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                                                                   EXHIBIT 10.21


                         PACIFICARE HEALTH SYSTEMS, INC.
                            2003 INCENTIVE BONUS PLAN


Section 1.        Purpose

                           The purpose of the Management Incentive Compensation
                           Plan is to promote the interests of the Company by
                           attracting and retaining an outstanding management
                           and key employee staff. Under the Plan, incumbents in
                           stipulated key positions may receive Awards that vary
                           with the success of the Company, the Subsidiary
                           Operating Units as appropriate, and individual
                           performance. Awards payable under this Plan are not
                           intended to qualify as performance-based compensation
                           with the meaning of Section 162(m) of the Internal
                           Revenue Code of 1986, as amended (the "Code"), and
                           the Treasury Regulations promulgated thereunder.

Section 2.        Definitions

                           (a)      "Award" refers to a contingent right to
                                    receive cash at the end of a Plan Year.

                           (b)      "Committee" means a committee of the Board
                                    of Directors established to administer this
                                    Plan.

                           (c)      "Company" means PacifiCare Health Systems,
                                    Inc.

                           (d)      "Covered Employee" means (i) the Company's
                                    chief executive officer (or officers) on the
                                    last day of each Plan Year, and (ii) the
                                    four (4) highest compensated executive
                                    officers of the Company (as defined in Rule
                                    3b-7 under the Securities Exchange Act of
                                    1934, as amended) other than the chief
                                    executive officer (or officers), as
                                    determined on the last day of each Plan
                                    Year.

                           (e)      "Disability" means, with respect to a
                                    Participant, the Participant's permanent and
                                    total disability as defined in Section
                                    22(e)(3) of the Code.

                           (f)      "Participant" means any officer or full-time
                                    employee of the Company or any subsidiary of
                                    the Company as are determined by the
                                    Committee to have a direct, significant, and
                                    measurable impact on the attainment of the
                                    Company's or subsidiary's long term growth
                                    and profitability objectives; provided, that
                                    a Covered Employee may not be a Participant
                                    under this Plan.

                           (g)      "Plan" refers to this 2003 Incentive Bonus
                                    Plan.

                           (h)      "Plan Year" refers to each annual fiscal
                                    year of the Company.

                           (i)      "Retirement" means, with respect to a
                                    Participant, the Participant's voluntary
                                    termination of his or her employment with
                                    the Company that occurs after the sum of the
                                    following two factors meet or

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                                    exceed fifty-five (55): (i) the
                                    Participant's age and (ii) the Participant's
                                    number of full years of service with the
                                    Company.

                           (j)      "Subsidiary Operating Units" refers to any
                                    profit center so designated by the
                                    Committee.

Section 3.        Administration

                           The Plan will be administered by the Committee. The
                           Committee will: (i) approve the Participants eligible
                           to receive Awards under the Plan with respect to each
                           Plan Year; (ii) determine the performance objectives;
                           and (iii) determine the amount of Awards subject to
                           the terms and conditions set forth in the Plan and to
                           other terms and conditions consistent with the
                           purpose and provisions of the Plan.

                           The Committee may prescribe, amend, or rescind such
                           rules, regulations, policies, interpretations, and
                           guides as deemed appropriate for proper and effective
                           Plan administration. In addition, only the Board of
                           Directors may suspend or terminate the Plan. Any of
                           the foregoing actions will affect future Plan Years
                           only.

                           No member of the Committee or employee of the Company
                           will be personally liable for any action, failure to
                           act, determination, or interpretation made in good
                           faith with respect to the Plan or any transaction
                           under the Plan.

                           All decisions, determinations, and interpretations of
                           the Committee will be final and binding.

Section 4.        Eligibility and Participation

                           The persons eligible to participate in the Plan shall
                           be those Participants designated by the Committee to
                           participate in the Plan.

                           The Committee will designate Participants who are to
                           be granted Awards for an Award year and, in its
                           discretion, may designate additional Participants
                           during any Award year as deemed appropriate;
                           provided, however, that adjustments shall be made to
                           the minimum performance objectives applicable to new
                           Participants to ensure that any Award payable to such
                           new Participant is based solely on the attainment of
                           future performance objectives. The Committee, through
                           its designee, will notify Participants of their
                           eligibility in writing. The Committee will not be
                           bound by selections made for prior Award years.

Section 5.        Determination and Allocation of Awards

                           (a)      Establishment of Annual Objectives and
                                    Formulas. For each Plan Year, the Committee
                                    will establish, in writing, specific
                                    financial and/or strategic performance
                                    objectives for such Plan Year. At such time,
                                    the Committee will establish minimum
                                    performance objectives below which no Awards
                                    will be earned, maximum performance
                                    objectives above which Awards will not be
                                    affected,


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                                    and the formula for computing each
                                    Participant's Award. The performance
                                    objectives may, but need not, be based on
                                    the following criteria, either alone or in
                                    any combination, and on either a
                                    consolidated or Subsidiary Operating Unit
                                    level, and measured either on an absolute
                                    basis, relative basis against a
                                    pre-established target, and/or peer group,
                                    or prior year's performance as the Committee
                                    determine: (i) revenue(sales); (ii) cash
                                    flow; (iii) earnings per share (including
                                    earnings before interest, taxes and
                                    amortization); (iv) return on equity; (v)
                                    total shareholder return, (vi) return on
                                    capital; (vii) return on assets or net
                                    assets; (viii) income or net income; (ix)
                                    operating income or net operating income;
                                    (x) adjusted operating income; (xi)
                                    operating profit or net operating profit;
                                    (xii) operating margin; (xiii) market share;
                                    (xiv) member satisfaction; or (xv) employee
                                    satisfaction. The foregoing criteria shall
                                    have any reasonable definitions that the
                                    Committee may specify, which may include or
                                    exclude any or all of the following items as
                                    the Committee may specify: extraordinary,
                                    unusual or non-recurring items; effects of
                                    accounting changes; effects of financing
                                    activities; expenses for restructuring or
                                    productivity initiatives; other
                                    non-operating items; spending for
                                    acquisitions; and effects of divestitures.
                                    Any such performance objective or
                                    combination of such objectives may apply to
                                    a Participant's Award opportunity in its
                                    entirety or to any designated portion or
                                    portions of the Award opportunity, as the
                                    Committee may specify.

                                    Upon establishment of the performance
                                    objective(s) for a specific Plan Year, the
                                    appointed designee of the Committee will
                                    notify each participant in writing of the
                                    established objective(s).

                                    If the Committee determines the established
                                    performance objectives are no longer
                                    suitable due to a change in the Company's
                                    business, operations, corporate structure,
                                    capital structure, or other conditions
                                    deemed by the Committee to be material, the
                                    Committee will have sole discretion during
                                    the Plan Year to modify the performance
                                    objectives as considered appropriate and
                                    equitable.

                           (b)      Without limiting the generality of Section
                                    5(a), the Committee may, in its sole
                                    discretion, reduce the amount of any Award
                                    made to any Participant from the potential
                                    Award allocated to that Participant under
                                    Section 5(a), taking into account such
                                    factors as it deems relevant, including,
                                    without limitation: (1) significant
                                    financial or strategic achievements during
                                    the year; (2) its subjective assessment of
                                    such Participant's overall performance for
                                    the Plan Year; and (3) information about
                                    compensation practices at other peer group
                                    companies for the purpose of evaluating
                                    competitive compensation levels so that the
                                    Committee may determine that the amount of
                                    the Award is within the targeted competitive
                                    compensation range of the Company's
                                    compensation program. The Committee shall
                                    determine the amount of any

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                                    reduction in a Participant's Award on the
                                    basis of the foregoing and other factors it
                                    deems relevant and shall not be required to
                                    establish any allocation or weighting
                                    formula with respect to the factors it
                                    considers.


                           (c)      No Stockholder Approval. Establishment of
                                    Awards for Participants shall not be subject
                                    to, nor contingent upon, the disclosure to
                                    the stockholders of the Company of the
                                    material terms of the performance objectives
                                    and stockholder approval of such terms.

Section 6.        Payment of Awards Earned

                           The basis of Awards for a given Plan Year will be the
                           achievement of the performance objectives and
                           individual contributions as determined by the
                           Committee. If minimum financial performance is not
                           attained for a Plan Year, no payment will be made and
                           all contingent rights will cease. Further, no
                           additional payments will be made for financial
                           performance above the maximum objective.

                           If performance objectives are achieved, the Committee
                           shall certify in writing, prior to the payment of any
                           Award, that such performance goals (and any other
                           material terms) were satisfied. The Award, if any,
                           earned by each Participant will be paid as soon as
                           administratively possible following the close of the
                           applicable Plan year and the certification by the
                           Committee, described in the preceding sentence.

                           A Participant may elect in writing one year in
                           advance of a Plan Year, upon approval by the
                           Committee, to defer receipt of all or a portion of an
                           Award earned for a specified time as approved by the
                           Committee. Payment of deferred amounts may be in a
                           lump sum on the designated payment date or in
                           installments as approved by the Committee. A
                           Participant's right to any deferred Award will be
                           that of a general creditor of the Company; no trust
                           will be deemed to be created by virtue of such
                           deferral.

Section 7.        Termination of Employment

                           In the event of a Participant's death, Disability, or
                           Retirement during a Plan Year, payment of the Award
                           earned will be prorated unless otherwise determined
                           by the Committee. Such Awards will then be paid to
                           the Participant, the Participant's estate or legal
                           representative as determined by the Committee.

                           In the event of a Participant's death, Disability, or
                           Retirement, after the end of the Plan Year but before
                           payment of an Award to which the Participant is
                           entitled, such Award will be paid to the Participant,
                           the Participant's estate or legal representative.

                           In the event of termination of employment of a
                           Participant or a Participant ceases to be an Officer,
                           voluntarily or by the actions of the Company, with

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                           or without cause, for reasons other than those
                           specified above, at any time before payment of the
                           incentive award, the Participant will forfeit all
                           rights to any Award subject to the sole discretion of
                           the Committee.

Section 8.        Discretionary Incentive Award.

                           The Committee may, in its sole discretion, make an
                           additional award to any Participant determined by the
                           Committee to have positively impacted directly on the
                           attainment of the performance objectives established
                           by the Committee.

Section 9.        Adjustments Upon Changes in Capitalization

                           In the event of a reorganization, merger,
                           consolidation or similar transaction in which the
                           Company is not the surviving corporation, or upon the
                           sale of substantially all the assets of the Company
                           to another corporation, or upon the dissolution or
                           liquidation of the Company, then the Company or a
                           successor corporation, if any, may continue the Plan
                           and, if not, then the Plan will terminate on the
                           effective date of such transaction. Provision will be
                           made for determining the amount of cash payable for
                           all Awards for a Plan Year which will end after such
                           event based on the portion of the Plan Year occurring
                           prior to such event, unless provisions are made for
                           the continuance of the Plan and the assumption or
                           substitution for such Awards of an equivalent value
                           by the successor corporation.

                           Adjustments under this section will be made by the
                           Committee whose determination as to what adjustments
                           will be made and the extent will be final, binding,
                           and conclusive.


Section 10.       General Provisions

                           (a)      No right to Participate: Nothing in the Plan
                                    will be deemed to give a Participant or a
                                    Participant's legal representative or any
                                    other person or entity claiming under or
                                    through a Participant any contract or right
                                    to participate in the benefits of the Plan.

                           (b)      No Employment Right: Participation in the
                                    Plan will not be construed as constituting a
                                    commitment, guarantee, agreement, or
                                    understanding of any kind that the Company
                                    will continue to employ any individual.

                           (c)      Nontransferability: A Participant or any
                                    designed beneficiary has no right to assign,
                                    transfer, attach, or hypothecate any
                                    benefits or payments of the Plan.

                           (d)      Withholding: The Company has the right to
                                    deduct any sums federal, state, or local tax
                                    requires to be withheld with respect to the
                                    payment of any Award.

                           (e)      Restricted Liability: Payments held by the
                                    Company before distribution will not be
                                    liable for the debts, contracts, or
                                    obligations

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                                    of any Participant or beneficiary, or be
                                    taken in execution by attachment or
                                    garnishment, or by any other legal or
                                    equitable proceeding.

Section 11.       Amendment, Suspension, or Termination of Plan

                           The Company may amend, suspend, or terminate the Plan
                           at any time. Such amendment, suspension, or
                           termination will not adversely alter or affect any
                           right or obligation to any Award made before this
                           action. The Committee will determine the effect on
                           Awards that may be effected by such event and make
                           adjustments and/or payments as it, in its sole
                           discretion, determines appropriate.

Section 12.       Effective Date

                           This Plan will be effective upon its adoption by the
                           Company and may be applied retroactively to the
                           beginning of the Company's fiscal year at the sole
                           discretion of the Committee.


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