UNITED
STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

# FORM 10-Q

(Mark One)(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
          ACT OF 1934

For Quarterly Period
Ended June 30, 2005OR
                           ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number 1-8538

USHEALTH GROUP, INC.(Exact
Name of Registrant as Specified in its Charter)

| | DELAWARE                                                         |  | 73-1165000                             
| | ---------------------------------------------------------------- |  | ---------------------------------------
| | (State or Other Jurisdiction of Incorporation or Organization)   |  | (I.R.S. Employer Identification Number)
| | 3100 Burnett Plaza, 801 Cherry Street,Unit 33, Fort Worth, Texas |  | 76102                                  
| | (Address of Principal Executive Offices)                         |  | (Zip Code)                             

Registrant's Telephone Number, including Area Code
                                                (817) 878-3300

Indicate, by check mark, whether the
Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes         X             No

Indicate, by check mark, whether the
Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes                      No        X

Common Stock  Par value $0.01; 50,763,826
shares outstanding at August 2, 2005.



# USHEALTH GROUP, INC.INDEX
TO FORM 10-Q

---

|PART I  FINANCIAL INFORMATION | Page No.
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|PART II  OTHER INFORMATION    |         
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# USHEALTH GROUP, INC.CONDENSED
CONSOLIDATED BALANCE SHEETS

|                                                          |                                   | 
|--------------------------------------------------------- | --------------------------------- | 
|                                                          |                                   | 
|                                                          |                                   | 
|Assets                                                    | (in thousands, except share data)
|Investments:                                              |                                   | 
|Fixed Maturities:                                         |                                   | 
|Available-for-sale, at fair value (amortized cost $97,799 |                                   | 
|and $96,940)                                              |                                   | 
|Short-term investments                                    |                                   | 
|Other investments, at market value (cost $352 and $353)   |                                   | 
|                                                          |                                   | 
|Total Investments                                         |                                   | 
|Cash                                                      |                                   | 
|Accrued investment income                                 |                                   | 
|Receivables from agents, net of allowance for doubtful    |                                   | 
|accounts of $3,654 and $3,601                             |                                   | 
|Deferred policy acquisition costs, net                    |                                   | 
|Property and equipment, net of accumulated depreciation   |                                   | 
|of $5,303 and $4,891                                      |                                   | 
|Other assets                                              |                                   | 
|                                                          |                                   | 
|Total Assets                                              |                                   | 
|                                                          |                                   | 
|Liabilities and Stockholders' Equity                      |                                   | 
|Liabilities:                                              |                                   | 
|Policy liabilities and accruals:                          |                                   | 
|Future policy benefits                                    |                                   | 
|Claim reserves                                            |                                   | 
|                                                          |                                   | 
|Total Policy Liabilities and Accruals                     |                                   | 
|Accounts payable and other liabilities                    |                                   | 
|Notes payable to bank                                     |                                   | 
|Notes payable to related party                            |                                   | 
|                                                          |                                   | 
|Total Liabilities                                         |                                   | 
|                                                          |                                   | 
|Stockholders' Equity:                                     |                                   | 
|Common stock ($0.01 par value, 75,000,000 shares          |                                   | 
|authorized; 50,763,826 and 50,606,876 shares              |                                   | 
|issued and outstanding)                                   |                                   | 
|Capital in excess of par value                            |                                   | 
|Accumulated other comprehensive income                    |                                   | 
|Retained deficit                                          |                                   | 
|                                                          |                                   | 
|Total Stockholders' Equity                                |                                   | 
|                                                          |                                   | 
|Total Liabilities and Stockholders' Equity                |                                   | 
|                                                          |                                   | 
|                                                         

See
the Notes to the Condensed Consolidated Financial Statements.



USHEALTH GROUP, INC.CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)

|                                                      |                                       |  |                          |       
|----------------------------------------------------- | ------------------------------------- |  | ------------------------ | ------
|                                                      | Three Months EndedJune 30,            |  | Six Months EndedJune 30,
|                                                      |                                       |  |                          |       
|                                                      |                                       |  |                          | 2005  
|                                                      |                                       |  |                          |       
|                                                      | (in thousands, except per share data)
|Revenues:                                             |                                       | 
|Premiums:                                             |                                       | 
|First-year premium                                    |                                       |  | $                        | 3,027 
|Renewal premium                                       |                                       |  |                          | 17,440
|                                                      |                                       |  |                          |       
|Total premiums                                        |                                       |  |                          | 20,467
|Net investment income                                 |                                       |  |                          | 1,373 
|Fee and service income                                |                                       |  |                          | 833   
|Other insurance revenues                              |                                       |  |                          | 320   
|Net realized loss on investments                      |                                       |  |                          | (8    
|                                                      |                                       |  |                          |       
|Total revenues                                        |                                       |  |                          | 22,985
|                                                      |                                       |  |                          |       
|Benefits, claims and expenses:                        |                                       | 
|Benefits and claims                                   |                                       |  |                          | 13,648
|Change in deferred policy acquisition costs           |                                       |  |                          | 345   
|Commissions                                           |                                       |  |                          | 2,162 
|General and administrative expenses                   |                                       |  |                          | 5,365 
|Fee and service operating expenses                    |                                       |  |                          | 718   
|Taxes, licenses and fees                              |                                       |  |                          | 797   
|Interest expense on notes payable                     |                                       |  |                          | 269   
|                                                      |                                       |  |                          |       
|Total expenses                                        |                                       |  |                          | 23,304
|                                                      |                                       |  |                          |       
|(Loss) income from continuing operations before       |                                       | 
|income taxes                                          |                                       |  |                          | (319  
|Federal income taxes                                  |                                       |  |                          | -     
|                                                      |                                       |  |                          |       
|Net (loss) income from continuing operations          |                                       |  |                          | (319  
|Loss from discontinued operations before income taxes |                                       |  |                          | -     
|Federal income tax expense                            |                                       |  |                          | -     
|                                                      |                                       |  |                          |       
|Net loss from discontinued operations                 |                                       |  |                          | -     
|                                                      |                                       |  |                          |       
|Net (loss) income                                     |                                       |  |                          | (319  
|Preferred stock dividends                             |                                       |  |                          | -     
|                                                      |                                       |  |                          |       
|(Loss) income applicable to common stockholders       |                                       |  | $                        | (319  
|                                                      |                                       |  |                          |       
|Basic and diluted (loss) earnings from continuing     |                                       | 
|operations per common share                           |                                       |  | $                        | (.01  
|                                                      |                                       |  |                          |       
|Basic and diluted (loss) earnings per                 |                                       | 
|common share                                          |                                       |  | $                        | (.01  
|                                                      |                                       |  |                          |       
|Weighted average shares outstanding:                  |                                       | 
|Basic                                                 |                                       |  |                          | 50,764
|                                                      |                                       |  |                          |       
|Diluted                                               |                                       |  |                          | 50,764
|                                                      |                                       |  |                          |       

See
the Notes to the Condensed Consolidated Financial Statements.



USHEALTH GROUP, INC.CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(Unaudited)

|                                                     |                            |  |                          |      
|---------------------------------------------------- | -------------------------- |  | ------------------------ | -----
|                                                     | Three Months EndedJune 30, |  | Six Months EndedJune 30,
|                                                     |                            |  |                          |      
|                                                     |                            |  |                          | 2005 
|                                                     |                            |  |                          |      
|                                                     | (in thousands)            
|                                                    
|Net (loss) income                                    |                            |  | $                        | (319 
|Other comprehensive income (loss):                   |                            | 
|Unrealized holding gain (loss) arising during period |                            |  |                          | 1,740
|Reclassification adjustment of loss on sales         |                            | 
|of investments included in net income                |                            |  |                          | 8    
|                                                     |                            |  |                          |      
|Comprehensive income (loss)                          |                            |  | $                        | 1,429
|                                                     |                            |  |                          |      
|                                                    

See
the Notes to the Condensed Consolidated Financial Statements.



USHEALTH GROUP, INC.CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY(Unaudited) (in thousands, except share data)

|                              |              |        |                     |            |                        |  
|----------------------------- | ------------ | ------ | ------------------- | ---------- | ---------------------- | -
|                              | Common Stock |        | Capital inExcess Of |            | AccumulatedOther Comp. |  
|                              |              |        |                     | Shares     |                        |  
|                              |              |        |                     |            |                        |  
|Balance at January 1, 2005    |              |        |                     | 50,606,876 |                        | $
|                             
|Net loss                      |              | (1,069 | )                   | (1,069     | )                     
|Other comprehensive loss      |              |        |                     | (119       | )                      |  
|Common stock issued and other |              |        |                     | 156,950    |                        |  
|                              |              |        |                     |            |                        |  
|Balance at June 30, 2005      |              |        |                     | 50,763,826 |                        | $
|                              |              |        |                     |            |                        |  
|                             

See
the Notes to the Condensed Consolidated Financial Statements.



USHEALTH GROUP, INC.CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

|                                                       |                            |  |                          |       
|------------------------------------------------------ | -------------------------- |  | ------------------------ | ------
|                                                       | Three Months EndedJune 30, |  | Six Months EndedJune 30,
|                                                       |                            |  |                          |       
|                                                       |                            |  |                          | 2005  
|                                                       |                            |  |                          |       
|                                                       | (in thousands)            
|Cash Flows From Operating Activities:                  |                            | 
|Net (loss) income                                      |                            |  | $                        | (319  
|Adjustments to reconcile net (loss) income to cash     |                            | 
|provided by operating activities                       |                            | 
|(Increase) decrease in accrued investment income       |                            |  |                          | (2    
|Decrease in deferred policy acquisition costs          |                            |  |                          | 345   
|Decrease in receivables from agents                    |                            |  |                          | 389   
|Provision for uncollectible agent receivables          |                            |  |                          | 24    
|Decrease in other assets                               |                            |  |                          | 622   
|(Decrease) increase in policy liabilities and accruals |                            |  |                          | (565  
|Increase (decrease) in accounts payable and            |                            | 
|other liabilities                                      |                            |  |                          | 18    
|Interest expense on note payable to related party      |                            |  |                          | 251   
|Other, net                                             |                            |  |                          | 391   
|                                                       |                            |  |                          |       
|Net Cash Provided By Operating Activities              |                            |  |                          | 1,154 
|                                                       |                            |  |                          |       
|Cash Flows From Investing Activities:                  |                            | 
|Purchases of fixed maturity investments                |                            |  |                          | (3,068
|Sales of fixed maturity investments                    |                            |  |                          | 653   
|Maturities and calls of fixed maturity investments     |                            |  |                          | 1,881 
|Net (increase) decrease in short-term and other        |                            | 
|investments                                            |                            |  |                          | (264  
|Property and equipment purchased                       |                            |  |                          | (52   
|                                                       |                            |  |                          |       
|Net Cash Used For Investing Activities                 |                            |  |                          | (850  
|                                                       |                            |  |                          |       
|Cash Flows From Financing Activities:                  |                            | 
|Repayment of notes payable                             |                            |  |                          | (200  
|                                                       |                            |  |                          |       
|Net Cash Used For Financing Activities                 |                            |  |                          | (200  
|                                                       |                            |  |                          |       
|Increase (Decrease) In Cash During Period              |                            |  |                          | 104   
|Cash At Beginning Of Period                            |                            |  |                          | 1,253 
|                                                       |                            |  |                          |       
|Cash At End Of Period                                  |                            |  | $                        | 1,357 
|                                                       |                            |  |                          |       
|                                                       |                            | 

See
the Notes to the Condensed Consolidated Financial Statements.



USHEALTH GROUP, INC.NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSJune 30, 2005 (Unaudited)

# NOTE 1 
DESCRIPTION OF BUSINESS

USHEALTH Group, Inc.
(USHEALTH), formerly Ascent Assurance, Inc., is the successor to a Delaware
company originally incorporated in 1982 as an insurance holding company. USHEALTH, through
its applicable subsidiaries, is engaged in the development, marketing, underwriting and
administration of medical expense and supplemental health insurance products, primarily to
self-employed individuals and small business owners.

The Companys revenues result
primarily from premiums and fees from the insurance products sold by its wholly-owned
subsidiaries National Foundation Life Insurance Company (NFL), Freedom Life
Insurance Company of America (FLICA), National Financial Insurance Company
(NFIC) and American Insurance Company of Texas (AICT), and
together with NFL, NFIC and FLICA, collectively, the Insurance Subsidiaries,
and marketed by NationalCare® Marketing, Inc. (NCM) and
AmeriCare Benefits, Inc. (ACB), also wholly-owned subsidiaries. The Company,
through applicable subsidiaries, also derives fee and service revenue from (i)
telemarketing services, (ii) renewal commissions for prior year sales of both affiliated
and unaffiliated insurance products, and (iii) commissions on the sale of the benefits of
unaffiliated membership benefit programs.

# NOTE 2  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation.   
The accompanying unaudited condensed consolidated financial
statements of the Company are prepared in accordance with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X, and do not include all of the information and footnotes
required by accounting principles generally accepted in the United States
(GAAP) for complete financial statements. The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. The Companys
significant accounting estimates relate to investments, agent receivables, deferred policy
acquisition costs, deferred tax assets, claim reserves, future policy benefit reserves,
reinsurance and statutory accounting practices. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Certain reclassifications of prior years amounts
have been made to conform to the 2005 financial statement presentation. The financial
statements should be read in conjunction with the consolidated financial statements and
notes thereto included in USHEALTHs Annual Report on Form 10-K for the year ended
December 31, 2004.

Cash Equivalents.   
Cash equivalents consist of highly liquid instruments with
maturities at the time of acquisition of three months or less. Cash equivalents are stated
at cost, which approximates fair value.

Short-Term Investments.   
Short-term investments are stated at cost, which approximates
fair value.

Investments.   
          The Companys fixed maturity portfolio is classified as available-for-sale
          and is carried at estimated fair value. Equity securities consisting of common
          stocks, which are included in other investments, are also carried at estimated
          fair value. Changes in aggregate unrealized appreciation or depreciation on
          fixed maturity and equity securities are reported directly in stockholders
          equity and, accordingly, will have no effect on current operations.

Deferred Policy Acquisition Costs (DPAC).   
Policy acquisition costs consisting of
commissions and other policy issue costs, which vary with and are primarily related to the
production of new business, are deferred and amortized over periods not to exceed the
estimated premium-paying periods of the related policies. Also included in Other Assets is
the value of business acquired. The amortization of these costs is based on actuarially
estimated future premium revenues, and the amortization rate is adjusted periodically to
reflect actual experience. Projected future levels of premium revenue are estimated using
assumptions as to interest, mortality, morbidity and withdrawals consistent with those
used in calculating liabilities for future policy benefits.

Agent Receivables.   
In the ordinary course of business, a subsidiary of USHEALTH
advances commissions on policies written by its general agencies and their agents. Net
agent receivables were approximately $2.6 million and $3.5 million at June 30, 2005 and
December 31, 2004, respectively. Such subsidiary is reimbursed for these advances from the
commissions earned over the respective policys life. In the event that policies
lapse prior to the time the subsidiary has been fully reimbursed, the general agencies or
the individual agents, as the case may be, are responsible for reimbursing the subsidiary
for the outstanding balance of the commission advances. A reserve for uncollectible
agents balances is routinely established based upon historical experience and
projected commission earnings. As of June 30, 2005 and December 31, 2004, the
Companys allowances for uncollectible commission advances were approximately $3.7
million and $3.6 million, respectively.

Property and Equipment.   
Property and equipment is stated on the basis of cost and consists
primarily of furniture, fixtures, leasehold improvements and software. Depreciation is
computed principally by the straight-line method for financial reporting purposes using
estimated useful lives of 3 to 10 years.

Future Policy Benefits.   
Liabilities for future policy benefits not yet incurred are computed
primarily using the net level premium method including actuarial assumptions as to
investment yield, mortality, morbidity, withdrawals, persistency and other assumptions,
which were appropriate at the time the policies were issued. Assumptions used are based on
the experience of each of the Insurance Subsidiaries, as adjusted to provide for possible
adverse deviation. Generally, these actuarial assumptions are fixed and, absent material
adverse benefit experience, are not adjusted.

Claim Reserves.   
Claim reserves represent the estimated liabilities on claims reported plus claims incurred
but not yet reported. The process of estimating claim reserves involves the active
participation of experienced actuaries with input from the underwriting, claims, and
finance departments. The inherent uncertainty in estimating claim reserves is increased
when significant changes occur. Changes impacting the Insurance Subsidiaries include: (1)
changes in economic conditions; (2) changes in state or federal laws and regulations,
particularly insurance reform measures; (3) writings of significant blocks of new business
and (4) significant changes in claims payment patterns. Because claim reserves are
estimates, management monitors reserve adequacy over time, evaluating new information as
it becomes available and adjusting claim reserves as necessary. Such adjustments are
reflected in current operations.

Notes Payable.   
Notes payable are stated at cost, which approximates fair value.

Federal Income Taxes.   
The Company records income taxes based on the asset and liability approach,
which requires the recognition of deferred tax liabilities and assets for the expected
future tax consequence of temporary differences between the carrying amounts and the tax
basis of assets and liabilities. The tax effect of future taxable temporary differences
(liabilities) and future deductible temporary differences (assets) are separately
calculated and recorded when such differences arise. A valuation allowance, reducing any
recognized deferred tax asset, must be recorded if it is determined that it is more likely
than not that such deferred tax asset will not be realized. Net deferred tax assets of
$17.9 million and $17.8 million at June 30, 2005 and December 31, 2004, respectively, were
fully reserved.

Recognition of Revenue.   
Premium revenues from insurance contracts are recognized when due from
policyholders. Fee and service income is recognized when earned, the services have been
provided and collection is reasonably assured.

Earnings Per Share.   
Under GAAP, there are two measures of earnings per share: basic
earnings per share and diluted earnings per share. Basic earnings per
share are computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding during the period. Diluted earnings per share
reflect the potential dilution that could occur if securities or other contracts to issue
common stock were converted or exercised. For the six months ended June 30, 2005, stock
options of 5,380,469 were anti-dilutive and were not included in the computation of
diluted earnings per share because to do so would have been anti-dilutive. For the six
months ended June 30, 2004, 43,995,026 of common shares attributable to the conversion of
USHEALTHs Series B convertible participating preferred stock (see the Notes to the
Condensed Consolidated Financial Statements  Note 4  Conversion of Redeemable
Convertible Preferred Stock) were included in the computation of basic and diluted
earnings per share as of March 15, 2004. To include the common shares attributable to the
conversion of USHEALTHs preferred stock in the computation of diluted earnings per
share from the beginning of 2004 would have been anti-dilutive. For the six months ended
June 30, 2004, only 231,950 of 870,300 outstanding stock options were dilutive and
included in the computation of diluted earnings per share.



The following table reflects the
calculation of basic and diluted EPS (in thousands, except for per share data):

|                                                   |                                                  |  |                          |       
|-------------------------------------------------- | ------------------------------------------------ |  | ------------------------ | ------
|                                                   | Three Months EndedJune 30,                       |  | Six Months EndedJune 30,
|                                                   |                                                  |  |                          |       
|                                                   |                                                  |  |                          | 2005  
|                                                   |                                                  |  |                          |       
|                                                   | (amounts in thousands, except per share amounts)
|                                                  
|(Loss) income from continuing operations           |                                                  |  | $                        | (319  
|Loss from discontinued operations                  |                                                  |  |                          | -     
|                                                   |                                                  |  |                          |       
|Net (loss) income                                  |                                                  |  |                          | (319  
|Preferred stock dividends                          |                                                  |  |                          | -     
|                                                   |                                                  |  |                          |       
|(Loss) income applicable to common stockholders    |                                                  |  | $                        | (319  
|                                                   |                                                  |  |                          |       
|Weighted average shares outstanding:               |                                                  | 
|Basic                                              |                                                  |  |                          | 50,764
|                                                   |                                                  |  |                          |       
|Diluted                                            |                                                  |  |                          | 50,764
|                                                   |                                                  |  |                          |       
|Basic and diluted (loss) earnings per share from   |                                                  | 
|continuing operations                              |                                                  |  | $                        | (.01  
|                                                   |                                                  |  |                          |       
|Basic and diluted loss per share from              |                                                  | 
|discontinued operations                            |                                                  |  | $                        | -     
|                                                   |                                                  |  |                          |       
|Basic and diluted (loss) earnings per common share |                                                  |  | $                        | (.01  
|                                                   |                                                  |  |                          |       

Recently Issued Accounting Pronouncements.   
In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123 (revised 2004) (FAS 123R),
Share-Based Payment. FAS123R eliminates the alternative to use APB No. 25s,
Accounting for Stock Issued to Employees, intrinsic value method of accounting
that was provided in Statement 123 as originally issued. This Statement establishes
standards for accounting for transactions in which an entity exchanges its equity
instruments for goods or services. It requires a public entity to measure the cost of
employee services received in exchange for an award of equity instruments based on the
grant-date fair value of the award (with limited exceptions). That cost will be recognized
over the period during which an employee is required to provide service, usually the
vesting period, in exchange for the award. FAS123R is effective as of the beginning of the
first interim period or annual reporting period that begins after June 15, 2005. Disclosed
at Note 7  Employee Benefit Plans is the effect on net loss and loss per share for
the years presented if the Company had applied the fair value recognition provisions of
FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based
employee compensation which the Company does not believe will significantly differ from
the effects ofadoptingFAS123R.

# NOTE 3 
DISCONTINUED OPERATIONS

On October 29, 2004, USHEALTH sold
its printing subsidiary, Westbridge Printing Services, Inc. (WPS), to an
unrelated party and exited the printing business. In accordance with Statement of
Financial Accounting Standard No. 144 Accounting for the Impairment or Disposal of
Long-Lived Assets, the Companys printing subsidiary is reported as discontinued
operations in the accompanying consolidated financial statements. The operating loss of
WPS for the three months and six months ended June 30, 2004 is reflected in discontinued
operations. Revenues from the discontinued operations of WPS for the three months and six
months ended June 30, 2004 were approximately $1.0 million and $2.0 million, respectively.

# NOTE 4  CONVERSION
OF REDEEMABLE CONVERTIBLE PREFERRED STOCK

On March 15, 2004, USHEALTHs
common shareholders approved an amendment to the Companys Certificate of
Incorporation to increase the authorized number of shares of common stock to 75 million
shares from 30 million shares. The approval of this amendment resulted in the automatic
conversion of all 37,504 outstanding shares of the Companys Series B convertible
participating preferred stock (Series B Preferred Stock) into 43,995,026
shares of common stock. Preferred stock dividends of $430,000 accrued through March 15,
2004 were forgiven by preferred stockholders and, as a result, were credited to capital in
excess of par value, and had no impact on total stockholders equity. All outstanding
shares of the Series B Preferred Stock were held by Special Situations Holdings, Inc.
 Westbridge (SSHW), the Companys largest shareholder. The
conversion of the Series B Preferred Stock increased the ownership percentage of SSHW in
the Companys common stock to approximately 93% from 49%.

# NOTE 5  RELATED
PARTY TRANSACTION

On April 18, 2005, SSHW
(USHEALTHs largest stockholder) announced that it intends to take USHEALTH private
through a short-form merger before year end 2005. SSHW currently owns
approximately 93% of USHEALTH outstanding common stock which, under Delaware law, is
sufficient to effectuate the merger without necessity of seeking approval by either the
USHEALTH Board of Directors or its common stockholders. Common stockholders as of the
effective date of the merger will receive $.31 in cash for each share of USHEALTH common
stock held.

# NOTE 6  FINANCING
ACTIVITIES

CSFB Financing.   
USHEALTH received debt financing to fund an $11 million capital
contribution to FLICA in April 2001 from Credit Suisse First Boston Management LLC
(CSFBM), which is an affiliate of SSHW (USHEALTHs largest stockholder).
The credit agreement relating to that loan (CSFBM Credit Agreement) provided
USHEALTH with total loan commitments of $11 million, all of which were drawn in April
2001. Under restructured terms effective December 31, 2003, the loan bears interest at a
rate of 6% per annum and matures in March 2010.

Absent any acceleration following an
event of default, the Company may elect to pay interest in kind by issuance of additional
notes. During the six months ended June 30, 2005, USHEALTH issued $496,000 in additional
notes for payment of interest in kind, which increased the note payable balance at June
30, 2005 to approximately $16.7 million.

USHEALTHs obligations to CSFBM
are secured, pursuant to a guarantee and security agreement and pledge agreements, by
substantially all of the assets of USHEALTH and its subsidiaries (excluding the capital
stock and the assets of AICT, FLICA, NFL, NFIC, NCM, USHEALTH Funding, Inc. and USHEALTH
Administrators, Inc. (formerly Ascent Management, Inc.), some or all of which is pledged
as collateral for bank financing described below). USHEALTHs subsidiaries (other
than those listed above) have also guaranteed USHEALTHs obligations under the CSFBM
Credit Agreement. Under this agreement, the Company is required to meet certain
restrictive requirements including minimum statutory capital and surplus and RBC ratios
for its Insurance Subsidiaries, and other customary covenants. At June 30, 2005, there
were no events of default.

Bank Financing.   
The majority of commission advances to NCM and ACB agents are financed
through USHEALTH Funding, Inc. (UFI), an indirect wholly owned subsidiary of
USHEALTH. On December 31, 2003, UFI entered into a Credit Agreement (the Credit
Agreement) with Frost National Bank (Frost) that provides UFI with a
$3.0 million revolving loan facility, the proceeds of which are used to purchase agent
advance receivables from NCM and ACB. The amounts outstanding under the Credit Agreement
as of June 30, 2005 and December 31, 2004 were $50,000 and $250,000, respectively. The
Credit Agreement as amended matures on January 15, 2007, at which time the outstanding
principal and interest will be due and payable.

UFIs obligations under the
Credit Agreement are secured by liens upon substantially all of UFIs assets.
UFIs principal assets at June 30, 2005 are net agent receivables of $2.6 million. In
addition, NCM, ACB and USHEALTH have guaranteed UFIs obligation under the Credit
Agreement, and have pledged all of the issued and outstanding shares of the capital stock
of UFI, NFL, and FLICA as collateral for those guaranties (the Guaranty
Agreements). USHEALTH, certain of its subsidiaries, CSFBM and Frost have entered
into an Intercreditor and Subordination Agreement dated as of December 31, 2003 to give
effect to a subordination of the notes payable to CSFBM to up to $10 million in borrowings
under the Credit Agreement. As of June 30, 2005, there were no events of default under the
Credit or Guaranty Agreements.

# NOTE 7  EMPLOYEE
BENEFIT PLANS

USHEALTH applies the intrinsic value
method, in accordance with APB 25, in accounting for its stock options issued to employees
of one of its subsidiaries and non-employee directors. Accordingly, no compensation
expense has been recognized for options granted with an exercise price equal to market
value at the date of grant. USHEALTH applies the fair value method in accounting for stock
options issued to consultants (including marketing agents).

Compensation cost recognized in the
income statement for stock-based employee and consultants (including marketing agents)
compensation awards was approximately $0 and $200 for the three months ended June 30, 2005
and 2004, respectively, and $104 and $1,200 for the six months ended June 30, 2005 and
June 30, 2004, respectively.

The following table illustrates the
effect on loss applicable to common stockholders and loss per share if USHEALTH had
applied the fair value recognition provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensation, to stock-based employee compensation.

|                                          |                            |  |                          |     
|----------------------------------------- | -------------------------- |  | ------------------------ | ----
|                                          | Three Months EndedJune 30, |  | Six Months EndedJune 30,
|                                          |                            |  |                          |     
|                                          |                            |  |                          | 2005
|                                          |                            |  |                          |     
|(Loss) income from continuing operations  |                            |  | $                        | (319
|Total stock-based employee compensation   |                            | 
|expense determined under fair value       |                            | 
|based method for all awards,              |                            | 
|net of related tax effects                |                            |  |                          | (77 
|                                          |                            |  |                          |     
|Proforma (loss) income from continuing    |                            | 
|operations                                |                            |  |                          | (396
|Loss from discontinued operations         |                            |  |                          | -   
|                                          |                            |  |                          |     
|Proforma net (loss) income                |                            |  |                          | (396
|Preferred stock dividends                 |                            |  |                          | -   
|                                          |                            |  |                          |     
|Proforma (loss) income applicable to      |                            | 
|common stockholders                       |                            |  | $                        | (396
|                                          |                            |  |                          |     
|(Loss) earnings per share from continuing |                            | 
|operations:                               |                            | 
|Basic and diluted - as reported           |                            |  | $                        | (.01
|Basic and diluted -proforma               |                            |  | $                        | (.01
|Loss per share from discontinued          |                            | 
|operations:                               |                            | 
|Basic and diluted - as reported           |                            |  | $                        | -   
|Basic and diluted - proforma              |                            |  | $                        | -   
|(Loss) earnings per share:                |                            | 
|Basic and diluted - as reported           |                            |  | $                        | (.01
|Basic and diluted - proforma              |                            |  | $                        | (.01

For purposes of pro forma disclosure,
the estimated fair value of the stock compensation is amortized to expense over the
stocks vesting period. The effect on net loss of the stock compensation amortization
for the year presented above is not likely to be representative of the effects on reported
income for future years.

# NOTE 8 
COMMITMENTS AND CONTINGENCIES

In the normal course of its business
operations, the Company is involved in various claims, other business related suits
(alleging actual as well as substantial exemplary damages) and regulatory matters. In the
opinion of management, the Company is not a party to any pending litigation which is
reasonably likely to have an adverse result or disposition that would have a material
adverse effect on the Companys business, consolidated financial position or
consolidated results of operations.

The Companys Insurance
Subsidiaries are subject to extensive governmental regulation and supervision at both
federal and state levels. Such regulation includes premium rate levels, premium rate
increases, policy forms, minimum loss ratios, dividend payments, claims settlement,
licensing of insurers and their agents, capital adequacy, transfer of control, and amount
and type of investments. Additionally, there are numerous health care reform proposals and
regulatory initiatives under consideration, which if enacted, could have significant
impact on the Companys results of operations.



# ITEM 2 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

# GENERAL

USHEALTH Group, Inc.
(USHEALTH), formerly Ascent Assurance, Inc., is the successor to a Delaware
company incorporated in 1982 as an insurance holding company. USHEALTH, through its
applicable subsidiaries, is engaged in the development, marketing, underwriting and
administration of medical expense and supplemental health insurance products, primarily to
self-employed individuals and small business owners.

The following discussion provides
managements assessment of financial condition at June 30, 2005 as compared to
December 31, 2004 and results of operations for the three months and six months ended June
30, 2005 as compared to the comparable 2004 period for the Company. This discussion
updates the Managements Discussion and Analysis of Financial Condition and
Results of Operations in the Companys 2004 Report on Form 10-K and should be
read in conjunction therewith.

Business Overview.   
The Companys revenues result primarily from premiums and fees from
the insurance products sold by its wholly owned subsidiaries National Foundation Life
Insurance Company (NFL), Freedom Life Insurance Company of America
(FLICA), National Financial Insurance Company (NFIC) and American
Insurance Company of Texas (AICT), and together with NFL, NFIC and FLICA,
collectively, the Insurance Subsidiaries and marketed by
NationalCare® Marketing, Inc. (NCM) and AmeriCare Benefits,
Inc. (ACB), also wholly owned subsidiaries. The Company, through applicable
subsidiaries, also derives fee and service revenue from (i) telemarketing services, (ii)
renewal commissions for prior year sales of both affiliated and unaffiliated insurance
products, and (iii) commissions on the sale of benefits of unaffiliated membership benefit
programs.

The Companys operations are
comprised of one segment, Accident and Health insurance. The principal products currently
marketed by NCM and ACB and underwritten by NFL and FLICA are medical expense
reimbursement policies. These products are designed with flexibility as to benefits,
deductibles, coinsurance and premium payments, which can be adapted to meet regional sales
or competitive needs, as well as those of the individual policyholders. The principal
product groups currently underwritten by NFL and FLICA are comprehensive major medical
products, hospital/surgical medical expense products and supplemental specified disease
products:

| |  | Comprehensive major medical products are generally designed to reimburse insureds for
eligible expenses incurred for hospital confinement, surgical expenses, physician
services, outpatient services and the cost of inpatient medicines.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Hospital/surgical medical expense products are similar to comprehensive major medical
products except that benefits are generally limited to medical and surgical services
received in a hospital either as an inpatient or outpatient (services such as outpatient
physician office visits and outpatient prescription drugs are excluded) and deductibles
and coinsurance provisions are generally higher.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Supplemental specified disease products include blanket group accident coverages, blanket
group hospital daily indemnity coverages, as well as individual indemnity policies for
hospital confinement and convalescent care for treatment of specified diseases and
event specific individual policies, which provide fixed benefits or lump sum
payments directly to the insured upon diagnosis of certain types of internal cancer or
heart disease.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Prior to 1998, some of the Insurance
Subsidiaries also actively underwrote Medicare Supplement products designed to provide
reimbursement for certain expenses not covered by the Medicare program. Such Insurance
Subsidiaries continue to receive renewal premiums on Medicare Supplement policies sold
prior to that date.

Forward-Looking Statements.   
Statements contained in this analysis and elsewhere in this
document that are not based on historical information are forward-looking statements and
are based on managements projections, estimates and assumptions. In particular,
forward-looking statements can be identified by the use of words such as may,
will, should, expect, anticipate,
estimate, continue, or similar words. Management cautions readers
regarding its forward-looking statements. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. Various statements
contained in the Managements Discussion and Analysis of Results of Operation and
Financial Condition, are forward-looking statements. These forward-looking statements are
based on the intent, belief or current expectations of USHEALTH and members of its senior
management team. While USHEALTHs management believes that its expectations are based
on reasonable assumptions within the bounds of its knowledge of its business and
operations, prospective investors are cautioned that any such forward-looking statements
are not guarantees of future performance, and involve risks and uncertainties, and that
actual results may differ materially from those contemplated by such forward-looking
statements.

Important factors known to management
that could cause actual results to differ materially from those contemplated by the
forward-looking statements in this Report include, but are not limited to:

| |  | any limitation imposed on the Insurance Subsidiaries ability to control the impact
of rising health care costs, especially prescription drugs, and rising medical service
utilization rates through product and benefit design, underwriting criteria, premium rate
increases, utilization management and negotiation of favorable provider contracts;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the impact of changing health care trends on the Insurance Subsidiaries ability to
accurately estimate claim and settlement expense reserves;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------

| |  | the ability of the Company to fund competitive commission advances to its agents from
internally generated cash flow or external financing;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------

| |  | developments in health care reform and other regulatory issues, including the Health
Insurance Portability and Accountability Act of 1996 and increased privacy regulation, and
changes in laws and regulations in key states where the Company operates;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | USHEALTHs ability to make additional investment in its Insurance Subsidiaries in the
form of capital contributions, if needed, in order for such subsidiary to comply with
regulatory capital or debt covenant requirements;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | default by issuers of fixed maturity investments owned by the Insurance Subsidiaries; and
|- |  | -----------------------------------------------------------------------------------------

| |  | the loss of key management personnel.
|- |  | -------------------------------------

Subsequent written or oral statements
attributable to USHEALTH or persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements in this Report and those in USHEALTHs reports
previously filed with the SEC. Copies of these filings may be obtained by contacting
USHEALTH or the SEC.



# OPERATING RESULTS

Consolidated results of operations
for USHEALTH are reported for the three and six months ended June 30, 2005 and 2004. (In
thousands except insurance operating ratios.)

|                                                  |                            |  |                          |       
|------------------------------------------------- | -------------------------- |  | ------------------------ | ------
|                                                  | Three Months EndedJune 30, |  | Six Months EndedJune 30,
|                                                  |                            |  |                          |       
|                                                  |                            |  |                          | 2005  
|                                                  |                            |  |                          |       
|Premiums                                          |                            |  | $                        | 20,467
|Other insurance revenue                           |                            |  |                          | 320   
|Net investment income                             |                            |  |                          | 1,373 
|Net realized loss on investments                  |                            |  |                          | (8    
|                                                  |                            |  |                          |       
|Total insurance revenues                          |                            |  |                          | 22,152
|                                                 
|Benefits and claims                               |                            |  |                          | 13,648
|Commissions                                       |                            |  |                          | 2,162 
|Change in deferred policy acquisition costs       |                            |  |                          | 345   
|General and administrative expense                |                            |  |                          | 5,365 
|Taxes, licenses and fees                          |                            |  |                          | 797   
|Interest expense on bank facilities               |                            |  |                          | 16    
|Interest expense on note payable to related party |                            |  |                          | 253   
|                                                  |                            |  |                          |       
|Total insurance operating expenses                |                            |  |                          | 22,586
|                                                  |                            |  |                          |       
|Insurance operating results                       |                            |  |                          | (434  
|                                                  |                            |  |                          |       
|Fee and service income                            |                            |  |                          | 833   
|Fee and service expenses                          |                            |  |                          | 718   
|                                                  |                            |  |                          |       
|Fee and service results                           |                            |  |                          | 115   
|                                                  |                            |  |                          |       
|(Loss) income from continuing operations before   |                            | 
|income taxes                                      |                            |  |                          | (319  
|Federal income taxes                              |                            |  |                          | -     
|                                                  |                            |  |                          |       
|(Loss) income from continuing operations          |                            |  |                          | (319  
|                                                  |                            |  |                          |       
|Loss from discontinued operations before          |                            | 
|income taxes (1)                                  |                            |  |                          | -     
|Federal income tax expense                        |                            |  |                          | -     
|                                                  |                            |  |                          |       
|Loss from discontinued operations                 |                            |  |                          | -     
|                                                  |                            |  |                          |       
|Net (loss) income                                 |                            |  |                          | (319  
|Preferred stock dividends                         |                            |  |                          | -     
|                                                  |                            |  |                          |       
|(Loss) income applicable to common Stockholders   |                            |  | $                        | (319  
|                                                  |                            |  |                          |       
|Insurance operating ratios*                       |                            | 
|Benefits and claims                               |                            |  |                          | 66.7  
|Commissions                                       |                            |  |                          | 10.6  
|Change in deferred policy acquisition costs       |                            |  |                          | 1.7   
|General and administrative expenses               |                            |  |                          | 25.8  
|Taxes, licenses and fees                          |                            |  |                          | 3.9   

| | 
| | 

| | (1) | In October 2004, the Company sold its printing subsidiary, Westbridge Printing
          Services, Inc. (WPS). The operating results of WPS are presented as
          loss from discontinued operations.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | *Ratios
are calculated as a percent of premium with the exception of the general and
administrative expense ratio, which is calculated as a percent of premiums plus other
insurance revenue.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Overview.   
          For the second quarter of 2005, loss from continuing operations was
          ($319,000) compared to income from continuing operations of $1.2 million for the
          corresponding period in 2004. The ($1.5) million decrease in income from
          continuing operations was principally due to a ($1.4) million decrease in
          insurance operating results. For the six months ended June 30, 2005, loss from
          continuing operations was ($1.1) million compared to $1.5 million for the
          corresponding period in 2004. The ($2.6) million decrease in income from
          continuing operations was principally due to a ($2.4) million decrease in
          insurance operating results and a ($197,000) decrease in fee and service
          results.

The decline in insurance operating
results for 2005 is partially attributable to planned marketing and administrative
infrastructure initiatives, which increased general and administrative expense by
approximately $527,000 for the second quarter of 2005 and $1.1 million for the six months
ended June 30, 2005 as compared to the corresponding prior year periods. The general and
administrative expense ratio was also adversely impacted by a decline in premium revenue
during 2005 that resulted in decreased coverage of fixed overhead expenses and accounted
for approximately $333,000 and $595,000 of the decline in insurance operating results for
the second quarter and year to date 2005, respectively. In addition, the claims and
benefits ratio for the second quarter of 2005 was 1.9 percentage points higher than the
second quarter of 2004, which accounted for approximately $400,000 of the decrease in
insurance operating results for the quarter and year to date 2005.

On October 29, 2004, the Company sold
its printing subsidiary and exited the printing business. The losses from discontinued
operations for the three months and six months ended June 30, 2004 of ($185,000) and
($385,000), respectively, represented operating losses.

On March 15, 2004, USHEALTHs
shareholders approved an amendment to the Companys Certificate of Incorporation to
increase the authorized number of shares of common stock to 75 million shares from 30
million shares. The approval of this amendment resulted in the automatic conversion of all
37,504 outstanding shares of the Companys convertible participating Series B
preferred stock into 43,995,026 shares of common stock. As a result, preferred stock
dividends of $430,000 accrued through March 15, 2004 were credited to capital in excess of
par value and had no impact on total stockholders equity. All shares of the Series B
preferred stock were held by Special Situations Holdings, Inc.  Westbridge
(SSHW), the Companys largest shareholder. The conversion of Series B
preferred stock increased the ownership of SSHW in the Companys common stock to
approximately 93% from 49%.

On April 18, 2005, SSHW announced
that it intends to take USHEALTH private through a short-form merger before
year end 2005. Under Delaware law, SSHWs 93% common stock ownership position is
sufficient to effectuate the merger without necessity of seeking approval by either the
USHEALTH Board of Directors or its common stockholders. Common stockholders as of the
effective date of the merger will receive $.31 in cash for each share of USHEALTH common
stock held.

The following narratives discuss the
principal components of insurance operating results.

Premiums.   
          The Insurance Subsidiaries premium revenue is derived principally from the
          following medical expense reimbursement products: comprehensive major medical,
          hospital/surgical medical expense and supplemental products, including specified
          disease coverage and Medicare supplement. Comprehensive major medical products
          are generally designed to reimburse insureds for eligible expenses incurred for
          hospital confinement, surgical expenses, physician services, outpatient
          services, and the cost of laboratory and diagnostic services, as well as
          inpatient medicines. Hospital surgical medical expense products are similar to
          comprehensive major medical products with respect to benefits for inpatient
          services, except that deductibles and coinsurance provisions are generally
          higher. However, benefits for outpatient services are generally more limited
          under hospital/surgical medical expense coverage than comprehensive major
          medical coverage. Supplemental products include blanket group accident coverage,
          blanket group hospital daily indemnity coverage, as well as individual indemnity
          policies for hospital confinement and convalescent care for treatment of
          specified diseases and event specific individual policies, which
          provide fixed benefits or lump sum payments directly to the insured upon
          diagnosis of certain types of internal cancer or heart disease. Prior to 1998,
          the Insurance Subsidiaries also underwrote Medicare supplement products and
          continue to receive renewal premiums from such policies.

Premium revenue, in thousands, for
each major product line is set forth below:



|                                |                            |  |                          |       
|------------------------------- | -------------------------- |  | ------------------------ | ------
|                                | Three Months EndedJune 30, |  | Six Months EndedJune 30,
|                                |                            |  |                          |       
|                                |                            |  |                          | 2005  
|                                |                            |  |                          |       
|Major medical:                  |                            | 
|First-year                      |                            |  | $                        | 2,931 
|Renewal                         |                            |  |                          | 9,878 
|                                |                            |  |                          |       
|Subtotal                        |                            |  |                          | 12,809
|                               
|Supplemental specified disease: |                            | 
|First-year                      |                            |  |                          | 14    
|Renewal                         |                            |  |                          | 4,663 
|                                |                            |  |                          |       
|Subtotal                        |                            |  |                          | 4,677 
|                               
|Medicare supplement:            |                            | 
|Renewal                         |                            |  |                          | 2,584 
|                                |                            |  |                          |       
|Subtotal                        |                            |  |                          | 2,584 
|                               
|Other                           |                            |  |                          | 397   
|                                |                            |  |                          |       
|Consolidated Premium Revenue    |                            |  | $                        | 20,467
|                                |                            |  |                          |       

Total premiums decreased $2.6
million, or 11.2%, for the second quarter of 2005 as compared to the second quarter of
2004. Total premiums decreased $5.0 million, or 10.8%, for the six months ended June 30,
2005 as compared to the 2004 corresponding period. Major medical premiums declined due to
lower new business sales and a disciplined pricing philosophy focused upon profitability.
In addition, supplemental specified disease and Medicare supplement premiums declined due
to normal lapsing of policies.

The accident and health insurance
industry is highly competitive and includes a large number of insurance companies, many of
which have substantially greater financial resources, broader and more diversified product
lines than the Company. Starting in 2004, and accelerating in 2005, a number of new and
formidable competitors have entered the individual health insurance marketplace. As a
result, the competition for new individual health insurance customers has intensified.
This competition for market share in the individual health market is creating significant
pricing pressure on all carriers. The Company is evaluating its market position. If
current individual health insurance market pricing trends continue, the Companys
ability to sell new individual health insurance policies may be adversely impacted and
result in an accelerating decline in premium revenue.

Benefits and Claims.   
Benefits and claims are comprised of (1) claims paid, (2) changes in claim reserves
for claims incurred (whether or not reported), and (3) changes in future policy benefit
reserves (see Financial Condition  Claims Reserves and Future
Policy Benefit Reserves). The increase in the benefits and claims ratio from 64.8%
for the second quarter of 2004 to 66.7% for the second quarter of 2005 and from 66.6% for
year to date June 30, 2004 to 67.6% for year to date June 30, 2005 is principally due to
the increased severity and frequency of major medical claims reported in the second
quarter of 2005.

For the past several years, the costs
of medical services covered by the Companys major medical insurance policies has
increased dramatically, with medical inflation averaging 15% to 20% annually in comparison
to an average increase in the consumer price index of 3%. To maintain a consistent ratio
of claims and benefits to premium into future periods, the Company must accurately
estimate future medical inflation and implement timely premium rate increases for both new
major medical product sales and the majority of its in force insurance policies, including
supplemental specified disease and Medicare supplement policies.



# FINANCIAL CONDITION

Investments.   
          The following table summarizes the Companys fixed maturity securities,
          excluding short-term investments. All of the Companys fixed maturity
          securities are classified as available-for-sale and are carried at fair value.
          Investments in the debt securities of corporations are principally in publicly
          traded bonds.

|                                                  |               |  |                   |           
|------------------------------------------------- | ------------- |  | ----------------- | ----------
|                                                  | June 30, 2005 |  | December 31, 2004
|                                                  |               |  |                   |           
|Fixed Maturity Securities                         |               |  |                   | FairValue 
|                                                  |               |  |                   |           
|                                                  | (in 000s)    |  |                   | (in 000s)
|U.S. Government and governmental agencies         |               | 
|and authorities (except mortgage backed)          |               |  | $                 | 10,873    
|Finance companies                                 |               |  |                   | 22,705    
|Public utilities                                  |               |  |                   | 10,154    
|Mortgage-backed securities                        |               |  |                   | 21,584    
|States, municipalities and political subdivisions |               |  |                   | 3,323     
|All other corporate bonds                         |               |  |                   | 31,865    
|                                                  |               |  |                   |           
|Total fixed maturity securities                   |               |  | $                 | 100,504   
|                                                  |               |  |                   |           

The following table indicates by
rating the composition of the Companys fixed maturity securities portfolio,
excluding short-term investments.

|                                                   |               |  |                   |           
|-------------------------------------------------- | ------------- |  | ----------------- | ----------
|                                                   | June 30, 2005 |  | December 31, 2004
|                                                   |               |  |                   |           
|Composition of Fixed Maturity Securities by Rating |               |  |                   | FairValue 
|                                                   |               |  |                   |           
|                                                   | (in 000s)    |  |                   | (in 000s)
|Ratings                                            |               | 
|Investment grade:                                  |               | 
|U.S. Government and agencies                       |               |  | $                 | 22,071    
|AAA                                                |               |  |                   | 12,286    
|AA                                                 |               |  |                   | 3,872     
|A                                                  |               |  |                   | 31,420    
|BBB                                                |               |  |                   | 27,754    
|Non-Investment grade:                              |               | 
|BB                                                 |               |  |                   | 2,211     
|B and below                                        |               |  |                   | 890       
|                                                   |               |  |                   |           
|Total fixed maturity securities                    |               |  | $                 | 100,504   
|                                                   |               |  |                   |           

The Company monitors the financial
condition and operations of securities rated below investment grade and of certain
investment grade securities on which there are concerns regarding credit quality. In
evaluating fixed maturities to determine whether any of the unrealized losses are other
than temporary, managements assessments as to the nature of declines in fair values
are based upon historical operating trends, business prospects, status of the industry in
which the company operates, analyst ratings on the issuer and sector, the quality of the
investments, the severity and duration of the unrealized losses and the Companys
ability or intent to hold the investments. If fair value is less than the carrying value
and the decline is determined to be other than temporary, an appropriate write-down is
recorded.

The scheduled contractual maturities
of the Companys fixed maturity securities, excluding short-term investments and
certificates of deposit, at June 30, 2005 and December 31, 2004 are shown in the table
below. Expected maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without penalties.



|                                                     |               |  |                   |            | 
|---------------------------------------------------- | ------------- |  | ----------------- | ---------- | 
|                                                     | June 30, 2005 |  | December 31, 2004
|                                                     |               |  |                   |           
|Composition of Fixed Maturity Securities by Maturity |               |  |                   | FairValue  | 
|                                                     |               |  |                   |            | 
|                                                     | (in 000s)    |  |                   | (in 000s) | 
|Scheduled Maturity                                   |               | 
|Due in one year or less                              |               |  | $                 | 4,852      | 
|Due after one year through five years                |               |  |                   | 27,086     | 
|Due after five years through ten years               |               |  |                   | 31,198     | 
|Due after ten years                                  |               |  |                   | 15,784     | 
|Mortgage-backed and asset-backed securities          |               |  |                   | 21,584     | 
|                                                     |               |  |                   |            | 
|Total fixed maturity securities                      |               |  | $                 | 100,504    | 
|                                                     |               |  |                   |            | 

Claim Reserves.   
Claim reserves are established by the Insurance Subsidiaries for benefit payments which
have already been incurred by the policyholder, but which have not been paid by the
applicable Insurance Subsidiary. Claim reserves totaled $25.3 million at June 30, 2005 as
compared to $24.6 million at December 31, 2004. The process of estimating claim reserves
involves the active participation of experienced actuaries with input from the
underwriting, claims, and finance departments. The inherent uncertainty in estimating
claim reserves is increased when significant changes occur. Changes impacting the
Insurance Subsidiaries include: (1) changes in economic conditions; (2) changes in state
or federal laws and regulations, particularly insurance reform measures; (3) writings of
significant blocks of new business and (4) significant changes in claims payment patterns.
Because claim reserves are estimates, management monitors reserve adequacy over time,
evaluating new information as it becomes available and adjusting claim reserves as
necessary. Such adjustments are reflected in current operations.

Management considers many factors
when setting reserves including: (1) historical trends; (2) current legal interpretations
of coverage and liability; (3) loss payments and pending levels of unpaid claims; and (4)
product mix. Based on these considerations, management believes that adequate provision
has been made for the claim reserves of the Insurance Subsidiaries. Actual claims paid may
deviate, perhaps substantially, from such reserves.

Future Policy Benefit Reserves.   
Policy benefit reserves are established by each applicable
Insurance Subsidiary for benefit payments that have not been incurred, but are estimated
to be incurred, in the future. Policy benefit reserves totaled $53.1 million at June 30,
2005 as compared to $53.5 million at December 31, 2004. Policy benefit reserves are
calculated according to the net level premium reserve method and are equal to the
discounted present value of the applicable Insurance Subsidiarys expected future
policyholder benefits minus the discounted present value of its expected future net
premiums.

These present value determinations
are based upon assumed fixed investment yields, the age of the insured(s) at the time of
policy issuance, expected morbidity and persistency rates, and expected future
policyholder benefits. In determining the morbidity, persistency rate, claim cost and
other assumptions used in determining the Insurance Subsidiaries future policy
benefit reserves, each Insurance Subsidiary relies primarily upon its own benefit payment
history and upon information developed in conjunction with actuaries and industry data.
Persistency rates have a direct impact upon their policy benefit reserves because the
determinations for these reserves are, in part, a function of the number of policies in
force and expected to remain in force to maturity. If persistency is higher or lower than
expected, future policyholder benefits will also be higher or lower because of the
different than expected number of policies in force, and the policy benefit reserves will
be increased or decreased accordingly.

In accordance with GAAP, actuarial
assumptions of each of the Insurance Subsidiaries are generally fixed, and absent
materially adverse benefit experience, are not generally adjusted. The Insurance
Subsidiaries each monitor the adequacy of their policy benefit reserves on an ongoing
basis by periodically analyzing the accuracy of their actuarial assumptions. The adequacy
of policy benefit reserves may also be impacted by the development of new medicines and
treatment procedures which may alter the incidence rates of illness and the treatment
methods for illness and accident (such as out-patient versus in-patient care) or prolong
life expectancy. Changes in coverage provided by major medical insurers or government
plans may also affect the adequacy of reserves if, for example, such developments had the
effect of increasing or decreasing the incidence rate and per claim costs of occurrences
against which the applicable Insurance Subsidiary insures. An increase in either the
incidence rate or the per claim costs of such occurrences could result in the need for the
Insurance Subsidiaries to post additional reserves, which could have a material adverse
effect upon USHEALTHs liquidity, capital resources and results of operations.



# LIQUIDITY, CAPITAL
RESOURCES AND STATUTORY CAPITAL AND SURPLUS

General.   
          The primary sources of cash for the Companys consolidated operations are
          premiums and fees from insurance policies, sales and maturity of invested assets
          and investment income, while the primary uses of cash are payments of insurance
          policy benefits, claims and commissions, and general operating expenses. Net
          cash provided by operations totaled $1.2 million and $3.5 million for the three
          and six months ended 2005 and totaled $0.9 million and $2.2 million for the
          three and six months ended 2004.

USHEALTH is a holding company, the
principal assets of which consist of the capital stock of its subsidiaries and invested
assets. USHEALTHs principal sources of funds are comprised of dividends from its
non-insurance subsidiaries. The Insurance Subsidiaries are precluded from paying dividends
without prior approval of the Texas Insurance Commissioner, as the Insurance
Subsidiaries earned surplus is negative due to statutory losses incurred prior to
2003. USHEALTHs principal uses of cash are for general and administrative expenses
and to make discretionary additional investments in its Insurance Subsidiaries in the form
of capital contributions to maintain desired statutory capital and surplus levels.
USHEALTH made no capital contributions to its Insurance Subsidiaries during the six months
ended June 30, 2005 and June 30, 2004. As of June 30, 2005, USHEALTH had approximately
$4.2 million in unrestricted cash and invested assets.

Related Party Financing.   
USHEALTH received debt financing to fund an $11 million capital
contribution to FLICA in April 2001 from Credit Suisse First Boston Management LLC,
(CSFBM), which is an affiliate of Special Situations Holdings, Inc. 
Westbridge (SSHW) (USHEALTHs largest common stockholder), and a
subsidiary of Credit Suisse First Boston LLC (CSFB). The Credit Agreement
relating to that loan (CSFBM Credit Agreement) provided USHEALTH with total
loan commitments of $11 million, all of which were drawn in April 2001. Under restructured
terms effective December 31, 2003, the loan bears interest at a rate of 6% per annum and
matures in March 2010. Absent any acceleration following an event of default, USHEALTH may
elect to pay interest in kind by issuance of additional notes. During the six months ended
June 30, 2005, USHEALTH issued $496,000 in additional notes for payment of interest in
kind which increased the notes payable balance to CSFBM at June 30, 2005 to approximately
$16.7 million. USHEALTHs obligations to CSFBM are secured, pursuant to a guaranty
and security agreement and pledge agreements, by substantially all of the assets of
USHEALTH and its subsidiaries (excluding the capital stock and the assets of AICT, FLICA,
NFL, NFIC, NCM, USHEALTH Funding, Inc. and USHEALTH Administrators, Inc. (formerly Ascent
Management, Inc.), some or all of which is pledged as collateral for bank financing
described below). USHEALTHs subsidiaries (other than those listed above) have also
guaranteed USHEALTHs obligations under the CSFBM Credit Agreement. At June 30, 2005,
there were no events of default.

Bank Financing.   
The majority of commission advances to NCM and ACB agents are financed through USHEALTH
Funding, Inc. (UFI), an indirect wholly owned subsidiary of USHEALTH. On
December 31, 2003, UFI entered into a Credit Agreement (the Credit Agreement)
with Frost National Bank (Frost) that provides UFI with a $3.0 million
revolving loan facility, the proceeds of which are used to purchase agent advance
receivables from NCM and ACB. As of June 30, 2005 and December 31, 2004, $50,000 and
$250,000, respectively, were outstanding under the Credit Agreement. The Credit Agreement,
as amended, matures on January 15, 2007, at which time the outstanding principal and
interest will be due and payable. The Company maintains an agent receivable financing
arrangement to facilitate growth in new business sales.

UFIs obligations under the
Credit Agreement are secured by liens upon substantially all of UFIs assets.
UFIs principal assets at June 30, 2005 are net agent receivables of $2.6 million. In
addition, NCM, ACB and USHEALTH have guaranteed UFIs obligation under the Credit
Agreement, and have pledged all of the issued and outstanding shares of the capital stock
of UFI, NFL, and FLICA as collateral for those guaranties (the Guaranty
Agreements). As of June 30, 2005, there were no events of default under the Credit
or Guaranty Agreements.

Inflation.   
          Inflation impacts claim costs and overall operating costs and, although
          inflation has been lower the last few years, hospital and medical costs have
          still increased at a higher rate than general inflation, especially prescription
          drug costs. New, more expensive and wider use of pharmaceuticals is inflating
          health care costs. The Insurance Subsidiaries will continue to establish premium
          rates in accordance with trends in hospital and medical costs along with
          concentrated efforts in various cost containment programs. However, there can be
          no assurance that these efforts will fully offset the impact of inflation or
          that increases in premium rates will equal or exceed increasing health care
          costs.

# ITEM 3 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

USHEALTH has no material changes to
the disclosure concerning market risk made in its Annual Report on Form 10-K for the year
ended December 31, 2004.



# ITEM 4  CONTROLS
AND PROCEDURES

Evaluation of disclosure controls and procedures.   
Under the supervision and with the participation of
USHEALTHs management, including the Chief Executive Officer and Chief Financial
Officer, the Company has evaluated the effectiveness of its disclosure controls and
procedures as of June 30, 2005, the end of the period covered by this report. Based on
such evaluation, USHEALTHs Chief Executive Officer and Chief Financial Officer have
concluded that, as of June 30, 2005, the end of the period covered by this report, the
Companys disclosure controls and procedures were effective to ensure that
information required to be disclosed by USHEALTH in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange Commission.

Changes in internal control over financial reporting.   
There were no changes in the Companys internal
controls over financial reporting that have materially affected, or, are reasonably likely
to materially affect, these controls during the period covered by this quarterly report.



# PART II

---

# ITEM 6  EXHIBITS

(a) Exhibits:

The following exhibits are filed
herewith. Exhibits incorporated by reference are indicated in the parentheses following
the description.

|3.1 |  | Second Amended and Restated Certificate of Incorporation of the Company filed with the
Secretary of State of Delaware on March 24, 1999 (incorporated by reference to Exhibit 3.1
to the Companys Form 8-A filed on March 25, 1999).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.2 |  | Amended and Restated By-Laws of the Company, effective as of March 24, 1999 (incorporated
by reference to Exhibit 3.2 to the Companys Form 8-A filed on March 25, 1999).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.3 |  | Amendment to the By-Laws of the Company, effective as of April 5, 2000 (incorporated by
reference to Exhibit 3.3 to the Companys Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.4 |  | Certificate of Elimination of Series A Preferred Stock of the Company dated December 31,
2003 (incorporated by reference to Exhibit 3.1 to the Companys 8-K filed on January
6, 2004).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.5 |  | Certificate of Designation for Series B Convertible Participating Preferred Stock of the
Company dated December 31, 2003 (incorporated by reference to Exhibit 3.2 to the
Companys 8-K filed on January 6, 2004).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.6 |  | Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation
dated March 3, 2005 (incorporated by reference to Exhibit 3.6 to USHEALTHs 10K for
the year ended December 31, 2004).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.1 |  | Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the
Companys Form 8-A filed on March 25, 1999).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------

|4.2 |  | Form of Warrant Certificate, included in the Form of Warrant Agreement (incorporated by
reference to Exhibit 4.2 to the Companys Form 8-A filed on March 25, 1999).
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.3 |  | Form of Warrant Agreement dated as of March 24, 1999, between Company and LaSalle National
Bank, as warrant agent (incorporated by reference to Exhibit 4.3 to the Companys
Form 8-A filed on March 25, 1999).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.4 |  | Form of Preferred Stock Certificate (incorporated by reference to Exhibit 4.4 to the
Companys Annual Report on Form 10-K for the year ended December 31, 1998).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.1 |  | Second Amended and Restated Receivables Purchase and Sale Agreement, dated as of June 6,
1997 between National Foundation Life Insurance Company, National Financial Insurance
Company, American Insurance Company of Texas, Freedom Life Insurance Company of America,
and Westbridge Funding Corporation (incorporated by reference to Exhibit 10.5 to the
Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 1997).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 |  | Amended and Restated Non-Insurance Company Sellers Receivables Purchase and Sale
Agreement, dated as of June 6, 1997 between American Senior Security Plans, L.L.C.,
Freedom Marketing, Inc., Health Care-One Insurance Agency, Health Care-One Marketing
Group, Inc., LSMG, Inc., Senior Benefits of Texas, Inc., and Westbridge Marketing
Corporation (incorporated by reference to Exhibit 10.6 to the Companys Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997).
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 |  | Lock-Up Agreement, dated as of September 16, 1998, by and among the Company and Credit
Suisse First Boston Corporation (incorporated by reference to Exhibit 10.1 to the
Companys Form 8-K filed on September 21, 1998).
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 |  | Stock Purchase Agreement, dated as of September 16, 1998, between the Company and Credit
Suisse First Boston Corporation (incorporated by reference to Exhibit 10.2 to the
Companys Form 8-K filed on September 21, 1998).
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 |  | Registration Rights Agreement dated as of March 24, 1999 between the Company and Special
Situations Holdings, Inc.  Westbridge (incorporated by reference to Exhibit 10.13 to
the Companys Annual Report on Form 10-K for the year ended December 31, 1998).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 |  | 1999 Stock Option Plan dated as of March 24, 1999 (incorporated by reference to the
Companys Schedule 14A filed with the Commission on April 30, 1999).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 |  | Credit Agreement dated April 17, 2001 between the Company and Credit Suisse First Boston
Management Corporation (incorporated by reference to Exhibit 10.1 to the Companys
Form 8-K filed April 25, 2001).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.8 |  | Guaranty and Security  Agreement dated April 17, 2001 among Foundation  Financial  Services,  Inc.,  NationalCare® Marketing,
         Inc.,  LifeStyles  Marketing Group,  Inc.,  Precision Dialing Services,  Inc., Senior Benefits L.L.C. and Westbridge  Printing
         Services,  Inc.,  and Credit  Suisse First Boston  Management  Corporation  (incorporated  by reference to Exhibit 10.2 to the
         Company's Form 8-K filed April 25, 2001).
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 |  | Pledge Agreement dated April 17, 2001 between the Company and Credit Suisse First Boston
Management Corporation (incorporated by reference to Exhibit 10.3 to the Companys
Form 8-K filed April 25, 2001).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.10 |  | Employment Agreement dated as of December 18, 2002, by and between the Company, Ascent
Management, Inc. and Mr. Patrick J. Mitchell (incorporated by reference to Exhibit 10.36
to the Companys Annual Report on Form 10-K for the year ended December 31, 2002).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.11 |  | Employment Agreement dated as of December 18, 2002, by and between the Company, Ascent
Management, Inc. and Mr. Patrick H. ONeill (incorporated by reference to Exhibit
10.37 to the Companys Annual Report on Form 10-K for the year ended December 31,
2002).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.12 |  | Employment Agreement dated as of January 10, 2003, by and between the Company, Ascent
Management, Inc. and Mr. Konrad H. Kober (incorporated by reference to Exhibit 10.38 to
the Companys Annual Report on Form 10-K for the year ended December 31, 2002).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 |  | Employment Agreement dated as of January 10, 2003, by and between the Company, Ascent
Management, Inc. and Ms. Cynthia B. Koenig (incorporated by reference to Exhibit 10.39 to
the Companys Annual Report on Form 10-K for the year ended December 31, 2002).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.14 |  | First Amendment to Credit Agreement dated February 26, 2003 between the Company and Credit
Suisse First Boston Management Corporation (incorporated by reference to Exhibit 10.45 to
the Companys Annual Report on Form 10-K for the year ended December 31, 2002).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.15 |  | Exchange Agreement among the Company, Credit Suisse First Boston Management, LLC, and
Special Situations Holdings, Inc.  Westbridge dated December 31, 2003 (incorporated
by reference to Exhibit 10.1 to the Companys 8-K filed on January 6, 2004).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.16 |  | First Amendment to Registration Rights Agreement between the Company and Special
Situations Holdings, Inc.  Westbridge dated December 31, 2003 (incorporated by
reference to Exhibit 10.2 to the Companys 8-K filed on January 6, 2004).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.17 |  | Second Amendment to Credit Agreement dated December 31, 2003 between the Company and
Credit Suisse First Boston Management, LLC (incorporated by reference to Exhibit 10.3 to
the Companys 8-K filed on January 6, 2004).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.18 |  | First Amendment and Waiver to Guaranty and Security Agreement dated December 31, 2003 between Foundation  Financial  Services,
         Inc.,  NationalCare® Marketing,  Inc.,  Lifestyles Marketing Group, Inc., Precision Dialing Services,  Inc., Senior Benefits,
         LLC, and Westbridge  Printing  Services,  Inc. and Credit Suisse First Boston  Management,  LLC  (incorporated by reference to
         Exhibit 10.4 to the Company's 8-K filed on January 6, 2004).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.19 |  | Intercreditor and Subordination Agreement among the Frost National Bank, Credit Suisse
First Boston Management, LLC, and the Company and named subsidiaries dated December 31,
2003 (incorporated by reference to Exhibit 10.5 to the Companys 8-K filed on January
6, 2004).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.20 |  | Credit Agreement dated as of December 31, 2003 among Ascent Funding, Inc., the Company,
NationalCare®Marketing, Inc. and the Frost National Bank including
exhibits to such agreement, Pledge and Security Agreement dated December 31, 2003 between
NationalCare® Marketing, Inc. and Frost National Bank, Pledge and Security
Agreement dated December 31, 2003 between the Company and Frost National Bank, Revolving
Promissory Note dated December 31, 2003 between Ascent Funding, Inc. and Frost National
Bank, Security Agreement dated December 31, 2003 between Ascent Funding, Inc. and Frost
National Bank, Waiver of Jury Trial and Notice of Final Agreement dated December 31, 2003
between Ascent Funding, Inc. and Frost National Bank and Intercreditor and Subordination
Agreement among Frost National Bank, Credit Suisse First Boston Management, LLC and the
Company and named subsidiaries dated December 31, 2003 (incorporated by reference to
Exhibit 10.49 to the Companys 10-K for the year ended December 31, 2003).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.21 |  | Extension of Employment Agreement dated as of March 16, 2004 by and between the Company,
Ascent Management, Inc. and Mr. Patrick J. Mitchell (incorporated by reference to Exhibit
10.39 to the Companys 10Q for the quarter ended March 31, 2004).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.22 |  | Extension of Employment Agreement dated as of March 16, 2004 by and between the Company,
Ascent Management, Inc. and Mr. Patrick H. ONeill (incorporated by reference to
Exhibit 10.40 to the Companys 10Q for the quarter ended March 31, 2004).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.23 |  | First Amendment To Credit Agreement And Security Agreement dated as of July 6, 2004
between Ascent Funding, Inc., the Company, NationalCare® Marketing, Inc., AmeriCare
Benefits, Inc. and Frost National Bank including exhibits to such agreement, Guaranty
Agreement between AmeriCare Benefits, Inc. and Frost National Bank; First Restated
Guaranty Agreement between NationalCare® Marketing, Inc. and Frost National Bank dated
July 6, 2004; First Amendment to Intercreditor and Subordination Agreement among Frost
National Bank, Credit Suisse First Boston Management, LLC and the Company and named
subsidiaries dated as of July 6, 2004 (incorporated by reference to Exhibit 10.41 to the
Companys 10Q for the quarter ended September 30, 2004).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.24 |  | Employment Agreement dated as of September 1, 2004 by and between the Company and Mr.
Benjamin M. Cutler (incorporated by reference to Exhibit 10.42 to the Companys 10Q
for the quarter ended September 30, 2004).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.25 |  | Third Amendment to Credit Agreement dated September 1, 2004 between the Company and Credit
Suisse First Boston Management, LLC (incorporated by reference to Exhibit 10.43 to the
Companys 10Q for the quarter ended September 30, 2004).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.26 |  | First Amendment to Pledge Agreement dated October 28, 2004 between the Company and Credit
Suisse First Boston Management, LLC (incorporated by reference to Exhibit 10.44 to the
Companys 10Q for the quarter ended September 30, 2004).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.27 |  | Second  Amendment  and Consent to Guaranty  and  Security  Agreement  dated  October 28,  2004  between  Foundation  Financial
         Services,  Inc.,  NationalCare® Marketing,  Inc., Lifestyles Marketing Group, Inc., Precision Dialing Services,  Inc., Senior
         Benefits  LLC, and  Westbridge  Printing  Services,  Inc.  and Credit  Suisse First Boston  Management  LLC  (incorporated  by
         reference to Exhibit 10.45 to the Company's 10Q for the quarter ended September 30, 2004).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.28 |  | Sale and Purchase Agreement dated October 29, 2004 between the Company and Printers
Alliance, Inc. (incorporated by reference to Exhibit 10.46 to the Companys 10Q for
the quarter ended September 30, 2004).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.29 |  | Second Amendment to Credit Agreement, dated as of December 29, 2004, among Ascent Funding,
Inc., the Company, NationalCare® Marketing, Inc., AmeriCare Benefits, Inc. and the
Frost National Bank; Waiver of Jury Trial and Notice of Final Agreement between Ascent
Funding Inc. and The Frost National Bank dated December 29, 2004 (incorporated by
reference to Exhibit 10.29 to USHEALTHs 10K for the year ended December 31, 2004).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.30 |  | Consent Related to Intercreditor and Subordination Agreement among the Frost National
Bank, Credit Suisse First Boston Management, LLC, and the Company and named subsidiaries
dated December 29, 2004 (incorporated by reference to Exhibit 10.30 to USHEALTHs 10K
for the year ended December 31, 2004).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31.1* |  | Certification  of  Benjamin  M.  Cutler,  Chairman  and Chief  Executive  Officer of the  Company  pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31.2* |  | Certification  of Cynthia B.  Koenig,  Chief  Financial  Officer  and  Treasurer  of the  Company  pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|32.1* |  | Certification of Benjamin M. Cutler, Chairman and Chief Executive Officer and Cynthia B.
Koenig, Senior Vice President, Chief Financial Officer and Treasurer of the Company
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Form 10-Q

Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

| | USHEALTH GROUP, INC.                                                                                                                               
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
|
|
| | /s/ Cynthia B. Koenig
     Cynthia B. KoenigSenior Vice President,Chief Financial Officer and Treasurer(Principal Financial and Accounting Officer)

Dated at Fort Worth, TexaAugust 3, 2005