financial Statements

# Healthaxis
Inc. and SubsidiariesConsolidated Balance Sheets

(In thousands
except share and per share data) (Unaudited)

|                                                                                                                                      |  | March
         31,
2006 |   | December 31,
  2005 |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | - | ------------------- | -
|**Assets**                                                                                                                            |  |                         |   |                     |  
|Current assets:                                                                                                                       |  |                         |   |                     |  
|Cash and cash equivalents                                                                                                             |  | $     3,862             |   | $     4,729         |  
|Accounts receivable, net of allowance for doubtful accounts of $7 each period                                                         |  | 2,732                   |   | 2,256               |  
|Prepaid expenses                                                                                                                      |  | 637                     |   | 628                 |  
|                                                                                                                                      |  |                         |   |                    
|Total current assets                                                                                                                  |  | 7,231                   |   | 7,613               |  
|                                                                                                                                      |  |                         |   |                     |  
|Property,
         equipment and software, less accumulated depreciation and amortization
         of $6,064 and $5,943, respectively |  | 1,730                   |   | 1,726               |  
|Contract start-up costs, less accumulated amortization of $1,755 and $1,681, respectively                                             |  | 773                     |   | 451                 |  
|Goodwill                                                                                                                              |  | 11,276                  |   | 11,276              |  
|Other assets                                                                                                                          |  | 109                     |   | 80                  |  
|                                                                                                                                      |  |                         |   |                    
|Total assets                                                                                                                          |  | $   21,119              |   | $   21,146          |  
|                                                                                                                                      |  |                         |   |                    
|                                                                                                                                      |  |                         |   |                     |  
|**Liabilities
and Stockholders Equity**                                                                                              |  |                         |   |                     |  
|                                                                                                                                      |  |                         |  
|Current liabilities:                                                                                                                  |  |                         |   |                     |  
|Accounts payable                                                                                                                      |  | $     1,687             |   | $     1,318         |  
|Accrued liabilities                                                                                                                   |  | 705                     |   | 788                 |  
|Deferred revenues                                                                                                                     |  | 995                     |   | 626                 |  
|Notes payable, current portion                                                                                                        |  | 1,862                   |   | 2,028               |  
|Current portion, post retirement and employment liabilities                                                                           |  | 106                     |   | 106                 |  
|Current portion, capital lease obligations                                                                                            |  | 222                     |   | 234                 |  
|                                                                                                                                      |  |                         |   |                    
|Total current liabilities                                                                                                             |  | 5,577                   |   | 5,100               |  
|                                                                                                                                      |  |                         |   |                     |  
|Post retirement and employment liabilities                                                                                            |  | 791                     |   | 793                 |  
|Capital lease obligations                                                                                                             |  |                        |   | 40                  |  
|Other liabilities                                                                                                                     |  | 406                     |   | 406                 |  
|                                                                                                                                      |  |                         |   |                    
|Total liabilities                                                                                                                     |  | 6,774                   |   | 6,339               |  
|                                                                                                                                      |  |                         |   |                     |  
|Commitments and contingencies                                                                                                         |  |                         |   |                     |  
|                                                                                                                                      |  |                         |   |                     |  
|Stockholders Equity:                                                                                                                 |  |                         |   |                     |  
|Preferred stock, par value $1.00:  authorized 100,000,000 shares:                                                                     |  |                         |   |                     |  
|Series
         A Convertible, 2,751,658 shares issued and outstanding each period (no liquidation
         preference)               |  | 2,752                   |   | 2,752               |  
|Common stock, par value $.10:  authorized 1,900,000,000 shares, issued and outstanding 6,088,855 shares each period                   |  | 609                     |   | 609                 |  
|Note receivable from employees                                                                                                        |  | (23                     | ) | (23                 | )
|Additional paid-in capital                                                                                                            |  | 448,571                 |   | 448,571             |  
|Accumulated deficit                                                                                                                   |  | (437,564                | ) | (437,102            | )
|                                                                                                                                      |  |                         |   |                    
|Total stockholders equity                                                                                                            |  | 14,345                  |   | 14,807              |  
|                                                                                                                                      |  |                         |   |                    
|Total liabilities and stockholders equity                                                                                            |  | $   21,119              |   | $   21,146          |  
|                                                                                                                                      |  |                         |   |                    

See notes to
unaudited consolidated financial statements.

Page 3

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# Healthaxis
Inc. and SubsidiariesConsolidated Statements of Operations

(In
thousands, except share and per share data) (Unaudited)

|                                                                                                                    | Three Months Ended
|------------------------------------------------------------------------------------------------------------------- | ------------------
|
|Revenue                                                                                                             |                   
|                                                                                                                    |                   
|Expenses:                                                                                                           |                   
|Cost of revenues                                                                                                    |                   
|Sales and marketing                                                                                                 |                   
|General and administrative                                                                                          |                   
|Amortization
      of intangibles                                                                                   |                   
|Total expenses                                                                                                      |                   
|                                                                                                                    |                   
|                                                                                                                    |                   
|Operating loss                                                                                                      |                   
|                                                                                                                    |                   
|                                                                                                                    |                   
|Interest
      and other income, net                                                                                |                   
|Interest expense                                                                                                    |                   
|                                                                                                                    |                   
|                                                                                                                    |                   
|Net loss                                                                                                            |                   
|                                                                                                                    |                   
|                                                                                                                    |                   
|Net loss per share of common stock (basic and diluted)                                                              |                   
|                                                                                                                    |                   
|                                                                                                                    |                   
|Weighted
         average common shares and equivalents used in computing basic and diluted
         loss per share |                   

See notes to
unaudited consolidated financial statements.

Page 4

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# Healthaxis
Inc. and SubsidiariesConsolidated Statements of Cash Flows

(In
thousands) (Unaudited)

|                                                                                     | Three Months Ended
|------------------------------------------------------------------------------------ | ------------------
|
|Net loss                                                                             |                   
|Adjustments
         to reconcile net loss to net cash used in operating activities: |                   
|Depreciation and amortization                                                        |                   
|Loss on disposition of assets                                                        |                   
|Change in:                                                                           |                   
|Accounts receivable                                                                  |                   
|Prepaid expenses and other current assets                                            |                   
|Accounts payable and accrued liabilities                                             |                   
|Deferred revenues                                                                    |                   
|Other liabilities                                                                    |                   
|                                                                                     |                   
|Net cash used in operating activities                                                |                   
|                                                                                     |                   
|                                                                                     |                   
|**Cash flows from investing activities**                                             |                   
|Investment in capitalized software and contract start-up costs                       |                   
|Purchases of property, equipment and software                                        |                   
|                                                                                     |                   
|Net cash used in investing activities                                                |                   
|                                                                                     |                   
|                                                                                     |                   
|**Cash flows from financing activities**                                             |                   
|Net cash used in financing activities                                                |                   
|                                                                                     |                   
|Decrease in cash and cash equivalents                                                |                   
|Cash and cash equivalents, beginning of period                                       |                   
|                                                                                     |                   
|Cash and cash equivalents, end of period                                             |                   
|                                                                                     |                   
|                                                                                     |                   
|Non-cash financing activities                                                        |                   
|Accounts
         receivable applied to note and interest payable in Lieu of cash    |                   

See notes to
unaudited consolidated financial statements.

Page 5

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# Healthaxis
Inc. and SubsidiariesNotes to Unaudited Consolidated Financial StatementsMarch 31, 2006

## Note A 
Description of business and basis of presentation

Unaudited
Financial Information

The
unaudited  consolidated  financial statements have been prepared by Healthaxis Inc. and
its subsidiaries  (Healthaxis or  the  "Company"),  pursuant to the
rules and  regulations  of the  Securities  and  Exchange  Commission  and  reflect  all
adjustments  consisting of normal  recurring  entries,  which,  in the opinion of the
Company,  are necessary to present  fairly the results for the  interim  periods.  The
interim  financial  statements do not include all disclosures  provided in fiscal year
end financial  statements  prepared in accordance with accounting  principles  generally
accepted in the United States of America,  although the Company believes  that the
accompanying  disclosures  are adequate to make the  information  presented not
misleading.  Results of  operations  for the  three-month  period  ended March 31,  2006,
are not  necessarily  indicative  of the results  that may be expected for the year
ending  December 31, 2006.

These
financial  statements  should be read in conjunction  with the financial  statements and
notes thereto  contained in the  Company's Annual Report on Form 10-K for the year ended
December 31, 2005

Earnings Per
Share

Basic
loss per share is computed  using only the weighted  average  number of common  shares
outstanding  during the  respective  periods.  Diluted  earnings per share is computed to
show the dilutive  effect,  if any, of  convertible  preferred  stock,  stock  options
and warrants  using the  treasury  stock  method  based on the average  market price of
the stock during the  respective  periods.  The effect of including the convertible
preferred  stock,  stock options and warrants in the computation of diluted earnings  per
share  would be  anti-dilutive  for each of the periods  presented,  thus these  items
have not been  included in the  computation.  Following is a summary of these potentially
dilutive securities:

|                                 | As of March 31,
|-------------------------------- | ---------------
|                                 | 2006           
|Options                          | 1,299,328      
|Warrants                         | 7,229,186      
|Preferred stock                  | 2,751,658      
|                                 |                
|Total common shares if converted | 11,280,172     
|                                 |                

Note B  Recently
Adopted Accounting Pronouncements

In
December 2004, the FASB issued a revision of Statement of Financial Accounting  Standards
No. 123 (SFAS 123R),  Accounting  for  Stock-Based  Compensation. SFAS 123R
requires  companies to measure the cost of employee  services  received in exchange for
an  award of equity  instruments  (typically  stock  options)  based on  grant-date  fair
value of the award.  The fair value is  estimated  using  option-pricing  models.  The
resulting  cost is  recognized  over the period  during  which an  employee is required
to provide  service in exchange for the award,  usually the vesting  period.  Prior to
the adoption of SFAS 123R,  this  accounting  treatment  was  optional with pro forma
disclosures required.

Page 6

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We
adopted SFAS 123R effective January 1, 2006 using the modified  prospective  transition
method.  SFAS 123R is effective for  all stock  options and other awards we grant
beginning  January 1, 2006 and any stock options or other awards  previously  granted but
that vest in 2006 or in the future.  In November 2005, the Compensation  Committee of the
Board of Directors  approved the acceleration  of vesting of all unvested  options,  the
exercise price for which exceeded the then current stock price, thus there is no
compensation  expense required related to prior stock option grants and no new grants
were made in the first quarter of 2006.

The
table below summarizes stock option activity pursuant to our plans for the three months
ended March 31, 2006:

|                                   |  | Number of
Shares |   |  | Weighted
Average 
Exercise Price
|---------------------------------- |  | ---------------- | - |  | --------------------------------
|Outstanding at beginning of period |  | 1,366,843        |   |  | $     7.95                      
|Granted                            |  |                 |   |  |                                
|Exercised                          |  |                 |   |  |                                
|Forfeited                          |  | (67,515          | ) |  | 2.33                            
|Expired                            |  |                 |   |  |                                
|                                   |  |                  |   |  |                                 
|Outstanding at end of period       |  | 1,299,328        |   |  | $     8.24                      
|                                   |  |                  |   |  |                                 
|                                   |  |                  |   |  |                                 
|Exercisable at end of period       |  | 1,299,328        |   |  | $     8.24                      

Shares
available for future stock grants to employees and directors under existing  plans were
1,062,483 at March 31, 2006.  At March 31, 2006, the exercise  price of all
outstanding options exceeded the current market price thus there  was no intrinsic value of options outstanding or exercisable.

The
following table  summarizes the range of exercise prices and weighted  average  remaining
contractual life of the options  outstanding and the range of exercise prices for the
options exercisable at March 31, 2006:

|                            
|----------------------------
|Exercise 
       Price Range
|$1.72 - $2.25               
|$2.26 - $5.00               
|$5.01 - $10.00              
|$10.00 - $87.50             

Page 7

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The
 following  table  illustrates  the pro forma  effect on net loss and loss per share for
the three  months ended March 31, 2005 had we applied the fair value  recognition
 provisions  of SFAS No.  123,  Accounting  for  Stock-based  Compensation  (table in
thousands, except per share data):

|                                                  | 
|------------------------------------------------- | 
|Net loss, as reported                             | 
|Pro forma stock based compensation expense        | 
|computed under the fair value method              | 
|Pro forma net loss                                | 
|                                                  | 
|Loss per share of common stock, basic and diluted | 
|as reported                                       | 
|                                                  | 
|Pro forma                                         | 
|                                                  | 

The
Company  granted 200 options in the first quarter 2005.  The fair value of the options
and warrants  granted are estimated on the date of grant using the  Black-Scholes  option
pricing model.  The major  assumptions used include no dividends paid, a weighted average
 expected life of three years,  expected stock  volatility of 69% and risk free interest
rates of 4.09%.  The  weighted-average grant-date fair value of options granted during
2005 was $1.10.

## Note C 
Post Retirement Benefits

Healthaxis
 has an  obligation  to provide  certain post  retirement  benefits,  primarily  lifetime
 health,  dental and life insurance  coverage,  to a group of individuals  consisting of
three former executives and 17 retired  employees of Provident  American Corporation,
 which became  Healthaxis,  and the  Companys  former  Chairman.  The  following  table
sets forth the  components of net post-retirement benefit expense for all plans:

|                                   | (Table in $000s)
                                                                Three Months Ended March 31, |    
|---------------------------------- | ------------------------------------------------------------------------------------------------------------- | ---
|                                   | 2006                                                                                                          |    
|Interest cost                      |                                                                                                               | $13
|Transition obligation amortization |                                                                                                               | 14 
|                                   |                                                                                                               |    
|Net post retirement expense        |                                                                                                               | $27
|                                   |                                                                                                               |    

## Note D  Significant
Customer Concentrations

For
the three months ended March 31, 2006 and 2005,  four  customers  accounted for $2.7
million (70%) and $2.7 million (64%), respectively,  of the Companys  total  revenues.
 At March 31, 2006 and December 31, 2005,  two customers  individually  accounted for
more than 10% of the Companys  accounts  receivable:  one accounted for $623,000 (23%)
and $660,000  (29%),  while the other accounted for $454,000 (17%) and $166,000  (7%), of
the Companys  accounts  receivable  for March 31, 2006 and December 31, 2005,
 respectively. These customers are making payments in accordance with the terms of their
contracts.

## Note E 
Other Liabilities and Contingencies

Other
liabilities include $324,000 of contingent tax liabilities at March 31, 2006 and December
31, 2005.

Page 8

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## Note F  Related
Party Transactions

As
described in our 2005 Form 10-K, the Company entered into a five year Remote Resourcing
 Agreement with Healthcare BPO Partners L.P., a company  affiliated with Tak Investments
and owned by Mr. Tak.  Healthcare BPO Partners,  based in Jaipur,  India, provides
 personnel and  infrastructure  that is utilized by the Company to provide  business
 process  outsourcing  services and other software  development and technical  support
 services to support the Companys  operations.  The resources  provided by Healthcare
BPO Partners  supplement  the  Companys  existing  wholly-owned  operations  in  Utah,
 Texas  and  Jamaica.  As a part of the  Resourcing Agreement,  Healthcare BPO Partners
also provides data center hosting services, at a Vienna Virginia facility,  to
Healthaxis.  For the three months ended March 31, 2006, the Company  incurred costs of
 approximately  $228,000  related to the Resourcing  Agreement and at March 31, 2006, the
Company had accounts payable to Healthcare BPO Partners of approximately $157,000.

Page 9

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## Item
2.  Managements Discussion and Analysis of Financial Condition and Results
of Operations

## Forward-Looking
Statements

All
statements other than statements of historical fact contained in this report,  including
 statements in this "Management's Discussion and Analysis of Financial  Condition and
Results of Operations"  concerning the Company's  financial position and liquidity,
results of  operations,  prospects for future  growth,  and other  matters are
 forward-looking  statements.  These  statements  may be identified with words such as
"anticipate,"  "believe," "plan,"  "estimate,"  "expect,"  "intend," "should," "could,"
"goal," "target," "designed," "on track,"  "comfortable  with," "optimistic" and other
similar  expressions,  and constitute  forward-looking  statements within the meaning of
Section 27A of the  Securities Act of 1933, as amended,  and Section 21E of the
Securities  Exchange Act of 1934, as amended. These forward-looking  statements are
subject to known and unknown risks,  uncertainties and other factors, which may cause
actual results to be materially  different from those contemplated by the
 forward-looking  statements.  Such factors include the risks and uncertainties
 identified in Healthaxis  documents filed with, or furnished to, the Securities and
Exchange  Commission,  including without  limitation  those  identified  under the
caption  "Risk  Factors" in the Companys  Form 10-K for the year ended  December 31,
2005. The Company  undertakes no obligation to publicly  update or revise any
 forward-looking  statements,  whether as a result of new information, future events or
otherwise.  Readers are cautioned not to place undue reliance on forward-looking
statements.

## Overview

Healthaxis
 Inc. is a Pennsylvania  corporation,  which was organized in 1982.  Healthaxis  common
stock trades on the NASDAQ Capital Market under the symbol HAXS. The operations of
Healthaxis are conducted  through its  subsidiary,  Healthaxis,  Ltd.  Unless otherwise
 indicated,  or the context otherwise requires,  all references in this document to the
"Company,"  "Healthaxis," "we," "our" or "us" include  Healthaxis Inc. and all of its
 subsidiaries.  Healthaxis  maintains a website at  www.healthaxis.com.  The Healthaxis
Code of Conduct can be found on the Healthaxis website.  Information found on the
Healthaxis website is not a part of this report.

The
Company reported revenue of $3.9 million and an operating loss of $441,000 in the first
quarter of 2006.  While revenue was approximately $208,000 less than the first quarter of
2005, it showed sequential improvement of approximately $193,000 as compared the fourth
quarter of 2005.  The operating loss for the first quarter of 2006 improved approximately
$470,000 as compared to the first quarter of 2005 and approximately $17,000 as compared
to the fourth quarter of 2005.  The Company is in the middle of a large-scale customer
implementation that is expected to continue to add a significant number of
revenue-generating lives to our systems.  In addition, we have added new customers and we
have renewed contracts with a number of existing customers.  Due to the subscription
nature of our business, these customer wins do not immediately impact the operating
results, but are expected to provide additional revenue in future periods.

Critical Accounting Policies

Critical
accounting  policies are those which are most important to the financial statement
 presentation and that require the most difficult,  subjective complex  judgments.  As
described in Note B to the financial  statements,  the Company adopted SFAS 123R in the
first  quarter of 2006.  There have been no other  changes in the  Companys  critical
 accounting  policies  as  described  in the Companys Form 10-K for the year ended
December 31, 2005.

Page 10

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## Results of
Operations

## Three months
ended March 31, 2006 compared to three months ended March 31, 2005

|                 | (Table in thousands)
                                                       Three Months Ended March 31,
|---------------- | --------------------------------------------------------------------------------------------------------
|                 | 2006                                                                                                    
|Revenues         |                                                                                                         
|Cost of revenues |                                                                                                         
|                 |                                                                                                         
|Gross profit     |                                                                                                         
|                 |                                                                                                         
|% of revenue     |                                                                                                         

Revenues
 were  approximately  $208,000  (5%) lower in the three  months  ended March 31, 2006
 compared to the same period in 2005.  Professional  Services  revenue  declined
 $184,000  because  significant  work performed in the current period was focused on a
significant  implementation,  and thus the related  revenue is deferred.  In the prior
year,  we worked on several  projects  that were billable and could be recognized as
revenue as services were  performed.  Transaction  fees and license fees were each down
slightly as declines in lives and  transactions  from  existing  customers  were mostly
offset by business  from new and existing  customers.  Data Capture  revenue was up
slightly as volume from new customers and groups offset a) a decrease in transactions
 from existing  customers and b) the continuing trend towards a higher volume of
electronic claims.

Cost
of revenues  includes all  expenses  directly  associated  with the  production  of
revenue,  and  consists  primarily of salaries and related benefits,  rent,  amortization
and depreciation,  system expenses such as maintenance and repair, as well as other
related  consumables.  Cost of revenues  declined  $720,000  (18%) in the three months
ended March 31, 2006 compared to the same period in 2005.  Cost of revenues was 86% of
revenues in the 2006 period  compared to 99% in the 2005 period.  The decrease in cost
 consisted of  approximately  a) $139,000 due to lower  personnel  and  contractor  costs
 resulting  from  improved  efficiencies  and  headcount reductions,  b)  $171,000
 related  to  facilities  costs  from the June 2005  headquarters  office  move,  c)
 $294,000  in  increased capitalizable costs due to 2006 implementation  projects,  and
d) $119,000 in lower depreciation and amortization  expense as equipment and prior
capitalized costs became fully amortized.

Page 11

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|                                   | (Table in thousands)
                                                       Three Months Ended March 31,
|---------------------------------- | --------------------------------------------------------------------------------------------------------
|                                   | 2006                                                                                                    
|Sales and marketing expense        |                                                                                                         
|General and administrative expense |                                                                                                         
|Amortization of intangibles        |                                                                                                         
|Interest and other income, net     |                                                                                                         
|Interest expense                   |                                                                                                         

Sales
and marketing  expenses consist primarily of employee  salaries and related benefits,  as
well as promotional costs such as direct mailing  campaigns,  trade shows and media
 advertising.  Sales and marketing  expenses increased $161,000 (76%) in the three months
ended March 31, 2006  compared to the same quarter of 2005.  This  increase  was due to
higher  personnel  costs and the related increase in benefits, travel and collateral
material related to the hiring of a new sales and marketing team.

General
and  administrative  expenses include executive  management,  accounting,  legal and
human resources  compensation and related  benefits,  as well as expenditures for
applicable  overhead costs.  These expenses  decreased $35,000 (5%) in the three months
ended March 31, 2006  compared to the same  quarter of 2005.  The  majority of the
 decrease is also  attributable  to the  decrease in facilities costs as described above.

Amortization
of intangibles  includes the  amortization  of developed  software and customer base
acquired in the January 2001 Healthaxis  merger.  These expenses  declined $84,000 in the
three months ended March 31, 2006 compared to the same quarter of 2005, as these
intangible assets were fully amortized in January 2005.

Interest
 and other  income,  net  increased  $20,000  (250%) in the three  months  ended March
31, 2006  compared to the same quarter of 2005 due primarily to higher balances of cash
resulting from the 2005 sale of common stock.

Interest
expense  decreased  slightly in the three months ended March 31, 2006 compared to the
same quarter of 2005.  Interest accrued on the note payable to UICI was lower due to the
declining principal balance.

## Liquidity and
Capital Resources

Overview of Cash Resources

At
March 31,  2006,  our cash and cash  equivalents  amounted to $3.9  million  compared to
$4.7 million at December 31, 2005. The  sources  and uses of cash  during the first
 quarter of 2006 are  described  more fully in  Analysis  of Cash  Flows  below.  We
believe that the Company will maintain  sufficient  liquidity to fund  operations for at
least the next 12 months.  As discussed in our 2005 Form 10-K,  the Company has a note
 payable to UICI,  the balance of which is  approximately  $1.9 million as of March 31,
2006. A balloon  payment is due September  30, 2006 if the note has not been paid through
the monthly  payments,  and the Company  expects that the balance at maturity will be
 approximately  $1.5 million.  The Company is presently  exploring  various means of
extending the term or obtaining other financing to satisfy this commitment.

As
part of a contract  executed in the fourth quarter of 2005, the Company will be required
to expend  substantial  resources, in the form of both human and capital  expenditures,
 during the  implementation  phase of a  significant  customer  contract  which is
expected to extend over a period as long as the next 6 to 9 months.  As a result,  the
Company expects a negative  short-term impact on cash flow until deferred  collection
 provisions  present

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in the contract are fulfilled and
on-going  profits  expected to be generated from the  recurring  revenue  stream start to
be realized.  The Company  does not believe  that the  short-term  impact of this project
implementation  will  impact the  Companys  ability to  maintain  sufficient  liquidity
 to fund  operations  for at least the next 12 months.  The implementation effort and
terms of this agreement are typical for Healthaxis contracts of this scope and nature.

Analysis of Cash Flows

Cash
used in operating  activities  for the three months ended March 31, 2006 was
 approximately  $363,000 as compared to $1.2 million for the same period in 2005.  The
 improvement  was primarily the result of the reduced net loss in 2006 and changes in
various working capital  accounts,  primarily prepaid expenses,  accounts payable and
deferred  revenues.  Changes in working capital accounted for a $162,000 use of cash in
the 2006 period as opposed to $700,000 for the comparable period in 2005.

Cash
used in  investing  activities  for the three  months  ended March 31, 2006 was  $504,000
as compared to $168,000 for the same period in 2005. The Companys  investing  activities
 continue to be primarily in the areas of developing  software  enhancements, contract
start-up activities and acquisition of property, equipment and software.

Cash
used in financing activities for the three months ended March 31, 2006 and March 31, 2005
were both zero.

## Recently
Adopted Accounting Pronouncements

See
Note B to the  Consolidated  Financial  Statements  herein  for a  discussion  of the
 impact on the  Companys  financial statements of new accounting standards.

Item
3.  Quantitative and Qualitative Disclosures About Market Risk

Exposure
to market risk for changes in interest rates relate  primarily to short-term
 investments.  The Company does not use derivative financial  instruments.  The primary
objective of its investment activities is to preserve principal while maximizing yields
without  significantly  increasing  risk.  Due to the nature of the  Companys
 investments,  we believe that there is no material risk exposure.

Our
cash  equivalents and other  investment  instruments  are exposed to financial  market
risk due to fluctuation in interest rates,  which may affect our  interest  income.
 These  instruments  are not entered  into for trading  purposes.  We do not expect our
interest income to be significantly affected by a sudden change in market interest rates.

The
dividend rate on our preferred stock is fixed at a nominal rate of $0.0001 per share of
the new preferred  stock,  payable semi-annually  (aggregating less than $1,000 in
dividend  payments to all preferred  shareholders  annually).  The interest rate on our
note  payable is fixed at 6%.  The fair value of these  instruments  is  therefore
 subject to market  fluctuation  as  interest  rates change.

Item 4.  
Controls and Procedures

As
of the end of the period covered by this quarterly  report,  the Company  carried out an
evaluation,  under the supervision and with the participation of the Company  management,
 including the Companys Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Companys  disclosure  controls and
procedures pursuant to Securities Exchange Act Rule  13a-15.  Based on that  evaluation,
 the Chief  Executive  Officer and the Chief  Financial  Officer  have  concluded  that
these disclosure  controls and procedures  are

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effective as of the end of the
period covered by this report.  There has been no change in the Companys  internal
 control over  financial  reporting  that  occurred  during the period  covered by this
report that has  materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting.

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## PART II.  OTHER INFORMATION

|Item 1. |  | Legal
Proceedings.
|------- |  | ------------------

The
Company is involved in litigation  arising in the ordinary  course of its business.
 Management is of the opinion that no currently pending litigation will have a material
adverse effect on the Companys results of operations or financial position.

|Item 1A. |  | Risk
Factors
|-------- |  | ------------

We
face a number of significant risks and  uncertainties in our business,  which are
detailed under Risk Factors in our Annual Report on Form 10-K for the year ended
 December 31, 2005.  These risks and  uncertainties  may affect our current  position and
future  prospects,  and should be  considered  carefully  in  evaluating  us and an
 investment  in our common  stock.  We have not identified any material changes to the
Risk Factors detailed in our most recent Annual Report on Form 10-K.

|Item 2. |  | Unregistered
Sales of Equity Securities and Use of Proceeds.
|------- |  | ------------------------------------------------------------

None.

|Item 3. |  | Defaults
Upon Senior Securities.
|------- |  | --------------------------------

None.

|Item 4. |  | Submission
of Matters to a Vote of Security Holders.
|------- |  | ----------------------------------------------------

None.

|Item 5. |  | Other
Information.
|------- |  | ------------------

None.

|Item 6. |  | Exhibits
|------- |  | --------

| | (31.1) |  | Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
filed herewith.
| | ------ |  | -------------------------------------------------------------------------------------------------------------------

| | (31.2) |  | Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
filed herewith.
| | ------ |  | -------------------------------------------------------------------------------------------------------------------

| | (32.1) |  | Certifications
of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, furnished herewith.
| | ------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

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# Signature

Pursuant
to the  requirements of the Securities  Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.

| |  | Healthaxis Inc.
| |  | ---------------

|Date: May 12, 2006 |  | By: /s/ John M. Carradine
John M. Carradine, President and Chief Executive Officer(Principal Executive Officer)
|------------------ |  | ---------------------------------------------------------------------------------------------------------------

| |  | By: /s/ Ronald K. Herbert
Ronald K. Herbert, Chief Financial Officer (PrincipalFinancial Officer)
| |  | -------------------------------------------------------------------------------------------------

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# Exhibit Index

|(31.1) |  | Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
filed herewith.
|------ |  | -------------------------------------------------------------------------------------------------------------------

|(31.2) |  | Certification
of Chief Financial Officer pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002,
filed  herewith.
|------ |  | ---------------------------------------------------------------------------------------------------------------------

|(32.1) |  | Certifications
of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, furnished herewith.
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

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