After a $5.0 million charge, Maxicare reports net income of $.5 million and earnings per share of $.03 for the second quarter of 1996.

LOS ANGELES--(BUSINESS WIRE)--July 23, 1996--MAXICARE HEALTH PLANS INC. (NASDAQ-NMS:MAXI) Tuesday announced it reported net income of $.5 million for the three months ended June 30, 1996, compared to $4.9 million for the same three month period in 1995.

Net income per common share on a fully diluted basis was $.03 for the second quarter of 1996, compared to $.27 for 1995.

For the three months ended June 30, 1996, the company reported operating revenues of $134.6 million, an increase of 18 percent or $20.9 million when compared to the same period in 1995. Operating revenues increased as a result of a 25 percent increase in the company's membership over the prior year period.

A majority of the increase resulted from a doubling of membership in the company's Medicaid and Medicare lines of business primarily in Indiana and California. The remaining increase resulted from a 15 percent increase in commercial membership primarily in California and Indiana, offset in part by a decrease in the average per member per month ("PMPM") commercial premium.

The increase in operating revenues for the second quarter of 1996 was more than offset by a $24.8 million increase in health care expenses. This increase in health care expenses was in part a result of a $5.0 million charge for unanticipated health care claims costs primarily related to the Illinois and Carolinas healthplans, where the company assumes greater risk for claims costs as compared to its other health plans.

The remaining increase primarily results from growth in the company's Medicaid and Medicare lines of business, both of which have a higher medical loss ratio (health care expenses as a percentage of operating revenues) than the company's commercial line of business.

Marketing, general and administrative ("MG&A") expenses for the second quarter of 1996 increased $1.2 million to $11.8 million as compared to the second quarter of 1995. However, MG&A expenses as a percentage of operating revenues decreased to 8.8 percent for the three months ended June 30, 1996 as compared to 9.3 percent for the second quarter of 1995 primarily as a result of revenue growth in the company's Medicaid line of business.

Net investment income for the second quarter of 1996 decreased by $200,000 to $1.5 million, as compared to 1995, due to lower interest rates partially offset by greater cash and investment balances.

The company reported a $32,000 provision for income taxes for the three months ended June 30, 1996 and an offsetting income tax benefit of $32,000 due to the company increasing its deferred tax asset. The company reported a $1.0 million provision for income taxes for the three months ended June 30, 1995.

Operating revenues for the first six months of 1996 increased 17.8 percent to $266.3 million from $226.0 million for the same period in 1995 primarily due to a 24 percent membership increase in the company's Medicaid, Medicare and commercial lines of business; offset in part by a 5.2 percent decline in the average premium PMPM primarily as a result of the growth in the lower premium PMPM Medicaid line of business.

Total health care expenses increased $43.4 million for the first six months of 1996 as compared to the same period in 1995 as a result of the increase in membership and the $5.0 million charge recorded in the second quarter of 1996. MG&A expenses increased $2.1 million for the six months ended June 30, 1996, but decreased as a percentage of operating revenues to 8.7 percent from 9.4 percent.

The company reported net income of $6.3 million for the six months ended June 30, 1996 as compared to $9.6 million for the same period in 1995.

Maxicare operates in seven states, serving members in California, Indiana, Illinois, Louisiana, North Carolina, South Carolina and Wisconsin. -0-

               MAXICARE HEALTH PLANS INC. AND SUBSIDIARIES
                 Consolidated Statements of Operations
              (Amounts in thousands except per share data)
                              (Unaudited)

                            For the three months    For the six months
                               ended June 30,         ended June 30,
                               1996       1995       1996       1995
                             --------   --------   --------   --------
Operating Revenues           $134,572   $113,692   $266,339   $226,047
Total Health Care Expenses    123,421     98,570    239,211    195,769
Gross Margin                   11,151     15,122     27,128     30,278
Marketing, General and
 Administrative Expenses       11,816     10,591     23,263     21,165
Depreciation and Amortization     329        301        675        595
Income (Loss) from Operations    (994)     4,230      3,190      8,518
Net Investment Income           1,516      1,679      3,068      3,020
Income before Income Taxes        522      5,909      6,258     11,538
Income Tax Provision              ---      1,012        ---      1,953
Net Income                        522      4,897      6,258      9,585

Net Income per Common and Common
 Equivalent Share:
Primary
  Primary Earnings per Common
    Share                         .03        .27        .34        .61
  Weighted Average Number of
    Common and Common Equivalent
    Shares Outstanding         18,406     18,092     18,446     15,758
Fully Diluted
  Fully Diluted Earnings per
    Common Share                  .03        .27        .34        .53
  Weighted Average Number of
    Common and Common Equivalent
    Shares Outstanding         18,406     18,092     18,446     18,076

CONTACT: Maxicare Health Plans Inc., Los Angeles 

Ed Coghlan, 213/765-2112