##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

|                                                                                                              
|--------------------------------------------------------------------------------------------------------------
|[X]                    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended  March 31, 2003


OR

|                                                                                                                
|----------------------------------------------------------------------------------------------------------------
|[  ]                    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For 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.)

5215 N. OConnor Blvd., 800 Central Tower, 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.

Yes  [X]  No  [  ]


Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes  [  ]  No  [X]


Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date: 53,645,297 shares of common
stock, par value $.10, outstanding as of May 8, 2003.

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TABLE OF CONTENTS



|                                                 |                                                                                                 |                                                 |  |  |  |  |  | 
|------------------------------------------------ | ----------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                   
|                                                 | Item 1.Condensed Consolidated Financial Statements                                             
|                                                 |                                                                                                 | Condensed Consolidated Balance Sheets          
|                                                 |                                                                                                 | Condensed Consolidated Statements of Operations
|                                                 |                                                                                                 | Condensed Consolidated Statements of Cash Flows
|                                                 |                                                                                                 | Notes to Consolidated Financial Statements     
|                                                 | Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition _
|                                                 | Item 3. Quantitative and Qualitative Disclosures About Market Risk                             
|                                                 | Item 4. Controls and Procedures                                                                
|PART II. OTHER INFORMATION                      
|                                                 | Item 1. Legal Proceedings.                                                                     
|                                                 | Item 2. Changes in Securities and Use of Proceeds.                                             
|                                                 | Item 3. Defaults Upon Senior Securities.                                                       
|                                                 | Item 4. Submission of Matters to a Vote of Security Holders.                                   
|                                                 | Item 5. Other Information.                                                                     
|                                                 | Item 6. Exhibits and Reports on Form 8-K.                                                      
|Signature                                       
|Exhibit Index                                   
|EX-99.1 Certification of Chief Executive Officer
|EX-99.2 Certification of Chief Financial Officer



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##### Table of Contents



Healthaxis Inc.

Table of Contents

|                                         |  |                                                                                       |  |     
|---------------------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|                                         |  |                                                                                       |  | Page
|                                         |  |                                                                                       |  |     
|PART I  
Financial Information           |  |                                                                                      
|Item 1.                                  |  | Condensed Consolidated Financial Statements                                           |  | 3   
|                                         |  | Condensed Consolidated Balance Sheets                                                 |  | 3   
|                                         |  | Condensed Consolidated Statements of Operations                                       |  | 4   
|                                         |  | Condensed Consolidated Statements of Cash Flows                                       |  | 5   
|                                         |  | Notes to Condensed Consolidated Financial Statements                                  |  | 6   
|Item 2.                                  |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations |  | 12  
|Item 3.                                  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 18  
|Item 4.                                  |  | Controls and Procedures                                                               |  | 18  
|PART
II  Other Information               |  |                                                                                      
|Items 1-5                                |  | 19                                                                                   
|Item 6. Exhibits and Reports on Form 8-K |  | 19                                                                                   
|Signatures                               |  | 20                                                                                   
|Certifications                           |  | 21                                                                                   
|Exhibit Index                            |  | 23                                                                                   

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PART I. FINANCIAL INFORMATION




Item 1.    Condensed Consolidated Financial Statements




Healthaxis Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

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

|                                                                                                                       |                                                                                                         |                           |                                            |       |          |        |             |       |        |        | 
|---------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------------------------- | ------------------------------------------ | ----- | -------- | ------ | ----------- | ----- | ------ | ------ | 
|                                                                                                                       |                                                                                                         |                           |                                            |       | March 31 |        | December 31
|                                                                                                                       |                                                                                                         |                           |                                            |       | 2003     |        | 2002       
|                                                                                                                       |                                                                                                         |                           |                                            |       |          |        |            
|Assets                                                                                                                 |                                                                                                         |                           |                                            |       |          |        |             |      
|Cash and cash equivalents                                                                                              |                                                                                                         | $                         | 9,924                                      |       |          | $      | 11,380      |      
|Accounts receivable, net of allowance for doubtful accounts of $239 and $195, respectively                             |                                                                                                         |                           | 4,498                                      |       |          |        | 3,101       |      
|Accounts receivable from affiliates                                                                                    |                                                                                                         |                           | 96                                         |       |          |        | 245         |      
|Prepaid expenses and other current assets                                                                              |                                                                                                         |                           | 904                                        |       |          |        | 648         |      
|Notes receivable                                                                                                       |                                                                                                         |                           | 211                                        |       |          |        | 214         |      
|                                                                                                                       |                                                                                                         |                           |                                            |       |          |        |             |      
|                                                                                                                       |                                                                                                         | Total current assets      |                                            |       | 15,633   |        |             |       | 15,588 |       
|Property, equipment and software, less accumulated depreciation and
amortization of $11,522 and $11,174, respectively  |                                                                                                         |                           | 1,275                                      |       |          |        | 1,462       |      
|Contract start-up costs, less accumulated amortization of $973 and $834, respectively                                  |                                                                                                         |                           | 1,111                                      |       |          |        | 1,175       |      
|Capitalized software, less accumulated amortization of $1,582 and $1,383, respectively                                 |                                                                                                         |                           | 1,332                                      |       |          |        | 1,502       |      
|Customer base, less accumulated amortization of $2,364 and $2,112, respectively                                        |                                                                                                         |                           | 1,850                                      |       |          |        | 2,102       |      
|Goodwill                                                                                                               |                                                                                                         |                           | 11,276                                     |       |          |        | 11,276      |      
|Notes receivable                                                                                                       |                                                                                                         |                           | 118                                        |       |          |        | 134         |      
|Other assets                                                                                                           |                                                                                                         |                           | 134                                        |       |          |        | 135         |      
|                                                                                                                       |                                                                                                         |                           |                                            |       |          |        |             |      
|                                                                                                                       |                                                                                                         |                           | Total assets                               |       | $        | 32,729 |             |       | $      | 33,374 | 
|                                                                                                                       |                                                                                                         |                           |                                            |       |          |        |             |      
|Liabilities and Stockholders Equity                                                                                   |                                                                                                         |                           |                                            |       |          |        |             |      
|Accounts payable                                                                                                       |                                                                                                         | $                         | 1,923                                      |       |          | $      | 1,438       |      
|Accrued liabilities                                                                                                    |                                                                                                         |                           | 763                                        |       |          |        | 847         |      
|Deferred revenues                                                                                                      |                                                                                                         |                           | 1,891                                      |       |          |        | 1,430       |      
|                                                                                                                       |                                                                                                         |                           |                                            |       |          |        |             |      
|                                                                                                                       |                                                                                                         | Total current liabilities |                                            |       | 4,577    |        |             |       | 3,715  |       
|Post retirement and employment liabilities                                                                             |                                                                                                         |                           | 960                                        |       |          |        | 966         |      
|Other liabilities                                                                                                      |                                                                                                         |                           | 1,063                                      |       |          |        | 1,085       |      
|                                                                                                                       |                                                                                                         |                           |                                            |       |          |        |             |      
|                                                                                                                       |                                                                                                         |                           | Total liabilities                          |       |          | 6,600  |             |       |        | 5,766  | 
|Commitments and contingencies                                                                                          |                                                                                                         |                           |                                            |       |          |        |             |      
|Stockholders Equity:                                                                                                  |                                                                                                         |                           |                                            |       |          |        |             |      
|Preferred stock, par value $1.00: authorized 100,000,000 shares:                                                       |                                                                                                         |                           |                                            |       |          |        |             |      
|                                                                                                                       | Series A cumulative convertible, 23,500 shares issued and outstanding,
($23,500 liquidation preference) |                           |                                            | 6,280 |          |        |             | 6,280 |       
|Common stock, par value $.10: authorized 1,900,000,000 shares,
issued and outstanding 53,645,297 and 53,645,297 shares |                                                                                                         |                           | 5,364                                      |       |          |        | 5,364       |      
|Additional paid-in capital                                                                                             |                                                                                                         |                           | 440,487                                    |       |          |        | 440,593     |      
|Accumulated deficit                                                                                                    |                                                                                                         |                           | (426,002                                   | )     |          |        | (424,629    | )    
|                                                                                                                       |                                                                                                         |                           |                                            |       |          |        |             |      
|                                                                                                                       |                                                                                                         |                           | Total stockholders equity                 |       |          | 26,129 |             |       |        | 27,608 | 
|                                                                                                                       |                                                                                                         |                           |                                            |       |          |        |             |      
|                                                                                                                       |                                                                                                         |                           | Total liabilities and stockholders equity |       | $        | 32,729 |             |       | $      | 33,374 | 
|                                                                                                                       |                                                                                                         |                           |                                            |       |          |        |             |      

See notes to consolidated financial statements.

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Healthaxis Inc. and Subsidiaries
Condensed Consolidated Statements of Operations

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

|                                                                                |                                        |   |                    |            |           |   |        |            |  
|------------------------------------------------------------------------------- | -------------------------------------- | - | ------------------ | ---------- | --------- | - | ------ | ---------- | -
|                                                                                |                                        |   | Three Months Ended
|                                                                                |                                        |   |                   
|                                                                                |                                        |   | March 31,          |            | March 31,
|                                                                                |                                        |   | 2003               |            | 2002     
|                                                                                |                                        |   |                    |            |          
|Revenue                                                                         |                                        | $ | 5,231              |            |           | $ | 5,292  |           
|Expenses:                                                                       |                                        |   |                    |            |           |   |        |           
|                                                                                | Cost of revenues                       |   |                    | 5,097      |           |   |        | 5,689      |  
|                                                                                | Sales and marketing                    |   |                    | 255        |           |   |        | 366        |  
|                                                                                | General and administrative             |   |                    | 909        |           |   |        | 279        |  
|                                                                                | Research and development               |   |                    | 30         |           |   |        | 117        |  
|                                                                                | Amortization of intangibles            |   |                    | 324        |           |   |        | 325        |  
|                                                                                |                                        |   |                    |            |           |   |        |           
|Total expenses                                                                  |                                        |   | 6,615              |            |           |   | 6,776  |           
|                                                                                |                                        |   |                    |            |           |   |        |           
|Operating loss                                                                  |                                        |   | (1,384             | )          |           |   | (1,484 | )         
|                                                                                | Interest and other income, net         |   |                    | 30         |           |   |        | 115        |  
|                                                                                | Interest expense                       |   |                    | (19        | )         |   |        | (179       | )
|                                                                                |                                        |   |                    |            |           |   |        |           
|Loss from continuing operations                                                 |                                        |   | (1,373             | )          |           |   | (1,548 | )         
|Gain from discontinued operations                                               |                                        |   |                   |            |           |   | 547    |           
|                                                                                |                                        |   |                    |            |           |   |        |           
|Net loss before cumulative effect of accounting change                          |                                        |   | (1,373             | )          |           |   | (1,001 | )         
|Cumulative effect of accounting change                                          |                                        |   |                   |            |           |   | (6,674 | )         
|                                                                                |                                        |   |                    |            |           |   |        |           
|Net loss                                                                        |                                        |   | (1,373             | )          |           |   | (7,675 | )         
|                                                                                |                                        |   |                    |            |           |   |        |           
|Preferred stock dividends                                                       |                                        |   | (115               | )          |           |   |       |           
|                                                                                |                                        |   |                    |            |           |   |        |           
|Net loss attributable to common shareholders                                    |                                        | $ | (1,488             | )          |           | $ | (7,675 | )         
|                                                                                |                                        |   |                    |            |           |   |        |           
|Loss per share of common stock (basic and diluted)                              |                                        |   |                    |            |           |   |        |           
|                                                                                | Continuing operations                  |   | $                  | (0.03      | )         |   | $      | (0.03      | )
|                                                                                | Discontinued operations                |   |                    |           |           |   |        | 0.01       |  
|                                                                                | Cumulative effect of accounting change |   |                    |           |           |   |        | (0.12      | )
|                                                                                |                                        |   |                    |            |           |   |        |           
|                                                                                | Net loss                               |   | $                  | (0.03      | )         |   | $      | (0.14      | )
|                                                                                |                                        |   |                    |            |           |   |        |           
|Weighted average common shares and equivalents used
in computing loss per share |                                        |   |                    |            |           |   |        |           
|                                                                                | Basic and diluted                      |   |                    | 53,645,000 |           |   |        | 53,483,000 |  

See notes to consolidated
financial statement
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Healthaxis Inc. and Subsidiaries




Condensed Consolidated Statements of Cash Flows

(Dollars in thousands) (Unaudited)

|                                                  |                                                                             |                                                          |                                           |        |                    |        |           |        |        |      |  
|------------------------------------------------- | --------------------------------------------------------------------------- | -------------------------------------------------------- | ----------------------------------------- | ------ | ------------------ | ------ | --------- | ------ | ------ | ---- | -
|                                                  |                                                                             |                                                          |                                           |        | Three Months Ended
|                                                  |                                                                             |                                                          |                                           |        |                   
|                                                  |                                                                             |                                                          |                                           |        | March 31,          |        | March 31,
|                                                  |                                                                             |                                                          |                                           |        | 2003               |        | 2002     
|                                                  |                                                                             |                                                          |                                           |        |                    |        |          
|Cash flows from operating activities              |                                                                             |                                                          |                                           |        |                    |        |           |       
|                                                  | Net loss                                                                    |                                                          | $                                         | (1,373 | )                  |        | $         | (7,675 | )     
|                                                  | Adjustments to reconcile net loss to net cash used in
operating activities: |                                                          |                                           |        |                    |        |           |        |       
|                                                  |                                                                             | Cumulative effect of accounting change                   |                                           |        |                   |        |           |        | 6,674  |     
|                                                  |                                                                             | Depreciation and amortization                            |                                           |        | 938                |        |           |        | 1,343  |     
|                                                  |                                                                             | Amortization of unearned compensation                    |                                           |        |                   |        |           |        | 71     |     
|                                                  |                                                                             | Bad debt reserve                                         |                                           |        | 44                 |        |           |        | 4      |     
|                                                  |                                                                             | Gain on settlement of severance obligation               |                                           |        |                   |        |           |        | (1,345 | )   
|                                                  |                                                                             | Stock option compensation                                |                                           |        | 9                  |        |           |        | 78     |     
|                                                  |                                                                             | Stock issued in lieu of severance                        |                                           |        |                   |        |           |        | 355    |     
|                                                  |                                                                             | Payment of interest with common stock                    |                                           |        |                   |        |           |        | 277    |     
|                                                  |                                                                             | Interest on convertible debt                             |                                           |        |                   |        |           |        | 24     |     
|                                                  |                                                                             | Change in:                                               |                                           |        |                    |        |           |        |        |     
|                                                  |                                                                             |                                                          | Accounts receivable                       |        |                    | (1,292 | )         |        |        | 790  |  
|                                                  |                                                                             |                                                          | Prepaid expenses and other current assets |        |                    | (330   | )         |        |        | (117 | )
|                                                  |                                                                             |                                                          | Accounts payable and accrued liabilities  |        |                    | 523    |           |        |        | (165 | )
|                                                  |                                                                             |                                                          | Deferred revenues                         |        |                    | 461    |           |        |        | (527 | )
|                                                  |                                                                             |                                                          | Other liabilities                         |        |                    | (28    | )         |        |        | (9   | )
|                                                  |                                                                             |                                                          |                                           |        |                    |        |           |        |       
|                                                  | Net cash used in operating activities                                       |                                                          |                                           | (1,048 | )                  |        |           | (222   | )     
|                                                  |                                                                             |                                                          |                                           |        |                    |        |           |        |       
|Cash flows from investing activities              |                                                                             |                                                          |                                           |        |                    |        |           |       
|                                                  |                                                                             | Collection (advances) of notes receivable                |                                           |        | 19                 |        |           |        | (17    | )   
|                                                  |                                                                             | Investment in capitalized software and contract start-up |                                           |        | (104               | )      |           |        | (258   | )   
|                                                  |                                                                             | Purchases of property, equipment and software            |                                           |        | (86                | )      |           |        | (63    | )   
|                                                  |                                                                             |                                                          |                                           |        |                    |        |           |        |       
|                                                  | Net cash used in investing activities                                       |                                                          |                                           | (171   | )                  |        |           | (338   | )     
|                                                  |                                                                             |                                                          |                                           |        |                    |        |           |        |       
|Cash flows from financing activities              |                                                                             |                                                          |                                           |        |                    |        |           |       
|                                                  | Payment of preferred stock dividends                                        |                                                          |                                           | (237   | )                  |        |           |       |       
|                                                  | Payments on capital leases                                                  |                                                          |                                           |       |                    |        |           | (8     | )     
|                                                  |                                                                             |                                                          |                                           |        |                    |        |           |        |       
|                                                  | Net cash used in financing activities                                       |                                                          |                                           | (237   | )                  |        |           | (8     | )     
|                                                  |                                                                             |                                                          |                                           |        |                    |        |           |        |       
|                                                  | Decrease in cash and cash equivalents                                       |                                                          |                                           | (1,456 | )                  |        |           | (568   | )     
|                                                  | Cash and cash equivalents, beginning of period                              |                                                          |                                           | 11,380 |                    |        |           | 13,149 |       
|                                                  |                                                                             |                                                          |                                           |        |                    |        |           |        |       
|                                                  | Cash and cash equivalents, end of period                                    |                                                          | $                                         | 9,924  |                    |        | $         | 12,581 |       
|                                                  |                                                                             |                                                          |                                           |        |                    |        |           |        |       
|Supplemental disclosure of cash flow information: |                                                                             |                                                          |                                           |        |                    |        |           |       
|                                                  | Interest paid                                                               |                                                          | $                                         | 19     |                    |        | $         | 19     |       
|                                                  |                                                                             |                                                          |                                           |        |                    |        |           |        |       

See notes to consolidated financial statements.

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Healthaxis Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands except share and per share data)
March 31, 2003

Note A  Description of business and basis of presentation

Unaudited Financial Information

The unaudited condensed 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, 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, 2003, are not necessarily
indicative of the results that may be expected for the year ending December 31,
2003.

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, 2002.

General

Healthaxis is a technology and business process services firm committed to
providing innovative and configurable web-based connectivity and applications
solutions for health benefit distribution and administration. These solutions,
which are comprised of software products and related services, are designed to
assist health insurance payers, government agencies, third party administrators
and health and welfare plans in providing enhanced services to members,
employees, employers and providers through the application of Healthaxis
flexible technology to legacy systems, either on a fully integrated or on an
Application Service Provider (ASP) basis. These technology solutions are
complimented by Healthaxis Business Process Outsourcing (BPO) services that
are offered to its technology clients and on a stand-alone basis.

Healthaxis is a Pennsylvania corporation organized in 1982. Healthaxis
common stock trades on the Nasdaq Small Cap Market under the symbol HAXS.
The operations of Healthaxis during 2001 were conducted primarily through its
subsidiary, Healthaxis.com, Inc. In the fourth quarter of 2001 the Company
reorganized and formed a new subsidiary, Healthaxis, Ltd., through which all
operations are now conducted. Unless otherwise indicated, or the context
otherwise requires, all references in this document to the Company or
Healthaxis include Healthaxis Inc. and all of its subsidiaries.

Earnings Per Share

Basic earnings per share is computed only on the weighted average number
of common shares outstanding during the respective periods, and the dilutive
effect of stock options and warrants is excluded. Diluted earnings per share
is computed to show the dilutive effect, if any, of 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 stock options,
warrants and shares issuable upon conversion of the Companys convertible
preferred stock into the computation of diluted earnings per share would be
anti-dilutive. Accordingly, these items have not been included in the
computation.

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Stock-Based Compensation

The Company selected an accounting policy which requires only the excess of the
market value of its common stock over the exercise price of options granted to
be recorded as compensation expense (intrinsic method). Pro forma information
regarding net loss is required as if the Company had accounted for its employee
stock options under the fair value method. Pro forma net loss applicable to the
option granted is not likely to be representative of the effects on reported
net loss for future years. The fair value for these options is estimated at the
date of grant using a Black-Scholes option pricing model. Stock compensation
determined under the intrinsic method is recognized over the vesting period
using the straight-line method.

Had compensation cost for the Companys stock option grants been
determined based on the fair value at the date of grants in accordance with the
provisions of SFAS 123, the Companys net loss and net loss per common share
would have been increased to the following pro forma amounts:

|                                                                                |             |   |                              |       |      |   |        |       |  
|------------------------------------------------------------------------------- | ----------- | - | ---------------------------- | ----- | ---- | - | ------ | ----- | -
|                                                                                |             |   | Three Months ended March 31,
|                                                                                |             |   |                             
|                                                                                |             |   | 2003                         |       | 2002
|                                                                                |             |   |                              |       |     
|Net loss, as reported                                                           |             | $ | (1,373                       | )     |      | $ | (7,675 | )    
|Stock based compensation expense recorded
under the intrinsic value method      |             |   | 9                            |       |      |   | 78     |      
|Pro forma stock based compensation
expense computed under the fair value
method |             |   | (442                         | )     |      |   | (779   | )    
|                                                                                |             |   |                              |       |      |   |        |      
|Pro forma net loss                                                              |             | $ | (1,806                       | )     |      | $ | (8,376 | )    
|                                                                                |             |   |                              |       |      |   |        |      
|Loss per share of common stock, basic and diluted                               |             |   |                              |       |      |   |        |      
|                                                                                | as reported |   | $                            | (0.03 | )    |   | $      | (0.14 | )
|                                                                                |             |   |                              |       |      |   |        |      
|                                                                                | Pro forma   |   | $                            | (0.03 | )    |   | $      | (0.16 | )
|                                                                                |             |   |                              |       |      |   |        |      

Note B  Recently Adopted Accounting Pronouncements

In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB
Statement No. 13, and Technical Corrections (Statement 145). For most
companies, Statement 145 will require gains and losses on extinguishments of
debt to be classified as income or loss from continuing operations rather than
as extraordinary items as previously required under Statement 4. Upon adoption,
any gain or loss on extinguishment of debt previously classified as an
extraordinary item in prior periods presented that does not meet the criteria
of Opinion 30 for such classification will be reclassified to conform with the
provisions of Statement 145. The provisions of this Statement related to the
rescission of Statement 4 shall be applied in fiscal years beginning after May
15, 2002. The Company adopted the provisions of this statement effective
January 1, 2003, and anticipates the reclassification of extraordinary gains
reported in prior periods to be included in the gain or loss from operations.

Statement of Financial Accounting Standards No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (SFAS 146) requires that a
liability for costs associated with an exit or disposal activity be recognized
when the liability is incurred rather than at the date of commitment to an exit
or disposal plan. SFAS 146 is effective for exit and disposal activities that
are initiated after December 29, 2002. The adoption of SFAS 146 is not
expected to have a significant impact on the financial position or results of
operations of the Company.

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Note C   Significant Customer
Concentrations

For the three months ended March 31, 2003, four customers (including UICI)
accounted for $2,906, or 56%, of the Companys total revenues. At March 31,
2003, one customer accounted for $969 of the Companys accounts receivable.

Note D  Contracts in Progress

The Company uses contract accounting for certain contracts where
significant software modification is performed or where services are performed
that are essential to the functionality of the delivered software. Generally,
contracts that include significant software modification are accounted for
using the percentage of completion method. Contracts with significant customer
acceptance provisions are recognized using the completed contract method upon
achieving customer acceptance of the completed project. During the three
months ended March 31, 2003, the Company had one contract in progress under
each method.

Costs, earnings and billings to date on the contract in progress accounted
for under the percentage of completion method are as follows:

|                                                 |  |   |       |  
|------------------------------------------------ |  | - | ----- | -
|Costs incurred on contract                       |  | $ | 1,374 |  
|Estimated earnings                               |  |   |      |  
|                                                 |  |   |       |  
|Revenues recognized to date                      |  |   | 1,374 |  
|Less billings to date                            |  |   | (931  | )
|                                                 |  |   |       |  
|Net unbilled receivables on contract in progress |  | $ | 443   |  
|                                                 |  |   |       |  

Costs and billings to date on the contract in progress accounted for under
the completed contract method are as follows:

|                                                     |  |   |      |  
|---------------------------------------------------- |  | - | ---- | -
|Costs incurred on contract                           |  | $ | 83   |  
|Less billings to date                                |  |   | (250 | )
|                                                     |  |   |      |  
|Billings on uncompleted contracts in excess of costs |  | $ | (167 | )
|                                                     |  |   |      |  

Both the unbilled receivables and the billings on uncompleted contracts are
included in deferred revenues.

Note E  Related Party Transactions

The Company conducts business with a major shareholder, UICI. At March
31, 2003, UICI owned approximately 46% of the Companys outstanding common
stock and owns warrants to purchase 222,396 shares of the Companys common
stock at prices ranging from $3.01 to $12.00 per share. UICI also owns 1,424
shares of the Companys Series A convertible preferred stock that are
convertible into 542,477 common shares.

The Company previously provided services to a number of UICI subsidiaries
and affiliates pursuant to written agreements. These services include the use
of certain of its proprietary workflow and business applications, as well as
systems integration and technology management. The most significant of these
agreements was the UICI Information Technology Services Agreement. In June
2002, the Company and UICI terminated this agreement. Notwithstanding, the
Company continues to provide products and services to UICI.

For the three months ended March 31, 2003 and 2002, UICI and its
subsidiaries and affiliates accounted for $455 (9%) and $843 (16%),
respectively, of the Companys revenues from continuing operations. As of March

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31, 2003, Healthaxis had accounts receivable due from UICI and its subsidiaries
and affiliates totaling $96, which represented 2% of the Companys total
accounts receivable.

In addition, UICI revenue from discontinued operations totaled $0, and
$4,500, for the three months ended March 31, 2003 and 2002, respectively.

Note F  Cumulative Effect of Accounting Change

Effective January 1, 2002, the Company adopted Statements of Financial
Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible Assets,
which requires companies to stop amortizing goodwill and certain intangible
assets with an indefinite useful life. Instead, SFAS No. 142 requires that
goodwill and intangible assets deemed to have an indefinite useful life be
reviewed for impairment upon adoption of SFAS No. 142 (January 1, 2002),
annually thereafter and upon the occurrence of any event that indicates
potential impairments. In the second quarter of 2002, the Company completed a
transitional goodwill impairment test. This test resulted in an impairment
charge totaling $6,674. The impairment charge is shown as a cumulative effect
of an accounting change as of January 1, 2002.

Note G  Discontinued Operations

On June 11, 2002, the Company initiated and entered into an agreement with
UICI terminating the amended Information Technology Services Agreement (the
Agreement) between the two parties. The Agreement was originally entered
into on January 3, 2000 in conjunction with the merger of Healthaxis.com, Inc
and Insurdata Incorporated. Under the terms of the termination agreement, UICI
made a one-time cash payment to Healthaxis in the amount of $6,500 and tendered
500,000 shares of Healthaxis common stock back to the Company. In return,
approximately 165 Healthaxis employees that were previously dedicated to
providing services to UICI under the Agreement were transferred to and became
employees of UICI on June 15, 2002.

The Company previously reported the revenues and expenses associated with
the Agreement as those from the UICI Outsourcing segment. As a result of the
termination of the Agreement, the Companys financial statements have been
prepared with the UICI Outsourcing segment results of operations presented as
discontinued operations. All historical financial statements presented have
been restated to conform to this presentation.

The operating results of the discontinued UICI Outsourcing segment for the
three months ending March 31, 2002 are as follows:

|                            |                |   |       |       | 
|--------------------------- | -------------- | - | ----- | ----- | 
|Revenue                     |                | $ | 4,500 |      
|                            |                |   |       |      
|Cost of revenue             |                |   | 3,659 |      
|Amortization of intangibles |                |   | 294   |      
|                            |                |   |       |      
|                            | Total expenses |   |       | 3,953 | 
|                            |                |   |       |      
|Net income                  |                | $ | 547   |      
|                            |                |   |       |      

Note H  Segment Reporting

In May of 2001, the Company implemented a restructuring plan which, among
other things, created separate business units, each with accountability for
operations beginning July 1, 2001. Each business unit is deemed to be a
reporting segment. Assets are not allocated to business units for internal
reporting purposes and are therefore not included in the segment information
below.

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In November 2002, the Company began a cost reduction and business
effectiveness initiative. In connection with this initiative, on January 1,
2003, two of the Companys three remaining business units (formerly known as
Web Connectivity Products and Benefit Administration and Claims Processing
Systems) were consolidated into one reporting unit named Technology &
Operations. Additional segment reporting changes include a change in the
classification of sales and marketing expenses and a change in the
classification of other operating expenses. Sales and marketing is included as
a component of Corporate Overhead, not allocated to the reporting units as in
the past. Certain operating expenses that were previously allocated to all
reporting units are now included solely in Technology & Operations. These
costs are associated with operating the Healthaxis Customer Care unit and other
customer security and infrastructure issues. All segment information has been
restated for prior periods to conform with this new presentation.

As of January 1, 2003, the Companys operating segments were:



| |  |  | Technology & Operations - provides web-enabled systems for
enrollment, administration and processing of health insurance claims on
an ASP basis, connectivity platforms and solutions for self service
(broker, employer, employee and providers), large group enrollment and
small group enrollment, sale/distribution and post-sale administration
of group and individual insurance policies including health, for life
and dental insurance.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | BPO Services Group - provides electronic data capture, imaging,
storage and retrieval of health insurance claims, attachments and other
correspondence, and claims pre-adjudication services.                                                                                                                                                                                                                                                   

Each business segment generally sells its products and services to the
same constituent users, generally located in the United States, namely
healthcare payers, which include insurance payers, government agencies, third
party administrators and health and welfare plans.

All revenue is specifically associated with a separate business unit and
therefore there are no reconciling items. Earnings before interest, income
tax, depreciation and amortization (EBITDA), as defined, is the primary
liquidity measurement used by management to make decisions regarding the
segments. EBITDA, as defined by the Company, also excludes restructuring and
impairment, severance and non-cash stock based compensation charges (EBITDA As
Defined). However, EBITDA As Defined is not a measure defined in generally
accepted accounting principles (GAAP) and should not be construed as an
alternative to operating income as determined in accordance with GAAP. EBITDA
As Defined does not consider depreciation and amortization of software and
equipment, which could be significant with increased capital expenditures.
Management does not consider these expenses significant for purposes of
evaluating separate business unit liquidity. Management believes that the
EBITDA As Defined measurement is useful in monitoring basic cash flow generated
and used in the Companys core operating activities, and in monitoring the
effects of changes made by management in the Companys operations across
different time periods. This factor alone is insufficient to measure all of
the Companys operating characteristics and is used in conjunction with GAAP
operating income to measure total operating performance. EBITDA As Defined may
not be comparable to similarly titled measures reported by other companies.
Corporate overhead includes executive management, accounting, legal, human
resources, sales, marketing, and other expenses. Operating income does not
include any cost allocations for corporate overhead.

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|                                  |  |              |       |          |  |           |       |              |  |   |        |   |  |   |        |  
|--------------------------------- |  | ------------ | ----- | -------- |  | --------- | ----- | ------------ |  | - | ------ | - |  | - | ------ | -
|                                  |  | Technology   |       | BPO      |  | Corporate |       | Consolidated
|                                  |  | & Operations |       | Services |  | Overhead  |       | Total       
|                                  |  |              |       |          |  |           |       |             
|Three Months Ended March 31, 2003 |  |              |       |          |  |           |       |              |  |   |        |   |  |   |        |  
|Revenue                           |  | $            | 4,018 |          |  | $         | 1,213 |              |  | $ |       |   |  | $ | 5,231  |  
|EBITDA As Defined                 |  |              | 589   |          |  |           | 111   |              |  |   | (1,137 | ) |  |   | (437   | )
|Depreciation and amortization     |  |              | 467   |          |  |           | 126   |              |  |   | 345    |   |  |   | 938    |  
|Operating income (loss)           |  |              | 122   |          |  |           | (15   | )            |  |   | (1,491 | ) |  |   | (1,384 | )
|Three Months Ended March 31, 2002 |  |              |       |          |  |           |       |              |  |   |        |   |  |   |        |  
|Revenue                           |  | $            | 4,254 |          |  | $         | 1,038 |              |  | $ |       |   |  | $ | 5,292  |  
|EBITDA As Defined                 |  |              | 443   |          |  |           | (201  | )            |  |   | (1,873 | ) |  |   | (1,631 | )
|Depreciation and amortization     |  |              | 489   |          |  |           | 205   |              |  |   | 355    |   |  |   | 1,049  |  
|Operating income (loss)           |  |              | (47   | )        |  |           | (406  | )            |  |   | (1,031 | ) |  |   | (1,484 | )

A reconciliation of EBITDA As Defined to the most directly comparable GAAP
financial measure, Operating loss, is as follows:

|                  |                               |   |                              |      |      |   |        |       |  
|----------------- | ----------------------------- | - | ---------------------------- | ---- | ---- | - | ------ | ----- | -
|                  |                               |   | Three Months Ended March 31,
|                  |                               |   |                             
|                  |                               |   | 2003                         |      | 2002
|                  |                               |   |                              |      |     
|EBITDA As Defined |                               | $ | (437                         | )    |      | $ | (1,631 | )    
|                  | Depreciation and amortization |   |                              | (614 | )    |   |        | (724  | )
|                  | Stock based compensation      |   |                              | (9   | )    |   |        | (149  | )
|                  | Severance expense             |   |                              |     |      |   |        | 1,345 |  
|                  | Amortization of intangibles   |   |                              | (324 | )    |   |        | (325  | )
|                  |                               |   |                              |      |      |   |        |      
|Operating loss    |                               | $ | (1,384                       | )    |      | $ | (1,484 | )    
|                  |                               |   |                              |      |      |   |        |      

The Companys core products are sold through the Technology & Operations
group, and most of the Companys research and development efforts are
concentrated in these areas.

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

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 Business-Risk Factors in the Companys Form 10-K for the year
ended December 31, 2002. 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 is a technology and business process services firm committed to
providing innovative and configurable web-based connectivity and applications
solutions for health benefit distribution and administration. These solutions,
which are comprised of software products and related services, are designed to
assist health insurance payers, government agencies, third party administrators
(TPA) and health and welfare plans in providing enhanced services to members,
employees, employers and providers through the application of Healthaxis
flexible technology to legacy systems, either on a fully integrated or on an
Application Service Provider (ASP) basis. These technology solutions are
complimented by Healthaxis Business Process Outsourcing (BPO) services that
are offered to its technology clients and on a stand-alone basis. Healthaxis
believes that its solutions enable a client to reduce their administrative
costs, enhance their customer service, grow their revenues and improve their
profitability.

Revenue
Model. Healthaxis derives revenue from a number of sources. Set
forth below is a description of our revenues generated by each of our suite of
products and solutions.

Revenues generated by our benefits administration and claims processing
systems are either transaction based or derived from providing professional
services. These revenues are generated by our Technology & Operations business
segment. Transaction revenue is a combination of a per-employee-per-month fee
for the use of our proprietary applications and a per document fee for the
printing and mailing of system output (benefit checks, explanations of benefits
and letters). The transaction revenue is based on an application service
provider model, where we host the hardware and software and perform some print
and mail services on behalf of clients. Professional services revenue is
generated from direct billing for our staff time. These billings are generally
derived from converting a clients existing system, client training and
tailoring custom solutions for a client. Professional services generally are
billed on a flat rate per hour. In some cases, a project may be done for a
fixed price.

Revenues generated by our web connectivity (WebAxis) products are derived
from licensing of our proprietary software products and providing professional
services. These revenues are generated by our Technology & Operations business
segment. The licensing revenue is a combination of per-member-per-month fees
and fixed price license fees. Depending upon the contract terms, the fixed
price license fees are recognized

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over a period of time, or as one-time license
fee agreements upon the delivery of the product. Professional service revenue
is generated from direct billing for our staff time. These billings generally
are associated with customer
support. Contracts generally include an up-front payment intended to
recoup the start-up costs incurred in setting up a new client. Such fees,
along with the associated costs, are generally deferred and recognized over the
life of the transaction-based contract.

Revenues generated from our BPO Services business segment are transaction
based. Fees for mail handling, scanning and converting insurance claims from
paper to electronic format, and image storage and retrieval, are priced on a
per-document or a per-image basis. Such revenue is recognized in the month the
services are performed. Contracts generally include an up-front payment
intended to recoup the start-up costs incurred in setting up a new client.
Such fees are generally deferred and recognized over the life of the
transaction-based contract.

November
2002 Cost Reduction Initiative. On November 12, 2002, we began a
cost reduction initiative designed to more closely align expenses with revenues
and to enhance the Companys operating performance. The cost reduction
initiative consisted of both a reduction in the Companys labor force and an
across-the-board reduction in salary levels, as well as planned reductions in
certain operating and overhead expenses. The reduction in labor force was
effective in mid-November and the reduction in salary levels was effective
January 1, 2003. In total, the cost reduction initiative is designed to save
in excess of $5 million in expenses in 2003, as compared to 2002.

Management believes that the cost reduction initiative serves not only the
Companys financial goals, but is also consistent with its strategic business
goals. Healthaxis has spent significant resources in the past two years
developing certain products and functionality. That development effort is now
substantially complete and the level of human resources necessary to sustain
the effort is no longer required. In addition, the Company now outsources
portions of its software development work to Satyam Computer Services Ltd., a
leading global consulting and IT services company based in India. The Company
will now focus on selling these capabilities to new customers, as well as using
them to strengthen relationships with existing customers. In addition, the
Company has, in recent periods, sharpened its focus on more specific target
markets with more specific product offerings, the effect of which has been to
reduce its human resource requirements. Hence, management believes that its
reduced labor force will be able to effectively serve its existing customer
base, while also focusing on new market opportunities.

Results of Operations
(Tables in Thousands)
    Revenues

| |                         |  |                              |       |      |  |        |       |  |  |   |      |  
| | ----------------------- |  | ---------------------------- | ----- | ---- |  | ------ | ----- |  |  | - | ---- | -
| |                         |  | Three Months Ended March 31, |       |      |  |       
| |                         |  | 2003                         |       | 2002 |  | Change
| |                         |  |                              |       |      |  |       
| | Technology & Operations |  | $                            | 4,018 |      |  | $      | 4,254 |  |  | $ | (236 | )
| | BPO Services            |  |                              | 1,213 |      |  |        | 1,038 |  |  |   | 175  |  
| |                         |  |                              |       |      |  |        |       |  |  |   |     
| | Total revenue           |  | $                            | 5,231 |      |  | $      | 5,292 |  |  | $ | (61  | )
| |                         |  |                              |       |      |  |        |       |  |  |   |     

Technology & Operations
Our technology and operations (T&O) revenue is down approximately 5% from the
first quarter of 2002. Revenue for the three months ended March 31, 2002
contains $420,000 related to the recognition of the final portion of the UICI
web technology perpetual license fee, which was non-recurring. Revenue for the
three months ended March 31, 2003, however, includes $370,000 related to the
non-recurring, perpetual license fee from the State of Washington. As
anticipated, one of our existing customers quit using our claims system in
2003, resulting in a

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$370,000 decrease from 2002. Revenue from Digital
Insurance continues to decline. It is down to $30,000, compared to $260,000
for the first quarter of 2002. With respect to our TPA customers, revenue
growth is directly
related to our existing customer revenue growth. Certain of these existing
customers added a significant amount of lives to our system since the first
quarter of 2002, while others lost business during the same time period,
serving to offset these increases.

Revenue for the three months ended March 31, 2003 also includes new revenue
from two existing customers in the amount of $340,000 related to print and
distribution services. Prior to 2003, we did not perform print and
distribution services for these customers. This added revenue is the direct
result of our outsourcing of these services to a third party beginning in the
fourth quarter of 2002.

BPO Services (formerly known as
Imaging Services Group)
BPO services revenues are up by 17 percent from the quarter ended March 31,
2002. In January 2003, we added additional work from an existing customer.
This new work accounts for most of the increase. Since March 2002, we lost
two, smaller customers, which accounts for approximately $50,000 in lost
revenue. However, increased imaging revenues from other existing customers
made up for most of the loss.

Cost of revenuesincludes 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.

|                        |              |   |                              |    |      |   |        |     |   |   |      |   | 
|----------------------- | ------------ | - | ---------------------------- | -- | ---- | - | ------ | --- | - | - | ---- | - | 
|                        |              |   | Three Months Ended March 31, |    |      |   |       
|                        |              |   | 2003                         |    | 2002 |   | Change
|                        |              |   |                              |    |      |   |       
|Technology & Operations |              | $ | 3,869                        |    |      | $ | 4,245  |     |   | $ | (376 | )
|BPO Services            |              |   | 1,228                        |    |      |   | 1,444  |     |   |   | (216 | )
|                        |              |   |                              |    |      |   |        |     |   |   |      |  
|Total cost of revenues  |              | $ | 5,097                        |    |      | $ | 5,689  |     |   | $ | (592 | )
|                        |              |   |                              |    |      |   |        |     |   |   |      |  
|                        | % of revenue |   |                              | 97 | %    |   |        | 108 | % |   |      |   | 

Technology & Operations
Cost of revenues for Technology & Operations decreased $376,000 (9%) from the
first quarter of 2002. The decrease is the result of the overall reduction in
staffing during November 2002, offset by reduced capitalization and added costs
attributable to print and distribution outsourcing. In November 2002, we
implemented a cost reduction initiative which reduced the employee headcount
significantly. As a result, personnel expenses were down $996,000 from the
three months ended March 31, 2002. However, some employees were re-assigned to
expensable projects from capitalizable development projects which served to
offset the expense savings by $165,000. During the fourth quarter of 2002, we
began outsourcing our print and distribution capabilities to a third party.
The increase in costs of revenues attributable to the conversion in the first
quarter of 2003 were approximately $425,000. These additional costs are in
lieu of costs previously incurred to in-house employees plus other operating
expenses. This transition necessitated part of the reduction in force that
occurred in November 2002. As a percentage of revenue, cost of revenues
decreased from 100% in the first quarter of 2002 to 96% in the first quarter of
2003. Although a significant amount of personnel costs were cut in November
2002, they were replaced with costs attributable to low-margin activities.
Most of our outsourcing expenses are passed through to the customer at cost, or
with only minimal mark-up. Subcontractor expenses are up related to work
performed on the State of Washington project. This project is accounted for
under the percentage of completion method, using a zero margin estimate as of
March 31, 2003. While we believe that the project will be profitable, all
profit on the project has been deferred until reliable estimates of costs to
complete can be obtained.

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BPO Services (formerly Imaging)
The cost of BPO Services revenue decreased primarily as a result of an employee
headcount reduction in the Imaging Support group from twelve to eight. This
reduction was part of the November staff reduction. Across-the-board salary
reductions also went into effect, on a company wide basis, January 1, 2003.
Personnel cost reductions from this BPO Services group alone accounted for
$99,000 of the cost decrease from 2002. Other cost decreases came from
efficiencies gained at our Ephraim, Utah facility through automation of the
mail process.

Sales and marketing expensesconsist primarily of employee salaries and
related benefits, as well as promotional costs such as direct mailing
campaigns, trade shows and media advertising.

|                    |  |                              |     |      |  |        |     |  |  |   |      |  
|------------------- |  | ---------------------------- | --- | ---- |  | ------ | --- |  |  | - | ---- | -
|                    |  | Three Months Ended March 31, |     |      |  |       
|                    |  | 2003                         |     | 2002 |  | Change
|                    |  |                              |     |      |  |       
|Sales and marketing |  | $                            | 255 |      |  | $      | 366 |  |  | $ | (111 | )

At September 30, 2002, we employed nine sales and marketing employees. Five of
these employees were terminated in November 2002. This reduction, combined
with the January 2003 salary reductions accounts for the decrease in costs from
the first quarter of 2002.

General and administrative expensesinclude executive management,
accounting, legal and human resources compensation and related benefits, as
well as expenditures for applicable overhead costs.

|                           |  |                              |     |      |  |        |     |  |  |   |     | 
|-------------------------- |  | ---------------------------- | --- | ---- |  | ------ | --- |  |  | - | --- | 
|                           |  | Three Months Ended March 31, |     |      |  |       
|                           |  | 2003                         |     | 2002 |  | Change
|                           |  |                              |     |      |  |       
|General and administrative |  | $                            | 909 |      |  | $      | 279 |  |  | $ | 630 | 

In the first quarter of 2002, we booked a credit on the settlement of Al
Clemens severance liability in the amount of $1.3 million. Excluding this
one-time benefit, general and administrative expenses dropped by $715,000, or
44%. The number of corporate employees dropped from nineteen at March 31, 2002
to thirteen at March 31, 2003. This reduction accounts for approximately
$200,000 of the cost decrease from the first quarter of 2002. A large portion
of the decrease ($360,000) comes from a decrease in consulting fees paid in the
first quarter of 2002. Other miscellaneous cost reductions account for the
remainder of the decrease.

Research and development expensesare primarily the salary and related
benefits of personnel engaged directly in the development of new products and
the enhancement of existing products, prior to the establishment of
technological feasibility.

|                         |  |                              |    |      |  |        |     |  |  |   |     |  
|------------------------ |  | ---------------------------- | -- | ---- |  | ------ | --- |  |  | - | --- | -
|                         |  | Three Months Ended March 31, |    |      |  |       
|                         |  | 2003                         |    | 2002 |  | Change
|                         |  |                              |    |      |  |       
|Research and development |  | $                            | 30 |      |  | $      | 117 |  |  | $ | (87 | )

We have significantly reduced our research and development activities in 2003.
Due to the November cutbacks, emphasis has been put on the completion of
existing development products, and the maintenance of existing customer
accounts.

Amortization
of intangibles includes the amortization of developed
software and customer base acquired in the January 2001 Healthaxis merger. The
amount is unchanged from 2002.

|                            |  |                              |     |      |  |        |     |  |  |   |    |  
|--------------------------- |  | ---------------------------- | --- | ---- |  | ------ | --- |  |  | - | -- | -
|                            |  | Three Months Ended March 31, |     |      |  |       
|                            |  | 2003                         |     | 2002 |  | Change
|                            |  |                              |     |      |  |       
|Amortization of intangibles |  | $                            | 324 |      |  | $      | 325 |  |  | $ | (1 | )

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Interest and other income, netdecreased from the first quarter of 2002
due to a gain on the sale of equipment in the amount of $62,000 in 2002. No
such gain was incurred in 2003. Interest income was also down by $26,000, the
result of lower notes receivable balances in 2003.

|                          |  |                              |    |      |  |        |     |  |  |   |     |  
|------------------------- |  | ---------------------------- | -- | ---- |  | ------ | --- |  |  | - | --- | -
|                          |  | Three Months Ended March 31, |    |      |  |       
|                          |  | 2003                         |    | 2002 |  | Change
|                          |  |                              |    |      |  |       
|Interest and other income |  | $                            | 30 |      |  | $      | 115 |  |  | $ | (85 | )

Interest expensedecreased as a result of the elimination of the
convertible debentures on July 31, 2002.

|                 |  |                              |     |      |  |        |      |   |  |   |      |  
|---------------- |  | ---------------------------- | --- | ---- |  | ------ | ---- | - |  | - | ---- | -
|                 |  | Three Months Ended March 31, |     |      |  |       
|                 |  | 2003                         |     | 2002 |  | Change
|                 |  |                              |     |      |  |       
|Interest expense |  | $                            | (19 | )    |  | $      | (179 | ) |  | $ | (160 | )

Gain from discontinued operationsrelates to the gain from the disposal of
the UICI Outsourcing business unit. These operations were discontinued in
connection with the June 2002 termination of the UICI Information Technology
Services Agreement.

|                                  |  |                              |   |      |  |        |     |  |  |   |      |  
|--------------------------------- |  | ---------------------------- | - | ---- |  | ------ | --- |  |  | - | ---- | -
|                                  |  | Three Months Ended March 31, |   |      |  |       
|                                  |  | 2003                         |   | 2002 |  | Change
|                                  |  |                              |   |      |  |       
|Gain from discontinued
operations |  | $                            |  |      |  | $      | 547 |  |  | $ | (547 | )

Cumulative effect of accounting changewas recorded as a result of our
adoption of SFAS No. 142 Goodwill and Other Intangible Assets. In the second
quarter of 2002, the Company completed a transitional goodwill impairment test,
which resulted in an impairment charge of $6.7 million. The impairment charge
is shown as a cumulative effect of an accounting change as of January 1, 2002.
No such charge was recorded in 2003.

|                                       |  |                              |   |      |  |        |        |   |  |   |       | 
|-------------------------------------- |  | ---------------------------- | - | ---- |  | ------ | ------ | - |  | - | ----- | 
|                                       |  | Three Months Ended March 31, |   |      |  |       
|                                       |  | 2003                         |   | 2002 |  | Change
|                                       |  |                              |   |      |  |       
|Cumulative effect of
accounting change |  | $                            |  |      |  | $      | (6,674 | ) |  | $ | 6,674 | 

Liquidity and Capital Resources

Overview of Cash Resources

A major objective of Healthaxis is to maintain sufficient liquidity to
fund growth and meet all cash requirements with cash and short-term equivalents
on hand plus funds generated from operating cash flow. We believe that our
current cash reserves and the cash generated by future operations well be
sufficient to fund operations for at least the next 12 months. Funding
operations on a longer-term basis will depend upon our ability
to continue controlling costs, maintain existing customer relationships,
and generate new revenues. The Healthaxis

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operating cost structure is
predominantly personnel and human resource related. The November 2002 cost
reduction initiative, which consists of a reduction in Healthaxis labor force,
an across-the-board reduction in salary levels, and reductions in certain
operating and overhead expenses, reflects our continuing drive to control
costs.

Analysis of Cash Flows

Cash
used in operating activities for the three months ended March 31,
2003 was approximately $1.0 million as compared to $222,000 for the same period
in 2002. Approximately half of the use of cash in 2003 was the result of our
overall loss from operations. The remainder of the decrease was due primarily
to an increase in accounts receivable. Changes in operating assets and
liabilities as detailed in the Condensed Consolidated Statements of Cash Flows
accounted for $638,000 of the increased expenditure. In 2002, our cash loss
from operations was higher, but was offset by increased collections of accounts
receivable totaling $790,000.

Cash
used in investing activities for the three months ended March 31,
2003 was $171,000 as compared to $338,000 for the same period in 2002. The
reduced cash expenditure was primarily the result of reductions in expenditures
for capitalized software and contract start-up activities totaling $154,000.

Cash
used in financing activities for the three months ended March 31,
2003 was $237,000 as compared to $8,000 for the same period in 2002. The
increased cash expenditure was primarily the result of a $237,000 cash payment
of preferred stock dividends in 2003. The dividend payments are due
semi-annually. We anticipate that the next dividend payment, due to be paid in
July 2003, will also be made in cash.

Preferred Stock

In 1999, Healthaxis issued 2% convertible debentures in the amount of
$27.5 million. These debentures, as amended, were due on September 14, 2005
and could be converted into common stock at a conversion price of $9.00 per
share at the option of the holder. On July 31, 2002 we completed a transaction
providing for the cancellation of our $27.5 million 2% convertible debentures
in exchange for issuance to the debenture holders of shares of Series A
Convertible Preferred Stock (Preferred Stock) and the payment of $4.0 million
cash. The Preferred Stock has a stated value of $23.5 million and is
convertible into shares of Healthaxis common stock at a conversion price of
$2.625. The terms of the Preferred Stock provide that cumulative dividends be
paid at the rate of 2% per year, payable semi-annually. In general, we may
choose to pay the dividends either in cash or by issuing shares of common
stock, although in some circumstances we are required to pay cash dividends.
The terms of the Preferred Stock provide that in some situations the holders of
the Preferred Stock can force Healthaxis to redeem, or buy back, their shares.
This redemption may adversely affect Healthaxis, because it may not have the
cash necessary to effect the redemption or because cash that could have been
used to make investments in Healthaxis business will instead be paid to the
holders of our Preferred Stock. While we believe that, currently, there is no
cause for redemption, the situations in which Healthaxis can be required to
redeem shares of Preferred Stock involve situations where specific events or
transactions are effected by Healthaxis without, generally, the affirmative
vote or consent of the holders of at least 60% of the then outstanding
Preferred Stock, or it is found to have made an incorrect representation or
warranty in the Certificate of Designation or other documents executed in
connection with the issuance of the Preferred Stock. We believe that the
occurrence of the situations where Healthaxis can be required to redeem shares
of Preferred Stock is within our control. The Preferred Stock also contains,
among other things, provisions providing the holders a preference in the
payment of dividends and also a liquidation preference equal to at least the
stated value of the Preferred Stock plus all accrued but unpaid dividends. The
holders of the Preferred Stock do not have general voting rights, although they
do have the right to vote separately as a class in connection with some
matters.

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Lease and Other Commitments

Healthaxis also has certain capital and operating lease commitments over the
next five years. These leases are primarily for office space and data
processing equipment. Healthaxis has no other significant cash commitments
other than those required by the normal day-to-day operations of the business.
Some of Healthaxis applications will require modification in order to achieve
or maintain compliance with HIPAA. We do not anticipate these expenditures to
be significant, and expect to be able to pass through some of the costs to its
clients.

Recently Adopted Accounting Pronouncements

In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB
Statement No. 13, and Technical Corrections (Statement 145). For most
companies, Statement 145 will require gains and losses on extinguishments of
debt to be classified as income or loss from continuing operations rather than
as extraordinary items as previously required under Statement 4. Upon adoption,
any gain or loss on extinguishment of debt previously classified as an
extraordinary item in prior periods presented that does not meet the criteria
of Opinion 30 for such classification will be reclassified to conform with the
provisions of Statement 145. The provisions of this Statement related to the
rescission of Statement 4 shall be applied in fiscal years beginning after May
15, 2002. The Company adopted the provisions of this statement effective
January 1, 2003, and anticipates the reclassification of extraordinary gains
reported in prior periods to be included in the gain or loss from operations.

Statement of Financial Accounting Standards No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (SFAS 146) requires that a
liability for costs associated with an exit or disposal activity be recognized
when the liability is incurred rather than at the date of commitment to an exit
or disposal plan. SFAS 146 is effective for exit and disposal activities that
are initiated after December 29, 2002. The adoption of SFAS 146 is not
expected to have a significant impact on the financial position or results of
operations of the Company.




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, management believes that there is no
material risk exposure.

Healthaxis cash equivalents and other investment instruments are exposed
to financial market risk due to fluctuation in interest rates, which may affect
its interest income. These instruments are not entered into for trading
purposes. Management does not expect the Companys interest income to be
significantly affected by a sudden change in market interest rates.




Item 4. Controls and Procedures

Within the 90 days prior to the filing date of 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-14. Based on that evaluation, the
Chief Executive Officer and the Chief Financial Officer have concluded that
these disclosure controls and procedures are effective. There were no
significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the date of our evaluation.

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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 2.  Changes in Securities and Use of Proceeds.

Not applicable




Item 3.  Defaults Upon Senior Securities.

Not applicable




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

Not Applicable




Item 5.  Other Information.

Not Applicable




Item 6. Exhibits and Reports on Form 8-K.



| | (a) |  | Exhibits:
| | --- |  | ---------

| |  |  |  |        |  |                                                                                                                                                                  
| |  |  |  | ------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |  | (99.1) |  | Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 filed herewith.
| |  |  |  |        |  |                                                                                                                                                                  
| |  |  |  | (99.2) |  | Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 filed herewith.



| | (b) |  | Reports on Form 8-K:
| | --- |  | --------------------
|
| |     |  | None                

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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 14, 2003 |  | By: /s/ James W. McLane                         |  | 
|                   |  |                                                 |  | 
|                   |  | James W. McLane, President and Chief            |  | 
|                   |  | Executive Officer (Principal Executive Officer) |  | 
|                   |  |                                                 |  | 
|                   |  | By: /s/ John Carradine                          |  | 
|                   |  |                                                 |  | 
|                   |  | John Carradine, Chief Financial Officer         |  | 
|                   |  | (Principal Financial Officer) and Treasurer     |  | 

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I, James W. McLane, Chief Executive Officer of Healthaxis Inc., certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Healthaxis Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)     designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b)     evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c)     presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):

a)     all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b)     any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

|             |  |                        
|------------ |  | -----------------------
|May 14, 2003 |  |                        
|             |  |                        
|             |  | By: /s/ James W. McLane
|             |  |                        
|             |  | James W. McLane        
|             |  | Chief Executive Officer

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I, John Carradine, Chief Financial Officer of Healthaxis Inc., certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Healthaxis Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)     designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b)     evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c)     presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):

a)     all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b)     any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

|             |  |                        
|------------ |  | -----------------------
|May 14, 2003 |  |                        
|             |  | By: /s/ John Carradine 
|             |  |                        
|             |  | John Carradine         
|             |  | Chief Financial Officer

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Exhibit Index

|       |  |                                                                                                                                                                  
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(99.1) |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 filed herewith.
|       |  |                                                                                                                                                                  
|(99.2) |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 filed herewith.

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