Sierra Reports Second Quarter One-Time Gains in Its TRICARE Subsidiary -- Sierra Military Health Services.

Business Editors/Health/Medical Writers

LAS VEGAS--(BUSINESS WIRE)--May 18, 2004

Sierra Health Services Inc. (NYSE:SIE) reported today that its wholly owned subsidiary, Sierra Military Health Services Inc. (SMHS), will experience higher than expected income for the second quarter of 2004, as a result of one-time settlements on certain contractual matters, including change orders and bid price adjustments, along with SMHS' sale of certain assets to Health Net Federal Services (Health Net). These one-time settlements will result in additional income for the second quarter of over $12 million on a pre-tax basis or approximately $8 million after tax.

In May, SMHS settled certain outstanding contract modifications, including the TRICARE for Life contract change order, initiated in October 2001, which expanded health benefits to retired military personnel and families over the age of 65. Additionally, in April, SMHS finalized a definitive agreement with Health Net to provide certain transition services and to sell certain assets associated with its TRICARE business, including its provider network.

SMHS is in the final year of its TRICARE managed care support contract with the Department of Defense. SMHS will continue to administer managed care support services to 710,000 eligible beneficiaries in TRICARE Northeast Region 1 through Aug. 31, 2004, followed by a phase out of activities for a period of six months thereafter.

Sierra Health Services Inc., based in Las Vegas, is a diversified health care services company that operates health maintenance organizations, indemnity insurers, military health programs, preferred provider organizations and multi-specialty medical groups. Sierra's subsidiaries serve over 1.2 million people through health benefit plans for employers, government programs and individuals. For more information, visit the company's Web site at www.sierrahealth.com.

Statements in this news release that are not historical facts are forward-looking and based on management's projections, assumptions and estimates; actual results may vary materially. Forward-looking statements are subject to certain risks and uncertainties, which include but are not limited to: 1) potential adverse changes in government regulations, contracts and programs, including TRICARE, Medicare, Medicaid and legislative proposals to eliminate or reduce ERISA pre-emption of state laws that would increase potential managed care litigation exposure; 2) competitive forces that may affect pricing, enrollment, renewals and benefit levels; 3) unpredictable medical costs, malpractice exposure, reinsurance costs and inflation; 4) impact of economic conditions; 5) changes in healthcare reserves; 6) our failure to obtain an extension of the Medicare Social HMO contract; and 7) the amount of actual proceeds to be realized from the note receivable related to the sale of the workers' compensation insurance operation. Further factors concerning financial risks and results may be found in documents filed with the Securities and Exchange Commission and which are incorporated herein by reference.

Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Sierra will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Sierra or its business or operations. Sierra assumes no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or otherwise.