PacifiCare of Texas Signs MOU with Texas AG & TDI

March 24, 2003

PacifiCare Health Systems Inc. announced its subsidiary PacifiCare of Texas, without admitting any wrongdoing, entered into a binding memorandum of understanding (MOU) with the Texas Department of Insurance (TDI) and the Texas Attorney General (AG) to settle pending litigation and certain other administrative matters with the state.

PacifiCare has agreed to enter into a definitive settlement agreement within 30 days.

The MOU calls for PacifiCare to make payments to the AG of $1.25 million in attorney’s fees, and payments to the State on behalf of the TDI of $1.5 million in administrative services reimbursement and a fine of $1.5 million. The State agreed to stay its pending investigations relating to the lawsuit for up to twelve months while the company completes the process of resolving liabilities relating to insolvent or non performing Texas medical groups and remains in compliance with the Texas prompt payment laws.

If all conditions to the settlement are not met, then litigation could resume. PacifiCare also agreed to stay its legal proceedings against the State. PacifiCare believes it is adequately reserved to satisfy the terms and conditions of the settlement, and expect it will have no impact on 2003 earnings.

“We believe the MOU with the TDI and AG will allow us to continue to focus our efforts on providing access to quality health care for our Texas members,” said Howard G. Phanstiel, president and chief executive officer of PacifiCare Health Systems. “Our recently earned ‘Excellent’ Accreditation by the National Committee for Quality Assurance (NCQA) for our Texas commercial HMO and POS plans demonstrated we are making tremendous progress.”

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