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Healthaxis
Inc
 7301 North State Highway 161, Suite 300
Irving, Texas 75039

August 12, 2005

Kathleen
Collins
Accounting Branch Chief
Securities and Exchange Commission
Division of
Corporate Finance
Washington, D.C.  20549

     Re:

     Healthaxis
Inc.
 Form 10-K for the Fiscal Year Ended
December 31, 2004
Filed March 31, 2005
Forms
8-K filed March 30, 2005 and May 16, 2005
File No. 000-25797

Dear Ms.
Collins:

     Set
forth  below  are the  responses  of  Healthaxis  Inc.  (the  “Company”)  to
the  Commission’s  comment  letter  dated July 29, 2005.

     For
your  convenience,  the  Commission’s  comments  have  been  repeated  herein,  with
the  Company’s  response  immediately  following each of the  Commission’s
comments and  highlighted in bold font.

Form 10-K Filed
March 31, 2005

Consolidated
Statements of Cash Flows, page 45

1. We note your
disclosure  on page 56  relating to your note  payable  to  UICI  where  the  promissory
note  will  be paid  through  deductions  from  monthly  invoices  for  services
provided  to  one  of  UICI’s  subsidiaries.  Based  on  this  disclosure,  it
appears  that  the  repayment  of  the  note  payable  through  these  deductions
represents  a  non-cash  activity.  Help us  understand  why you have  included  a cash
outflow from financing  activities in your  statements of cash  flows  related  to  the
repayment  of  this  note.  Refer  to  paragraph 32 of SFAS 95.

After further
consideration of SFAS 95, and specifically paragraph 32, we concur that this
transaction constitutes an exchange of non-cash assets and liabilities. The
Statements of Cash Flows will be changed beginning in the Form 10-Q to be filed
for the second quarter of calendar year 2005, including a reclassification for
the first quarter of 2005, to reflect this as a non-cash exchange of accounts
receivable and note payable. Changes will also be made to the appropriate
narrative in Management’s Discussion and Analysis – Liquidity and
Capital Resources – Analysis of Cash Flows. Further, all future Statements
of Cash Flows will reflect this reclassification for the

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historical
periods presented. We will note that the amounts have been reclassified. We are of
the view that it is not necessary to amend our Form 10-K filing for the year
ended December 31, 2004 for this reclassification. The effect of the
reclassification on operating cash flows would be as follows:

  Year

  2004

  2003

  2002

     Net cash used in operations:

         As reported
       2,225

       1,060

       2,091

         Effect of UICI netting
       618

       104

       --

         As revised
       2,843

       1,164

       2,091

The
  effect of the reclassification would not change the trend in net cash used in
  operations and we believe the effect is insignificant to the Statements of Cash
  Flows.

Note 1 – Organization
and Summary of Significant Accounting Policies, page 48

2. We note that
you have  capitalized  software  costs related  to software to be sold,  leased or
otherwise  marketed  which  are included in  capitalized  software on your  balance
sheet  as of  December  31,  2004 and  2003.  We also note on page 24  that you  state
that  customers  do not have the  contractual  right  to  take  possession  of the
software  and  with  some  exceptions,  you  have  not  licensed  such  software.
Additionally,  you  also  state  that  no  new  licenses  were  granted  in 2004.  Tell
us how you  determined  the  remaining  capitalized  software  costs  are  realizable
given  the fact  that  you  did  not  sell  any  licenses  in  2004.  Refer  to
paragraph 10 of SFAS 86.

Certain of
the  Company’s  internally  developed  software was  originally  intended for sale
and therefore  capitalized under  the guidance of SFAS 86. As our  business  model
evolved,  we  ceased the  development  and  marketing  of  certain  software  products
and  incurred  impairment  charges for the  write-off  of the related  capitalized
costs.  Other  products  that had  been  originally  intended  for  sale  are  now  being
used  internally  in  our  hosted-software  environment.  All  capitalized  software
currently  being  developed  is  for  internal  use and is being  capitalized  under the
guidance of  SOP 98-1.

Capitalized
software at December 31, 2004 was  $688,000,  and  it is being  used for  internal  use
in serving  our  clients.  On  all  financial  statements  to be  filed  in  the  future,
beginning  with  the  Form  10-Q  for the  second  quarter  of  calendar  year 2005,  the
software  developed for internal use  will be properly  classified  as part of  property,
equipment  and  software.  We are of the  view  that it is not  necessary  to amend our
Form 10-K for  calendar  year 2004 to  reclassify  this  amount  which is less than 3% of
total  assets,  and has  no  effect  on  total  assets,  liabilities  or  stockholders
equity.

3.  We note the
line item  “amortization  of intangibles” in your  statements of  operations
includes  amortization  of  developed  software  as  noted  on  page  30.  Tell us how
you  considered  FASB  Staff  Implementation  Guide,  SFAS  86,  Question 17 in
determining the classification of such costs.

The
amortization  of developed  software that was recorded as  a result  of  merger-related
purchase  price  allocation  has  been  reported  as  a  component  of  “amortization
of  intangibles” on the statement of  operations.  The amounts so  reported  for the
years ended  December 31, 2004 and 2003 were  $0  and  $24,000  respectively.  We
believe  that  reclassification  of this  amount to cost of  revenues  is not

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necessary
due  to  immateriality.  The  amortization  of  all  software  developed  for  internal
use  has  been  correctly  reported as a component of cost of revenues.

Note 10 – Stockholders’ Equity,
page 59

4. We  note
that  you  modified  your  Series  A  Convertible  preferred  stock  agreement  which
modified  the  conversion  terms and  provided  for the  issuance  of  warrants.  Tell us
how you determined  the fair value of the new preferred  stock  of $4.8 million,
including  the  underlying  assumptions  you  applied.  Also,  tell us how you
considered  the  guidance in  EITF  98-5  and  EITF  00-27  and  whether  any  beneficial
conversion  feature  existed.  In this  regard,  based  on the  fair  value of the new
preferred  stock and the fair value of  your common  stock at the  commitment  date,  it
appears  that  the  conversion  option of the new  preferred  stock is in the  money at
the commitment date.  Please advise.

The $4.8
million  value of the new  preferred  stock as shown  below  was  originally  determined
by  management.  We  subsequently  engaged  Huron  Consulting  Group,  LLC,  a  financial
consulting  services  company,  to  perform  an  independent  valuation  analysis  with
respect to the value of  the  new  preferred  stock.  A  description  of the  valuation
process  and  assumptions  applied by each of  management  and  Huron are  further
described  below and we have  attached  as  Exhibit A  certain  excerpts  from  Huron’s
valuation  report  that we think  will be helpful to the  Staff’s  evaluation  of
this transaction.

Management’s
valuation  included  separate  calculations  for  the preferred  stock and the warrants.
Factors  considered in  the valuation of the new preferred  stock  included the market
price  of  our  common  stock  on  the  date  the  of  the  transaction,  the size of the
block of shares of common  stock  into which the  preferred  stock was  convertible
relative to  the total  number of  outstanding  shares of common  stock and  the  ability
of the  holder to sell such a large  block,  and  the  contractual  trading  restrictions
imposed  on  the  new  preferred  stock and  related  shares of common  stock for one
year  following  the  close of the  transaction.  Specifically  with  regard to the large
size of the  block,  we were able to  consider the September  2003  transaction in which
the Company  bought  back 48% of its  then  outstanding  common  stock at a  discount of
40% to the  then-current  market price, in an arms  length  transaction  with  UICI.
Based  upon  these  factors,  management  calculated  the  value of the  preferred  stock
as  follows:

     3,850,000
shares of new preferred convertible into common at one for one
x $2.32 market
price of common on the date of the transaction
x 60% apply 40% discount due
to size of the block of shares
x 90% apply 10% discount due to trading
restrictions within year 1

     $4,823,280
estimated value of the new preferred stock

With
respect  to the  warrants  issued,  management  used the  Black-Scholes  Option  Pricing
model to calculate  the value.  The  indicated  value  of  the  warrants  was  $814,709.
Underlying  variables  included the market value of our common  stock on the date of
close,  the volatility of our stock,  the  term of the  warrants,  the “risk  free” rate
based upon the 5  year constant  maturity  treasury  bond and an adjustment  for  the
dilutive effect of the newly issued shares.

Based upon
the  documentation  and conclusions  reached above,  we  believe  that the  estimated
value of the  package of the  new  securities  was  less  than  the  book  value  of the
old  preferred  stock.  We concluded that the new preferred  shares  should be  recorded
at their  $1.00 par value,  the  warrants  should be recorded at a value of  $814,709
and the  remaining  carrying  value of the  preferred  stock  reversed  into APIC.  The
book  value of the old  preferred  stock in  excess of the  value of the new

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preferred
stock and warrants was netted out  of  the  net  loss  applicable  to  common
shareholders  ($5,899,351  -  $4,823,280  value of new  preferred - $814,709  value  of
warrants  =  $261,362).  The  entry to  record  the  transaction was therefore as follows:

     Preferred stock – old

     5,899,351

         Preferred stock - new at par

     3,850,000

         APIC – warrants

     814,709

         APIC - excess fair value

     261,362

         APIC – remainder

     973,280

We  also
engaged  Huron  to  perform  its  own  independent  valuation  analysis of the new
preferred  stock and  warrants  as a basis for further  supporting  or  adjusting  the
amounts  recorded.  Huron  gave  consideration  to  the  Company’s  history,  as
well  as  general  industry  and  economic  conditions.  Huron’s  valuation  of  the
preferred  stock  considered the following different methodologies:

Income approach

Cost approach

Market approach

     –

      Market
comparable method

     –

      Market
transaction method

Huron
concluded  that the value of the  preferred  stock fell  into a range of $1.17 to $1.33
per  share,  or  approximately  $4.5  million to $5.1  million  (management’s  $4.8
million is  near the middle of that range).

With
respect to the  warrants,  Huron  estimated  their value  using both the  Black-Scholes
Model and the  Binomial  Model.  Huron  concluded that the aggregate  value of the
warrants was  $810,836  (almost  the  same  as  $814,709  determined  by  management).

After
reviewing  Huron’s  valuation  report, we concluded that  the amounts  recorded by
the Company  were  further  supported  by  this  analysis  and  accurate  in all
material  respects.  Accordingly,  the Company  then  believed,  and  continues  to
believe,  that  this  transaction  has  been  accounted  for  properly.

We have
considered  the  related  guidance  of EITF  98-5 and  EITF 00-27 in accounting for this
transaction.

The
accounting  for this  transaction  was first  included in  the  Company’s  Form 10-Q
for the second  quarter of  calendar  year  2004  reviewed  by Ernst & Young,  LLP.
The  accounting  was  also  included  in  a  Form  S-3  Registration  Statement  declared
effective  on October 28, 2004,  which  included the  reports  and  consent of Ernst & Young,
LLP.  The  accounting  for  this  transaction  also  was  included  in the  financial
statements  for  calendar  year 2004  audited by  McGladrey  & Pullen, LLP, the
Company’s new auditors.

Management,
the Audit  Committee  of the  Board of  Directors  and  the  Company’s  current
auditing  firm,  McGladrey  and  Pullen,  LLP continue to believe the Company’s
accounting for  this  transaction  is correct and  reflects  the  substance of  the
transaction  based  upon  the  following  primary  considerations:

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     (a)

     Management
believes that the securities exchanged were less valuable than the securities
redeemed. Therefore, in substance, there cannot have been a “beneficial
conversion” or a preferred stock dividend.

     (b)

     Under
the terms of the preferred stock modification agreement, Healthaxis was able to
eliminate a preferred stock liquidation preference in excess of $22 million, was
able to reduce preferred stock dividend requirements by approximately $440,000
annually, was able to eliminate preferred stock voting rights and was able to
eliminate “permission fees” (accounted for as preferred stock dividends)
that occurred on occasions when Healthaxis needed to enter into other capital
transactions. The new preferred stock has no liquidation preference, a nominal
dividend and no voting rights.

     (c)

      In
an arms-length treasury stock transaction (treasury stock was immediately
retired) that occurred exactly nine months before this transaction, on
September 30, 2003, Healthaxis acquired a large block of 48% of the then
outstanding common stock from UICI for a price per share that represented a 40%
discount from the NASDAQ closing market price on that same date. The terms of the
transaction with UICI were negotiated over a period of several months.

     (d)

     While
the new preferred stock that was issued is convertible into common stock on a
share-for-share basis, the 3,850,000 shares of new preferred stock had limitations
on the number of shares into which it may be converted and sold through the
first anniversary of the closing of the preferred stock modification agreement.
An appropriate discount for these restrictions was applied. This block of
3,850,000 shares was larger than the block acquired from UICI that was purchased
at an arms-length-negotiated discount of 40% just nine months prior. Thus, a
substantial discount factor was, and properly should have been, applied to the
quoted NASDAQ market price of a share of Healthaxis common stock. The fact that
the common stock of Healthaxis had an average daily trading volume of
approximately 8,300 shares during the month of June 2004 supported use of this
discount factor as well.We do not believe that this large block of convertible
preferred stock should be considered “in-the-money” when compared to the
market value of the common stock on the date of the transaction.

     (e)

     All
particulars of the transaction were included in a Proxy Statement submitted to
the common shareholders for a vote. The common shareholders approved the
transaction with an overwhelming vote of approximately 93% of the shares voted.
It may be deduced that the common shareholders perceived that the terms of the new
preferred stock were more favorable to the common shareholders, and not less so.

In summary,
based on the foregoing,  management and the Audit  Committee  of  the  Board  of
Directors  of  Healthaxis,  in  consultation  with  its  various  advisors,  believe
that the  preferred  stock  modification  transaction  has been  properly  accounted  for
and  that  any  adjustments  would  be  inappropriate.

Note 16 – Subsequent
Event, page 66

5. We note
that  subsequent  to your  interim  balance  sheet  date,  you  entered  into  a  Stock
and  Warrant  Purchase  Agreement with Tak  Investments,  Inc., as well as a number of
related  agreements.  Tell us how you  intend to  account  for  each  of  the