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

September 23, 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:

Further to our
response to you dated August 12, 2005 and your subsequent correspondence addressed to
Mr. James W. McLane, Chief Executive Officer, of September 13, 2005, we have an
apparent difference of opinion with regard to your comments on Note 10 – Stockholders
Equity, page 59 of our Form 10-K referenced above. We are, therefore, submitting this
additional information and summary for your reconsideration and request that the matter
be reviewed and considered on appeal by Mr. Joel Levine in the Division of Corporate
Finance.

We agree that
the relevant accounting for this transaction  is the fair value of the package of the new
securities  compared to the book value of the existing preferred stock  as of the
transaction date, as described in EITF D-42.  The  new securities in this case are the
new “modified” convertible preferred stock shares and the attached  warrants.
The valuation techniques used to establish the  fair value of both the new preferred
shares and the warrants  are described in our previous response of August 12.

We acknowledge
the SEC’s position and FASB guidance in EITF 98-5, Section 5, indicating that
quoted market prices in active markets (underscoring added) are the best evidence of
fair value and should be used as the basis of measurement of fair value. It appears
that the difference in conclusions reached by the SEC staff and by management is largely
based upon the consideration that the new securities are not common stock (and have no
public market) and upon the definition of an “active market” as the term is
used but not defined in EITF 98-5, Section 5. We believe our situation is materially
different from other situations previously considered by the Staff of the SEC because of
the discussion presented in the “bullet points” that follow. We believe that
it is important that all material facts surrounding our “preferred stock
modification” transaction be considered and understood by the Staff.

We believe that
the underpinning of the “active market” concept is predicated upon having a
market that is active enough on which to base a fair value of the securities being
issued (in this case 3,850,000 shares of preferred stock someday convertible under
restricted circumstances into shares of common stock, plus 1,000,000 warrants to acquire
common stock). We believe that an “active market” is defined as one in which
there exists – within a reasonable amount of time -- enough willing buyers and
willing sellers, neither under compulsion to act, to establish such fair value,
regardless of whether or not the stock is traded on a public exchange. We do not
believe that having a market open or a bid or asked quotation available based on the
trading of a minimal number of shares necessarily constitutes an “active market”.
We also do not believe that a minimal amount of trading relative to the number of shares
included in the transaction constitutes an “active market” as that term is used
but not defined in EITF 98-5, Section 5. Believing that there is not a market
sufficiently active to establish a fair value for the securities issued, we made our
own evaluation internally and then immediately hired and relied on the work of an expert
as a basis for corroborating the amount that we booked for this transaction. The
expert, Huron Consulting, arrived at a range that comfortably included the amount booked
by management. Two different National CPA firms have issued consents in SEC filings
containing Healthaxis’ financial statements that include our accounting for this
“preferred stock modification” transaction.

There are also
other very important pieces of information  relative to valuing this transaction that
management  considers relevant:

Our own precedent: Exactly nine
months earlier, on September 30, 2003, Healthaxis acquired in an arms-length
transaction a block of 48% of the then outstanding common stock held by UICI for a
discount of 40% from the last quoted NASDAQ market price. The block of treasury stock
acquired was immediately retired by Healthaxis. The terms of this treasury stock
purchase were negotiated over a period of almost one year in heated discussions where
UICI’s only objective was maximizing the purchase price of the block of stock.
The 40% discount purchase price accepted by UICI, and properly booked by Healthaxis,
consisted of only $500,000 cash and a long-term note receivable for the balance.
Healthaxis’ note payable to UICI is payable partially by the value of future
services rendered by Healthaxis to a subsidiary of UICI. This transaction was
negotiated stubbornly over a long period of almost one year and at arms-length and can
be tracked in Healthaxis’ financial statements and represents a block of
comparable size and magnitude to that block in the “preferred stock modification” transaction
effective June 30, 2004. While UICI was a customer of Healthaxis at the time of the
repurchase transaction, it should be pointed out that UICI was not represented on the
Healthaxis board and had no other relationship with Healthaxis, that UICI could have
arranged to obtain services from parties other than Healthaxis and that UICI had no
reason to have any continuing interest in Healthaxis’ success. Hence, Healthaxis
fully believes that the discount at which these shares were purchased was the result of
arms-length negotiations and represented the fair value of the shares purchased. It
should be noted that the market trading volumes for Healthaxis common stock at the time
of the UICI transaction were similar to those occurring at the time of the preferred
stock modification transaction. As a result, Healthaxis believes that the UICI
transaction provided the best guide to an appropriate market discount.

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The “modified” preferred
stock is not common stock and, thus, not the same security as that quoted on the NASDAQ
market. For the security modified in this transaction, there is NO market whatsoever,
except possibly among other institutional investors. The preferred stock modified in
the transaction effective June 30, 2004 is still a preferred stock whereby the
preferred stockholders agreed to eliminate or substantially reduce all preferences
(eliminated a liquidation preference of about $22 million), dividends (reduced from
$440,000 to $700 annually), and voting rights (totally eliminated) in exchange for a
better conversion ratio; however, during the one-year period following the closing of
the preferred stock modification transaction, the convertibility of the preferred stock
was subject to significant restrictions and the transferability of the preferred stock
in the private or public markets was also subject to substantial limitations. We
acknowledge the wording in EITF 98-5 regarding “block discounts” and “transfer
restrictions”; however, we are not dealing with common stock in this transaction.
The “modified preferred stock” was accepted by the holders of the preferred
stock because the four institutional holders believed the modified security was their
best chance to recover some of their investment. The transaction was submitted to a
vote of Healthaxis’ common stockholders and 93% of the common shares voting voted
for the transaction indicating that they believed the transaction was beneficial to the
COMMON stockholders (not beneficial to the preferred stockholders). It is the
universal opinion of everyone close to the transaction that the preferred stockholders
received a security that was less valuable than the one held before it was modified.
Management and the Board of Directors (including the Audit Committee) believe that to
account for a preferred stock dividend would be incorrect and misleading and not reflect
the substance of the transaction.

The “modified preferred stock” represents
potential future conversion into 3,850,000 shares of common stock. Prior to this
transaction, Healthaxis had 2,768,291 shares of common stock outstanding – and the
preferred stock prior to this “modification transaction” was already
convertible into 1,424,548 shares of common stock. For the 30 trading days prior to
the June 30, 2004 transaction date, Healthaxis common stock (NASDAQ: HAXS) traded an
average of 8,350 shares per day. At this rate, the 3,850,000 modified block of shares,
if and when converted to common (and without considering the 1,000,000 warrants to
acquire common stock that were also issued), would require 461 trading days of average
activity. This total of 461 trading days is almost two full years of trading days. We
believe this is prima facie evidence that an “active market” as contemplated
by the writers of the EITF 98-5, Section 5 does not exist. We think it is not correct
to value the block of 3,850,000 modified preferred shares based on the NASDAQ closing
quotation for HAXS common stock on a single day such as June 30, 2004. In fact, if a
block of that size were placed on the market, management (and its expert advisers)
believes that the market quotation would be immediately substantially lower per share
than the amount at which management recorded the transaction.

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Because there is no public market
for the securities (“modified preferred” and warrants) issued, the
convertibility and transferability of the “modified preferred” was subject to
substantial restrictions, and because we do not believe that an “active market” for
our common stock then existed or currently exists (as that term is used but not defined
in EITF 98-5, Section 5), Healthaxis followed the guidance in EITF 98-5 for recording
the transaction when an “active market” does not exist. Specifically,
Healthaxis engaged an independent expert to assist in the valuation and in the proper
recording of the transaction. The amount at which management recorded the modified
preferred stock and warrants falls very near the mid-point of the ranges determined in
the independent valuation performed by Huron Consulting. Before management engaged
Huron, management confirmed that the work of Huron would be professionally acceptable
to its then-current audit firm, Ernst & Young LLP.

We summarize
our arguments and position as follows.  Firstly, we have a precedent involving our own
company in  the treasury stock transaction with UICI on September 30,  2003, where a 48%
block of the then outstanding common stock  was acquired arms-length at a 40% discount
from the quoted  market on the transaction date.  Secondly, our “modified  preferred
stock” transaction of June 30, 2004, modified an  issue of already outstanding
preferred stock and is not  common stock. Thirdly, the “preferred stock modification” transaction
involved more shares than were already  outstanding (3,850,000 versus 2,768,291). If the
modified  preferred stock could have been converted to common stock  immediately (it
could not have been, of course) it would  have taken 461 trading days (almost two years)
to trade the  quantity of common stock covered by the preferred stock  modification—and
that assumes that there would have been  willing buyers available every day and no other
sellers.  We believe the answer determined by management and  corroborated by the
valuation consultants is the proper  recording of the transaction.

We strongly
believe that we have accounted for the” preferred stock modification” transaction
effective June 30, 2004 correctly and in accordance with generally accepted accounting
principles (including EITF D-42 and EITF 98-5, Section 5 where an “active market” doesnot exist).

The recording
of this transaction was initiated by our Chief  Financial Officer and the accounting has
been considered  also by our former CFO and now CEO-designate (an experienced  CPA), our
Audit Committee (which includes two former Big 6  CPA partners), our entire Board of
Directors, our  independent consultant that performed the valuation, and  various
partners of two National CPA firms who have issued  consents on

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our financial
statements included in various  filings with the SEC.  Every party mentioned believes it
would be wrong and misleading to record this transaction  reflecting a preferred stock
dividend.  There was NO  preferred stock dividend paid in any form or fashion.
Healthaxis has properly valued and accounted for the  “preferred stock modification” transaction.
Every party  mentioned also believes the transaction is properly recorded  as it is.

We respectfully
request that the Staff of the Securities and  Exchange Commission accept our explanation
and withdraw the  comment regarding this item in its letter of August 12, 2005.

Healthaxis
management and its auditors and advisors are  available to discuss this matter further
should the Staff  desire to do so.  Please contact me at 972-443-5004 should  you wish to
have such a discussion.

Very truly
yours,

/s/ Jimmy D.
Taylor
Jimmy D. Taylor
Chief Financial Officer

Cc:

     Ms. Lisa Mitrovich

Mr. Patrick Gilmore

Mr. James W. McLane, Chairman and Chief Executive Officer

Mr. John M. Carradine, President and Chief Operating Officer

Mr. J. Brent Webb, Secretary and General Counsel

Mr. Thomas L. Cunningham, Audit Committee Chairman

Mr. John McKnight, Locke-Leddell & Sapp, LLP

Mr. Bob Allen, McGladrey & Pullen, LLP.

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