Bear Stearns 17th Annual Healthcare Conference September 14, 2004 The Plaza, New York City

1. Bear Stearns 17th Annual Healthcare Conference September 14, 2004 The Plaza, New York City PacifiCare Health Systems Howard G. Phanstiel Chairman & CEO

2. Cautionary Statement The statements made during this presentation that are not historical facts are forward-looking statements within the meaning of the Federal securities laws, and may involve a number of risks and uncertainties. Factors that could cause actual results to differ materially from expectations include, but are not limited to, the risks discussed in the company's most recent filings with the SEC, including the Form 10Q filed as of June 30, 2004, and the Form10K filed as of December 31, 2003.

3. Continued Market Expansion Largest purchaser of health care services in the Western U.S. 2004 Market Expansion • Medicare Supplement • PBM • Behavioral Health • A Fortune 200 company with 2004 goals of: • $12 billion in revenue • 2.3 million commercial lives • 717K Medicare+Choice HMO lives • 11.8 million specialty lives 2003 Health Plan + Specialty Companies 2003 Specialty Companies only 2004 Planned Specialty Company Expansion

4. Earnings Growth $350-$360 $296-$306 * Excluding effect of the adoption of FAS 142 relating to the amortization of goodwill

5. Excess Statutory Capital Average of 400% RBC in core HMO states

6. 2004 Trends- YTD through June 30th • Net income up 30% from 2003, excluding ‘03 favorable reserve development • Commercial business, year-over-year • Membership up 107K (5%); 4 consecutive quarters of membership growth • CA membership up 8% • MLR down 60 basis points • Gross margin up 17% • Medicare+Choice business, year-over-year • Membership about flat • M+C MLR up 210 bp, at low end of 2004 guidance • SG&A down 10 bp year-over-year • Commercial premiums up 10% PMPM, over health care cost PMPM of 9% • ‘04 premium increase guidance = 11%; ~30% of book re-prices post 6/30

7. DIVERSIFIED INSURANCE COMPANY CONSUMER HEALTH ORGANIZATION HMO PacifiCare Vision

8. Increases in Health Insurance Premiums Compared to other Indicators, 1998-2003 3.1% 2.2% Source: KFF/HRET Survey of Employer-Sponsored Health Benefits: 1999-2003; KPMG Survey of Employer-Sponsored Health Benefits: 1993,1996; HIAA: 1988-1990; Bureau of Labor Statistics, CPI (US City Avg of Annual Inflation) 1988-2003; Bureau of Labor Statistics; Seasonally Adjusted: 1988-2003

9. All Key Stakeholders Looking for Solutions Physicians Employers Consumers Government Angry about • Economics • Hassles • Professional autonomy Unhappy about costs Worried about • Ability to access care when needed • Hassles Imposed legislative/ regulatory actions to restrict aggressive intervention and mandate benefits PacifiCare’s Value Propositions and Consumer Aligned Health Care

10. Delivering Consumer Aligned Value Propositions C SUPERIOR HEALTH CARE COST MGMT DATA DRIVEN OUTCOMES O N S C O N S U M E R DELIGHTING THE CUSTOMER CONSUMER DRIVEN TOTAL SOLUTION U M E R

11. Concentrated Purchasing Power Q U Best in Class Networks A C L Tiered & Narrow Network Products I O T Demand Side Interventions Y S Proven Medical Management Capability T Integrated Disease Management Programs Maximizing Cost & Quality Outcomes SUPERIOR HCC MGMT

12. Proven Medical Management Capacity SUPERIOR HCC MGMT * excludes Oklahoma for comparison purposes to 2001

13. Integrated Disease Management Programs SUPERIOR HCC MGMT Rolling 12 Months Savings = $121 Million Cumulative DM Savingsfrom 12/00 Program Inception $274M $2.2M $4.2M DM Outcome Report May 2004

14. Health Services Reports PAAX Provider & Network Reports • Member Centric • Integrated Data Sources • - Episode Grouping • - Risk Adjustment • - Predictive Modeling • Benchmarking • Multiple Units of Analysis Marketing & Sales Reports Actuary & Underwriting Reports PAAX – PacifiCare AdvancedAnalytixSM DATA DRIVEN OUTCOMES - Demographic Info - Medical Claims - Pharmacy Claims - Clinical Encounters - Health Risk Assessment - Disease Management - Direct Lab Feeds* - Satisfaction Survey* * 2004 Deployment

15. Quality Index Profile of Hospitals DATA DRIVEN OUTCOMES

16. Highly Satisfied Members - Commercial DELIGHT THE CUSTOMER Source: MSBR / CSA Satisfaction Details

17. Commercial (HMO) First Call Resolution DELIGHT THE CUSTOMER

18. Would you recommend PacifiCare if a health benefits manager was considering offering a health plan? DELIGHT THE CUSTOMER Source: National Account Employer Survey

19. SignatureValue Traditional Plan SignatureValue Select Hospital Plan SignatureOptions Advantage SignatureOptions Traditional Plan HMO/EPO SignatureValue Advantage PPO Signature Freedom Signature Independence • Front End • Decision Support • Quality Index Profiles • Benefit Selection Pricer • Health Risk Assessment • Worksite/Web Based Tools • On-Line Enrollment • On-Going Support - • Care Management • Disease Mgmt/ Web Admin • Health Credits • Women’s Health • Flexible Spending Account • Ethnic Diversity Programs • Specialty Offerings • Pharmacy • Dental & Vision • Behavioral • Life/STD/LTD • Caregiver • PAN SDHP Indemnity Low Cost High Cost Consumer Driven Total Solution TOTAL SOLUTION

20. Consumer Aligned Product Leadership • SignatureFreedom • Engages members to: • Become better consumers of healthcare • Be accountable for their decisions • Manage their own health and adopt healthy lifestyles

21. Self Directed Account $1,000 • Covered Services (apply to deductible): • Physician Office Visits • Wellness & Preventive Care • Office-based Diagnostic Tests AnnualDeductible$2,000 Employee Responsibility $1,000 to $2,000 $ In-Network 70% Out-of-Network 50% PPO Benefit Plan 100% After Coinsurance Maximum SignatureFreedom Plan Design Rx $10 generic$35 brand Employee Responsibility $1,000 to $2,000 Out-of-Network 50% In-Network 70%

22. SignatureFreedom Growth Over 62,000 Members! • Approximately 10% from groups that did not previously offer insurance • 75% from Small Group (2 to 50 employees) • 90% from customers new to PacifiCare

23. Spending Account Model Comparison Model HSA – Health Savings Account HRA – Health Reimbursement Account Signature Freedom (SDHP) Key Features Employees enrolled in HDHP Eligibility All Employees All Employees Employee or employer or combination Employer Only PacifiCare Contributor Account Carryover Yes Yes or No Yes Ability to Withdraw for Non-Health Care No Yes No Ability to Earn Investment Yes No No

24. Grow commercial business through consumer-aligned products and ISG segment expansion Build Senior Solutions products/distribution Medicare Advantage growth Specialty company external member growth Prescription Solutions Behavioral health Dental & Vision Strategy for Profit Growth

25. Growth of Commercial Business Diversification through new Individual/Small Group sales

26. Medicare Advantage After Reform • Managed growth rather than managed phase-down • Growth from membership expansion rather than margin expansion • Revised 2004 MA membership guidance = 717,000 • Expanded sales network w/ brokers • Geographic expansion to new counties • New products for low income seniors

27. Medicare Advantage Timeline • Health Plan ACRs for 2005 submitted 9/13/04 • PPO and PDP regions defined: Oct-Dec ’04 • Benchmark rates issued first Monday in April ’05 • Health Plan RFPs due first Monday in June ’05 • New prescription drug benefit starts 1/1/06

28. 700 600 500 400 300 200 100 0 2000A* 2001A* 2002A 2003A 2004E Prescription Solutions Revenue Growth $661 $472 $322 $403 $394 (in millions) $340 $239 $172 $339 $231 $232 Internal Revenue External Revenue * Breakout of internal vs. external revenue is not available prior to CY 2002

29. Prescription Solutions SG&A Ratio 20.2% 20.5 20.2% 20 19.6% 19.5 19 18.5 (%) 17.8% 18 17.5 17.1% 17 16.5 16 15.5 2000A 2001A 2002A 2003A 2004E

30. Mail Service Revenue & Mail Order Penetration $600 $543 $500 $387 $400 $341 $328 $296 (in millions) $300 24.8% 25.0% $200 20.6% 20.3% 18.7% 18.4% $100 $0 2000A 2001A 2002A 2003A 2004E

31. Specialty Pharmacy Revenue $60 $56 $50 $39 $40 (in millions) $30 $25 $20 $10 $4 $0 2001A 2002A 2003A 2004E

32. Best Disease Management Programs as Recognized by the Disease Management Association of America NCQA Accreditation: 99% of PacifiCare members are in Excellent-accredited plans Health Financing Innovator Award from the Foundation for Accountability Recent Honors and Recognition • National Business Group on Health Award for Excellence and Innovation in Value Purchasing • Innovators Award sponsored by Health Insurance Association of America

33. Room for P/E Multiple Expansion 2004 Average 2005 Average Comparison as of 8/27/04