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, 2004

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 VOTING PREFERRED STOCK, PAR VALUE $10 PER SHARE
                                (Title of class)

        CLASS C NON-VOTING 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, 2005
     -----                                       -----------------------------
Class C Non-Voting Common Stock                           1,365,604

The aggregate market value of the voting and non-voting common equity 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 Registrant's definitive Proxy Statement for its 2005
Annual Meeting of stockholders are incorporated by reference into Item 11 of
Part III of this Annual Report on Form 10-K.


                                     PART I

ITEM 1. BUSINESS

South Dakota State Medical Holding Company, Incorporated, was incorporated in
the State of South Dakota on May 5, 1988. Reference to "we", "us", "our",
"Company",  "Corporation" or "DAKOTACARE" means South Dakota State Medical
Holding Company, Incorporated.  Its corporate offices are located at 1323 South
Minnesota Avenue, Sioux Falls, South Dakota, 57105. The Company's Amended and
Restate 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 prepare this Annual Report on Form 10-K
in plain, easy-to-understand English. The Business section (Item 1)attempts to
outline the scope of strategies currently employed by the Company.  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 this entire Form 10-K, as the principles of
the business are complicated, and involve risk and uncertainties.

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 Form 10-K 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 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. Ownership of the Class C Non-Voting Common Stock is
restricted by the Company's Amended and Restate Articles of Incorporation to
the following persons or entities: (a) medical and osteopathic physicians who
have executed participating physician agreements with the Company, (b) a trust
or self-directed individual retirement account controlled by such physician, (c)
a professional corporation, partnership or other entity domiciled in the State
of South Dakota and in which such 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, or the South Dakota
Foundation for Medical Care, Inc., or (e) the spouse or children of such
physician or other person set forth in (a) or (d) above.  In addition to such
restrictions, 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.  The Class C Non-Voting
Common Stock is not convertible into any other shares of capital stock of the
Company and is only transferable to those persons set forth in (a)-(e) above
and is a resident or domically of the State of South Dakota.




                                                            2





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.

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 2002 through 2004 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
Department of Commerce and Regulation, Division of Insurance (Division) approve
payouts, subject to a written agreement with the Division.  The recorded
liability at December 31, 2004 is equal to actual amounts withheld for the
years ended December 31, 2004 and 2003.  In 2004, the Company paid $3,020,127
of withheld contingency reserves from 2002, which was approved by the Division.
During 2003 and 2002, the Company's Board of Directors, with approval from the
Division, 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.

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
self-insured 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.  Carewest formally dissolved its operations in
December 2004 and the results of operations through December 2004 are included
in the consolidated financial statements.  DIL began the process of formal
dissolution, which is expected to be completed approximately December 2006.





                                                        3


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, including information regarding
revenues from external customers, income or loss, and total assets, is
contained in Note 12, segment information, to the Company's Consolidated
Financial Statements. 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, 2005,
DAKOTACARE and its subsidiaries provided health care services to approximately
107,700 individuals, which also includes medical coverage enrollment and
ancillary product enrollment for both the HMO and TPA segments.

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 37,000 at the end of 2003, decreased to approximately 30,000 by
the end of 2004 and also for January 1, 2005.  Commencing in 1993, the Company
began its TPA business.  January 1, 2005, the company had enrolled
for medical coverage approximately 56,200 enrollees, bringing the total
individuals served by the Company and its' subsidiaries medical coverage to
approximately 86,200. 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 21,500 members as of January 1, 2005,
bringing the total health care services enrollment to approximately 107,700.
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 $200,000,
$175,000, and $125,000 in 2004, 2003, and 2002, respectively, 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.


                                                              4




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 and Preferred Provider Organization, among others) 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 HMOs, 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.

REGULATIONS
The Company's HMO segment is regulated and operates under a license issued by
the Division. DAS is also registered as a third party administrator 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 each of December 31, 2004 and 2003, for which no
further action is required 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.







                                                          5

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:
                                                       2004              2003
                                                       ----              ----
 Certificates of deposit                               30.4%             24.8%
 Obligations of state and political subdivisions       40.8              54.5
 Obligations of U.S. Treasury, government
   agencies and corporations                           14.3               6.8
 Corporate bonds                                       14.5              13.9
                                                      -----             -----

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

The Company's investment portfolio, excluding cash and cash equivalents and
contracts with life insurance companies, totaled 7,231,237 and $6,039,329  as
of December 31, 2004 and 2003, respectively. Cash and cash equivalents totaling
$17,819,826 and $14,518,442 at December 31, 2004 and 2003, respectively, are
invested substantially in interest bearing accounts.

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.
                                                           6

EMPLOYEES
As of December 31, 2004, 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.

ITEM 2. PROPERTIES

The Company leases office space for its HMO and TPA segments in Sioux Falls, SD,
from the South Dakota State Medical Association (Association). See ITEM 13.

The Company obtained approval from the Division and agreed to lend
approximately $3,500,000 to the Association for the purpose of allowing the
Association to purchase the land and building that will house the main office of
the Company, the Association, and the South Dakota Foundation for Medical Care.
The loan will be secured by a real estate mortgage with repayment over 22.5
years at a rate of 4.5% annual interest.  As of December 31, 2004, no amounts
had been advanced to the Association.  Prior to the occupancy of the building,
the Company will negotiate lease terms with the Association.

The Company owns an office building in Webster, South Dakota, which is used
for its HMO and TPA segments. The Company leases office space for the TPA
segment in Rapid City, South Dakota.

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.

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

There were no matters submitted to a vote of the Company's stockholders in the
fourth quarter of 2004.

                                     PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

STOCK PRICES
There is no active trading market for any class of stock of the Company and no
class of stock is listed on an exchange or on the over-the-counter market.
A limited number of exchanges of shares of Class C Non-Voting Common Stock 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.
                                                        7
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 97,300 shares of the Company's Class C
Non-Voting stock are currently owned by the officers and directors of the
Company. The Company believes that 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, 2005, there were 1,523 holders of record of Class A Voting
Preferred Stock, 1 holder of Class B Voting Preferred Stock, and 694 holders of
record of Class C Non-Voting Common Stock. There are no options or warrants
outstanding.

DIVIDENDS
The holders of the Class A Voting Preferred Stock and the Class B Voting
Preferred Stock are not entitled to dividends. The Company is not required to
pay annual cumulative dividends to the holders of its Class C Non-Voting 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, 2004 and 2003 was $200,000 on a statutory basis of
accounting, which the Company significantly exceeded. No dividends were paid
in 2004 or 2003 and none were declared during 2004.

STOCK REPURCHASE PLAN
As a service to the Company's stockholders to facilitate liquidity for Class C
Non-Voting 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
2004 or 2003 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 Voting 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. Upon the termination of a
physician's participation agreement, his or her share of Class A Voting
Preferred Stock is canceled. During 2004, the Company issued a net increase of
99 shares of Class A Voting Preferred Stock to physicians who entered into
participation agreements with the Company. 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.

ISSUER PURCHASES OF EQUITY SECURITIES
The Company did not repurchase any shares of any class of its equity securities
during the fourth quarter of 2004.


                                                        8


ITEM 6. SELECTED FINANCIAL DATA

The following information for the Company is as of and for the years ended
December 31, 2004, 2003, 2002, 2001, and 2000(dollars in thousands, except per
share data):
<TABLE>
<S>                                         <C>      <C>      <C>      <C>      <C>
                                                     Years Ended December 31,
                                            -------------------------------------------
                                              2004     2003     2002     2001     2000
                                            -------  -------  -------  ------   -------
Income Statement Data:
  Net premiums                              $80,871  $87,307  $76,547  $57,993  $43,574
  Third party administration fees             5,446    5,753    5,034    4,075    3,372
  Investment income                             429      354      450      688      767
  Total revenues                             88,105   94,945   83,612   63,898   48,424
  Net claims incurred                        62,075   79,676   72,125   51,615   35,151
  Other operating expenses                   15,725   14,387   13,687   13,620   10,395
  Income (loss) before income taxes
         and minority interest               10,305      882   (2,200)  (1,337)   2,878
  Net income (loss)                           7,535      992   (2,669)    (718)   1,954
                                            =======  =======  =======  =======  =======
Earnings (loss) per common share            $  5.52  $  0.73  $ (1.95) $ (0.52) $  1.38
                                            =======  =======  =======  =======  =======
Dividends per common share                  $  0.00  $  0.00  $  0.00  $  0.05  $  0.05
                                            =======  =======  =======  =======  =======
Balance Sheet Data:
  Invested assets and cash                  $25,157  $20,653  $17,009  $15,273  $13,576
  Total assets                               29,511   25,639   20,698   19,358   17,704
  Reported and unreported
         claims payable                       9,651   12,854    9,906    8,238    5,831
  Contingency reserves payable                5,305    6,081    5,191    3,847    2,875
  Total liabilities                          19,026   22,688   18,737   14,736   11,796
  Stockholders' equity                       10,485    2,951    1,961    4,622    5,908
</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: 2004 1,365,604; 2003 1,365,604; 2002 1,365,604;
2001 1,379,258; 2000 1,412,869.


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

GENERAL
The following operating information are presented for DAKOTACARE's operation as
a HMO only and do not include the operations of its subsidiaries for the years
ended December 31, 2004, 2003, 2002, and 2001. The HMO results indicated below
are reported separately since it is the main component within the consolidated
statements.  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
HMO. 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,
                                               -----------------------------
                                                2004    2003    2002    2001
                                                ----    ----    ----    ----
   Loss ratio                                   76.6%   90.6%   94.3%   89.4%
   Expense ratio                                12.3    10.0    10.7    15.0
                                               -----   -----    ----    ----
     Combined ratio                             88.9%  100.6%  105.0%  104.4%
                                               =====   ======  ======  ======

                                                                   9
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 HMO 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, 2004 and December 31, 2003 and Comparison of Years
December 31, 2003 and December 31, 2002.

OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements.

CONTRACTUAL OBLIGATIONS
The Company does not have any contractual obligations, except for operation
lease obligations, which are described in Note 10 in the Company's Notes
to Consolidated Financial Statements.


REPORTED AND UNREPORTED CLAIMS PAYABLE

Activity in the liability for reported and unreported claims payable is
summarized as follows:
<TABLE>
<S>                                                 <C>       <C>       <C>       <C>
                                                            Years Ended December 31,
                                                     -----------------------------------
                                                      2004     2003     2002      2001
                                                     ------   ------    ------    ------
                                                            (dollars in thousands)

Balance at January 1                                $12,854  $ 9,906    $8,238    $5,831
                                                    -------   ------    ------    ------

Incurred related to:
 Current year                                        63,531   81,052    73,888    51,684
 Prior years                                         (1,456)     748      (188)      (69)
 Contingency reserve written off                         --   (2,124)   (1,575)       --
                                                    -------   ------    ------    ------
Total incurred                                       62,075   79,676    72,125    51,615
                                                    -------   ------    ------    ------

Paid related to:
 Current year                                        53,879   65,894    62,332    43,493
 Prior years                                         11,399   10,718     8,157     5,748
                                                    -------    -----    ------    ------

Total paid                                           65,278   76,612    70,489    49,241
                                                    -------   ------    ------    ------

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

Balance at December 31                              $ 9,651  $12,854    $9,906    $8,238
                                                    =======   ======    ======    ======
</TABLE>
The difference between the reserves reported in the accompanying tables, which
are presented in accordance with U.S. generally accepted accounting principles
(GAAP), and the statutory reserves reported to state regulatory authorities
was insignificant for all periods presented.
                                                            10

The following table presents the development of DAKOTACARE's consolidated
balance sheet reserves for reported and unreported claims payable from 1995
through 2004. 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,
                           -------------------------------------------------------------------
                           2004    2003   2002   2001   2000   1999   1998   1997   1996   1995
                           ----    ----   ----   ----   ----   ----   ----   ----   ----   ----
                                                         (dollars in thousands)
Reported and unreported
  claims payable        $ 9,651 $12,854 $9,906 $8,238 $5,831 $4,667 $4,410 $4,164 $3,188 $2,710
         Paid (cumulative) as of:
         End of Year                 --     --     --     --     --     --     --     --     --
         One Year Later          11,582 10,682  8,094  5,782  4,222  5,321  4,581  3,927  2,793
         Two Years Later             -- 10,521  8,130  5,768  4,191  4,891  4,581  3,927  2,793
         Three Years Later           --     --  8,108  5,768  4,185  4,880  4,581  3,927  2,793
         Four Years Later            --     --     --  5,768  4,185  4,856  4,603  3,927  2,793
         Five Years Later            --     --     --     --  4,185  4,856  4,603  3,927  2,793
         Six Years Later             --     --     --     --     --  4,856  4,603  3,927  2,793
         Seven Years Later           --     --     --     --     --     --  4,603  3,927  2,793
         Eight Years Later           --     --     --     --     --     --     --  3,927  2,793
         Nine Years Later            --     --     --     --     --     --     --     --  2,793
Liability reestimated as of:
         End of Year      9,651  12,854  9,906  8,238  5,831  4,667  4,410  4,164  3,188  2,710
         One Year Later          11,517 10,618  8,094  5,782  4,222  5,321  4,581  3,927  2,793
         Two Years Later             -- 10,521  8,130  5,768  4,191  4,891  4,581  3,927  2,793
         Three Years Later           --     --  8,108  5,768  4,185  4,880  4,581  3,927  2,793
         Four Years Later            --     --     --  5,768  4,185  4,856  4,603  3,927  2,793
         Five Years Later            --     --     --     --  4,185  4,856  4,603  3,927  2,793
         Six Years Later             --     --     --     --     --  4,856  4,603  3,927  2,793
         Seven Years Later           --     --     --     --     --     --  4,603  3,927  2,793
         Eight Years Later           --     --     --     --     --     --     --  3,927  2,793
         Nine Years Later            --     --     --     --     --     --     --     --  2,793
                          -----   -----  -----  -----  -----  -----  -----  -----  -----  -----

Redundancy (Deficiency)   $  -- $ 1,377 $ (615)$  130 $   63 $  482 $ (446)$ (439)$ (739)$ (83)
                          =====   =====  =====  =====  =====  =====  =====  =====  =====  =====
</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, 2004, 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.

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.
                                                                  11
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, 2004 is equal to actual amounts withheld for the
years ended December 31, 2004 and 2003.  In 2004, the Company paid $3,020,127
of withheld contingency reserves from 2002, which was approved by the Division
of Insurance.  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.

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, 2004, the Company recorded a
reduction to the valuation allowance of $692,200 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, 2004, 2003, and 2002.

COMPARISON OF YEARS DECEMBER 31, 2004 AND DECEMBER 31, 2003

GENERAL
The Company's net income increased $6,542,692 to $7,534,664 for the
year ended December 31, 2004, as compared to net income of $991,972 for the year
ended December 31, 2003.  This increase was primarily due to a decrease in
net claims expense of $17,601,093 and an increase in investment income of
$75,339.  These were partially offset by a decrease in net premium revenues of
$6,435,836, a decrease of third party administration fees of $306,995, a
decrease in other income of $171,652, an increase in administrative expenses
of $1,338,587, and an increase in income taxes of $2,874,529.

                                                                     12
REVENUES
Total revenues decreased $6,839,144, or 7.2%, for the year ended December 31,
2004, as compared to December 31, 2003.  Revenues from net premiums generated
by the HMO decreased $6,309,568. This decrease is attributable to a 19.3%
decrease in the number of enrollee months, but was partially offset by a 14.8%
increase in the net premium earned per enrollee for the year ended
December 31, 2004, as compared to December 31, 2003.  Revenues from the third
party administration fees decreased by $306,995 due to decreased enrollees and
pharmacy rebates per enrollee, but was partially offset by increased fees per
enrollee and stop-loss commissions.  Investment income increased $75,339 due
primarily to an increase in the amount of invested assets during the year, but
was partially offset by the decreased average rates earned on invested assets.
Other income decreased $171,652, primarily as a result of the decreased
enrollments overall.

OPERATING EXPENSES
Total operating expenses decreased $16,262,506, or 17.3%, for the year ended
December 31, 2004, as compared to December 31, 2003. The change was due
Primarily to a decrease in claims incurred, commission expense and state
insurance taxes.  These decreases were partially offset by increases in
personnel, professional fees, advertising and other general and administrative
expenses.

Net claims expense decreased by $17,601,093, or 22.1%, for the year ended
December 31, 2004, as compared to December 31, 2003.  The average claims paid
per enrollee decreased by 2.9% while the number of enrollee months decreased
by 19.3%. 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 2004, due to the
decrease in utilization, an effort to relax rate increases for new business
was implemented in underwriting.  The Company's goal is to continue to keep
pace with inflation, but to increase emphasis on retaining currently profitable
business and obtaining new profitable business.  Modest rate increases were
seen for January 1, 2005, with a small increase in enrollment for the HMO.  For
the short term, there has been an immediate and positive effect on enrollment
and pricing.    Commissions and state insurance taxes decreased due to the
decreased net premiums and the decreased third party administration fees as
the costs are directly related.  Personnel expenses increased $1,277,885, or
20.4%, in 2004 as compared to 2003.  This was due primarily to the year end
bonus paid employees and the related accruals of payroll taxes and retirement
contributions.  The total effect of this year end transaction approximated
$1,175,000.  Annual pay raises of about 5% were adjusted for employees in June,
but these increases were somewhat offset by the decrease in personnel when
compared to the prior year.  Professional fees increased $41,041, or 5.0% due
to additional costs of consulting and accounting fees needed due to increased
regulatory rules.  Advertising costs increased $86,909, or 19.0% for the year
ended December 31, 2004 as compared to December 31, 2003.  In 2003, about
$40,000 of the advertising spent was reimbursed from our pharmacy agreement to
co-op our advertising, which did not occur in 2004.  The remaining difference
was a budgeted amount to increase from 2003 and try to increase our exposure
publicly through advertising.  Other general and administrative expenses
increased $217,252, or 24.0% for the year ended December 31, 2004 as compared
to December 31, 2003.  Most of the increase was attributable to the increase in
insurance expense, which continues to increase for all types of coverages.  The
remainder of the increase was mostly an increase due to additional donations
made during 2004.

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 2004, the Company recorded an
income tax provision of $2,771,700, which represented 26.9% of income before
tax and minority interest.  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.
                                                                    13
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.

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 HMO 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.   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.
                                                                      14
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.


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 $835,311 to $4,491,812
for the year ended December 31, 2004, as compared to 2003.  Net cash provided
by operating activities increased from the prior year primarily due to
increases in net income, a decrease in receivables, and an increase in unearned
premiums and administration fees since December 31, 2003.  Items reducing the
cash provided by operating activities when compared to the prior year are a
decrease in reported and unreported claims payable, a decrease in contingency
reserves, a decrease in accounts payable and accrued expenses, an increase in
deferred income taxes and an increase in prepaid expenses and other assets.

Other uses of cash and cash equivalents were for the purchase of securities held
to maturity and certificates of deposit, and the purchase of property and
equipment.  This was somewhat offset by the maturities of securities held to
maturity and certificates of deposit. 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, 2004, the Company had certificates of deposit of $1,600,000 on
deposit with the Division to meet the deposit requirements of state insurance
laws.

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 2004, the Company paid $3,020,127 of
withheld contingency reserves from 2002, which was approved by the Division of
Insurance.  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 2004 and 2003 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, and pay out projected contingency reserves
payable.




                                                               15


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 employer groups 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, 2004 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.





















                                                           16



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

               CONSOLIDATED FINANCIAL STATEMENTS TABLE OF CONTENTS

                                                             Page
                                                             ----
Report of Independent Registered Public Accounting Firm      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, Senior Vice President
and Chief Operating Officer, Kirk Zimmer, and Vice President Finance 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 Form 10-K.
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.

ITEM 9B. OTHER INFORMATION

There were no Form 8K reports filed during the Fourth Quarter of 2004.


PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Name                               Age      Positions
- ----                             ---      ---------
Stephan D. Schroeder                54      President and Director

James A. Engelbrecht, M.D.          57      Secretary, Treasurer and Director

John Sternquist, M.D.               56      Vice President and Director

Thomas L. Krafka, M.D.              59      Director

John E. Rittmann, M.D.              67      Director

James R. Reynolds, M.D.             61      Director

Vance M. Thompson, M.D.             45      Director

Thomas L. Luzier, M.D.              57      Director

Bob L. Sutton                       36      Director

R. Van Johnson                      60      Director
                                                                   17
L. Paul Jensen                      56      Chief Executive Officer

Kirk J. Zimmer                      44      Senior Vice President and Chief
                                              Operating Officer

William O. Rossing, M.D.            70      Vice President, Medical Director

Sharon K. Duncan                    57      Vice President, System Operations

Dean M. Krogman                     55      Vice President, External Operations

Barbara A. Smith                    43      Vice President, Medical Services

Thomas N. Nicholson                 45      Vice President, Sales and Marketing

Bruce E. Hanson                     41      Vice President Finance and Chief
                                              Financial Officer

Brian E. Meyer                      42      Vice President, Information Systems

Scott L. Jamison                    47      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. 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. 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
the South Dakota State Medical Association and has been engaged in practice
as a family practitioner in Watertown, South Dakota, since 1973.

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
practice of cardiac surgery, thoracic surgery, and vascular surgery in
Sioux Falls, South Dakota 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.

Dr. Luzier became a director of the Company in June 2004.  He is a member of
the South Dakota State Medical Association and has been engaged in the practice
of Allergy/Immunology in Aberdeen, South Dakota, since 1986.

Mr. Sutton became a director of the Company in September 1999.  He is the
Executive Vice President of the South Dakota Bankers Association, a position
he took in 1998, 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 was the Executive Vice President of the South Dakota Automobile
Dealers Association, and the Executive Director of the South Dakota Trucking
Association until 2000.
                                                         18
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.  Previously, Mr. Jensen served 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 and the Chief Operating Officer in 2003. 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 also serves in this
capacity for 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.

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 as the Chief Financial Officer
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 previously employed by a clinic in Sioux Falls,
South Dakota as the clinic manager.

Pursuant to the Company's Amended and Restated 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 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 terms of Dr. John Rittman, Dr. Thomas Luzier, Dr. Thomas
Krafka and Dr. Stephan Schroeder expire at the 2007 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.

                                                         19



The Amended and Restated 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 Amended and Restate 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 during the year ended December 31, 2004, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were timely complied with.

AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT

The audit committee of the Company's Board of Directors consists of Dr.
Engelbrecht, Dr. Schroeder and Mr. Sutton since June 2004.  The Board of
Directors has not yet determined that any of those persons is an audit
committee financial expert, as that term is defined.  The Company's
efforts to find a qualified financial expert willing to commit their
time for the Board of Directors, has proven unsuccessful to this point.
Efforts will continue in the future.


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 of Directors at this time.


ITEM 11.  EXECUTIVE COMPENSATION

Information concerning executive compensation is incorporated herein by
reference from the definitive Proxy Statement for the 2005 Annual Meeting
of Stockholders to be held in June 2005.

                                                          20









ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The following table sets forth information, as of March 18, 2005, 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 2005, 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     Thomas L. Luzier                      1          .07%
Class C Common                                          1,960          .14%

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                          --           --

Class C Common        L. Paul Jensen(2)                 5,760          .42%
                      1323 South Minnesota Avenue
                      Sioux Falls, SD 57105

                                                             21



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS (cont.)
                                                   Amount & Nature
 Title                Name and Address of           of Beneficial    Percent
of Class               Beneficial Owner               Ownership      of Class
----------------------------------------------------------------------------
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          .53%
                      Officers as a Group
Class C Common        (14 people)                      97,300         7.13%

- --------------
(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

On January 1, 2002, the Company entered into a lease of office space
with the South Dakota State Medical Association, which requires minimum monthly
rentals of $18,982.  The agreement was renewed and payments are being made on a
month to month basis.  On January 1, 2001, Carewest entered into a three year
lease which required minimum monthly rentals of $1,500.  This lease was renewed
on January 1, 2004 and required monthly payments of $1,500 ending
December 31, 2004.  The Company also has entered into other short-term lease
agreements for which the total rental commitment at December 31, 2004 was not
significant.  Total rental payments for the years ended December 31, 2004, 2003
and 2002 were $253,662, $254,562 and $252,087, respectively.

The Company obtained approval from the Division and agreed to lend approximately
$3,500,000 to the Association for the purpose of allowing the Association to
purchase the land and building that will house the main office of the Company,
the Association, and the South Dakota Foundation for Medical Care.  The loan
will be secured by a real estate mortgage with repayment over 22.5 years at a
rate of 4.5% annual interest.  As of December 31, 2004, no amounts had been
advanced to the Association.  Prior to the occupancy of the building, the
Company will negotiate lease terms with the Association.

The Company provides group health insurance coverage for employees of the
Association.  Total premium income from the affiliate for each of the years
ended December 31, 2004, 2003 and 2002 was $114,898, $108,750 and $85,005,
respectively.

L. Paul Jensen received salaries and retirement contributions totaling $108,080,
$104,074, and 99,280, respectively, from the Association for the years ended
2004, 2003 and 2002.



                                                              22






ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
During the period covering the years ended December 31, 2004 and 2003, McGladrey
& Pullen, LLP and RSM McGladrey, Inc. performed the following professional
services:
                                                      2004           2003
                                                    -------        -------
Audit Fees (1)                                      $73,000        $65,500
Audit-related Fees (2)                                  300          1,200
Tax Fees (3)                                         11,000          5,500
All other fees (4)                                    5,000          1,200

 (1)Audit fees consist of fees for the audit of the Company's annual
consolidated financial statements and statutory financial statements, review
of unaudited 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 2004 consist of fees related to an agreed upon procdures
engagement performed for the Company.  All other fees for 2003 consist of fees
for consultations related to financing alternatives for the Company.


The Audit Committee's current practice on pre-approval of services performed by
the independent registered public accounting firm 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 2004 were pre-approved in accordance
with the Audit Committee's pre-approval policies.















                                                               23















PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:


FINANCIAL STATEMENTS                                        Page
                                                            ----

Report of Independent Registered Public Accounting Firm     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


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 and Chief Operating Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3 Certification of Vice President Finance and 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 and Chief Operating Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.3 Certification of Vice President Finance and Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


                                                          24
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   03/30/2005
   ----------------------------------             --------------------
     L. Paul Jensen
     Chief Executive Officer
     (Principal Executive Officer)


By /s/Kirk J. Zimmer                        Dated   03/30/2005
   ----------------------------------             --------------------
     Kirk J. Zimmer
     Senior Vice President and Chief Operating Officer
     (Principal Financial Officer)


By /s/Bruce E. Hanson                       Dated   03/30/2005
   ----------------------------------             --------------------
     Bruce E. Hanson
     Vice President Finance and Chief Financial Officer
     (Principal Financial Officer)


By /s/ Stephan D. Schroeder                 Dated   03/30/2005
   ----------------------------------             --------------------
     Stephan D. Schroeder, M.D.
     President and Director


By /s/James Engelbrecht                     Dated   03/30/2005
   ----------------------------------             --------------------
     James Engelbrecht, M.D.
     Secretary/Treasurer and Director


By /s/ John Sternquist                      Dated   03/30/2005
   ----------------------------------             --------------------
     John Sternquist, M.D.
     Vice President and Director


By /s/Thomas L. Luzier, M.D.                Dated   03/30/2005
   ----------------------------------             --------------------
     Thomas L. Luzier, M.D.
     Director


By /s/Thomas L. Krafka                      Dated   03/30/2005
   ----------------------------------             --------------------
     Thomas L. Krafka, M.D.
     Director




                                                      25



By /s/James R. Reynolds                     Dated   03/30/2005
   ----------------------------------             --------------------
     James R. Reynolds, M.D.
     Director



By /s/John Rittmann                         Dated   03/30/2005
   ----------------------------------             --------------------
     John Rittmann, M.D.
     Director


By /s/Vance Thompson                        Dated   03/30/2005
   ----------------------------------             --------------------
     Vance Thompson, M.D.
     Director


By /s/ Bob Sutton                           Dated   03/30/2005
   ----------------------------------             --------------------
     Bob Sutton
     Director


By /s/Van Johnson                           Dated   03/30/2005
   ----------------------------------             --------------------
     Van Johnson
     Director





























                                                        26







Report of Independent Registered Public Accounting Firm


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, 2004 and 2003, and the related consolidated  statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 2004.  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 the standards of the Public Company
Accounting Oversight Board (United States). 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, 2004 and 2003, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2004, in
conformity with U.S. generally accepted accounting principles.


Sioux Falls, South Dakota
February 22, 2005






















                                            F-1









South Dakota State Medical Holding Company, Incorporated
d/b/a DAKOTACARE
Consolidated Balance Sheets
December 31, 2004 and 2003
<TABLE>
<S>                                                <C>              <C>
Assets                                                 2004             2003
--------------------------------------------------------------------------------
Current Assets
  Cash and cash equivalents (Note 1)               $17,819,826      $14,518,442
  Investment in securities held to maturity
   (Note 5)                                            408,803          409,138
  Certificates of deposit                            1,600,000        1,400,000
  Receivables (Note 3)                               1,395,187        2,490,688
  Prepaid expenses and other assets                    175,000           75,500
  Deferred income taxes (Note 8)                     1,291,600          344,200
                                                   ----------------------------
    Total current assets                            22,690,416       19,237,968
                                                   ----------------------------




Long-Term Investments
  Investment in securities held to maturity
   (Note 5)                                          4,468,534        3,981,591
  Investment in securities available for sale
   (Note 5)                                            153,900          148,600
  Certificates of deposit                              600,000          100,000
  Contracts with life insurance companies              106,175           96,668
                                                   ----------------------------
                                                     5,328,609        4,326,859
                                                   ----------------------------




Property and Equipment, at cost,
  net of accumulated depreciation                      470,699          581,353
                                                   ----------------------------




Deferred Income Taxes (Note 8)                       1,021,400        1,492,500
                                                   ----------------------------
                                                   $29,511,124      $25,638,680
                                                   ============================
</TABLE>
See Notes to Consolidated Financial Statements.











                                                F-2






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

Liabilities and Stockholders' Equity                   2004             2003
-------------------------------------------------------------------------------

Current Liabilities
  Reported and unreported claims payable (Note 7)  $ 9,651,340      $12,854,487
  Unearned premiums and administration fees          2,780,976        2,275,579
  Accounts payable and accrued expenses              1,288,828        1,477,274
  Contingency reserves payable (Note 6)              2,891,167                -
                                                   ----------------------------
     Total current liabilities                      16,612,311       16,607,340
                                                   ----------------------------
Contingency Reserves Payable (Note 6)                2,413,523        6,080,812
                                                   ----------------------------

Commitments and Contingencies (Notes 4, 10 and 13)

Stockholders' Equity (Note 9)
  Class A preferred, voting, no par value, $10
    stated value, 2,500 shares authorized;
    1,523 and 1,424 shares issued and outstanding
    at December 31, 2004 and 2003; liquidation
    preference of outstanding shares of $15,230
    and $14,240 at December 31, 2004 and 2003,
    respectively                                        15,230           14,240
  Class B preferred, voting, no par value,
    $1 stated value, 2,500 shares authorized;
    1,800 shares issued and outstanding; liquidation
    preference of outstanding shares of $1,800           1,800            1,800
  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                                  8,031,148          496,484
  Accumulated other comprehensive income                 1,891            2,783
  Less cost of Class C common treasury stock,
    140,156 shares                                  (1,329,179)      (1,329,179)
                                                   ----------------------------
                                                    10,485,290        2,950,528
                                                   ----------------------------
                                                   $29,511,124      $25,638,680
                                                   ============================

</TABLE>






                                                F-3















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

Consolidated Statements of Operations
Years Ended December 31, 2004, 2003 and 2002
<TABLE>
<S>                                     <C>           <C>           <C>
                                            2004          2003          2002
Revenues:
  Premiums                              $81,495,819   $88,015,822   $77,438,834
  Less premiums ceded for reinsurance      (625,065)     (709,232)     (892,324)
                                        ---------------------------------------
                                         80,870,754    87,306,590    76,546,510
  Third party administration fees         5,445,667     5,752,662     5,033,670
  Investment income                         429,318       353,979       450,123
  Other income                            1,359,671     1,531,323     1,581,370
                                        ---------------------------------------
Total revenues                           88,105,410    94,944,554    83,611,673
                                        ---------------------------------------

Operating expenses:
  Claims incurred                        62,551,339    80,052,316    72,512,508
  Less reinsurance recoveries              (476,305)     (376,189)     (387,865)
                                        ---------------------------------------
                                         62,075,034    79,676,127    72,124,643
  Personnel expenses                      7,529,268     6,251,383     5,804,555
  Commissions                             3,007,016     3,195,769     2,911,295
  Professional fees expenses                867,003       825,962       858,814
  Office expenses                           903,317       887,645       982,407
  Occupancy expenses                        782,521       778,948       802,962
  State insurance taxes                     969,877     1,084,869       997,159
  Advertising expenses                      543,946       457,037       534,303
  Other general and administrative
    expenses                              1,122,304       905,052       795,735
                                        ---------------------------------------
        Total operating expenses         77,800,286    94,062,792    85,811,873
                                        ---------------------------------------
        Income (loss) before income
          taxes and minority interest    10,305,124       881,762    (2,200,200)
Income taxes (benefit) (Note 8)           2,771,700      (102,829)      494,201
                                        ---------------------------------------
        Income (loss) before minority
          interest                        7,533,424       984,591    (2,694,401)
Minority interest in loss of subsidiary       1,240         7,381        25,494
                                        ---------------------------------------
        Net income (loss)               $ 7,534,664       991,972   $(2,668,907)
                                        =======================================

Earnings (loss) per common share        $      5.52   $      0.73   $     (1.95)
</TABLE>
See Notes to Consolidated Financial Statements.








                                                        F-4







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

Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2004, 2003 and 2002
<TABLE>
<S>                                          <C>               <C>                <C>
                                                               Class A            Class B
                                             Comprehensive     Preferred          Preferred
                                              Income(Loss)       Stock            Stock
- ---------------------------------------------------------------------------------------

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
   Issuance of Class A preferred stock                            1,010                 -
   Redemption of Class A preferred stock                            (20)                -
   Comprehensive income:
      Net income                             $ 7,534,664              -                 -
      Net change in unrealized gain/loss
        on securities available for sale            (892)             -                 -
                                              -----------
      Comprehensive income                   $ 7,533,772
                                             --------------------------------------------
Balance, December 31, 2004                                       15,230             1,800
                                            =============================================

</TABLE>











                                                        F-5







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


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

              $  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

                      -           -              -          -             -         1,010
                      -           -              -          -             -           (20)

                      -           -      7,534,664          -             -     7,534,664

                      -           -              -       (892)            -          (892)

------------------------------------------------------------------------------------------
              $  15,058  $3,749,342    $ 8,031,148  $   1,891   $(1,329,179)  $10,485,290
==========================================================================================


</TABLE>










                                                     F-5 (cont)













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

Consolidated Statements of Cash Flows
Years Ended December 31, 2004, 2003 and 2002
<TABLE>
<S>                                              <C>             <C>             <C>
                                                     2004            2003            2002
--------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
  Net income (loss)                              $ 7,534,664     $   991,972     $(2,668,907)
  Adjustments to reconcile net income (loss)
    to net cash provided by operating activities:
    Depreciation                                     204,285         256,233         296,044
    Minority interest in (loss) of
      subsidiaries                                    (1,240)         (7,381)        (25,494)
    Amortization of discounts and premiums
      on investments, net                           (106,608)       (127,083)       (143,617)
    Loss on disposal of equipment                      3,328           1,771           6,439
    (Increase) decrease in receivables             1,095,501        (445,597)       (500,104)
    (Increase) decrease in prepaid expenses
      and other assets                               (99,500)        (25,502)         85,543
    (Increase) decrease in deferred income taxes    (476,300)       (945,300)        755,600
    Increase (decrease) in reported and
      unreported claims payable                   (3,203,147)      2,948,104       1,668,022
    Increase (decrease) in unearned premiums
      administration fees                            505,397         (40,166)      1,139,874
    Increase (decrease) in accounts payable and
      accrued expenses                              (188,446)        159,196        (141,185)
    Increase (decrease) in contingency
      reserves payable                              (776,122)        890,254       1,343,847
                                                 -------------------------------------------
      Net cash provided by operating activities    4,491,812       3,656,501       1,816,062
                                                 -------------------------------------------

Cash Flows From Investing Activities
  Available for sale securities:
    Purchased                                        (6,192)          (5,346)         (6,647)
  Held to maturity securities:
    Purchased                                      (800,000)               -        (957,863)
    Matured or called                               420,000          462,000       1,350,000
  Proceeds from maturities of certificates
    of deposit                                    1,500,000        1,400,000       1,400,000
  Purchases of certificates of deposit           (2,200,000)      (1,400,000)     (1,500,000)
  (Increase) in contracts with life
    insurance companies                             (10,000)          (2,643)         (1,195)
  Proceeds from the sale of property
    and equipment                                     5,812                -             200
  Purchase of property and equipment               (102,771)        (136,736)       (248,432)
                                                 -------------------------------------------
      Net cash provided by (used in)
       investing activities                      (1,193,151)         317,275          36,063
                                                 -------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.






                                                                     F-6



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


                                                     2004            2003            2002
---------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
  Proceeds from issuance of capital stock        $     1,010     $     1,670     $     1,060
  Redemption of capital stock                            (20)           (430)           (160)
  Increase in minority investment
    in subsidiary                                      1,733             212          16,402
                                                 --------------------------------------------
      Net cash provided by financing activities        2,723           1,452          17,302
                                                 --------------------------------------------
      Increase in cash and cash equivalents        3,301,384       3,975,228       1,869,427

Cash and Cash Equivalents
  Beginning                                       14,518,442      10,543,214       8,673,787
                                                 --------------------------------------------
  Ending                                         $17,819,826     $14,518,442     $10,543,214
                                                 ============================================

Supplemental Disclosures of Cash Flow Information
  Cash payments for:
    Income taxes, net of (refunds)               $ 3,520,000     $   (95,629)    $   (81,799)

Supplemental Disclosures of Noncash Investing
  and Financing Activities
    Change in unrealized gain/loss
      on securities available for sale           $      (892)    $    (3,246)    $     6,653


</TABLE>

















                                                                 F-7


















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.  Carewest was formally dissolved in December 2004,
but the activity from operations through December 2004 is included in the
consolidated financial statements.  Most of the self-funded customers of
Carewest transferred to DAS.  The Company has also submitted its request to the
South Dakota Department of Commerce and Regulation, Division of Insurance
(Division of Insurance) to dissolve DIL.  The Division of Insurance approved
the Company's request on November 18, 2004.  DIL is therefore not renewing
customer policies upon their expiration.  Typically, the claim run out time
from each policy is approximately 18 months, with the actual date of DIL's
dissolution dependent on the actual run out of claims from the policies.

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:  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.




                                            F-8



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)

Cash and cash equivalents (continued):  The Company has reverse repurchase
agreements in place with two banks, which totaled approximately $12,700,000
at December 31, 2004.  In accordance with the terms of the reverse 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, 2004, approximately $5,500,000 of reverse repurchase agreements
were held with First Premier Bank, which had a weighted average maturity of
December 2014 and approximately $7,200,000 of reverse repurchase agreements
were held with The First National Bank in Sioux Falls, which had a weighted
average maturity of March 2011.

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
securities 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.






                                                        F-9






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)

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:
                                               2004                2003
                                           -------------------------------
Furniture, equipment and automobiles       $ 2,611,488         $ 2,604,350
Building and building improvements              53,370              53,370
Other                                          198,656             141,728
                                           -------------------------------
                                             2,863,514           2,799,448
Less accumulated depreciation                2,392,815           2,218,095
                                           -------------------------------
                                           $   470,699         $   581,353
                                           ===============================
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 2004, 2003 and
2002.  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, 2004 year
end.  The Company's financial statements are not expected to be materially
affected by those accounting pronouncements.
                                               F-10
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, 2004, the carrying amount and fair
value of the Company's investment securities was $5,031,237 and $5,220,524,
respectively.  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.

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, 2004 and 2003:


                                               2004                2003
                                           -------------------------------
Drug manufacturer chargebacks              $   540,446         $   662,376
Third party administrator receivables           86,567             461,780
Funds withheld by ceding insurer               311,034             409,250
Coordination of benefits recoverable            18,000             192,000
Subrogation, net of recovery expenses          155,000             160,000
Commissions                                     69,374             159,264
Premiums                                        40,843              70,598
Interest                                        62,194              45,834
Other                                          111,729             329,586
                                           -------------------------------
                                             1,395,187           2,490,688
Less allowance for doubtful accounts                 -                   -
                                           -------------------------------
                                           $ 1,395,187         $ 2,490,688
                                           ===============================










                                                      F-11











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 $200,000,
$175,000 and $125,000 in 2004, 2003 and 2002, respectively, 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, 2004 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 and
    government agencies                $1,036,567      $   16,848   $  (9,770)    $1,043,645
  Obligations of state and political
    Subdivisions                        2,948,127         100,554           -      3,048,681
  Corporate bonds                         892,643          82,505        (850)       974,298
                                       -----------------------------------------------------
                                       $4,877,337      $  199,907   $ (10,620)    $5,066,624
                                       =====================================================

Equity securities available for sale:
  Bond mutual fund                     $  152,009      $    1,891   $       -     $  153,900
                                       =====================================================
</TABLE>

All gross unrealized losses are less than 12 months in accordance with Emerging
Issues Task Force Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment
and its Application to Certain Investments.  Management does not believe any
individual unrealized loss as of December 31, 2004 represents an
other-than-temporary impairment.  The unrealized losses reported for U.S.
treasury and government agencies relate to securities issued by FNMA and FHLMC.
These losses are primarily attributable to changes in interest rates and as a
group were less than 2% of its respective amortized cost basis.  The Company has
the ability to hold the securities to maturity for the time necessary to recover
the amortized cost.











                                                       F-12




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


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, 2004
                                            ------------------------------
                                              Amortized
                                                 Cost           Fair Value
                                             -----------------------------
Due in one year                              $  408,803         $  416,816
Due after one year through five years         1,768,677          1,900,491
Due after five years through ten years        1,624,852          1,672,264
Due after ten years                           1,075,005          1,077,053
                                             -----------------------------
                                             $4,877,337         $5,066,624
                                             =============================

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 and
    government agencies                $  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>







                                                       F-13













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

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,
                                           2004            2003            2002
                                        ---------------------------------------
Unrealized holding gain (loss) arising
  during the period                     $  (892)        $(3,246)        $ 6,653
Add reclassification adjustment for net
  losses realized in net income               -               -               -
                                        ---------------------------------------
     Net change in unrealized gain/loss
     before income taxes                   (892)         (3,246)          6,653
Income taxes                                  -               -               -
                                        ---------------------------------------
     Other comprehensive income - net
     change in unrealized gain/loss on
     securities available for sale      $  (892)        $(3,246)        $ 6,653
                                        =======================================

There were no sales of debt or equity securities during each of the three years
in the period ended December 31, 2004, and accordingly, no reclassification
adjustments on investment securities for those years.

As of December 31, 2004 and 2003, the Company had certificates of deposit of
$1,600,000 and $1,300,000, respectively, on deposit with the Division of
Insurance, to meet the deposit requirement of state insurance laws

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 2002 through 2004 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, 2004 is equal to
actual amounts withheld for the years ended December 31, 2004 and 2003.  In
2004, the Company paid $3,020,127 of withheld contingency reserves from 2002,
which was approved by the Division of Insurance.  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.


                                                                     F-14



SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
D/B/A DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
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>
                                                 2004            2003            2002
                                             -------------------------------------------
Balance at January 1                         $12,854,487       9,906,383     $ 8,238,361
                                             -------------------------------------------

Incurred related to:
  Current year                                63,530,786      81,051,988      73,887,831
  Prior years                                 (1,455,752)        747,894        (187,964)
  Contingency reserves written off                     -      (2,123,755)     (1,575,224)
                                             -------------------------------------------
Total incurred                                62,075,034      79,676,127      72,124,643
                                             -------------------------------------------

Paid related to:
  Current year                                53,879,446      65,893,965      62,331,756
  Prior years                                 11,398,735      10,717,688       8,157,147
                                             -------------------------------------------
Total paid                                    65,278,181      76,611,653      70,488,903
                                             -------------------------------------------

Less reinsurance recoverables at January 1             -        (116,370)        (84,088)
Plus reinsurance recoverables at December 31           -               -         116,370
                                              ------------------------------------------
Balance at December 31                       $ 9,651,340     $12,854,487     $ 9,906,383
                                             ===========================================
</TABLE>
Reserves for incurred claims and claim adjustment expenses attributable to
insured events of prior years decreased by $1,455,752 and $187,964 in 2004
and 2002, respectively, and increased by $747,894 in 2003 as a result of
reestimation of unpaid claims and claim adjustment expenses and decreased by
$2,123,755 in 2003 and $1,575,224 in 2002 as a result of the write off of
contingency reserves (Note 6).  These changes are generally the result of
ongoing analysis of recent loss development trends.  Original estimates are
increased or decreased as additional information becomes known regarding
individual claims.











                                                        F-15










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:

                                               2004                2003
                                           -------------------------------
Deferred tax assets:
  Contingency reserves payable             $ 1,803,600         $ 2,067,500
  Reported and unreported claims payable        76,300             110,800
  Unearned premiums                            188,500             154,000
  Accrued expenses and other                   224,500             158,100
  Net operating loss carryforwards
    of subsidiaries                            437,600             405,500
                                           -------------------------------
                                             2,730,500           2,895,900
  Less valuation allowance                     322,000           1,014,200
                                           -------------------------------
                                             2,408,500           1,881,700
                                           -------------------------------

Deferred tax liability:
  Property and equipment and other             (95,500)            (45,000)
                                           -------------------------------
                                           $ 2,313,000         $ 1,836,700
                                           ===============================

Reflected on the accompanying balance sheets as follows:

                                               2004                2003
                                           -------------------------------
Current assets                              $ 1,291,600        $   344,200
Noncurrent assets                             1,021,400          1,492,500
                                           -------------------------------
                                            $ 2,313,000        $ 1,836,700
                                            ==============================















                                                                  F-16


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, 2004, the Company decreased the valuation
allowance 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:

                                       2004            2003            2002
                                   -------------------------------------------
Current expense (benefit)          $ 3,248,000     $   842,471     $  (261,399)
Deferred expense (benefit)            (476,300)       (945,300)        755,600
                                   -------------------------------------------
                                   $ 2,771,700     $  (102,829)    $   494,201
                                   ===========================================

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>
                                                 2004            2003            2002
                                             -------------------------------------------
Computed "expected" tax expense (benefit)    $ 3,606,793     $   308,617     $  (770,070)
Tax exempt interest                              (47,284)        (47,797)        (44,456)
Lobbying                                           6,981           8,107           6,297
Change in valuation allowance for deferred
  tax assets                                    (692,200)       (416,100)      1,273,300
Effect of tax rate brackets and other           (102,590)         44,344          29,130
                                             -------------------------------------------
                                             $ 2,771,700     $  (102,829)    $   494,201
                                             ===========================================

</TABLE>













                                                  F-17












SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
D/B/A DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
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 have 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
ownership 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.  No
shares were acquired during 2004, 2003 or 2002.

Regulatory capital as required by the Division of Insurance at December 31, 2004
and 2003 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.
As of December 31, 2004, the Company's stockholders' equity exceeded the
minimum levels required by the RBC standards.



                                                F-18


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 required minimum monthly
rentals of $18,982.  The agreement was renewed and payments are being made on a
month to month basis.  On January 1, 2001, Carewest entered into a three year
lease which required 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 Company also has entered into other short-term lease
agreements for which the total rental commitment at December 31, 2004 was not
significant.  Total rental payments for the years ended December 31, 2004, 2003
and 2002 were $253,662, $254,562 and $252,087, respectively.

The Company obtained approval from the Division of Insurance and agreed to lend
approximately $3,500,000 to the South Dakota State Medical Association for the
purpose of allowing the South Dakota State Medical Association to purchase land
and a building that will house the main office of the Company, the South Dakota
State Medical Association, and the South Dakota Foundation for Medical Care.
The loan will be secured by a real estate mortgage with repayment over 22.5
years at a rate of 4.5% annual interest.  As of December 31, 2004, no amounts
had been advanced to the South Dakota State Medical Association.  Prior to the
occupancy of the building, the Company will negotiate lease terms with the
South Dakota State Medical Association.

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, 2004, 2003 and 2002 was $114,898, $108,750 and
$85,005, respectively.

Note 11.  Retirement Plan and 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, 2004, 2003 and
2002.  Retirement plan expense for the years ended December 31, 2004, 2003
and 2002 was $569,970, $481,082 and $386,588, respectively.

In connection with employment contracts between the Company and certain officers
and others, 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, 2004
and 2003, $106,175 and $96,175, respectively, was accrued under these contracts.

During 2004, the Company paid discretionary bonuses to its employees.  Such
amounts were charged to personnel expenses and were $972,651.

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.
                                                              F-19
SOUTH DAKOTA STATE MEDICAL HOLDING COMPANY, INCORPORATED
d/b/a DAKOTACARE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Note 12.  Segment Information (continued)

The Company evaluates performance and allocates resources based on net income
determined under U.S. generally accepted accounting principles.  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.

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, 2004            HMO            TPA        Reinsurance       Totals
---------------------------------------------------------------------------------------------
Revenues from external customers   $80,960,603    $ 5,900,048     $ 1,315,803     $88,176,454
Intersegment revenues                        -        223,563               -         223,563
Investment income                      415,177          8,331           5,810         429,318
Depreciation expense                    42,741        161,544               -         204,285
Segment profit (loss)                7,534,664        180,453        (110,649)      7,604,468
Equity in net income of subsidiaries    71,044              -               -          71,044
Income taxes                         2,673,200         98,500               -       2,771,700
Segment assets                      29,025,832      2,086,590         578,675      31,691,097

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

</TABLE>






                                                              F-20





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>
                                                      2004        2003           2002
                                                ------------------------------------------
Revenues
Total external revenues for reportable segments $ 88,176,454   $ 94,736,432   $ 83,809,255
Intersegment revenues for reportable segments        223,563        255,014        249,289
Elimination of intersegment revenues                (223,563)      (255,014)      (249,289)
Elimination of net (income) loss of subsidiaries     (71,044)       208,122       (197,582)
                                                ------------------------------------------
    Total consolidated revenues                 $ 88,105,410   $ 94,944,554   $ 83,611,673
                                                ==========================================

Income or Loss
Total income (loss) for reportable segments     $  7,604,468   $    776,469   $ (2,496,819)
Elimination of equity in net (income) loss
  of subsidiaries                                    (71,044)       208,122       (197,582)
Minority interest in loss of subsidiary                1,240          7,381         25,494
                                                ------------------------------------------
    Total consolidated net income (loss)        $  7,534,664   $    991,972   $ (2,668,907)
                                                ==========================================

Assets
Total assets for reportable segments            $ 31,691,097   $ 27,908,085   $ 22,402,468
Minority interest of subsidiary                            -            493              -
Elimination of intercompany receivable              (152,609)      (447,582)      (174,793)
Elimination of investment in subsidiaries         (2,027,364)    (1,822,316)    (1,529,673)
                                                ------------------------------------------
    Total consolidated assets                   $ 29,511,124   $ 25,638,680   $ 20,698,002
                                                ==========================================
</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, 2004.










                                                                 F-21













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, 2004         1st Quarter   2nd Quarter   3rd Quarter   4th Quarter
------------------------------------------------------------------------------------------
Total revenues                       $22,546,659   $21,882,007   $21,679,568   $21,997,176
Claims incurred, net                  16,572,922    15,548,384    13,846,803    16,106,925
Total operating expenses              20,617,865    19,280,338    17,243,855    20,658,228 (1)
Net income                             1,847,587     1,720,645     2,982,870       983,562

Income per share                     $      1.35  $       1.26  $       2.18  $       0.72

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 (2)
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
(1) Includes discretionary bonuses paid to officers and employees of approximately $973,000.
(2) Net of the write off of $2,123,755 in 2003 of contingency reserves payable (Notes 6 and 7).

</TABLE>





















                                                                 F-22

















                                  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 and Chief Operating Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3 Certification of Vice President Finance and 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 and Chief Operating Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.3 Certification of Vice President Finance and Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002














































EXHIBIT 21. SUBSIDIARIES OF THE REGISTRANT

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

DAKOTACARE Administrative             South Dakota                  100%
  Services, Incorporated

DAKOTACARE Insurance, Ltd.            Cayman Islands                100%

























































                                                            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, Incorporated.;
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 officers 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 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 change 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 officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors:
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:  March 30, 2005


















                                                             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, Incorporated;
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 officers 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 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 change 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 officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors:
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 and Chief Operating Officer

Date:  March 30, 2005


















                                                         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, Incorporated.;
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 officers 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 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 change 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 officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors:
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 and Chief Financial Officer

Date:  March 30, 2005


















                                                        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, Incorporated, dba DAKOTACARE(the "Company") on Form 10-K for the
year ended December 31, 2004, 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

March 30, 2005

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.
































                                                        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, Incorporated, dba DAKOTACARE(the "Company") on Form 10-K for the
year ended December 31, 2004, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Kirk Zimmer, Senior Vice
President and Chief Operating 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/ Kirk J. Zimmer_____
Senior Vice President and Chief Operating Officer

March 30, 2005

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.
































                                                        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, Incorporated., dba DAKOTACARE(the "Company") on Form 10-K for the
year ended December 31, 2004, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Bruce Hanson, Vice President
Finance and Chief Financial 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/ Bruce E. Hanson____
Vice President Finance and Chief Financial Officer

March 30, 2005

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.