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

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
                  For the fiscal year ended December 31, 2003

Commission file number 0-23430

            SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
             (Exact name of registrant as specified in its charter)

         SOUTH DAKOTA                         46-0401087
(State or other jurisdiction of            (I.R.S. Employer
 incorporation or organization)           Identification No.)

  1323 SOUTH MINNESOTA AVENUE
   SIOUX FALLS, SOUTH DAKOTA                    57105
(Address of principal executive offices)      (Zip Code)

Registrant's telephone number, including area code: (605) 334-4000

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:
        CLASS A PREFERRED STOCK, NO PAR VALUE, STATED VALUE $10 PER SHARE
                                (Title of class)

                 CLASS C COMMON STOCK, PAR VALUE $.01 PER SHARE
                                (Title of class)

Indicate by checkmark 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 checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Exchange Act Rule 12b-2).  YES ___ NO __X__

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

     Class                                       Outstanding at March 18, 2004
     -----                                       -----------------------------
Class C Common Stock                                          1,365,604

The aggregate market value of the voting stock held by non-affiliates is not
determinable as there is no market or exchange where these shares are traded.


                        DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the document listed below have been incorporated by
Reference into the indicated part of this Form 10-K;

Proxy Statement for 2004 Annual Meeting Item 11 of Part III
<PAGE>
                                     PART I

ITEM 1. BUSINESS

South Dakota State Medical Holding Company, Incorporated, was incorporated in
the State of South Dakota on May 5, 1988. Its corporate offices are located at
1323 South Minnesota Avenue, Sioux Falls, South Dakota, 57105. The Articles of
Incorporation permit the Company to engage in the development of quality
comprehensive health care delivery systems; and to conduct, promote, or operate
alternative health care delivery systems and other contractual health service
arrangements, including but not limited to, traditional third party
reimbursement systems, preferred provider organizations, and health maintenance
organizations (HMO).

Management has made its best effort to write the Company's Form 10-K report
in plain, easy-to-understand English. The Business section (Item 1)attempts to
outline the scope of strategies currently employed at South Dakota State
Medical Holding Company, Inc.  Although compelling, the other information
contained in this report is important and necessary in order to gain a
thorough understanding of our business, markets, customers and competition.
Accordingly, please read our entire Form 10-K report, as the principles of
the business are complicated, which involve risk and uncertainties.
Reference to "we", "us", "our", "Company",  "Corporation" or "DAKOTACARE"
means South Dakota State Medical Holding Company, Inc.

When used in this report, the words "anticipate", "believe", "estimate", "will",
"may", "intend" and "expect" and similar expressions identify forward-looking
statements. Forward-looking statements in this report include, but are not
limited to, those relating to the general expansion of our business. Although we
believe that our plans, intentions and expectations reflected in these
forward-looking statements are reasonable, we can give no assurance that these
plans, intentions or expectations will be achieved.

The Company contracts with over 98% of the physicians in the State of South
Dakota, 100% of the hospitals in the State of South Dakota, and many other
health care providers to provide medical services to its enrollees. Physicians
who are members of the South Dakota State Medical Association and who complete
the Company's credentialing process may participate with the Company by
purchasing one share of Class A voting preferred stock of the Company for $10.
The fee for non-members is $1,000. The South Dakota State Medical Association
owns 100% of the Class B voting preferred stock of the Company, and through this
ownership, maintains voting control of the Company.

The Company's agreements with participating physicians stipulate compensation on
a fee-for-service basis utilizing a relative value schedule developed by the
Company. This schedule assigns a value (measured in number of units) for each
individual service for which a physician may perform and submit a bill. These
values are then multiplied by an overall value per unit assigned by the Company,
and the product is the maximum amount allowed for payment to the physician.
Actual reimbursement is at the lower of this product or the actual billed
amount. The Company, at least annually, reviews the unit values and makes
adjustments when considered necessary. The effect of this reimbursement
mechanism is to establish a maximum allowable reimbursement, which is not
dependent upon actual billed charges. Regardless of the physician bill,
reimbursement will never exceed the maximum amount established by the relative
value schedule. Physicians also may not bill patients for any excess of the
billed charge over the amount allowed by the Company, but instead have
contractually agreed to hold the patient harmless for any such amounts.

                                                            2
<PAGE>

The Company's agreements with participating physicians provide that up to 20% of
fees for services provided, as submitted to and allowed by the Company, may be
withheld to provide a contingency reserve that may be used to fund operations or
meet other financial requirements of the Company. The percentage withheld for
years 2001 through 2003 was 15%. The contingency reserve withholding is also
designed to encourage efficient medical practice by the physicians. Less
expensive medical outcomes enhance net income and consequently, an increased
likelihood of contingency reserve payouts to the physicians. The amounts
withheld may be paid to the participating physicians at the discretion of the
Board of Directors of the Company, although the Company is not contractually
obligated to pay out amounts withheld. Management estimates the expected amount
of contingency reserves and records a liability based upon factors such as cash
flow needs, net income, and accumulations of amounts withheld. The Company
withheld from payment to the participating physicians $2,470,656 and $2,877,564
for the years ended December 31, 2003 and 2002, respectively.  Payments to
physicians are made at such times as the Board of Directors and the South Dakota
Department of Commerce, Division of Insurance (Division) approve payouts.
The recorded liability for contingency reserves at December 31, 2003 and 2002,
was $6,080,812 and $5,190,558, respectively. The recorded liability is equal
to actual amounts withheld plus or minus claims adjustments for each of the
two years in the period ended December 31, 2003.

In 1992, the Company incorporated DAKOTACARE Administrative Services,
Incorporated (DAS), a South Dakota corporation and wholly owned subsidiary of
the Company.  In January 1996, the Company incorporated DAKOTACARE Insurance,
Ltd. (DIL), a Caymen Island Corporation and wholly owned subsidiary of the
Company. DIL was formed to accept reinsurance risk on stop-loss policies of DAS
and DHP customers, reinsurance risk on group term life insurance coverage of
DAKOTACARE and DAS customers and other insurance risks. In August 2000, the
Company organized and purchased a majority interest in Carewest, Inc.
(Carewest), a South Dakota corporation.  The Articles of Incorporation of DAS
and Carewest permit them to engage in the development of Third Party
Administration services for health and welfare plans.  Carewest has
subcontracted with DAS to perform a substantial part of the Third Party
Administration activities.

PRODUCTS AND MARKETING
The Company markets its products under the trade name of DAKOTACARE. The
Company has three reportable segments as defined by Financial Accounting
Standards Board (FASB) Statement No. 131. The segments' products include
health care products (HMO), managed care and claims administration services for
self-insured employer groups (TPA) and the reinsurance segment, which provides
excess medical stop loss coverage to the self insured employer groups. A
detailed analysis of the various segments is contained in the Notes to the
Consolidated Financial Statements-Note 12. The Company markets its products
through an exclusive network of independent insurance agents throughout South
Dakota.

The Company markets its products to employer groups with a minimum of two
covered employees and its customers range in size from employers of this size
to its largest customer with over 12,500 employees. As of January 1, 2004,
DAKOTACARE and its subsidiaries provided health care services to approximately
109,100 individuals, which also includes medical coverage enrollment and
ancillary product enrollment for both the HMO and TPA segments.

                                                        3
<PAGE>

Approximately 15% of the state's population and approximately 24% of
DAKOTACARE's target market of approximately 460,000 is served by DAKOTACARE and
its subsidiaries, which does not include Medicare and Medicaid populations,
federal employee groups, the individual policy market, and other potential
populations. The Company's HMO enrollment for medical coverage, which was
approximately 40,000 at the end of 2002, decreased to approximately 37,000 by
the end of 2003.  Net enrollment declined by approximately 4,500 members for
January 1, 2004.  Commencing in 1993, the Company began its TPA business and by
January 1, 2004, had enrolled for medical coverage approximately 56,600
enrollees, bringing the total individuals served by the Company and its'
subsidiaries to medical coverage to approximately 89,200. The Company's HMO
client disenrollment rate is lower than the industry rate as a whole. The
ancillary product enrollment for the HMO and TPA segments covered
approximately 19,900 members for January 1, 2004, bringing the total health
care services enrollment to approximately 109,100.  All underwriting and
pricing decisions are made by the DAKOTACARE underwriting department based on
underwriting policy and guidelines established by senior management.
DAKOTACARE's underwriters evaluate the prior loss history, the inherent risk
characteristics, and the demographic makeup of the applicants where appropriate.

The Company's policy is to reinsure that portion of risk in excess of $175,000
in 2003 and $125,000 in 2002 and 2001 of covered hospital inpatient expenses of
any enrollee per contract year.  The covered expenses are subject to a
coinsurance provision which ranged from 50% to 90% based on average daily
amounts specified in the plan.  They are also subject to a $2,000,000 lifetime
maximum benefit per enrollee.  The Company would be liable for any obligations
that the reinsuring company is unable to meet under the reinsurance agreement.
The reinsurance agreement also provides for enrollee benefits to be paid in the
event the Company should cease operations or become insolvent, and a conversion
privilege for all enrollees in the event of plan insolvency and for any
enrollee that moves out of the service area of the Company.


The Company continually seeks out and evaluates opportunities for future growth
and expansion. These opportunities may include acquisitions or dispositions of
segments of its operations, marketing of insurance products underwritten by
other companies, the internal development of new products and techniques for the
containment of health care costs, and the measurement of the outcomes and
efficiency of health care delivered.

COMPETITION
The managed health care industry evolved primarily as a result of health care
buyers' concerns over rising health care costs. The industry's goal is to infuse
greater cost effectiveness and accountability into the health care system
through the development of different managed care products, while increasing the
accessibility and quality of health care services. The managed health care
industry has become increasingly competitive in many markets. As managed care
(HMO, Preferred Provider Organization, etc.) penetration of the health care
market increases, the Company expects that marketing to large employer groups
will become more difficult and competition for smaller employer groups will
intensify. In addition, more employers may choose to self-insure their health
care risk and seek benefit administration and managed care services from third
parties to assist them in controlling and reporting health care costs. In such
an environment, the Company believes that having a broad line of health care
programs and products available will be important in being selected by employers
to manage their health care programs. The Company's health care products compete
for group membership with traditional health insurance plans, Blue Cross/Blue
Shield plans, other HMO's, and third party administrators who provide
services to self-insured employers. The ability to increase the number of
individuals covered by the Company's services or to increase premiums can be
affected by the level of competition in any particular area. The Company
believes that the principal competitive factors affecting the Company include
price, the level and quality of service provided, provider network
capabilities, and marketplace reputation.

                                                              4
<PAGE>

REGULATIONS
The Company's HMO segment is regulated and operates under a license issued by
the Division. DAS and Carewest are also registered as third party
administrators in South Dakota and several other states. The Company has also
received certification from the South Dakota Department of Labor as a workers'
compensation managed care plan.  South Dakota statutes require the filing of
periodic financial reports and maintenance of restricted deposits in an amount
of not less than the greater of fifty percent of unearned premiums of the
Company on its outstanding policies or $200,000. The Company is required to
obtain approval from the Division for the Company's benefits contracts and
premium rates, licensing of its agents, and other items. The Company is also
subject to periodic examination of its financial affairs and market conduct.
The Company is also subject to Risk Based Capital (RBC) requirements promulgated
by the National Association of Insurance Commissioners (NAIC).  The RBC
standards establish uniform minimum capital requirements for insurance
companies.  The RBC formula applies various weighting factors to financial
balances or various levels of activities based on the perceived degree of
risk.  The Company exceeded both the Regulatory Action Level RBC and the
Company Action Level RBC at December 31, 2003, for which no further action is
required by the Division of Insurance.  The Company exceeded Regulatory Action
Level RBC at December 31, 2002, but did not exceed the Company Action Level
RBC.  The Company submitted a plan to achieve and exceed this requirement, and
it was approved by the Division of Insurance.

DAKOTACARE must comply with applicable insurance statutes and regulations which
prescribe the nature, form, quality, and relative amounts of investments which
may be made by insurance companies and HMO's. Generally, these statutes and
regulations permit companies to invest within varying limitations in state,
municipal, and federal government obligations, corporate obligations, preferred
and common stocks, bank certificates of deposit, and certain types of real
estate and first mortgage loans. The Company's management believes that its
investment strategy is conservative, with preservation of capital being the
foremost objective. Its investment strategy is also influenced by the terms of
its coverage written and by its expectations as to the timing of claims and
contingency reserves payments.

The following table sets forth, by type of investment, the percentage of the
total investment portfolio, excluding cash and cash equivalents and contracts
with life insurance companies, represented by each type of investment as of
December 31:

                                                       2003              2002
                                                       ----              ----
 Certificates of deposit                               24.8%             23.5%
 Obligations of state and political
   subdivisions                                        54.5              54.1
 Obligations of U.S. Treasury, government
   agencies and corporations                            6.8               9.3
 Corporate bonds                                       11.4              10.8
 Bond mutual fund                                       2.5               2.3
                                                      -----             -----

                                                      100.0%            100.0%
                                                      =====             =====

The Company's investment portfolio, excluding cash and cash equivalents and
contracts with life insurance companies, totaled $6,039,329 and $6,372,146 as
of December 31, 2003 and 2002, respectively. Cash and cash equivalents totaling
$14,518,442 and $10,543,214 at December 31, 2003 and 2002, respectively, are
invested substantially in interest bearing accounts.

                                                          5
<PAGE>

The anti-kickback provisions of the Medicare law prohibit the payment or receipt
of any remuneration in return for the referral of a patient, the charges to whom
are subject to reimbursement by Medicare. The Company provides coverage on a
group basis and does not provide coverage for the cost of medical and hospital
expenses to Medicare beneficiaries.  If otherwise eligible for coverage through
the Company, the Medicare eligible beneficiary may choose to have the Company
provide their health care benefits in lieu of coverage by Medicare. The Company
does not believe that it offers incentives to Medicare beneficiaries or that any
discounts the Company receives from health care providers would violate the
anti-kickback provisions of the Medicare law.

Government regulation of employee benefit plans, including health care coverage,
health plans and the Company's specialty managed care products is a changing
area of law that varies from jurisdiction to jurisdiction and generally gives
responsible administrative agencies broad discretion. The Company believes that
it is in compliance in all material respects with the various federal and state
regulations applicable to its current operations. To maintain such compliance,
it may be necessary for the Company or its subsidiaries to make changes from
time to time in its services, products, structure, or marketing methods.
Additional governmental regulation or future interpretation of existing
regulation could increase the cost of the Company's compliance or otherwise
affect the Company's operations, products, profitability, or business prospects.
As a provider of cost effective managed care plans for medium and small
employers, the Company believes it is delivering products and services that
address current health care reform issues. The Company will continue to
evaluate its business strategy as necessary to maximize its ability to adapt
to the changing health care marketplace.


ERISA
The provision of services to or through certain types of employee health benefit
plans is subject to the Employee Retirement Income Security Act of 1974 (ERISA).
ERISA is a complex set of laws and regulations that are subject to periodic
interpretation by the United States Department of Labor. ERISA places certain
controls on how DAKOTACARE may do business with employers covered by ERISA,
particularly employers who maintain self-funded plans. The Department of Labor
is engaged in an ongoing ERISA enforcement program, which may result in
additional constraints on how ERISA governed benefit plans conduct their
activities. There have been legislative attempts to limit ERISA's preemptive
effect on state laws. If such limitations were to be enacted, they might
increase DAKOTACARE's administrative costs and its liability exposure
under state law-based suits relating to employee health benefits offered by
DAKOTACARE's health plans.

EMPLOYEES
As of December 31, 2003, the Company employed 123 persons on a full-time basis.
None of these employees are covered by a collective bargaining agreement, and
the Company believes its employee relations are good.

                                                           6
<PAGE>

ITEM 2. PROPERTIES

The Company leases office space for the HMO and TPA segments in Sioux Falls,
South Dakota, from the South Dakota State Medical Association (Association).
See ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS for additional
details on this lease with the Association, which is an affiliated company.
The Company owns an office building in Webster, SD, which is used for the HMO
and TPA segments. The Company leases office space for the TPA segment in
Rapid City, SD.  The lease expired December 31, 2003 and was subsequently
Renewed and will terminate on December 31, 2004.

The Company leases office space from the South Dakota State Medical Association
(Association).  On January 1, 2002, the Company entered into a three year lease
which will automatically renew for for successive two year terms, unless
terminated with at least 30 days notice prior to the end of the lease term.
The 2002 lease required minimum annual rental payments of $227,784.
On January 1, 2004, Carewest entered into a one year lease for office space
with an unrelated third party which requires minimum monthly rentals of $1,500.
The Company also has entered into other short-term lease agreements with other
unrelated third parties for which the total rental commitment at
December 31, 2003 was not significant.  Total rental payments for the years
ended December 31, 2003, 2002 and 2001 were $254,562, $252,087, and $239,216,
respectively.

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in legal actions in the ordinary course of its business.
Although the outcome of any such legal actions cannot be predicted, management
believes there is no legal proceeding pending against or involving the Company
for which the outcome is likely to have a material adverse effect upon the
consolidated financial position or results of operations of the Company.

On September 9, 1998, a claim against the Company was filed in the 2nd Circuit
Court of South Dakota by Sioux Agency, Inc., D. Greg Heineman and Roger D.
Larsen, who are stockholders of the Company, and by Williams Insurance
Agency, Inc., a non-stockholder of the Company.  The claim alleged wrongful
non-renewal of a sales agency contract and sought both compensatory and
punitive damages.  This lawsuit was settled in July, 2001, under a
confidentiality provision between the parties.  The amount of settlement is
included in the third quarter 2001 results of operations and related cash
flows.  The settlement expense is also included and allocated between the HMO
and TPA segments in determining segment income or loss for each.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to shareholder vote in the fourth quarter
of 2003.

                                                        7
<PAGE>

                                     PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

STOCK PRICES
There is no active trading for shares of stock of the Company and the stock is
not listed on any exchange or over-the-counter market, but a limited number of
exchanges of Class C shares have occurred directly between interested buyers
and sellers. The Company does not regularly receive price information on these
transactions. The amended and restated Articles of Incorporation of the Company
currently restrict the ownership of shares as follows: (i) the ownership of the
Company's Class A voting preferred stock is restricted to medical or osteopathic
physicians who have executed participating agreements with the Company and may
not be issued to or held by any hospital, (ii) the ownership of the Company's
Class B voting preferred stock is restricted to the South Dakota State Medical
Association, and (iii) the ownership of the Company's Class C non-voting common
stock is restricted to (a) medical or osteopathic physicians who have executed
participating physician agreements with the Company, (b) a trust or
self-directed individual retirement account controlled by such physicians, (c)
professional corporations, partnerships, or other entities domiciled in the
state of South Dakota, and in which a participating physician is a shareholder,
partner, or employee in the practice of medicine, (d) management employees or
agents of the Company, the South Dakota State Medical Association, the South
Dakota Foundation for Medical Care, or (e) a spouse or child of a shareholder of
the Company, if such shares were first held by one of the persons or entities
entitled to own Class C common stock. In addition, the Class C non-voting common
stock may not be issued or transferred to any hospital or to any natural person
or entity who is not a resident or domiciliary of the state of South Dakota.

SHARES ELIGIBLE FOR FUTURE SALE
The Company's Class A voting preferred stock is nontransferable and ownership of
the Company's Class B voting preferred stock is restricted to the South Dakota
State Medical Association. Approximately 95,400 shares of the Company's Class C
non-voting stock are currently owned by the officers and directors of the
Company. All of the remaining Class C shares are eligible for resale under Rule
144(k) of the Securities Act of 1933, as amended, subject to the ownership
restrictions contained in the Company's Amended and Restated Articles of
Incorporation.

HOLDERS
As of March 18, 2004, there were 1,424 holders of record of Class A preferred
stock, 1 holder of Class B preferred stock, and 694 holders of record of
Class C common stock. There are no options or warrants outstanding.


DIVIDENDS
The Class A and B preferred stockholders are not entitled to dividends. The
Company is not required to pay annual cumulative dividends to its Class C common
stock. The Board of Directors, at its discretion, can elect to pay dividends in
any amount subject to availability of funds and regulatory requirements. As long
as the Company exceeds required regulatory capital as required by the Division,
there are no dividend restrictions. Regulatory capital as required by the
Division at December 31, 2003 and 2002 was $200,000 on a statutory basis of
accounting, which the Company significantly exceeded. No dividends were paid
in 2003 or 2002 and none were declared during 2003.

                                                          8
<PAGE>

STOCK REPURCHASE PLAN
As a service to the Company's shareholders to facilitate liquidity for Class C
common stock (Common Stock) in the event of death, disability, or retirement of
a shareholder, the Company's Board of Directors adopted a Stock Repurchase
Program (Program) which was implemented in February 1998. Participation in the
Program is voluntary. No shareholder is required to sell his or her shares of
Common Stock under the Program nor is the Company required to purchase any
Common Stock under the Program.  No shares were acquired in 2003 or 2002 for the
treasury under the Program.  The value per share is computed using guidelines
established in 1995 by an investment organization, and updated using audited
consolidated financial statements. These calculations are tested for accuracy
and consistency by an independent accounting firm. The purchase and sale of
Common Stock under the Program is subject to repurchase conditions as described
in the Program.

UNREGISTERED SALES OF SECURITIES
Ownership of the Company's Class A Voting Preferred Stock is restricted to
medical or osteopathic physicians who have executed participating physician
agreements with the Company. Class A Preferred Stock is nontransferable and
holders of these shares do not receive dividends. Each such physician is issued
one share of Class A Voting Preferred Stock upon execution of his or her
participation agreement and the payment of $10 per share. Upon the termination
of a physician's participation agreement, his or her share of Class A Preferred
Stock is canceled. During 2003, the Company issued a net increase of 74 shares
of Class A Preferred Stock to physicians who entered into participation
agreements with the Company. The Company also issued an additional 500 shares of
Class B Preferred Stock to the South Dakota State Medical Association, who owns
100% of the Class B Preferred Stock.  To the extent that the registration
provisions of the Securities Act of 1933, as amended, were applicable to these
transactions, the Company relied on the exemption from registration contained
in Section 4(2) of that act.








                                                            9
<PAGE>









ITEM 6. SELECTED FINANCIAL DATA

The following information for the Company is as of and for the years ended
December 31, 2003, 2002, 2001, 2000, and 1999(dollars in thousands, except per
share data):
<TABLE>
<S>                                         <C>      <C>      <C>      <C>      <C>

                                                         Years Ended December 31,
                                            -------------------------------------------
                                              2003     2002     2001     2000     1999
                                            -------  -------  -------  ------   -------
Income Statement Data:
  Net premiums                              $87,307  $76,547  $57,993  $43,574  $34,249
  Third party administration fees             5,753    5,034    4,075    3,372    3,061
  Investment income                             354      450      688      767      514
  Total revenues                             94,945   83,612   63,898   48,424   38,428
  Net claims incurred                        79,676   72,125   51,615   35,151   30,095
  Other operating expenses                   14,387   13,687   13,620   10,395    9,147
  Income (loss) before income taxes
         and minority interest                  882   (2,200)  (1,337)   2,878     (814)
  Net income (loss)                             992   (2,669)    (718)   1,954     (622)
                                            =======  =======  =======  =======  =======

Earnings (loss) per common share            $  0.73  $ (1.95) $ (0.52) $  1.38  $ (0.43)
                                            =======  =======  =======  =======  =======

Dividends per common share                  $  0.00  $  0.00  $  0.05  $  0.05  $  0.05
                                            =======  =======  =======  =======  =======

Balance Sheet Data:
  Invested assets and cash                  $20,653  $17,009  $15,273  $13,576  $10,425
  Total assets                               25,639   20,698   19,358   17,704   13,654
  Reported and unreported
         claims payable                      12,854    9,906    8,238    5,831    4,667
  Contingency reserves payable                6,081    5,191    3,847    2,875    2,723
  Total liabilities                          22,688   18,737   14,736   11,796    9,414
  Stockholders' equity                        2,951    1,961    4,622    5,908    4,240


</TABLE>
Earnings (loss) per common share was calculated by dividing net income
(loss) by the weighted average number of Class C common shares outstanding
during each period as follows: 2003 1,365,604; 2002 1,365,604; 2001 1,379,258;
2000 1,412,869; 1999 1,448,600.






                                                             10
<PAGE>







ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL
The following operating statistics are presented for DAKOTACARE's operation as
A health maintenance organization only and do not include the operations of its
subsidiaries for the years ended December 31, 2003, 2002, 2001, and 2000. The
results indicated in the following tables are not indicative of future
operating results.

The combined ratio, which reflects underwriting results but not investment and
ancillary income, is a traditional measure of the underwriting performance of a
health maintenance organization. A combined ratio of less than 100% indicates
underwriting profitability while a combined ratio in excess of 100% indicates
an underwriting loss.

                                                  Years Ended December 31,
                                               -----------------------------
                                                2003    2002    2001    2000
                                                ----    ----    ----    ----
   Loss ratio                                   90.6%   94.3%   89.4%   81.4%
   Expense ratio                                10.0    10.7    15.0    15.1
                                               -----   -----    ----    ----
     Combined ratio                            100.6%  105.0%  104.4%   96.5%
                                               =====   ======  ======  ======

The loss ratio is computed by dividing the net claims expense into net premium
revenue. The Company's results of operations will be affected by the changes in
the loss ratio. The loss ratio may vary from period to period depending
principally on claims experience. The expense ratio is computed by taking the
sum of the remaining operating expenses of the health maintenance organization
divided by net premium revenue.

The net decrease in the loss ratio was due to a greater increase in revenues
on a per member basis than the increase in claims volume and cost per claim on
a per member basis.  The expense ratio decreased due to the large increase
in premiums and the ability to maintain the actual costs of the administrative
expenses at a relatively constant amount. See Comparison of Years
December 31, 2003 and December 31, 2002 and Comparison of Years
December 31, 2002 and December 31, 2001.

OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any Off-Balance Sheet Arrangements.

CONTRACTUAL OBLIGATIONS
None, except for operating leases, which are described in Note 10 in the
Company's Notes to Consolidated Financial Statements.








                                                              11
<PAGE>




Activity in the liability for reported and unreported claims payable is
summarized as follows:
<TABLE>
<S>                                                 <C>       <C>       <C>       <C>
                                                            Years Ended December 31,
                                                     -----------------------------------
                                                      2003     2002     2001      2000
                                                     ------   ------    ------    ------
                                                            (dollars in thousands)

Balance at January 1                                $ 9,906   $8,238    $5,831    $4,667
                                                    -------   ------    ------    ------

Incurred related to:
 Current year                                        81,052   73,888    51,684    36,026
 Prior years                                            748     (188)      (69)     (875)
 Contingency reserve written off                     (2,124)  (1,575)       --        --
                                                    -------   ------    ------    ------
Total incurred                                       79,676   72,125    51,615    35,151
                                                    -------   ------    ------    ------

Paid related to:
 Current year                                        65,894   62,332    43,493    29,843
 Prior years                                         10,718    8,157     5,748     4,195
                                                    -------    -----    ------    ------

Total paid                                           76,612   70,489    49,241    34,038
                                                    -------   ------    ------    ------

Less reinsurance recoverables at January 1             (116)     (84)      (51)        0
Plus reinsurance recoverables at December 31              0      116        84        51
                                                    -------   ------    ------    ------

Balance at December 31                              $12,854   $9,906    $8,238    $5,831
                                                    =======   ======    ======    ======
</TABLE>
The difference between the reserves reported in the accompanying tables, which
are presented in accordance with accounting principles generally accepted in
the United States of America (GAAP), and the statutory reserves reported to
state regulatory authorities was insignificant for all periods presented.







                                                            12
<PAGE>






The following table presents the development of DAKOTACARE's consolidated
balance sheet reserves for reported and unreported claims payable from 1994
through 2003. The top line of the table shows the reserves at the balance sheet
date for each of the indicated periods. This represents the original estimate of
reported and unreported claims payable established in the respective year. The
Company is not required to pay claims if they are submitted over one year past
the date of service. The Company also has paid over 99% of the covered claims
received within one year after service. Since there would be minimal impact on
discounting claims reserves, the Company does not follow the practice of
discounting claims reserves.

<TABLE>
<S>                     <C>     <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
                                                           As of December 31,
                           -------------------------------------------------------------------
                           2003   2002   2001   2000   1999   1998   1997   1996   1995   1994
                           ----   ----   ----   ----   ----   ----   ----   ----   ----   ----
                                                         (dollars in thousands)

Reported and unreported
  claims payable        $12,854 $9,906 $8,238 $5,831 $4,667 $4,410 $4,164 $3,188 $2,710 $2,864
         Paid (cumulative) as of:
         End of Year                --     --     --     --     --     --     --     --     --
         One Year Later         10,682  8,094  5,782  4,222  5,321  4,581  3,927  2,793  2,985
         Two Years Later            --  8,130  5,768  4,191  4,891  4,581  3,927  2,793  2,977
         Three Years Later          --     --  5,768  4,185  4,880  4,581  3,927  2,793  2,977
         Four Years Later           --     --     --  4,185  4,856  4,603  3,927  2,793  2,977
         Five Years Later           --     --     --     --  4,856  4,603  3,927  2,793  2,977
         Six Years Later            --     --     --     --     --  4,603  3,927  2,793  2,977
         Seven Years Later          --     --     --     --     --     --  3,927  2,793  2,977
         Eight Years Later          --     --     --     --     --     --     --  2,793  2,977
         Nine Years Later           --     --     --     --     --     --     --     --  2,977
Liability reestimated as of:
         End of Year     12,854  9,906  8,238  5,831  4,667  4,410  4,164  3,188  2,710  2,864
         One Year Later         10,618  8,094  5,782  4,222  5,321  4,581  3,927  2,793  2,985
         Two Years Later            --  8,130  5,768  4,191  4,891  4,581  3,927  2,793  2,977
         Three Years Later          --     --  5,768  4,185  4,880  4,581  3,927  2,793  2,977
         Four Years Later           --     --     --  4,185  4,856  4,603  3,927  2,793  2,977
         Five Years Later           --     --     --     --  4,856  4,603  3,927  2,793  2,977
         Six Years Later            --     --     --     --     --  4,603  3,927  2,793  2,977
         Seven Years Later          --     --     --     --     --     --  3,927  2,793  2,977
         Eight Years Later          --     --     --     --     --     --     --  2,793  2,977
         Nine Years Later           --     --     --     --     --     --     --     --  2,977
                          -----  -----  -----  -----  -----  -----  -----  -----  -----  -----

Redundancy (Deficiency)   $  -- $ (712)$  108 $   63 $  482 $ (446)$ (439)$ (739)$  (83)$ (113)
                          =====  =====  =====  =====  =====  =====  =====  =====  =====  =====
</TABLE>
The Company is continually taking steps to improve its estimation of reserves
for reported and unreported claims payable. This includes, among other things,
improved underwriting standards, which stabilize the Company's assumptions of
risks, leading to a more predictable estimate of reported and unreported claims
payable. Additional approaches have also been developed to estimate claims
payable. The Company believes its reserves at December 31, 2003, are adequate.


Application of Critical Accounting Policies

GAAP requires management to utilize estimates when reporting financial results.
The Company has identified the policies discussed below as Critical Accounting
Policies because the accounting estimates require management to make certain
assumptions about matters that may be uncertain at the time the estimate was
made and a different method of estimating could have been reasonably made that
could have a material impact on the presentation of our financial condition,
changes in financial condition or results of operations.

                                                           13
<PAGE>

Management used all the relevant facts available to them at the time to make
the best judgments about accounting estimates.  Estimates significant to the
financial statements include the amount recorded for contingency reserves, the
liabilities for reported and unreported claims payable, and the valuation
allowance recorded on deferred taxes.

Following is management's description of the process utilized in forming
particularly sensitive accounting estimates.  The Company is not contractually
obligated to pay out contingency reserves withheld, but has historically
elected to pay out a majority of amounts withheld.  Typically, two years lapse
from the date the contingency reserves are withheld to the date that the
corresponding amounts are paid to the participating physicians.  The recorded
liability at December 31, 2003 is equal to actual amounts withheld for the
years ended December 31, 2003 and 2002.  During 2003, the Company's Board of
Directors, with approval from the Division, voted to write off $2,123,755 of
contingency reserves withheld in 2001, which reduced claims expense in 2003
and was accounted for as a change in accounting estimate.  This change had the
effect of increasing the income for 2003 by $1,401,678, or $1.03 per common
share, net of income taxes.

The liabilities for reported and unreported claims payable have been
estimated by utilizing statistical information developed from historical data,
current enrollment, health service utilization statistics and other related
information.  In addition, the Company uses the services of an independent
actuary in the determination of its year-end liabilities.

Deferred taxes are provided on an asset and liability method whereby deferred
tax assets are recognized for deductible temporary differences and operating
loss and tax credit carry forwards and deferred tax liabilities are
recognized for taxable temporary differences.  Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized.  During the year ended December 31, 2003, the Company recorded a
reduction to the valuation allowance of $416,100 on the deferred tax assets
recorded on the consolidated financial statements to increase the total of
deferred tax assets to an amount that management believes will ultimately be
realized.  Realization of deferred tax assets is dependent upon sufficient
future taxable income during the period that deductible temporary differences
and carry forwards are expected to be available to reduce taxable income.

Although management believes that it uses the best information available to
determine the above estimates, unforeseen market or other conditions could
result in adjustments and net earnings being significantly affected if
circumstances differ substantially from the assumptions used in making the
final estimate determinations.




RESULTS OF OPERATIONS

GENERAL
The following results of operations include the operations of DAKOTACARE and
its subsidiaries for the years ended December 31, 2003, 2002, and 2001.


COMPARISON OF YEARS DECEMBER 31, 2003 AND DECEMBER 31, 2002

GENERAL
The Company's net loss decreased $3,660,879 to income of $991,972 for the
year ended December 31, 2003, as compared to a loss of $2,668,907 for the year
ended December 31, 2002.  This increase was primarily due to an increase in
net premium revenues of $10,760,080, an increase of third party administration
fees of $718,992 and a decrease in income taxes of $597,030.  These were offset
by an increase in net claims expense of $7,551,484, an increase in
administrative expenses of $699,435 and a decrease in investment income of
$96,144.

                                                     14
<PAGE>

REVENUES
Total revenues increased $11,332,881, or 13.6%, for the year ended December 31,
2003, as compared to December 31, 2002.  Revenues from net premiums generated
by the health maintenance organization increased $10,760,080. This increase is
attributable to a 18.3% increase in the net premium earned per enrollee and was
offset by a 4.5% decrease in the number of enrollee months for the year ended
December 31, 2003, as compared to December 31, 2002.  Revenues from the third
party administration fees increased by $718,992 due to increased fees per
enrollee, stop-loss commissions and pharmacy rebates.  Investment income
decreased $96,144 due primarily to decreased average rates earned on
invested assets, but was somewhat offset by the increase in the amount of
invested assets during the year.

OPERATING EXPENSES
Total operating expenses increased $8,250,919, or 9.6%, for the year ended
December 31, 2003, as compared to December 31, 2002. The change was due
primarily to an increase in claims incurred, personnel expenses, commission
expense, state insurance taxes, and other general and administrative expenses.
These increases were somewhat offset by a decrease in office and advertising
expenses.

Net claims expense increased by $7,551,484, or 10.5%, for the year ended
December 31, 2003, as compared to December 31, 2002.  The average claims paid
per enrollee increased by 13.7% while the number of enrollee months decreased
by 4.5%. The Company contracts with an actuary to review the cost of claims
related to each coverage type and accordingly determine the prices to charge
for each coverage type for the next year.  In the Fall of 2003, the
Company received approval from the Division to implement updated rates.  These
new rates went into effect beginning January 2004 for new groups and groups
renewing their coverage.  As groups renew their coverage throughout the year,
the new rates will be implemented at that time for those groups. The effect
of these rate increases is anticipated to increase premiums by approximately
20% on a per member basis.  The trends for each quarter of 2003, indicated
that the premiums earned on a per member basis increased faster than the costs
of claims on a per member basis.  Premiums earned per member increased
approximately 18% from the prior year, while claims expense per member increased
approximately 14% from the prior year.  Since a large number of renewals occur
as a January 1 renewal date, the biggest increase in per member premiums are
generally seen in the first quarter.  Claims expense will generally increase
throughout the year and thus the latter quarters will reflect larger claims
loss percentages than the earlier quarters.  With an increase in premiums
anticipated at approximately 20% on a per member basis and claims expenses
increases anticipated at approximately 12%, the Company anticipates that it
should see another favorable trend for 2004.  Personnel expenses increased
$446,828, or 7.7%, in 2003 as compared to 2002.  This was due primarily to
annual compensation adjustments and an increase in staffing needs due to
increased workload generated by the volume and other requirements.  Commissions
and state insurance taxes increased due to the increased net premiums and the
increased third party administration fees as the costs are directly related.
Other general and administrative expenses increased $109,317, or 13.7% for the
year ended December 31, 2003 as compared to December 31, 2002.  Most of the
increase was attributable to the increase in insurance expense, which continues
to increase for all types of coverages.  Office expense decreased $94,762, or
9.6%, largely due to decreased postage and supplies costs resulting from
decreased membership.  Advertising decreased $77,266, or 14.5%, due to the
sharing of advertising expense with a vendor, which was in the past fully paid
by the Company alone.

                                                                        15
<PAGE>

INCOME TAXES
Income tax expense should represent approximately 35% of income before income
taxes and minority interest, but due to the change in the valuation allowance
recorded against deferred income tax assets in 2003, the Company recorded an
income tax benefit of $102,829.  The valuation allowance recorded against
deferred income taxes stems from limiting recorded deferred tax assets to
amounts that management believes will be ultimately realized.  See Note 8 of
the Notes to Consolidated Financial Statements.

COMPARISON OF YEARS DECEMBER 31, 2002 AND DECEMBER 31, 2001

GENERAL
The Company's net loss increased $1,951,297 to a loss of $2,668,907 for the
year ended December 31, 2002, as compared to a loss of $717,610 for the year
ended December 31, 2001.  This increase was primarily due to an increase in
net claims expense of $20,509,219, an increase in income taxes of $1,021,968,
an increase in administrative expenses of $67,560, and a decrease in minority
interest in loss of subsidiaries of $65,828.  These were offset by an increase
in net premium revenues of $18,554,004 and an increase in other revenues of
$1,159,274.


REVENUES
Total revenues increased $19,713,278, or 30.9%, for the year ended December 31,
2002, as compared to December 31, 2001.  Revenues from net premiums generated
by the health maintenance organization increased $18,460,931. This increase is
attributable to a 19.9% increase in the number of enrollee months and a 10.1%
increase in the net premium earned per enrollee for the year ended
December 31, 2002, as compared to December 31, 2001.  Revenues from the third
party administration fees increased by $958,527 due to increased fees per
enrollee totalling 7.2% and increased enrollee months of 10.5%.  Investment
income decreased $237,665 due primarily to decreased average rates earned on
invested assets, but was somewhat offset by the increase in the amount of
invested assets during the year.

OPERATING EXPENSES
Total operating expenses increased $20,576,779, or 31.5%, for the year ended
December 31, 2002, as compared to December 31, 2001. The change was due
primarily to an increase in claims incurred, state insurance taxes, personnel
expenses, office expenses, advertising expenses, and other general and
administrative expenses. These increases were somewhat offset by a decrease in
commissions expenses.

Net claims expense increased by $20,509,219, or 39.7%, for the year ended
December 31, 2002, as compared to December 31, 2001.  The average claims paid
per enrollee increased by 16.2% while the number of enrollee months increased
by 19.9%. The Company contracts with an actuary annually to review the cost
of claims related to each coverage type and accordingly determine the prices
to charge for each coverage type for the next year.  In the Fall of 2002, the
Company received approval from the Division to implement updated rates.  These
new rates went into effect beginning January 2003 for new groups and groups
renewing their coverage.  As groups renew their coverage throughout the year,
the new rates will be implemented at that time for those groups. The effect
of these rate increases is anticipated to increase premiums by approximately
20% on a per member basis.  The trends for each quarter of 2002, indicated
that the costs of claims on a per member basis increased faster than the
premiums earned on a per member basis.  Claims expense per member increased
approximately 15% from the prior year, while premiums earned per member
increased approximately 11% from the prior year.  Since a large number of
renewals occur with a January 1 date, the biggest increase in per member
premiums are generally seen in the first quarter.  Claims expense will
generally increase throughout the year and thus the latter quarters will
reflect larger claims loss percentages than the earlier quarters.  Additional

                                                             16
<PAGE>

changes in benefit coverages have also been implemented to help maintain the
costs of the care provided. State insurance taxes increased by $310,876 in
2002 as compared to 2001 due primarily to increased premium revenues. These
increased premium revenues and the increased third party administration fees
increased the commissions paid to agents in 2002 as compared to 2001.  The
settlement of a lawsuit aforementioned in Part 1, Item 3 settled in 2001 and
paid as commissions, caused the overall commission expense to decrease in
total in 2002 as compared to 2001.  Personnel expenses increased $592,287,
or 11.4%, in 2002 as compared to 2001. This was due primarily to annual
compensation adjustments and an increase in staffing needs due to the increased
volume. Office expense increased $235,692, or 31.6%, largely due to increased
postage and supplies costs resulting from additional clientele and membership.
Advertising increased $125,229, or 30.6%, due to the strategic decision to
increase spending as set forth in the business plan.  Other general and
administrative expenses increased $67,560, or 0.5%, in 2002 as compared
to 2001.  This was primarily due to a donation given to a local medical
school facility.

INCOME TAXES
Income tax expense should represent approximately 35% of income before income
taxes and minority interest, but due to the change in the valuation allowance
recorded against deferred income tax assets in 2002, the Company recorded
income tax expense of $494,201.  The valuation allowance recorded against
deferred income taxes stems from limiting recorded deferred tax assets to
amounts that management believes will be ultimately realized.  See Note 8 of
the Notes to Consolidated Financial Statements.



LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of cash have been premium and fee revenue,
collection of premiums in advance of the claims costs associated with them, and
an agreement with participating physicians in which a percentage of fees for
services is withheld for cash flows of the Company.  The Company in the past
has had borrowings from banks and affiliated companies, but currently does not
need to borrow for liquidity purposes.

Net cash provided by operating activities increased by $1,840,439 to $3,656,501
for the year ended December 31, 2003, as compared to 2002.  Net cash provided
by operating activities increased from the prior year primarily due to
increases in net income, reported and unreported claims payable and accounts
payable and accrued expenses since December 31, 2002.  Contingency reserves
payable increased since December 31, 2002, but to a lesser amount than the
prior year resulting in less cash provided by operating activities when compared
to the prior year's amount.  Items reducing the cash provided by operating
activities when compared to the prior year are an increase in prepaid expenses
and other assets, deferred income taxes and a decrease in unearned premiums and
administration fees.

Other sources of cash and cash equivalents were from the maturity of securities
held to maturity, but was offset by cash used for the purchases of property and
equipment.  The Company has invested cash not currently needed in operations
into intermediate-term bonds, consisting primarily of municipal bonds, U.S.
government securities and corporate bonds.

At December 31, 2003, the Company had certificates of deposit of $1,300,000 on
deposit with the Division to meet the deposit requirements of state insurance
laws.

                                                           17
<PAGE>

The Company is not contractually obligated to pay out contingency reserves
withheld but has historically elected (subject to Division approval) to pay
out a majority of amounts withheld.  In 2003, the Company did not pay any
previously withheld amounts and wrote off a portion of the contingency reserve
liability.  The amount that was written off was $2,123,755, which was withheld
for claims incurred in 2001.  This amount was expensed as claims at the time
they were incurred and was treated as a reduction in claims expense in 2003
when they were written off.  Typically, two years lapse from the date the
contingency reserves are withheld to the date which the corresponding amounts
are paid to the participating physicians or written off.  Currently, the
reserves withheld from claims with a date of service in 2003 and 2002 are the
amounts remaining within the contingent reserve payable.

The Company believes that cash flows generated by operations, withholding of
contingency reserves, cash on hand, and short-term investment balances will be
sufficient to fund operations, pay out projected contingency reserves payable,
and pay future dividends on the Class C common stock.

INFLATION

A substantial portion of the Company's operating expenses consist of health care
costs, which, in the general economy, have been rising at a rate greater than
that of the overall Consumer Price Index. The Company believes that its cost
control measures and risk sharing arrangements reduce the effect of inflation on
such costs. Historically, market conditions and the regulatory environment in
which the Company operates have permitted the Company to offset a portion or all
of the impact of inflation on the cost of health care benefits through premium
increases. If the Company was not able to continue to increase premiums, a
material adverse impact on the Company's operations could result. Inflation does
not have a material effect on the remainder of the Company's operating expenses.


INDUSTRY TRENDS

In recent years, there has been a trend by clients to switch to plans with
higher employee cost-sharing levels in order to maintain lower premiums. As a
provider of cost effective managed care plans for medium and small employers,
the Company believes it is delivering products and services that address current
health care reform issues. The Company will continue to evaluate its business
strategy as necessary to maximize its ability to adapt to the changing health
care marketplace.



RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued certain Statements of
Financial Accounting Standards, which have required effective dates occurring
after the Company's December 31, 2003 year end.  The Company's financial
statements are not expected to be materially affected by those accounting
pronouncements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not have any material market risk as defined by Item 305 of
Regulation S-K. The Company has market risk with its cash and investments, but
due to the conservative nature of the invested assets, management feels that
market risk is limited.






                                                           18
<PAGE>



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

               CONSOLIDATED FINANCIAL STATEMENTS TABLE OF CONTENTS

                                                             Page
                                                             ----

Independent Auditor's Report                                 F-1

Consolidated Financial Statements

     Balance Sheets                                          F-2
     Statements of Operations                                F-4
     Statements of Stockholders' Equity                      F-5
     Statements of Cash Flows                                F-6
     Notes to Consolidated Financial Statements              F-8

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None.


ITEM 9A. CONTROLS AND PROCEDURES

The Company's Chief Executive Officer, L. Paul Jensen, and Chief Financial
Officer, Bruce E. Hanson, have reviewed the Company's disclosure controls and
procedures as of the end of the period covered by this report.  Based upon this
review, these officers believe that the Company's disclosure controls and
procedures are effective in ensuring that material information related to the
Company is made known to them by others within the Company.

There have been no significant changes in internal control over financial
reporting that occurred during the most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.



PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


Name                               Age      Positions
- ----                             ---      ---------

Stephan D. Schroeder                53      President and Director

James A. Engelbrecht, M.D.          56      Secretary/Treasurer and Director

Ben J. Henderson, D.O.              61      Vice President and Director

Thomas L. Krafka, M.D.              58      Director

John E. Rittmann, M.D.              66      Director

John Sternquist, M.D.               55      Director

James R. Reynolds, M.D.             60      Director

Vance M. Thompson, M.D.             44      Director

Bob L. Sutton                       35      Director

R. Van Johnson                      59      Director

L. Paul Jensen                      55      Chief Executive Officer

                                                       19
<PAGE>

Kirk J. Zimmer                      43      Senior Vice President

William O. Rossing, M.D.            69      Vice President, Medical Director

Sharon K. Duncan                    56      Vice President, System Operations

Dean M. Krogman                     54      Vice President, External Operations

Barbara A. Smith                    42      Vice President, Medical Services

Thomas N. Nicholson                 44      Vice President, Sales and Marketing

Bruce E. Hanson                     40      Vice President, Finance

Brian E. Meyer                      41      Vice President, Information Systems

Scott L. Jamison                    46      Vice President, Provider Relations



Dr. Schroeder became a director of the Company in October 1998. He is a member
of the South Dakota State Medical Association and has been engaged in practice
as a family practitioner in Miller, South Dakota, since 1980.

Dr. Engelbrecht became a director of the Company in June 1997 and an officer
since October 2000. He is a member of the South Dakota State Medical Association
and has been engaged in the practice of internal medicine and rheumatology in
Rapid City, South Dakota, since 1980.

Dr. Henderson became a director of the Company in June 1995 and an officer
since October 2000. He is a member of the South Dakota State Medical Association
and has been engaged in the practice of internal medicine in Mobridge, South
Dakota, since 1972.

Dr. Krafka became a director of the Company in October 1998. He is a member of
the South Dakota State Medical Association and has been engaged in the practice
of radiology in Rapid City, South Dakota, since 1976.

Dr. Rittmann became a director of the Company in June 1997. He is a member of
as a family practitioner in Watertown, South Dakota, since 1973.

Dr. Sternquist became a director of the Company in October 2000. He is a member
of the South Dakota State Medical Association and has been engaged in the
practice as a general surgeon in Yankton, South Dakota, since 1980.

Dr. Reynolds became a director of the Company in September 1999.  He is a
member of the South Dakota State Medical Association and has been engaged in
the practice of cardiac surgery, thoracic surgery, and vascular surgery in
Sioux Falls since 1975.

Dr. Thompson became a director of the Company in June 2003.  He is a member of
the South Dakota State Medical Association and has been engaged in the practice
of ophthalmology in Sioux Falls, South Dakota, since 1991.

Mr. Sutton became a director of the Company in September 1999.  He is the
Executive Vice President of the South Dakota Bankers Association and previously,
Mr. Sutton was the Executive Director of the South Dakota Petroleum Council,
from 1995 to 1998.

Mr. Johnson became a director of the Company in September 1999.  He is a
Lobbyist and former Executive Vice President of the South Dakota Automobile
Dealers Association and the former Executive Director of the South Dakota
Trucking Association.
                                                         20
<PAGE>

Mr. Jensen became the Company's Chief Executive Officer in August 1999.  He
has also served as the Chief Executive Officer of the South Dakota State Medical
Association since 1999, and as Chief Executive Officer of the South Dakota
Foundation for Medical Care from 1996 to 1999.

Mr. Zimmer joined the Company in May 1988 and became the Company's Senior Vice
President in January 1990. Mr. Zimmer had been a Vice President since November
1988. Mr. Zimmer had been previously employed, since 1982, with McGladrey &
Pullen, LLP, a national certified public accountant firm and was a general
services manager from 1986 to 1988.

Dr. Rossing became the Company's Vice President and Medical Director
upon joining the Company in August 1996. Prior to his retirement from active
practice in July 1996, Dr. Rossing had been in the practice of internal
medicine in Sioux Falls, South Dakota, since 1966, following his tenure with
the U.S. Army Medical Service.

Ms. Duncan became the Company's Vice President of System Operations in February
1990. Prior to joining DAKOTACARE, Ms. Duncan had served as Vice President with
Blue Shield of South Dakota since 1986.

Mr. Krogman joined the Company in May 1993 and became the Company's Vice
President of External Operations in July 1994. Mr. Krogman is also employed by
the South Dakota State Medical Association. Mr. Krogman has been a contract
lobbyist since 1989 and was a broker/owner of Borchardt/Krogman and Associates,
a real estate company, until 1993.

Ms. Smith joined the Company in June 1996 and became the Company's Vice
President of Operations in September 1996.  Ms. Smith had served for four years
as the Secretary of the South Dakota Department of Health and for the prior
two years as Special Advisor to the Governor of the State of South Dakota.
                                                                         19.
Mr. Nicholson joined the Company in July 1996 as the Vice President of Sales and
Marketing. Mr. Nicholson had been previously employed, since 1981, by the
Williams Insurance Agency and was an Executive Vice President since 1994.

Mr. Hanson joined the Company in December 1996 and became the Vice President of
Finance in March 1997. Mr. Hanson had been in private practice as a certified
public accountant since 1991, and previously had been employed, since 1985, with
Charles Bailly & Co., a regional certified public accountant firm.

Mr. Meyer joined the Company in July 1997 as the Vice President of Information
Systems. Mr. Meyer had been previously employed since 1985 with Berkley
Information Services and was Vice President of Systems Development since 1990.

Mr. Jamison joined the Company in May 2000 as the Vice President of Provider
Relations.  Mr. Jamison had been employed by a clinic in Sioux Falls, SD.

Pursuant to the Company's Bylaws, the Board of Directors consists of ten
directors who are elected for three-year terms expiring at each successive
annual meeting of shareholders. Currently, no director may serve more than
three consecutive terms.  No position is currently vacant.  The terms of
Dr. John Rittman, Dr. Ben Henderson, Dr. Thomas Krafka and Dr. Stephan
Schroeder expire at the 2004 Annual Meeting of the Shareholders; the terms of
Dr James Reynolds, Mr. Bob Sutton and Mr. Van Johnson expire at the 2005 Annual
Meeting of Shareholders; the terms of Dr. James Engelbrecht, and Dr. John
Sternquist and Dr. Vance Thompson expire at the 2006 Annual Meeting of the
Shareholders.  The Officers of the Board of Directors are elected for one-year
terms and expire at the conclusion of the annual meeting of shareholders.

                                                         21
<PAGE>

The Bylaws currently require that eight of the directors be holders of Class A
voting preferred stock of the Company and two of the directors be consumers.
The Articles of Incorporation restrict ownership of Class A voting preferred
stock to medical or osteopathic physicians who have executed Participating
Physician Agreements with the Company. To assure equal eligibility and
opportunity throughout the state of South Dakota and avoid domination of the
Board of Directors by any geographic area or areas, the number of physician
directors from any one District Medical Society of the South Dakota State
Medical Association cannot exceed two. The consumer directors may be from any
geographic location which is served by South Dakota State Medical Holding
Company and their residence does not affect the geographic restriction for
physician directors. The consumer directors are currently Mr. Bob Sutton and
Mr. Van Johnson.  The officers of the Company are appointed by the Board of
Directors and hold office until their successors are chosen and qualified.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten-percent stockholders are also required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.

To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended December 31, 2003, all Section 16(a)
filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were timely complied with.

AUDIT COMMITTEE FINANCIAL EXPERT

The audit committee consisted of Dr. Engelbrecht, Dr. Schroeder and Mr. Sutton
since June 2003.  Our Board has not yet determined that any of those persons is
an audit committee financial expert, as that term is defined in rules adopted
by the SEC in January 2003.


CODE OF ETHICS

The Company has not adopted a Code of Ethics that applies to our principle
executive officer and principle financial officers.  The Company is in the
process of formulating a code of ethics, but is not complete and approved by
the Board at this time.


ITEM 11.  EXECUTIVE COMPENSATION

Information concerning executive compensation is incorporated herein by
reference from the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held in June, 2004.

                                                          22
<PAGE>



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information, as of March 18, 2003, regarding the
beneficial ownership of securities of the Company by (i) each person or group
who is known by the Company to be the beneficial owner of more than 5% of the
outstanding voting securities, (ii) all directors of the Company, (iii) each of
the executive officers of the Company to be named in the Summary Compensation
Table to be included in the Company's definitive proxy statement for the Annual
Meeting of Stockholders to be held in June 2004, and (iv) all directors and
executive officers of the Company as a group.  The Company believes that the
beneficial owners of the securities listed below, based on information
furnished by such owners, have sole voting and investment power (or shares
such powers with his or her spouse), subject to the terms of the respective
classes of securities of the Company and the information contained in the notes
to the table.

                                                   Amount & Nature
 Title                Name and Address of           of Beneficial    Percent
of Class               Beneficial Owner               Ownership      of Class
----------------------------------------------------------------------------
Class B Preferred     South Dakota State                1,800          100%
                      Medical Association(1)
                      1323 South Minnesota Avenue
                      Sioux Falls, SD 57105

Class A Preferred     Lloyd Solberg, M.D.                   1          .07%
Class C Common        P. O. Box 5054                  135,330         9.91%
                      Sioux Falls, SD 57117-5054

Class A Preferred     Thomas L. Krafka, M.D.                1          .07%
Class C Common                                         16,640         1.22%

Class A Preferred     John C. Sternquist, M.D.              1          .07%
Class C Common                                            560          .04%

Class A Preferred     Ben J. Henderson, D.O.                1          .07%
Class C Common                                          1,060          .08%

Class A Common        Stephan D. Schroeder                  1          .07%
Class C Common                                          1,920          .14%

Class A Preferred     James Engelbrecht, M.D.               1          .07%
Class C Common                                          1,160          .08%

Class A Preferred     John Rittmann, M.D.                   1          .07%
Class C Common                                          8,340          .61%

Class A Preferred     James Reynolds, M.D.                  1          .07%
Class C Common                                         50,440         3.69%

Class A Preferred     Vance Thompson, M.D.                  1          .07%
Class C Common                                          1,000          .07%

Class C Common        Bob Sutton                           --           --

Class C Common        Van Johnson                          --           --

                                                             23
<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (cont.)

                                                   Amount & Nature
 Title                Name and Address of           of Beneficial    Percent
of Class               Beneficial Owner               Ownership      of Class
----------------------------------------------------------------------------
Class C Common        L. Paul Jensen(2)                 5,760          .42%
                      1323 South Minnesota Avenue
                      Sioux Falls, SD 57105

Class C Common        William Rossing, M.D.             8,720          .64%

Class C Common        Kirk J. Zimmer                      800          .06%

Class C Common        Thomas Nicholson                     --           --

Class A Preferred     All Directors and Executive           8          .56%
                      Officers as a Group
Class C Common        (14 people)                      96,400         7.06%


- --------------
(1) The South Dakota State Medical Association is an affiliated company.
(2) L. Paul Jensen is the Chief Executive Officer of the Company and the
South Dakota State Medical Association.

EQUITY COMPENSATION PLAN INFORMATION
The Company does not currently have any equity compensation plans for
its directors, officers or other employees.  As such, the Company has
omitted the table required under 201(d) of Regulation S-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company leases office space from the Association.  On January 1, 2002,
the Company entered into a three year lease which will automatically renew
for successive two year terms, unless terminated with at least 30 days notice
prior to the end of the lease term.  The 2002 lease required minimum annual
rental payments of $227,784.  See Item 2 for additional information
regarding the lease.

The Company provides group health insurance coverage for employees of the
Association.  Total premium income from the affiliate for the years ended
December 31, 2003, 2002 and 2001 were $108,750, $85,005, and $66,086,
respectively.

L. Paul Jensen received salaries and retirement contributions totaling $104,074,
99,280 and $97,087 from the South Dakota Medical Association for the years
ended 2003, 2002 and 2001, respectively.

                                                              24
<PAGE>

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
During the period covering the years ended December 31, 2003 and 2002, McGladrey
& Pullen, LLP and RSM McGladrey, Inc. performed the following professional
services:
                                                      2003           2002
                                                    -------        -------
Audit Fees (1)                                      $65,500        $59,800
Audit-related Fees (2)                                1,200            400
Tax Fees (3)                                          5,500          3,800
All other fees (4)                                    1,200          3,500

 (1)Audit fees consist of fees for the audit of the Company's annual GAAP
financial statements and statutory financial statements, review of financial
statements included in the Company's quarterly reports on Form 10-Q and services
normally provided by the independent auditor in connection with statutory and
regulatory filings or engagements.
(2)Audit-related fees consist of fees for various accounting consultations.
(3)Tax fees consist of fees for tax consultation and tax compliance services
for the Company and its subsidiaries.
(4)All other fees for 2003 consist of fees for consultations related to
financing alternatives for the Company.  All other fees for 2002 consist of
fees related to an agreed upon procedures engagement performed for the Company.


The Audit Committee's current practice on pre-approval of services performed by
the independent auditors is to approve annually all audit services and, on a
case-by-case basis or in accordance with a pre-established approval limit, all
permitted non-audit services to be provided by the independent auditors during
the calendar year. The Audit Committee reviews each nonaudit service to be
provided and assesses the impact of the service on the auditor's independence
in accordance with the Audit Committee's pre-approval policies. In addition,
the Audit Committee may pre-approve other non-audit services during the year on
a case-by-case basis. All services performed by the independent auditors for
2003 were pre-approved in accordance with the Audit Committee's pre-approval
policies.




                                                               25
<PAGE>






ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

The following documents are filed as part of this report:


FINANCIAL STATEMENTS                                        Page
                                                            ----

Independent Auditor's Report                                F-1
Consolidated Financial Statements
     Balance Sheets                                         F-2
     Statements of Operations                               F-4
     Statements of Stockholders' Equity                     F-5
     Statements of Cash Flows                               F-6
     Notes to Financial Statements                          F-8


EXHIBITS
Exhibit No.     Description
-----------     -----------

3.1             The Amended and Restated Articles of Incorporation of the
                Company (incorporated by reference to Exhibit 3.1 to the
                Company's Form 8-A, as filed with the Securities and Exchange
                Commission on January 19, 1996)

3.2             The Amended and Restated Bylaws of the Company (incorporated
                by reference to Exhibit 3.2 to the Company's Form 8-A, as
                filed with the Securities and Exchange Commission on
                January 19, 1996)

3.3             Form of Specimen Certificate for Class A Voting Preferred Stock
                (incorporated by reference to Exhibit 4.1 to the Company's
                Form 8-A, as filed with the Securities and Exchange Commission
                on January 19, 1996)

4.2             Form of Stock Certificate for Class C Non-Voting Common Stock
                (incorporated by reference to Exhibit 4.2 to the Company's
                Form 10-K, as filed with the Securities and Exchange
                Commission on March 29, 1996)

10              Office Lease with the South Dakota State Medical Association
                (incorporated by reference to Exhibit 10 to the Company's
                Form 10-K, as filed with the Securities and Exchange
                Commission on March 29, 2002)

21              Subsidiaries of the Registrant

31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Senior Vice President Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.3 Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification of Senior Vice President Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.3 Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002


REPORTS ON FORM 8-K
None.




                                                          26
<PAGE>






SIGNATURES


Pursuant to the requirements of the Section 13 or 15(d) 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.

SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED


By /s/L. Paul Jensen                        Dated   03/26/2004
   ----------------------------------             --------------------
     L. Paul Jensen
     Chief Executive Officer
     (Principal Executive Officer)


By /s/Kirk J. Zimmer                        Dated   03/26/2004
   ----------------------------------             --------------------
     Kirk J. Zimmer
     Senior Vice President/COO
     (Principal Financial Officer)


By /s/Bruce E. Hanson                       Dated   03/26/2004
   ----------------------------------             --------------------
     Bruce E. Hanson
     Vice President Finance/CFO
     (Principal Financial Officer)


By /s/ Stephan D. Schroeder                 Dated   03/26/2004
   ----------------------------------             --------------------
     Stephan D. Schroeder, M.D.
     President and Director


By /s/James Engelbrecht                     Dated   03/26/2004
   ----------------------------------             --------------------
     James Engelbrecht, M.D.
     Secretary/Treasurer and Director


By /s/Ben J. Henderson                      Dated   03/26/2004
   ----------------------------------             --------------------
     Ben J. Henderson, D.O.
     Vice President and Director


By /s/Thomas L. Krafka                      Dated   03/26/2004
   ----------------------------------             --------------------
     Thomas L. Krafka, M.D.
     Director


By /s/James R. Reynolds                     Dated   03/26/2004
   ----------------------------------             --------------------
     James R. Reynolds, M.D.
     Director


                                                      27
<PAGE>

By /s/ John Sternquist                      Dated   03/26/2004
   ----------------------------------             --------------------
     John Sternquist, M.D.
     Director


By /s/John Rittmann                         Dated   03/26/2004
   ----------------------------------             --------------------
     John Rittmann, M.D.
     Director


By /s/Vance Thompson                        Dated   03/26/2004
   ----------------------------------             --------------------
     Vance Thompson, M.D.
     Director


By /s/ Bob Sutton                           Dated   03/26/2004
   ----------------------------------             --------------------
     Bob Sutton
     Director


By /s/Van Johnson                           Dated   03/26/2004
   ----------------------------------             --------------------
     Van Johnson
     Director





                                                        28
<PAGE>

















Independent Auditor's Report


To the Board of Directors
South Dakota State Medical Holding Company, Incorporated
d/b/a DAKOTACARE
Sioux Falls, South Dakota

We have audited the accompanying consolidated balance sheets of South Dakota
State Medical Holding Company, Incorporated d/b/a DAKOTACARE and subsidiaries
as of December 31, 2003 and 2002, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years
in the period ended December 31, 2003.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of South Dakota State
Medical Holding Company, Incorporated d/b/a DAKOTACARE and subsidiaries as of
December 31, 2003 and 2002, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2003, in
conformity with accounting principles generally accepted in the United States
of America.




Sioux Falls, South Dakota
February 27, 2004


<PAGE>


South Dakota State Medical Holding Company, Incorporated
d/b/a DAKOTACARE
Consolidated Balance Sheets
December 31, 2003 and 2002
<TABLE>
<S>                                                <C>              <C>
Assets                                                 2003             2002
--------------------------------------------------------------------------------

Current Assets
  Cash and cash equivalents                        $14,518,442      $10,543,214
  Investment in securities held to maturity
   (Note 5)                                            409,138          448,229
  Certificates of deposit                            1,400,000        1,400,000
  Receivables (Note 3)                               2,490,688        2,045,091
  Prepaid expenses and other assets                     75,500           49,998
  Deferred income taxes (Note 8)                       344,200          891,400
                                                   ----------------------------
    Total current assets                            19,237,968       15,377,932
                                                   ----------------------------




Long-Term Investments
  Investment in securities held to maturity
   (Note 5)                                          3,981,591        4,277,417
  Investment in securities available for sale
   (Note 5)                                            148,600          146,500
  Certificate of deposit                               100,000          100,000
  Contracts with life insurance companies               96,668           93,532
                                                   ----------------------------
                                                     4,326,859        4,617,449
                                                   ----------------------------




Property and Equipment, at cost,
  net of accumulated depreciation                      581,353          702,621
                                                   ----------------------------




Deferred Income Taxes (Note 8)                       1,492,500                -
                                                   ----------------------------
                                                   $25,638,680      $20,698,002
                                                   ============================
</TABLE>
See Notes to Consolidated Financial Statements.


                                                F-2

<PAGE>

<TABLE>
<S>                                                <C>              <C>

Liabilities and Stockholders' Equity                   2003             2002
-------------------------------------------------------------------------------

Current Liabilities
  Reported and unreported claims payable (Note 7)  $12,854,487      $ 9,906,383
  Unearned premiums and administration fees          2,275,579        2,315,745
  Accounts payable and accrued expenses              1,477,274        1,318,078
  Contingency reserves payable (Note 6)                      -        2,215,750
                                                   ----------------------------
     Total current liabilities                      16,607,340       15,755,956
                                                   ----------------------------
Contingency Reserves Payable (Note 6)                6,080,812        2,974,808
                                                   ----------------------------
Minority Interest in Subsidiary                              -            6,676
                                                   ----------------------------
Commitments and Contingencies (Notes 4 and 13)

Stockholders' Equity (Note 9)
  Class A preferred, voting, no par value, $10
    stated value, 2,500 shares authorized;
    1,424 and 1,350 shares issued and outstanding
    at December 31, 2003 and 2002; liquidation
    preference of outstanding shares of $14,240
    and $13,500 at December 31, 2003 and 2002,
    respectively                                        14,240           13,500
  Class B preferred, voting, no par value,
    $1 stated value, 2,500 shares authorized;
    1,800 and 1,300 shares issued and outstanding
    at December 31, 2003 and 2002; liquidation
    preference of outstanding shares of $1,800
    and $1,300 at December 31, 2003 and 2002,
    respectively                                         1,800            1,300
  Class C common, nonvoting, $.01 par value,
    10,000,000 shares authorized; issued
    1,505,760 shares                                    15,058           15,058
  Additional paid-in capital                         3,749,342        3,749,342
  Retained earnings (deficit)                          496,484         (495,488)
  Accumulated other comprehensive income                 2,783            6,029
  Less cost of Class C common treasury stock,
    140,156 shares                                  (1,329,179)      (1,329,179)
                                                   ----------------------------
                                                     2,950,528        1,960,562
                                                   ----------------------------
                                                   $25,638,680      $20,698,002
                                                   ============================
</TABLE>
                                                F-3
<PAGE>

South Dakota State Medical Holding Company, Incorporated
d/b/a DAKOTACARE

Consolidated Statements of Operations
Years Ended December 31, 2003, 2002 and 2001
<TABLE>
<S>                                     <C>           <C>           <C>
                                            2003          2002          2001
Revenues:
  Premiums                              $88,015,822   $77,438,834   $58,528,766
  Less premiums ceded for reinsurance      (709,232)     (892,324)     (536,260)
                                        ---------------------------------------
                                         87,306,590    76,546,510    57,992,506
  Third party administration fees         5,752,662     5,033,670     4,075,143
  Investment income                         353,979       450,123       687,788
  Other income                            1,531,323     1,581,370     1,142,958
                                        ---------------------------------------
Total revenues                           94,944,554    83,611,673    63,898,395
                                        ---------------------------------------

Operating expenses:
  Claims incurred                        80,052,316    72,512,508    51,709,053
  Less reinsurance recoveries              (376,189)     (387,865)      (93,629)
                                        ---------------------------------------
                                         79,676,127    72,124,643    51,615,424
  Personnel expenses                      6,251,383     5,804,555     5,212,268
  Commissions                             3,195,769     2,911,295     4,200,967
  Professional fees expenses                825,962       858,814       867,813
  Office expenses                           887,645       982,407       746,715
  Occupancy expenses                        778,948       802,962       768,696
  State insurance taxes                   1,084,869       997,159       686,283
  Advertising expenses                      457,037       534,303       409,074
  Other general and administrative
    expenses                                905,052       795,735       727,854
                                        ---------------------------------------
        Total operating expenses         94,062,792    85,811,873    65,235,094
                                        ---------------------------------------
        Income (loss) before income
          taxes and minority interest       881,762    (2,200,200)   (1,336,699)
Income taxes (benefit) (Note 8)            (102,829)      494,201      (527,767)
                                        ---------------------------------------
        Income (loss) before minority
          Interest                          984,591    (2,694,401)     (808,932)
Minority interest in (loss) of subsidiaries  (7,381)      (25,494)      (91,322)
                                        ---------------------------------------
        Net income (loss)               $   991,972   $(2,668,907)  $  (717,610)
                                        =======================================

Earnings (loss) per common share        $      0.73   $     (1.95)  $     (0.52)
</TABLE>
See Notes to Consolidated Financial Statements.

                                                        F-4

<PAGE>

South Dakota State Medical Holding Company, Incorporated
d/b/a DAKOTACARE

Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2003, 2002 and 2001
<TABLE>
<S>                                          <C>               <C>                <C>
                                                               Class A          Class B
                                             Comprehensive    Preferred        Preferred
                                              Income(Loss)       Stock           Stock
- ---------------------------------------------------------------------------------------

Balance, December 31, 2000                                     $ 11,790           $ 1,300
   Issuance of Class A preferred stock                            1,230                 -
   Redemption of Class A preferred stock                           (420)                -
   Dividends paid ($0.05 per share)
    on Class C common stock                                           -                 -
   Purchase of treasury stock                                         -                 -
   Comprehensive (loss):
      Net (loss)                             $  (717,610)             -                 -
      Net change in unrealized gain/loss
        on securities available for sale             599              -                 -
                                              -----------
      Comprehensive (loss)                   $  (717,011)
                                              -------------------------------------------
Balance, December 31, 2001                                       12,600             1,300
   Issuance of Class A preferred stock                            1,060                 -
   Redemption of Class A preferred stock                           (160)                -
   Comprehensive (loss):
      Net (loss)                             $(2,668,907)             -                 -
      Net change in unrealized gain/loss
        on securities available for sale           6,653              -                 -
                                              -----------
      Comprehensive (loss)                   $(2,662,254)
                                              -------------------------------------------
Balance, December 31, 2002                                       13,500             1,300
   Issuance of Class A preferred stock                            1,170                 -
   Redemption of Class A preferred stock                           (430)                -
   Issuance of Class B preferred stock                                -               500
   Comprehensive income:
      Net income                             $   991,972              -                 -
      Net change in unrealized gain/loss
        on securities available for sale          (3,246)             -                 -
                                              -----------
      Comprehensive income                   $   988,726
                                             --------------------------------------------
Balance, December 31, 2003                                       14,240             1,800
                                            =============================================
</TABLE>

<TABLE>
<S>           <C>        <C>           <C>          <C>         <C>           <C>

                                                     Accumulated
               Class C    Additional                    Other
                Common     Paid-In       Retained   Comprehensive  Treasury
                Stock      Capital       Earnings    Income(Loss)   Stock        Total
------------------------------------------------------------------------------------------

              $  15,058  $3,749,342    $ 2,960,959  $  (1,223)  $  (829,179)  $ 5,908,047
                      -           -              -          -             -         1,230
                      -           -              -          -             -          (420)

                      -           -        (69,930)         -             -       (69,930)
                      -           -              -          -      (500,000)     (500,000)

                      -           -       (717,610)         -             -      (717,610)

                      -           -              -        599             -           599


------------------------------------------------------------------------------------------
                 15,058   3,749,342      2,173,419       (624)   (1,329,179)    4,621,916
                      -           -              -          -             -         1,060
                      -           -              -          -             -          (160)

                      -           -     (2,668,907)         -             -    (2,668,907)

                      -           -              -      6,653             -         6,653


------------------------------------------------------------------------------------------
                 15,058   3,749,342       (495,488)     6,029    (1,329,179)    1,960,562
                      -           -              -          -             -         1,170
                      -           -              -          -             -          (430)
                      -           -              -          -             -           500

                      -           -        991,972          -             -       991,972

                      -           -              -     (3,246)            -        (3,246)

------------------------------------------------------------------------------------------
              $  15,058  $3,749,342    $   496,484  $   2,783   $(1,329,179)  $ 2,950,528
==========================================================================================
</TABLE>
                                                     F-5
<PAGE>

South Dakota State Medical Holding Company, Incorporated
d/b/a DAKOTACARE

Consolidated Statements of Cash Flows
Years Ended December 31, 2003, 2002 and 2001

<TABLE>
<S>                                              <C>             <C>             <C>

                                                     2003            2002            2001
--------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
  Net income (loss)                              $   991,972     $(2,668,907)    $  (717,610)
  Adjustments to reconcile net income (loss)
    to net cash provided by operating activities:
    Depreciation                                     256,233         296,044         287,969
    Minority interest in (loss) of
      subsidiaries                                    (7,381)        (25,494)        (91,322)
    Amortization of discounts and premiums
      on investments, net                           (127,083)       (143,617)       (140,797)
    Loss on disposal of equipment                      1,771           6,439               -
    (Increase) decrease in receivables              (445,597)       (500,104)        324,701
    (Increase) decrease in prepaid expenses
      and other assets                               (25,502)         85,543         (34,111)
    (Increase) decrease in deferred income taxes    (945,300)        755,600        (394,000)
    Increase in reported and unreported
      claims payable                               2,948,104       1,668,022       2,406,890
    Increase (decrease) in unearned premiums
      administration fees                            (40,166)      1,139,874         149,360
    Increase (decrease) in accounts payable and
      accrued expenses                               159,196        (141,185)       (253,485)
    Increase in contingency reserves payable         890,254       1,343,847         971,239
                                                 -------------------------------------------
      Net cash provided by operating activities    3,656,501       1,816,062       2,508,834
                                                 -------------------------------------------

Cash Flows From Investing Activities
  Available for sale securities:
    Purchased                                        (5,346)          (6,647)         (7,201)
  Held to maturity securities:
    Purchased                                             -         (957,863)     (1,065,221)
    Matured or called                               462,000        1,350,000         890,000
  Repayments on collateralized mortgage
    obligations                                           -                -           2,090
  Proceeds from maturities of certificates
    of deposit                                    1,400,000        1,400,000       1,200,000
  Purchases of certificates of deposit           (1,400,000)      (1,500,000)     (1,350,000)
  (Increase) decrease in contracts with life
    insurance companies                              (2,643)          (1,195)          8,782
  Proceeds from the sale of property
    and equipment                                         -              200               -
  Purchase of property and equipment               (136,736)        (248,432)       (141,650)
                                                 -------------------------------------------
      Net cash provided by (used in)
       investing activities                         317,275           36,063        (463,200)
                                                 -------------------------------------------

See Notes to Consolidated Financial Statements.
</TABLE>

                                                                     F-6

<PAGE>


<TABLE>
<S>                                              <C>             <C>             <C>

                                                     2003            2002            2001
---------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
  Proceeds from issuance of capital stock        $     1,670     $     1,060     $     1,230
  Redemption of capital stock                           (430)           (160)           (420)
  Payment of dividends                                     -               -         (69,930)
  Purchase of treasury stock                               -               -        (500,000)
  Increase (decrease) in minority investment
    in subsidiary                                        212          16,402        (242,241)
                                                 --------------------------------------------
      Net cash provided by (used in)
       financing activities                            1,452          17,302        (811,361)
                                                 --------------------------------------------
      Increase in cash and cash equivalents        3,975,228       1,869,427       1,234,273

Cash and Cash Equivalents
  Beginning                                       10,543,214       8,673,787       7,439,514
                                                 --------------------------------------------
  Ending                                         $14,518,442     $10,543,214     $ 8,673,787
                                                 ============================================

Supplemental Disclosures of Cash Flow Information
  Cash payments for:
    Income taxes, net of (refunds)               $   (95,629)    $   (81,799)    $   200,000

Supplemental Disclosures of Noncash Investing
  and Financing Activities
    Change in unrealized gain/loss
      on securities available for sale           $    (3,246)    $     6,653     $       599

</TABLE>

                                                                  F-7
<PAGE>

SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
D/B/A DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
Note 1.  Nature of Business and Significant Accounting Policies

Nature of business:  South Dakota State Medical Holding Company, Incorporated
(the Company), is a South Dakota licensed health maintenance organization
(HMO) d/b/a DAKOTACARE.  The Company has contracted with hospitals,
physicians and other providers to provide health care services to
policyholders.  Policyholders are employee groups located in South Dakota.

A summary of the Company's significant accounting policies follows:

Principles of consolidation:  The accompanying consolidated financial
statements include the accounts of the Company, its wholly-owned subsidiaries,
DAKOTACARE Administrative Services, Incorporated (DAS), and DAKOTACARE
Insurance, LTD. (DIL), and its majority owned subsidiary, Carewest, Inc.
(Carewest).  DAS and Carewest are third party administrators of health care
plans for independent employer companies.  DIL's primary activity is in
providing reinsurance quota share excess medical stop loss coverage to DAS'
self funded customers.  All intercompany balances and transactions have been
eliminated in consolidation.

Revenue recognition:  Premiums are billed in advance of their respective
coverage periods.  Income from such premiums is recorded as earned during the
coverage period; the unearned portion of premiums received prior to the end
of the coverage period is recorded as unearned premiums.  Revenue is reduced
by reinsurance premiums ceded to reinsurance companies.  Third party
administration fees are recorded as earned in the period in which the related
services are performed.  The unearned portion of fees received but not earned
prior to the end of the contract is recorded as unearned administration fees.

Basis of financial statement presentation:  The consolidated financial
statements have been prepared in conformity with accounting principles
generally accepted in the United States of America.  In preparing the
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of
the balance sheet.  Actual results could differ significantly from those
estimates.  Material estimates that are particularly susceptible to significant
change in the near-term relate to the liabilities for contingency reserves
payable and reported and unreported claims payable, and the valuation allowance
on deferred tax assets.

Cash and cash equivalents:  For purposes of reporting the statements of cash
flows, the Company includes as cash equivalents all cash accounts and highly
liquid debt instruments which are not subject to withdrawal restrictions or
penalties.  Certificates of deposit are considered investments as all have been
purchased with maturities in excess of ninety days.  Although the Company
maintains its cash accounts in a limited number of commercial banks, the
Company believes it is not exposed to any significant credit risk on cash and
cash equivalents.

The Company has reverse repurchase agreements in place with two banks, in which
related securities totaled approximately $11,100,000 at December 31, 2003.  In
accordance with the terms of the repurchase agreements, the Company does not
take possession of the related securities.  The Company's agreements also
contain provisions to ensure that the market value of the underlying assets
remain sufficient to protect the Company in the event of default by the banks by
requiring that the underlying securities have a total market value of at least
100% of the banks' total obligations under the agreements.

At December 31, 2003, approximately $2,200,000 of securities were held with
First Premier Bank, which had a weighted average maturity of June 2015, and
approximately $8,900,000 of securities were held with The First National Bank in
Sioux Falls, which had a weighted average maturity of February 2007.
                                             F-8
<PAGE>

SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
D/B/A DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
Note 1. Nature of Business and Significant Accounting Policies (continued)

Receivables:  Receivables are recorded based on amounts billed to customers,
subscribers, and other third party payors, and amounts estimated to be received
or recovered from reinsurers and other third party payors.  The Company
evaluates the collectibility of such receivables monthly based on the third
party payors' financial condition, credit history, and current economic
conditions.  Receivables are written off when deemed uncollectible.  Recoveries
of receivables previously written off are recorded when received.

Investment securities:  Investment securities classified as held to maturity
are those debt securities that the Company has both the intent and ability to
hold to maturity regardless of changes in market conditions, liquidity needs,
or changes in general economic conditions.  These securities are stated at
amortized cost.

Investment securities classified as available for sale are marketable equity
securities and those debt securities that the Company intends to hold for an
indefinite period of time, but not necessarily to maturity.  Any decision to
sell a security classified as available for sale would be based on various
factors, including significant movements in interest rates, changes in the
maturity mix of the Company's assets and liabilities, liquidity needs,
regulatory capital considerations, and other similar factors.  Investment
ecurities available for sale are carried at fair value.  Unrealized gains or
losses are reported as increases or decreases in comprehensive income, net of
the related deferred tax effect, if any.

Premiums and discounts on investments in debt securities are amortized over
their contractual lives.  The method of amortization results in a constant
effective yield on those securities (the interest method).  Interest on debt
securities is recognized in income as accrued.  Realized gains and losses on
the sale of investment securities are determined using the specific
identification method.

Depreciation:  Building and building improvements are depreciated using
straight-line methods over the estimated useful lives of the assets, which
are twenty to thirty-nine years.  Depreciation on furniture, equipment and
automobiles is computed using straight-line methods based upon the estimated
useful lives of the respective assets, which is principally five to seven
years.  A summary of property and equipment is as follows:

                                               2003                2002
                                           -------------------------------
Furniture, equipment and automobiles       $ 2,604,350         $ 2,483,474
Building and building improvements              53,370              53,370
Other                                          141,728             140,236
                                           -------------------------------
                                             2,799,448           2,677,080
Less accumulated depreciation                2,218,095           1,974,459
                                           -------------------------------
                                           $   581,353         $   702,621
                                           ===============================
                                                        F-9
<PAGE>

SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
D/B/A DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Note 1.  Nature of Business and Significant Accounting Policies (continued)

Reported and unreported claims payable:  The coverage offered by the Company
is on an occurrence basis which provides for payment of claims which occur
during the period of coverage regardless of when the claims are reported.
Reported and unreported claims payable consist of actual claims reported to be
paid and estimates of health care services rendered but not reported and to be
paid.  The liabilities for reported and unreported claims payable have been
estimated by utilizing statistical information developed from historical data,
current enrollment, health service utilization statistics and other related
information.  In addition, the Company uses the services of an independent
actuary in the determination of its year end liabilities.  The accruals are
continually monitored and reviewed and as adjustments to the estimated
liabilities become necessary, such adjustments are reflected in current
operations.

Income taxes:  Deferred taxes are provided on an asset and liability method
whereby deferred tax assets are recognized for deductible temporary differences
and operating loss and tax credit carryforwards and deferred tax liabilities
are recognized for taxable temporary differences.  Temporary differences are
the differences between the reported amounts of assets and liabilities and
their tax bases.  Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized.  Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.

Segment reporting:  Operating segments are defined as components of an
enterprise for which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance.  The Company's operations
are classified into three business segments.

Earnings (loss) per common share:  Earnings (loss) per common share was
calculated by dividing net income (loss) by the weighted average number of
Class C common shares outstanding during each period.  The weighted average
number of Class C common shares outstanding was 1,365,604 in 2003, 1,365,604
in 2002 and 1,379,258 in 2001.  All references to earnings (loss) per share in
the consolidated financial statements are to basic earnings (loss) per share,
as the Company has no potentially issuable common stock.

Recent accounting pronouncements:  The Financial Accounting Standards Board
has issued certain Statements of Financial Accounting Standards, which have
required effective dates occurring after the Company's December 31, 2003 year
end.  The Company's financial statements are not expected to be materially
affected by those accounting pronouncements.

                                               F-10
<PAGE>

SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
D/B/A DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Note 2.  Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:

Cash and cash equivalents and certificates of deposit:  The carrying amount
approximates fair value because of the relative short maturity of those
instruments.

Investments:  Fair values for the Company's investment securities are based on
quoted market prices.  At December 31, 2003, the carrying amount and fair
value of the Company's investment securities was $4,539,329 and $4,833,358,
respectively.  At December 31, 2002, the carrying amount and fair value of the
Company's investment securities was $4,872,146 and $5,167,060, respectively.

Accrued interest receivable:  The carrying amount approximates fair value due
to the nature of the balances recorded.

Note 3.  Receivables

Receivables consist of the following as of December 31, 2003 and 2002:

                                               2003                2002
                                           -------------------------------
Drug manufacturer chargebacks              $   662,376         $   308,700
Third party administrator receivables          461,780             104,878
Funds withheld by ceding insurer               409,250             163,041
Coordination of benefits recoverable           192,000             217,400
Subrogation, net of recovery expenses          160,000             150,000
Commissions                                    159,264             200,662
Premiums                                        70,598              64,300
Interest                                        45,834              43,460
Income taxes                                         -             526,600
Reinsurance                                          -             116,370
Other                                          329,586             149,680
                                           -------------------------------
                                             2,490,688           2,045,091
Less allowance for doubtful accounts                 -                   -
                                           -------------------------------
                                           $ 2,490,688         $ 2,045,091
                                           ===============================

                                                      F-11
<PAGE>

SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
D/B/A DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Note 4.  Reinsurance

The Company's policy is to reinsure that portion of risk in excess $175,000
in 2003 and $125,000 in 2002 and 2001 of covered hospital inpatient expenses
of any enrollee per contract year, subject to a coinsurance provision which
ranged from 50% to 90% based on average daily amounts specified in the plan,
and a $2,000,000 lifetime maximum benefit per enrollee.  The Company would be
liable for any obligations that the reinsuring company is unable to meet under
the reinsurance agreement.

This reinsurance agreement also provides for enrollee benefits to be paid in
the event the Company should cease operations or become insolvent, and a
conversion privilege for all enrollees in the event of plan insolvency and for
any enrollee that moves out of the service area of the Company.

Note 5.  Investment Securities

Investment securities at December 31, 2003 are as follows:
<TABLE>
<S>                                    <C>             <C>          <C>           <C>
                                                         Gross         Gross
                                        Amortized      Unrealized   Unrealized       Fair
                                           Cost          Gains       (Losses)        Value
                                       -----------------------------------------------------
Debt securities held to maturity:
  Obligations of U.S. treasury,
    government agencies and
    corporations                       $  408,991      $   39,833   $       -     $  448,824
  Obligations of state and political
    Subdivisions                        3,291,048         148,238           -      3,439,286
  Corporate bonds                         690,690         105,958           -        796,648
                                       -----------------------------------------------------
                                       $4,390,729      $  294,029   $       -     $4,684,758
                                       =====================================================

Equity securities available for sale:
  Bond mutual fund                     $  145,817      $    2,783   $       -     $  148,600
                                       =====================================================
</TABLE>
The amortized cost and estimated fair values of debt securities, by contractual
maturity, are shown below.  Expected maturities will differ from contractual
maturities because the borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

                                                   December 31, 2003
                                            ------------------------------
                                              Amortized
                                                 Cost           Fair Value
                                             -----------------------------
Due in one year                              $  409,138         $  417,534
Due after one year through five years         1,516,887          1,656,285
Due after five years through ten years        2,189,699          2,323,482
Due after ten years                             275,005            287,457
                                             -----------------------------
                                             $4,390,729         $4,684,758
                                             =============================

                                                       F-12
<PAGE>

SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
D/B/A DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Note 5.  Investment Securities (continued)

Investment securities at December 31, 2002 are as follows:
<TABLE>
<S>                                    <C>             <C>          <C>           <C>
                                                         Gross         Gross
                                        Amortized      Unrealized   Unrealized       Fair
                                           Cost          Gains       (Losses)        Value
                                       -----------------------------------------------------
Debt securities held to maturity:
  Obligations of U.S. treasury,
    government agencies and
    corporations                       $  590,751      $   57,560   $        -    $  648,311
  Obligations of state and political
    Subdivisions                        3,446,166         150,420         (293)    3,596,293
  Corporate bonds                         688,729          87,227            -       775,956
                                       -----------------------------------------------------
                                       $4,725,646      $  295,207   $     (293)   $5,020,560
                                       =====================================================

Equity securities available for sale:
  Bond mutual fund                     $  140,471      $    6,029   $        -    $  146,500
                                       =====================================================
</TABLE>
The components of other comprehensive income (loss) - net change in unrealized
gain (loss) on securities available for sale are as follows:

                                                 Years Ended December 31,
                                           2003            2002            2001
                                        ---------------------------------------
Unrealized holding gain (loss) arising
  during the period                     $(3,246)        $ 6,653          $  599
Add reclassification adjustment for net
  losses realized in net income               -               -               -
                                        ---------------------------------------
     Net change in unrealized gain/loss
     before income taxes                 (3,246)          6,653             599
Income taxes                                  -               -               -
                                        ---------------------------------------
     Other comprehensive income - net
     change in unrealized gain/loss on
     securities available for sale      $(3,246)        $ 6,653          $  599
                                        =======================================

There were no sales of debt or equity securities during each of the three years
in the period ended December 31, 2003, and accordingly, no reclassification
adjustments on investment securities for those years.  At December 31, 2003 and
2002, the Company had certificates of deposit of $1,300,000 and $900,000,
respectively, on deposit with the South Dakota Department of Commerce and
Regulation, Division of Insurance (Division of Insurance), to meet the deposit
requirement of state insurance laws.

                                                       F-13
<PAGE>

SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
D/B/A DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Note 6.  Contingency Reserves Payable

The Company's agreements with participating physicians provide that up to 20%
of fees for services provided, as submitted to the Company, may be withheld to
provide a contingency reserve that may be used to fund operations or meet other
financial requirements of the Company.  The percentage withheld for the years
2001 through 2003 was 15%.  The amounts withheld may be paid to the
participating physicians at the discretion of the Board of Directors of the
Company, although the Company is not contractually obligated to pay out amounts
withheld.  Management estimates the expected amount of contingency reserves to
be paid to participating physicians and records a liability based upon factors
such as cash flow needs, net income, and accumulations of amounts withheld.
Payments to physicians are made at such times as the Board of Directors and
Division of Insurance approve payouts, subject to a written agreement with the
Division of Insurance.  The recorded liability at December 31, 2003 is equal to
actual amounts withheld for the years ended December 31, 2003 and 2002.  During
2003 and 2002, the Company's Board of Directors, with approval from the
Division of Insurance, voted to write off $2,123,755 and $1,575,224,
respectively, of contingency reserves withheld in 2001 and 2000, respectively,
which reduced claims expense in 2003 and 2002 and was accounted for as a change
in accounting estimate.  This change had the effect of increasing income for
2003 by $1,401,678, or $1.03 per common share, net of income taxes and had the
effect of decreasing the net loss for 2002 by $1,039,648, or $0.75 per common
share, net of income taxes.

Note 7.  Reported and Unreported Claims Payable

Activity in the liability for reported and unreported claims payable is
summarized as follows:
<TABLE>
<S>                                          <C>             <C>             <C>
                                                 2003            2002            2001
                                             -------------------------------------------
Balance at January 1                         $ 9,906,383     $ 8,238,361     $ 5,831,471
                                             -------------------------------------------

Incurred related to:
  Current year                                81,051,988      73,887,831      51,684,791
  Prior years                                    747,894        (187,964)        (69,367)
  Contingency reserves written off            (2,123,755)     (1,575,224)              -
                                             -------------------------------------------
Total incurred                                79,676,127      72,124,643      51,615,424
                                             -------------------------------------------

Paid related to:
  Current year                                65,893,965      62,331,756      43,493,105
  Prior years                                 10,717,688       8,157,147       5,748,359
                                             -------------------------------------------
Total paid                                    76,611,653      70,488,903      49,241,464
                                             -------------------------------------------

Less reinsurance recoverables at January 1      (116,370)        (84,088)        (51,158)
Plus reinsurance recoverables at December 31           -         116,370          84,088
                                              ------------------------------------------
Balance at December 31                       $12,854,487     $ 9,906,383     $ 8,238,361
                                             ===========================================
</TABLE>
                                                                     F-14
<PAGE>

SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
D/B/A DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Note 8.  Income Tax Matters

The Company is taxable as a property and casualty insurance company under
section 831 of the Internal Revenue Code.  The code prescribes certain
adjustments to book income to arrive at taxable income which include
adjustments to unearned premiums, discounting of loss reserves and proration
of tax-exempt income.  In addition, increases in contingency reserves, which
are included as claims expenses, are not allowable as tax deductions until
actually paid.  The Company files a consolidated income tax return with its
subsidiaries, DAS, DIL and Carewest.

The net deferred tax assets consist of the following components at December 31:

                                               2003                2002
                                           -------------------------------
Deferred tax assets:
  Contingency reserves payable             $ 2,067,500         $ 1,764,800
  Reported and unreported claims payable       110,800              92,200
  Unearned premiums                            154,000             151,800
  Accrued expenses and other                   158,100             193,900
  Net operating loss carryforwards
    of subsidiaries                            405,500             169,100
                                           -------------------------------
                                             2,895,900           2,371,800
  Less valuation allowance                   1,014,200           1,430,300
                                           -------------------------------
                                             1,881,700             941,500
                                           -------------------------------

Deferred tax liability:
  Property and equipment and other             (45,000)            (50,100)
                                           -------------------------------
                                           $ 1,836,700        $    891,400
                                           ===============================

Reflected on the accompanying balance sheets as follows:

                                               2003                2002
                                           -------------------------------
Current assets                              $   344,200        $   891,400
Noncurrent assets                             1,492,500                  -
                                           -------------------------------
                                            $ 1,836,700        $   891,400
                                            ==============================
                                                        F-15
<PAGE>

SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
D/B/A DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Note 8.  Income Tax Matters (continued)

During the year ended December 31, 2003, the Company decreased the valuation
allowance by $416,100 on the deferred tax assets to increase the deferred tax
assets to an amount that management believes will ultimately be realized.
Realization of deferred tax assets is dependent upon sufficient future taxable
income during the period that deductible temporary differences and
carryforwards are expected to be available to reduce taxable income.

The components of income tax expense as of December 31 are as follows:

                                       2003            2002            2001
                                   -------------------------------------------
Current expense (benefit)          $   842,471     $  (261,399)    $  (133,767)
Deferred expense (benefit)            (945,300)        755,600        (394,000)
                                   -------------------------------------------
                                   $  (102,829)    $   494,201     $  (527,767)
                                   ===========================================

Total income tax expense differed from the amounts computed by applying the
U.S. federal income tax rate of 35 percent to income before income taxes as a
result of the following:
<TABLE>
<S>                                          <C>             <C>             <C>
                                                 2003            2002            2001
                                             -------------------------------------------
Computed "expected" tax expense (benefit)    $   308,617     $  (770,070)    $  (468,000)
Tax exempt interest                              (47,797)        (44,456)        (43,709)
Lobbying                                           8,107           6,297           7,188
Change in valuation allowance for deferred
  tax assets                                    (416,100)      1,273,300           9,000
Effect of tax rate brackets and other             44,344          29,130         (32,246)
                                             -------------------------------------------
                                             $  (102,829)    $   494,201     $  (527,767)
                                             ===========================================
</TABLE>

                                                                  F-16
<PAGE>

Note 9.  Capital Stock

The Class A voting preferred stock is not entitled to receive dividends or
other distributions, except for redemption by the Company.  In the event of a
liquidation, each share of Class A preferred stock would be given priority over
Class B and C stock and would be entitled to receive a preferential payment in
an amount up to (and not to exceed) its stated value of $10 per share.  The
Class A preferred stock is restricted to ownership by medical and osteopathic
physicians who have executed a participating physician agreement with the
Company and may not be issued to or held by a hospital.

The Class B voting preferred stock is restricted to ownership by the South
Dakota State Medical Association, an affiliated company, and is not entitled
to receive dividends.  In the event of a liquidation, each share of Class B
preferred stock would be given priority over Class C stock and would be
entitled to receive a preferential payment after all preferential payments
ave been made to the holders of Class A preferred stock, in an amount up to (
and not to exceed) its par value of $1 per share.

The Class C nonvoting common stock is not entitled to cumulative dividends and
has no preference in a liquidation.  The Class C common stock is restricted to
ownership by  the following persons or entities: (1) physicians entitled to
wnership of Class A stock, (2) a trust or self-directed individual retirement
account controlled by a physician entitled to ownership of Class A stock, (3)
a professional corporation, partnership or other entity domiciled in the State
of South Dakota and in which a physician entitled to ownership of Class A stock
is a shareholder, partner, or employee in the practice of medicine, (4)
management, employees or agents of the Company, the South Dakota State Medical
Association, or the South Dakota Foundation for Medical Care, or (5) the spouse
or children of such physician or other person set forth in (1) or (4) above.

To facilitate liquidity for Class C common stock (Common Stock) in the event of
death, disability, or retirement of a shareholder, the Company's Board of
Directors has a Stock Repurchase Program (Program).  Participation in the
Program is voluntary.  No shareholder is required to sell his or her shares of
Common Stock under the Program nor is the Company required to purchase any
Common Stock under the Program.  The purchase and sale of Common Stock under
the Program is subject to repurchase conditions as described in the Program.
The Board of Directors of the Company may, at any time, modify or terminate the
Program.  The Company may also, at its discretion, offer to repurchase shares
of Common Stock outside of the Program in compliance with applicable laws.
During 2001, 33,003 shares were acquired for the treasury under the Program.
No shares were acquired during 2003 or 2002.

Regulatory capital as required by the Division of Insurance at December 31,
2003 and 2002 was $200,000 on a statutory basis of accounting, which the
Company significantly exceeded.  As long as the Company exceeds required
regulatory capital, it is not restricted by the Division of Insurance in the
amount of dividends it may pay.

The Company is also subject to risk based capital (RBC) requirements
promulgated by the National Association of Insurance Commissioners (NAIC).
The RBC standards establish uniform minimum capital requirements for insurance
companies.  The RBC formula applies various weighting factors to financial
balances or various levels of activities based on the perceived degree of risk.

                                                  F-17
<PAGE>

SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
D/B/A DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Note 10.  Leases and Transactions With Affiliate

On January 1, 2002, the Company entered into a three year lease of office space
with the South Dakota State Medical Association, which requires minimum monthly
rentals of $18,982 and will automatically renew for successive two year terms
unless terminated with at least 30 days notice prior to the end of the lease
term.  On January 1, 2001, Carewest entered into a three year lease which
requires minimum monthly rentals of $1,500.  This lease was renewed on
January 1, 2004 and requires monthly payments of $1,500 ending December 31,
2004.  The total minimum rental commitment at December 31, 2003 under the
leases mentioned above is $227,784 which is due within the next twelve months.
The Company also has entered into other short-term lease agreements for which
the total rental commitment at December 31, 2003 was not significant.  Total
rental payments for the years ended December 31, 2003, 2002 and 2001 were
$254,562, $252,087 and $239,216, respectively.

The Company provides group health insurance coverage for employees of the South
Dakota State Medical Association.  Total premium income from the affiliate for
the years ended December 31, 2003, 2002 and 2001 was $108,750, $85,005 and
$66,086, respectively.

Note 11.  Retirement Plan and Deferred Compensation

The Company is included in a qualified money-purchase pension plan with the
South Dakota State Medical Association and the South Dakota Foundation for
Medical Care.  This multiple-employer plan covers employees who have attained
age 21, and have completed one year of service.  Contributions, which are
required under the plan, were an amount equal to 11.5% of the participants'
compensation for the twelve-month periods ending September 1, 2003, 2002 and
2001.  Retirement plan expense for the years ended December 31, 2003, 2002 and
2001 was $481,082, $386,588 and $374,633, respectively.

In connection with employment contracts between the Company and certain
officers, provision has been made for future compensation which is payable upon
the completion of the earlier of 25 years of service to the Company and related
organizations or attainment of the age of 65 or any earlier retirement age
specified by the Board of Directors by resolution.  At December 31, 2003 and
2002, $79,031 and $77,026, respectively, was accrued under these contracts.

Note 12.  Segment Information

The Company has three reportable segments:  Health Maintenance Organization
(HMO), Third Party Administration (TPA) and Reinsurance.  The HMO segment
consists of the operations of the Company.  The Company is a South Dakota
licensed HMO engaged in the development of comprehensive health care delivery
systems.  The TPA segment consists of the operations of DAS and Carewest, which
are TPA's of healthcare plans for independent employer companies.  The
reinsurance segment consists of the operations of DIL.  DIL's primary activity
is in providing reinsurance quota share excess medical stop loss coverage to
DAS' self funded customers.

The Company evaluates performance and allocates resources based on net income
determined under accounting principles generally accepted in the United States
of America.  The accounting policies of the reportable segments are the same
as those described in the summary of significant accounting policies.  The
Company allocates payroll costs incurred based on the activities of admitting
new enrollees and in adjudicating claims.  The HMO segment profit includes the
equity in earnings (loss) of the TPA and reinsurance segments.  Intersegment
revenues primarily relate to equipment rental charges which are based on the
depreciation on the underlying assets.

                                                 F-18
<PAGE>

SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
D/B/A DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Note 12.  Segment Information (continued)

The Company's reportable segments are derived from the operations of the
Company and subsidiaries that offer different products.  The reportable
segments are managed separately because they provide distinct services.

<TABLE>
<S>                                <C>            <C>             <C>             <C>
Year Ended December 31, 2003            HMO            TPA        Reinsurance       Totals
---------------------------------------------------------------------------------------------
Revenues from external customers   $87,020,204    $ 6,275,902     $ 1,440,326     $94,736,432
Intersegment revenues                        -        255,014               -         255,014
Investment income                      344,192          5,727           4,060         353,979
Depreciation expense                    63,743        192,490               -         256,233
Segment profit (loss)                  991,972        523,743        (739,246)        776,469
Equity in net (loss) of subsidiaries  (208,122)             -               -        (208,122)
Income taxes (benefit)                (327,429)       224,600               -        (102,829)
Segment assets                      25,010,783      1,861,418       1,035,884      27,908,085

Year Ended December 31, 2002            HMO            TPA        Reinsurance       Totals
---------------------------------------------------------------------------------------------
Revenues from external customers   $77,759,341    $ 5,553,709     $   496,205     $83,809,255
Intersegment revenues                        -        249,288               -         249,288
Investment income                      441,575          6,753           1,795         450,123
Depreciation expense                    83,350        212,694               -         296,044
Segment profit (loss)               (2,668,907)       171,596             492      (2,496,819)
Equity in net income of subsidiaries   197,582              -               -         197,582
Income taxes                           359,201        135,000               -         494,201
Segment assets                      20,199,597      1,510,867         692,004      22,402,468

Year Ended December 31, 2001            HMO            TPA        Reinsurance       Totals
---------------------------------------------------------------------------------------------
Revenues from external customers   $58,945,048    $ 4,388,962     $   410,350     $63,744,360
Intersegment revenues                        -        233,662               -         233,662
Investment income                      653,296         25,480           9,012         687,788
Depreciation expense                    76,212        211,757               -         287,969
Segment profit (loss)                 (717,610)      (421,426)        176,069        (962,967)
Equity in net (loss) of subsidiaries  (154,035)             -               -        (154,035)
Income tax (benefit)                  (478,400)       (49,367)              -        (527,767)
Segment assets                      18,915,606      1,286,102         622,372      20,824,080
</TABLE>

                                                              F-19
<PAGE>

SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
d/b/a DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
NOTE 12.  SEGMENT INFORMATION (CONTINUED)
<TABLE>
<S>                                             <C>               <C>            <C>
                                                      2003           2002           2001
                                                ---------------------------------------------
Revenues
Total external revenues for reportable segments $ 94,736,432      $ 83,809,255   $ 63,744,360
Intersegment revenues for reportable segments        255,014           249,289        233,662
Elimination of intersegment revenues                (255,014)         (249,289)      (233,662)
Elimination of net income/loss of subsidiaries       208,122          (197,582)       154,035
                                                ---------------------------------------------
    Total consolidated revenues                 $ 94,944,554      $ 83,611,673   $ 63,898,395
                                                =============================================

Income or Loss
Total income (loss) for reportable segments     $    776,469      $ (2,496,819)  $   (962,967)
Elimination of equity in net income/loss
  of subsidiaries                                    208,122           197,582       (154,035)
Minority interest in loss of subsidiaries              7,381           (25,494)       (91,322)
                                                ---------------------------------------------
    Total consolidated net income (loss)        $    991,972      $ (2,668,907)  $   (717,610)
                                                =============================================

Assets
Total assets for reportable segments            $ 27,908,085      $ 22,402,468   $ 20,824,080
Minority interest of subsidiary                          493                 -              -
Elimination of intercompany receivable              (447,582)         (174,793)      (234,696)
Elimination of investment in subsidiaries         (1,822,316)       (1,529,673)    (1,231,494)
                                                ---------------------------------------------
    Total consolidated assets                   $ 25,638,680      $ 20,698,002   $ 19,357,890
                                                =============================================
</TABLE>

Note 13.  Litigation

The Company is involved in legal actions in the ordinary course of its
business.  Although the outcome of any such legal actions cannot be predicted,
in the opinion of management, there is no legal proceeding pending against or
involving the Company for which the outcome is likely to have a material
adverse effect upon the consolidated financial position or results of
operations of the Company as of and for the year ended December 31, 2003.

During 1998, a substantial claim was filed against the Company in circuit court
which alleged wrongful nonrenewal of a sales agency contract and sought
compensatory and punitive damages.  The lawsuit was settled in 2001 and all
payables and expenses were fully recorded in the accompanying 2001 consolidated
financial statements.

                                                              F-20
<PAGE>

SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
D/B/A DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Note 14.  Quarterly Financial Information (Unaudited)
<TABLE>
<S>                                  <C>           <C>           <C>           <C>
Year ended December 31, 2003         1st Quarter   2nd Quarter   3rd Quarter   4th Quarter
------------------------------------------------------------------------------------------
Total revenues                       $22,687,170   $23,458,037   $24,124,797   $24,674,550
Claims incurred, net                  19,547,393    19,047,765    20,926,031    20,154,938(1)
Total operating expenses              23,315,642    22,909,365    24,330,614    23,507,171
Net income (loss)                       (524,591)      539,124      (202,030)    1,179,469

Income (loss) per share              $     (0.38)  $      0.39   $     (0.15)  $      0.86

Year ended December 31, 2002         1st Quarter   2nd Quarter   3rd Quarter   4th Quarter
------------------------------------------------------------------------------------------
Total revenues                       $19,823,740   $20,488,982   $21,148,502   $22,150,449
Claims incurred, net                  16,582,669    17,771,360    18,886,559    18,884,055(1)
Total operating expenses              20,128,624    21,180,246    22,352,378    22,150,625
Net (loss)                              (287,150)     (437,971)     (727,429)   (1,216,357)

(Loss) per share                     $     (0.21)  $     (0.32)  $     (0.53)  $     (0.89)

(1) Net of the write off of $2,123,755 in 2003 and $1,575,224 in 2002 of
contingency reserves payable (Notes 6 and 7).
</TABLE>







                                                                 F-21

<PAGE>

                                  EXHIBIT INDEX
                                  -------------

Exhibit No.       Description
- -----------       -----------
21                Subsidiaries of the Registrant

31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Senior Vice President Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.3 Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification of Senior Vice President Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.3 Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002



































<PAGE>


                                                      EXHIBIT 21







EXHIBIT 21. SUBSIDIARIES OF THE REGISTRANT

Name                                  Incorporation               % Owned
- ----                                -------------               -------

DAKOTACARE Administrative             South Dakota                  100%
  Services, Incorporated

DAKOTACARE Insurance, Ltd.            Cayman Islands                100%

Carewest, Inc.                        South Dakota                83.90%


<PAGE>


                                                            Exhibit 31.1
CERTIFICATIONS

I, L. Paul Jensen, certify that:
1.  I have reviewed this Annual Report on Form 10-K of South Dakota State
Medical Holding Company, Inc.;
2.  Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3.  Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4.  The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a)  Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b)  Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
c)  Disclosed in this report any changes in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5.  The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal controls over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):
a)  All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b)  Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.

/s/ L. Paul Jensen
L. Paul Jensen
Chief Executive Officer

Date:  April 14, 2004
<PAGE>

                                                             Exhibit 31.2
CERTIFICATIONS
I, Kirk J. Zimmer, certify that:
1.  I have reviewed this Annual Report on Form 10-K of South Dakota State
Medical Holding Company, Inc.;
2.  Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3.  Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4.  The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a)  Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b)  Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
c)  Disclosed in this report any changes in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5.  The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal controls over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):
a)  All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b)  Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.


/s/ Kirk J. Zimmer
Kirk J. Zimmer
Senior Vice President/COO

Date:  April 14, 2004

<PAGE>

                                                         Exhibit 31.3
CERTIFICATIONS
I, Bruce E. Hanson, certify that:
1.  I have reviewed this Annual Report on Form 10-K of South Dakota State
Medical Holding Company, Inc.;
2.  Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3.  Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4.  The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a)  Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b)  Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
c)  Disclosed in this report any changes in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5.  The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal controls over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):
a)  All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b)  Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.


/s/ Bruce E. Hanson
Bruce E. Hanson
Vice President Finance/CFO

Date:  April 14, 2004

<PAGE>

                                                        Exhibit 32.1



                                   CERTIFICATION PURSUANT TO
                                      18 U.S.C. Sec. 1350,
                                     AS ADOPTED PURSUANT TO
                             SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of South Dakota State Medical Holding
Company, Inc., dba DAKOTACARE #0000919176(the "Company") on Form 10-K for the
year ended December 31, 2003, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, L. Paul Jensen, Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to
the best of my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.



_/s/ L. Paul Jensen_____
Chief Executive Officer

April 14, 2004

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to
the Securities and Exchange Commission or its staff upon request.

<PAGE>

                                                        Exhibit 32.2



                                   CERTIFICATION PURSUANT TO
                                      18 U.S.C. Sec. 1350,
                                     AS ADOPTED PURSUANT TO
                             SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of South Dakota State Medical Holding
Company, Inc., dba DAKOTACARE #0000919176(the "Company") on Form 10-K for the
year ended December 31, 2003, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Kirk Zimmer, Senior Vice
President and COO of the Company, certify, pursuant to 18 U.S.C. Sec. 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
to the best of my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.



_/s/ Kirk J. Zimmer_____
Senior Vice President/COO

April 14, 2004

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to
the Securities and Exchange Commission or its staff upon request.













<PAGE>

















                                                        Exhibit 32.3



                                   CERTIFICATION PURSUANT TO
                                      18 U.S.C. Sec. 1350,
                                     AS ADOPTED PURSUANT TO
                             SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of South Dakota State Medical Holding
Company, Inc., dba DAKOTACARE #0000919176(the "Company") on Form 10-K for the
year ended December 31, 2003, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Bruce Hanson, Vice President
Finance and CFO of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to
the best of my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.



_/s/ Bruce E. Hanson____
Chief Finance Officer

April 14, 2004

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to
the Securities and Exchange Commission or its staff upon request.








<PAGE>