1998 SENIOR MANAGEMENT BONUS PLAN


Participants  in the 1998 Senior  Management  Bonus Plan  ("Bonus  Plan")  shall
include all full-time  non-sales  positions  Level 17 and above,  which includes
those  individuals  who could  possibly  be  affected  by Section  162(m) of the
Internal  Revenue Code,  including  but not limited to the CEO. This  definition
includes  all  full-time  non-sales  employees  who are Level 17 and above as of
March 1, 1998 and all full-time non-sales employees who are promoted to or hired
at a Level 17 or above after March 1, 1998. Bonuses will be solely predicated on
the consolidated  earnings  performance of Mid Atlantic Medical  Services,  Inc.
(MAMSI) and will be accrued on at least a quarterly  basis as  documented by the
year end audited financial statements.

Bonuses shall be paid according to the following guidelines:

1.       Minimum  Bonus-  Minimum  bonuses  shall  be  paid  if  MAMSI  and  its
         consolidated  subsidiaries (the "Company")  achieve a profit of $33.750
         million before income taxes,  expansion or acquisition costs, and prior
         to the  physicians'  return of  withhold  and  payment  of  physicians'
         bonuses.

2.       Maximum Bonus- Maximum bonuses shall be paid if the Company  achieves a
         profit of $52.50 million before income taxes,  expansion or acquisition
         costs,  and prior to the physicians'  return of withhold and payment of
         physicians' bonuses.

3.       Pro-ration- In the event that the Company earns between $33.750 million
         and $52.50 million, bonus payments will be pro-rated accordingly.

4.       Bonus Base- In general, bonus payments will be calculated based on the
         salary level on March 1, 1998.  With respect to new participants who
         are hired or initially promoted to a full-time non-sales position Level
         17 or higher after March 1, 1998, the bonus will be calculated at the
         initial Level 17 or higher salary.  With respect to new participants
         who are hired or initially promoted to a full-time non-sales position
         Level 17 or higher after March 1, 1998, the bonus will be calculated
         at the initial Level 17 or higher salary.With respect to a participant
         who is demoted during 1998, the amount will be calculated on a pro-rata
         basis based on the portion of the year that the employee was employed
         in a full-time non-sales position Level 17 or higher.

5.       New Employees-  New full-time  employees or those who are promoted to a
         full-time  non-sales  position  Level  17 or  higher  during  1998  are
         eligible to  participate  in the Bonus Plan.  The bonus payment will be
         pro-rated accordingly for the portion of the year that the employee was
         employed in a full-time non-sales position Level 17 or higher.





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6.       Termination- No bonus shall be paid to bonus participants who terminate
         or are terminated by the Company prior to the year end. In the event of
         retirement or death, the employee or his\her beneficiary will receive a
         pro-rated portion of the bonus.

7.       Time of  Payment-  Bonus  payments  shall  be  distributed  immediately
         following  the receipt of the audited  financial  statement(s)  for the
         Company for the year 1998.

8.       Bonus   Percentages-   The   distribution  of  the  bonus  payments  to
         participants  shall be limited  according to the  following  percentage
         ranges:

         CEO                                                          12.5 - 50%
         Executive Staff (Level 18 & above, excluding CEO)             6.0 - 35%
         Senior Staff (Level 17)                                       5.5 - 30%

9.       Relationship  to Other  Bonus  Plan- This  Bonus Plan is  substantially
         similar  to the 1998  Management  Bonus  Plan for  full-time  non-sales
         employees  Level 10 to Level 16. The  primary  differences  between the
         Bonus  Plan  and the 1998  Management  Bonus  Plan  are the  percentage
         payments available to personnel and the personnel covered.

10.      Interpretation  of the  Bonus  Plan by the  Board  of  Directors-  If a
         question as to the the  interpretation  of the Bonus Plan  arises,  the
         Board of Directors may  interpret  the Bonus Plan.  The decision of the
         Board is final.

11.      Amendment-  The Board of  Directors  may not  amend  the Bonus  Plan to
         materially increase the amounts payable thereunder to participants.