<PAGE>


                                                                   Exhibit 10.26

                                     FORM OF
                            INDEMNIFICATION AGREEMENT

      THIS AGREEMENT is made and entered into this ____ day of _________, 2003
by and between PACIFICARE HEALTH SYSTEMS, INC., a Delaware corporation (the
"CORPORATION"), and _________________ ("INDEMNITEE").

                                    RECITALS

      WHEREAS, Indemnitee performs a valuable service to the Corporation in his
capacity as a member of the Board of Directors of the Corporation (a
"DIRECTOR");

      WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"BYLAWS") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations,
partnerships, joint ventures, trusts, employee benefit plans or other
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "CODE");

      WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its directors, officers, employees and
other agents with respect to indemnification of such persons; and

      WHEREAS, in order to induce Indemnitee to continue to serve as a Director
of the Corporation, the Corporation has determined and agreed to enter into this
Agreement with Indemnitee;

      NOW, THEREFORE, in consideration of the above recitals and the promises,
covenants, and conditions exchanged by the parties hereinbelow, including the
Indemnitee's continued service as a Director after the date hereof, and other
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

                                    AGREEMENT

      1. SERVICES TO THE CORPORATION. Indemnitee will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as a
Director of the Corporation or as a director, officer or other fiduciary of an
affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Indemnitee may at any time and for any reason resign from such
position (subject to any contractual obligation that Indemnitee may have assumed
apart from this Agreement) and that the Corporation or any affiliate shall have
no obligation under this Agreement to continue Indemnitee in any such position.

      2. INDEMNITY OF INDEMNITEE. The Corporation hereby agrees to hold harmless
and indemnify Indemnitee to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent


                                       1.
<PAGE>
that such amendment permits the Corporation to provide broader indemnification
rights than the Bylaws or the Code permitted prior to adoption of such
amendment) against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Indemnitee becomes legally obligated to pay because of any claim or
claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Indemnitee is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Indemnitee is, was or
at any time becomes a director, officer, employee or other agent of Corporation,
or is or was serving or at any time serves at the request of the Corporation as
a director, officer, employee or other agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
(collectively, "EXPENSES").

      3. LIMITATIONS ON INDEMNITY. No indemnity pursuant to Section 2 hereof
shall be paid by the Corporation:

            (A) on account of any claim against Indemnitee solely for an
accounting of profits made from the purchase or sale by Indemnitee of securities
of the Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;

            (B) on account of Indemnitee's conduct that is established by a
final judgment as knowingly fraudulent or deliberately dishonest or that
constituted willful misconduct;

            (C) on account of Indemnitee's conduct that is established by a
final judgment as constituting a breach of Indemnitee's duty of loyalty to the
Corporation or resulting in any personal profit or advantage to which Indemnitee
was not legally entitled;

            (D) for which payment is actually made to Indemnitee under a valid
and collectible insurance policy or under a valid and enforceable indemnity
clause, bylaw or agreement;

            (E) if indemnification is not lawful (and, in this respect, both the
Corporation and Indemnitee have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or

            (F) in connection with any proceeding (or part thereof) initiated by
Indemnitee, or any proceeding by Indemnitee against the Corporation or its
directors, officers, employees or other agents, unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the Corporation, (iii) such indemnification is
provided by the Corporation, in its sole discretion, pursuant to the powers
vested in the Corporation under the Code, or (iv) the proceeding is initiated
pursuant to Section 8 hereof.

      4. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Indemnitee is a
director, officer, employee or


                                       2.
<PAGE>
other agent of the Corporation (or is or was serving at the request of the
Corporation as a director, officer, employee or other agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Indemnitee shall be subject
to any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal, arbitrational, administrative or
investigative, by reason of the fact that Indemnitee was serving in the capacity
referred to herein.

      5. PARTIAL INDEMNIFICATION. Indemnitee shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the Expenses
that Indemnitee becomes legally obligated to pay in connection with any action,
suit or proceeding referred to in Section 2 hereof even if not entitled
hereunder to indemnification for the total amount thereof, and the Corporation
shall indemnify Indemnitee for the portion thereof to which Indemnitee is
entitled.

      6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Indemnitee of notice of the commencement of any action, suit or
proceeding, Indemnitee will, if a claim in respect thereof is to be made against
the Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Indemnitee otherwise than under this
Agreement. With respect to any such action, suit or proceeding as to which
Indemnitee notifies the Corporation of the commencement thereof:

            (A) the Corporation will be entitled to participate therein at its
own expense;

            (B) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Indemnitee. After notice from the Corporation to
Indemnitee of its election to assume the defense thereof, the Corporation will
not be liable to Indemnitee under this Agreement for any legal or other expenses
subsequently incurred by Indemnitee in connection with the defense thereof
except for reasonable costs of investigation or otherwise as provided below.
Indemnitee shall have the right to employ separate counsel in such action, suit
or proceeding but the fees and expenses of such counsel incurred after notice
from the Corporation of its assumption of the defense thereof shall be at the
expense of Indemnitee unless (i) the employment of counsel by Indemnitee has
been authorized by the Corporation, (ii) Indemnitee shall have reasonably
concluded, and so notified the Corporation, that there is a conflict of interest
between the Corporation and Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of Indemnitee's separate counsel shall be at the expense of the Corporation. The
Corporation shall not be entitled to assume the defense of any action, suit or
proceeding brought by or on behalf of the Corporation or as to which Indemnitee
shall have made the conclusion provided for in clause (ii) above; and

            (C) the Corporation shall not be liable to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose


                                       3.
<PAGE>
any penalty or limitation on Indemnitee without Indemnitee's written consent,
which may be given or withheld in Indemnitee's sole discretion.

      7. EXPENSES. The Corporation shall advance, prior to the final disposition
of any action, suit or proceeding, within twenty (20) days following request
therefor, all Expenses incurred by Indemnitee in connection with such action,
suit or proceeding to the extent payment for such Expenses is not promptly
received from a valid and collectible insurance policy or other source of
indemnity and upon receipt of an undertaking by or on behalf of Indemnitee to
repay said amounts if it shall be determined ultimately that Indemnitee is not
entitled to be indemnified under the provisions of this Agreement, the Bylaws,
the Code or otherwise.

      8. ENFORCEMENT.

            (A) Any right to indemnification or advances granted by this
Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee in
any court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim is
made within thirty (30) days of request therefor. Indemnitee, in such
enforcement action, if successful in whole or in part, shall also be entitled to
be paid the Expenses of prosecuting his claim. It shall be a defense to any
action for which a claim for indemnification is made under Section 2 hereof
(other than an action brought to enforce a claim for Expenses pursuant to
Section 7 or Section 11 hereof, provided that the required undertaking has been
tendered to the Corporation) that Indemnitee is not entitled to indemnification
because of the limitations set forth in Section 3 hereof. Neither the failure of
the Corporation (including its Board of Directors, its independent counsel or
its stockholders) to have made a determination prior to the commencement of such
enforcement action that indemnification of Indemnitee is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors, its independent counsel or its stockholders) that such
indemnification is improper shall be a defense to the action or create a
presumption that Indemnitee is not entitled to indemnification under this
Agreement or otherwise.

            (B) For purposes of this Agreement, the termination of any claim,
action, suit or proceeding, by judgement, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law.

            (C) In connection with any determination of whether Indemnitee is
entitled to be indemnified hereunder the burden of proof shall be on the
Corporation to establish that Indemnitee is not so entitled. It is understood
that the parties hereto intend this Agreement to be interpreted and enforced as
to provide indemnification to Indemnitee to the fullest extent not now or
hereafter prohibited by law.

      9. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.


                                       4.
<PAGE>
      10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Indemnitee by this
Agreement shall not be exclusive of any other right which Indemnitee may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.

      11. CONTRIBUTION. Irrespective of whether the indemnification rights
granted pursuant to this Agreement are available in any given instance and
without regard to the exclusions set forth in Section 3 hereof, the Corporation
shall pay the entire amount of any and all Expenses relating to or incurred in
connection with any claim under an action, suit or proceeding for which the
Corporation or any of its subsidiaries or affiliated entities is jointly liable
with Indemnitee (or would be jointly liable if joined in such claim), without
requiring Indemnitee to contribute to such payment, and the Corporation hereby
waives and relinquishes, and agrees to cause its subsidiaries and any such other
entity it controls to waive and relinquish, any right of contribution it or they
may have against Indemnitee. The Corporation shall not enter into any settlement
of any claim under any action, suit or proceeding for which the Corporation or
any of its subsidiaries or affiliated entities is jointly liable with Indemnitee
(or would be liable if joined in such claim) unless such settlement provides for
a full and final release of all claims asserted against Indemnitee.

      12. DIRECTOR AND OFFICER LIABILITY INSURANCE.

            (A) The Corporation hereby covenants and agrees that, so long as
Indemnitee shall continue to serve as a director, officer, employee or other
agent of the Corporation or any of its subsidiaries or affiliated entities (and
thereafter so long as Indemnitee shall be subject to any possible claim for
which Indemnitee is entitled to indemnification under this Agreement) the
Corporation, subject to clause (b) below, shall maintain directors' and
officers' insurance in full force and effect.

            (B) The Corporation shall have no obligation to maintain directors'
and officers' insurance if the Corporation determines in good faith that such
insurance is not reasonably available, the premium costs for such insurance are
disproportionate to the amount of coverage provided, or the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit.

      13. SURVIVAL OF RIGHTS.

            (A) The rights conferred on Indemnitee by this Agreement shall
continue after Indemnitee has ceased to be a director, officer, employee or
other agent of the Corporation or to serve at the request of the Corporation as
a director, officer, employee or other agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise and
shall inure to the benefit of Indemnitee's heirs, executors and administrators.

            (B) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner


                                       5.
<PAGE>
and to the same extent that the Corporation would be required to perform if no
such succession had taken place.

      14. SEVERABILITY. The provisions of the Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single action, paragraph or sentence) is held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable in any respect, and
the validity and enforceability of any such provision in every other respect and
of the remaining provisions hereof shall not be in any way impaired and shall
remain enforceable to the fullest extent permitted by law.

      15. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware without regard to its conflict
of law rules.

      16. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.

      17. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement.

      18. HEADINGS. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.

      19. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:

      (A)   If to Indemnitee, at the address indicated on the signature page
            hereof.

      (B)   If to the Corporation, to:

                      PACIFICARE HEALTH SYSTEMS, INC.
                      5995 Plaza Drive
                      Cypress, CA 90630
                      Attention: General Counsel

or to such other address as may have been furnished to Indemnitee by the
Corporation.


                                       6.
<PAGE>
      IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.

                                            PACIFICARE HEALTH SYSTEMS, INC.

                                            By:
                                               ---------------------------------
                                                 [Name]
                                                 [Title]

                                            [NAME OF INDEMNITEE]

                                            ------------------------------------


                                            Address:


                                       7.