Fitch Ratings Upgrades Sierra Health Services; Outlook Stable.

CHICAGO -- Fitch Ratings has upgraded its long-term issuer and senior debt ratings on Sierra Health Services, Inc. (SIE) to 'BB+' from 'BB', as well as the insurer financial strength ratings of SIE's core insurance subsidiaries Health Plan of Nevada, Inc.(HPN) and Sierra Health and Life Insurance Co., Inc. (SHL) to 'BBB+' from 'BBB'. The rating action affects approximately $115 million of outstanding public debt. The Rating Outlook is Stable.

The rating upgrade is based on SIE's strong operating trends in the Nevada healthcare market where higher membership, revenue, and margins have resulted from SIE's key competitive advantages built on the company's significant health maintenance organization market share. In addition, SIE successfully executed a sale of the workers' compensation business, which was an ongoing profitability drag. Through the combination of these factors, SIE achieved its highest ever level of net income before taxes of $192 million in 2004 and nearly doubled average net income before taxes margin from 4.7% to 8.5%. Looking forward, SIE benefits from a favorable near-term outlook for the Medicare business and strong medical cost management that aids both its Medicare and commercial businesses. Fitch expects SIE to continue the positive operating momentum achieved in 2004.

SIE's improved operating performance, high net income, and lack of dividend have also allowed it to improve financial flexibility and balance sheet fundamentals by retaining higher capital levels. SIE's equity adjusted leverage, which gives a 9% equity weighting to SIE's convertible debentures, decreased from 37.9% at first-quarter 2004 (Q1'04) to 31.6% at Q1'05, based on the strength of SIE's improving capital. SIE's strong year-end 2004 cash based interest coverage was approximately 21 times (x), based largely on management fee payments from HPN and to a lesser extent fee payments and dividends from other subsidiaries. Earnings based interest coverage of 24x is based on strong operating earnings from continuing operations of $193 million in 2004 and is supportive of its ratings. Capital levels at HPN and SHL have both risen in recent years and SIE has the flexibility to raise their capital further. While Fitch still views SIE's 2004 combined operating company risk based capital ratio of 215% of the company action level as moderate, Fitch notes the improvement over 2003's 190% and the increased holding company capital.

Primary rating concerns include SIE's limited diversification as 90% or more of its revenue and net income is generated from Nevada since the loss of its TRICARE business. While the Nevada economic and regulatory environment is favorable, concentration poses its own set of risks regardless of the situation. While SIE has significant advantages in Nevada, it competes against several much larger competitors in the managed care business, where scale does carry advantages. Another concern addressed in Fitch's ratings is some potential for further allowances on the Folksamerica note.

Sierra Health Services, Inc. is a publicly traded diversified healthcare services holding company (NYSE: SIE), whose primary insurance subsidiaries, HPN and SHL, provide health insurance and managed care products and services primarily in the southern Nevada market. At March 31, 2005, SIE had over 572,000 members and shareholders' equity of approximately $489 million.

Fitch has upgraded the following ratings:

Sierra Health Services, Inc.

-- Long-term Issuer to 'BB+' from 'BB';

-- Senior debt to 'BB+' from 'BB'.

Health Plan of Nevada, Inc.

Sierra Health and Life Insurance Company, Inc

-- Insurer financial strength to 'BBB+' from 'BBB'.

The Rating Outlook is Stable for all ratings.